New Local Law creates uncertainty for “as-of-right” development

Howard Goldman

Central to the concept of zoning is that a developer may rely on the text and build to the limits written into the zoning resolution.  The council has now tinkered with that expectation.  Under a new local law, the council can potentially overcome the “as-of-right” option by adopting a text change on an expedited basis.

The local law was a response to the controversial Two Bridges project, a proposal consisting of three residential towers located on Cherry, South and Clinton Streets on the lower east side of Manhattan. These towers, to be developed by JDS Development Group, L+M Development Partners and CIM Group, and Starrett Development, range from 62 to 79 stories.  city planning ruled that, because the development  complied with the underlying zoning text, the project was not subject to advisory review by the borough president and approval by the city council pursuant to the uniform land use review procedure.     

The city planning ruling meant that the city council had no authority to review the Two Bridges project. To fill that gap, the new local law allows the city council to start its own alternative zoning change application which, if successful, could trump the developer’s reliance on as-of-right. Ordinarily a proposed zoning change requires a lengthy pre-application procedure.  The new law eliminates that pre-application procedure for applications for text changes filed by the city council, a borough president and the mayor.  Eliminating pre-application review can shorten the review process by one year or more.  As explained in the land use committee report, this will allow elected officials to take “swift action on pressing land use issues.”

Swift action in this context means that a project intended to be as-of-right could wind up in a race with a text change.  If the development obtains a full building permit and completes work on foundations before the text change is adopted, the developer  wins.  If the text change is adopted before either of these events, the council’s text change wins. The developer’s option where a development has commenced but foundations are not complete is to file an application with the board of standards and appeals to establish substantial completion.

The new law creates a number of risks.  First, applications that bypass pre-application review may not fully and accurately disclose the relevant information.  In opposing the local law, the department of city planning explained that pre-application review “ensure[s] that applications are sufficiently comprehensive, clear, and complete before an application is verified or referred for public review.”

Similarly, expedited applications may run afoul of state and city environmental quality review requirements, which mandate that decision-making agencies take a “hard look” at potential environmental impacts before acting on an application.  Both the city planning commission and the city council are subject to this mandate and pre-application review assures that a hard look is taken.

Finally, the local law may have a chilling effect on development.  The real estate board, which opposed the local law, warned that capital investment could be undermined by the injection of uncertainty into the as-of-right development process.  Many developers, lenders and investors rely on this certainty and the large majority of developments are as-of-right.  With the uncertainty arising from the potential for an expedited text change, the City may be viewed as less favorable for capital investment.

These risks place the ball squarely in the city planning commission’s court.  Under the city charter, there is no fixed time period within which the commission must act on an application for a text change.  If it believes more study is required, the chair may direct the department of city planning to undertake such study.  Furthermore, if the commission disapproves an application, its decision is final unless the mayor certifies to the council that the text change is necessary, in which case the council has 50 days to approve by a two-thirds vote.  Since the mayor appoints a majority of the commission, including the chair, this is highly unlikely.

Howard Goldman is a partner at GoldmanHarris LLC, a New York City land use firm.