City plans to float deal on air rights

Los Angeles city officials said Tuesday that they plan to sell 9 million square feet of unused “air rights” above the Convention Center to developers -- who could add the vertical space to build housing projects elsewhere in downtown L.A. that exceed current city growth limits.

The move opens up downtown to larger and denser development at a time of growing debate across the region about overdevelopment and traffic congestion.

The developable space above the Convention Center is large enough to build the equivalent of seven 73-story U.S. Bank buildings, and city leaders expect the program to spark a new boom in residential development.

City officials said developers who buy the rights could significantly expand projects beyond what Los Angeles’ zoning allows.

The city intends to sell the air rights for about $20 a square foot -- which could be a bargain for developers who would have to spend many times more to buy the equivalent amount of land.

The new program was unveiled Tuesday by Los Angeles leaders and downtown developers who hailed it as a major step in giving downtown the dense urban atmosphere of cities such as New York, Chicago and Vancouver.

But the air rights sale was met with concern from some community activists who worried it could further clog the region’s roads and strain other services.

“We haven’t really created any more space. That’s a fiction,” said Robert Scott, past president of the Los Angeles Planning Commission and chairman of the Valley Industry and Commerce Assn. “And we don’t have the infrastructure to accommodate it just because somebody came up with a mathematical formula to create floor space.”

At the heart of the plan, quietly approved by the City Council last week, is the space above the Los Angeles Convention Center.

Although the center is only a few stories tall, the land is zoned for high-rise development.

The city plans to sell the space above it to developers, who could take the square footage and add it to their own downtown developments.

Money collected from the air rights sale -- estimated to be about $200 million -- would go into a special trust that would be disbursed by a special community commission for certain new projects downtown, such as affordable housing and park construction.

In most of downtown, zoning rules allow high-rise developers six square feet of building for every square foot of the total lot. If developers buy air rights, they are allowed up to 13 square feet of building for every square foot of total lot.

Carol Schatz, president of the Central City Assn., said she considers the air rights ordinance the biggest step by the city to encourage downtown residential development since the late 1990s, when the passage of Los Angeles’ “adaptive reuse” ordinance allowed developers to convert office buildings into housing.

“We want to see that skyline change,” she said.

After decades of decline, downtown Los Angeles has seen a major rebirth in recent years fueled by an increase in high-rise condos and luxury lofts. Several towers are rising around Staples Center, while work is to begin on two Frank Gehry-designed condo towers next to his Walt Disney Concert Hall later this year.

Backers say that the added density from the air rights sale won’t affect traffic because the new downtown dwellers can use the area’s transit system, including subways and buses. But a recent survey showed that the vast majority of downtown’s estimated 30,000 residents “rarely or never” use public transportation.

Critics also questioned whether the city was getting enough out of the deal, charging that it was underestimating the sale price for the Convention Center air rights.

The transfer of air rights is a tool that long has been used by cities to allow the preservation of old buildings while simultaneously encouraging new high-density development.

But the city of Los Angeles has never before attempted to use its own air rights to help spark more residential development -- let alone on such a massive scale.

In New York City, the sale of air rights above historic buildings, including its old theaters and Grand Central Station, was largely responsible for those buildings’ preservation. The air rights over Grand Central Station were at the heart of a seminal 1978 U.S. Supreme Court decision. The court ruled that because the city granted the owner of the historic train station the ability to sell air rights, it could designate the building a landmark and limit future building on or above the site without denying its owner certain economic rights.

In Los Angeles in the late 1980s, the city granted developer Rob Maguire the right to build the Library Tower (now the U.S. Bank building) to a then-unheard of height of 73 stories by selling air rights to the old, fire-damaged Central Library. Maguire paid $51 million for air rights from the library to build two new towers nearby. That money was used to renovate the library.

The money collected by developers would have to be spent within 1.5 miles of the original project, said Councilwoman Jan Perry, who represents most of downtown. She called the ordinance’s adoption “a major win-win for downtown and the neighborhoods that surround it.”

In the case of the Convention Center, the developers did not use up their entire ratio, and it is the excess square footage that is being sold off.

If the new ordinance is used by developers to the extent that city officials predicted Tuesday, it would represent another signal that there is a growing confidence in the downtown real estate market.

Still, some real estate analysts questioned whether the city was charging enough for the Convention Center air rights.

“Nine million square feet sold for $200 million is not a real high price,” said Richard Little, director of the Keston Institute for Public Finance and Infrastructure Policy at USC.

Most likely, he said, the development would increase congestion downtown. But, he said, that might be a trade-off the city is willing to make in exchange for more housing downtown. “If the city is serious about making the transition from spread-out L.A. to a more core-oriented city, then you do need pockets of density,” Little said.

Urban areas, Little said, can absorb certain increases in congestion, particularly when the higher density is phased in over time, as this probably will be. The key, he said, is improving public transportation before the area is built out.

“When this is all built, if everybody is going everywhere by car, it’s going to be a mess,” he said.

H. Carl Muhlstein, an executive vice president in developer Cushman & Wakefield’s downtown Los Angeles office, said it is difficult to assess whether the city is charging the right amount for its air space because the value would vary depending on a developer’s other costs.

For example, he said, if the city were requiring a developer to pay for expensive additional amenities, such as schools or extra parking, then the value of the extra density might not be very much. Depending on the specifics of the deal, air rights can be worth as much as $100 per square foot or even be worth less than zero, in which case the city would have to pay the developer to build the extra space.

Scott of the Valley Industry and Commerce Assn. said he worried about adding thousands of housing units without a clear plan to ease congestion or provide police and fire services.

“I think we’d all like to see downtown enhanced and improved,” he said. “But just adding more people downtown doesn’t necessarily make it a world-class downtown.”

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cara.dimassa@latimes.com

sharon.bernstein@latimes.com