How Luxury Developers Use a Loophole to Build Soaring Towers for the Ultrarich in N.Y.

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By Matthew Haag

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Some of the tallest residential buildings in the world soar above Central Park, including 432 Park Avenue, which rises 1,400 feet and features an array of penthouses and apartments for the ultrarich.

But 432 Park also has an increasingly common feature in these new towers: swaths of unoccupied space. About a quarter of its 88 floors will have no homes because they are filled with structural and mechanical equipment.

The building and nearby towers are able to push high into the sky because of a loophole in the city’s labyrinthine zoning laws. Floors reserved for structural and mechanical equipment, no matter how much, do not count against a building’s maximum size under the laws, so developers explicitly use them to make buildings far higher than would otherwise be permitted.

The towers benefiting the most from the zoning quirk have all sprouted during the past half-decade: enormous glass and steel buildings with lavish condominiums that sell for millions of dollars. Many line the blocks around Central Park, some of the most expensive and coveted real estate in the city, and have become second homes for Chinese billionaires, European tycoons and out-of-state hedge fund investors.

But the proliferation of these buildings is provoking a backlash amid a broader debate about affordable housing, megaprojects for the ultrarich and the city’s identity. Now, officials are seeking to rein in developers by proposing rules that would apply unusually large mechanical spaces toward a building’s height limit.

The motivation to build tall is obvious: panoramic views for residents and hefty profits for developers. A 95th floor condominium at 432 Park Avenue sold in December for $30.7 million, or about $7,592 a square foot. That same month, a unit about halfway down the building sold for $4,216 a square foot.

“It’s pretty outrageous, but it’s also pretty clever,” said George M. Janes, a planning consultant who has tracked and filed challenges against buildings in New York with vast unoccupied spaces. “What is the primary purpose of these spaces? The primary purpose is to build very tall buildings.”

The effort by the city to curb building heights has ignited a showdown with the powerful real estate industry, which has criticized the proposed rules as overly restrictive and misguided.

Harry B. Macklowe, who developed 432 Park Avenue, said he agrees with the effort to establish firm rules around mechanical spaces, but he rejected claims that his building was using them to rise higher. Every mechanical floor, he said, has equipment necessary for the building to function.

“It offends me,” Mr. Macklowe said, “because we created a very nice building that fits into the skyline perfectly.”

[Read more: Our columnist wrote that these towers “cast shadows that are both literal and figurative.”]

Many of these towers stay vacant most of the year, so their owners are not subject to local and state income taxes because they are not city residents. As a result, the state and city have already begun a separate crackdown on them.

State lawmakers proposed a pied-à-terre tax, an annual recurring tax on second homes valued at more than $5 million, but it was derailed under intense lobbying from real estate groups. Instead, lawmakers embraced a one-time fee on the sale of multimillion-dollar homes.

New York City’s complicated building regulations are meant to produce predictable developments. Height requirements are imposed in most of the city, though parts of Manhattan are exempt. Every block is also effectively assigned a maximum square footage, which can be spread across smaller buildings on a block or condensed in larger developments.

Savvy, well-heeled and patient developers have worked that system to their benefit. A developer seeking to build a supertall tower might start with one lot on a block and then buy unused square footage from its neighbors.

With advancements in engineering and construction, that developer can take the accumulated square footage and concentrate it in a skinny mega-tower. Floors of mechanical space, exempt from the square footage calculations, make the tower even taller.

“There is no question that they have become this lightning rod because they are not just luxury housing but uber-luxury housing,” said Elizabeth Goldstein, president of the Municipal Art Society, a nonprofit group that seeks to preserve the city’s architecture and urban design. She said they were unaffordable not only for the 99 percent but also for most of the 1 percent.

The city’s proposal aimed at supertall buildings — which needs to be approved by the City Council — would not eliminate enormous mechanical spaces but would penalize projects that have them.

Oversized mechanical floors — those greater than 30 feet tall, or about three times the size of a typical apartment’s ceiling height — would be counted toward the building’s maximum size. The rules would largely apply to developments around Central Park and in parts of Lower Manhattan.

Two other cities with skyscrapers, Chicago and Miami, have similar zoning codes but regulate mechanical floors differently.

In Chicago, big empty spaces — those greater than 5,000 square feet — are not counted toward the tower’s overall size, though officials said they knew of no complaints about developers exploiting the rule. In Miami, mechanical spaces are subtracted from the maximum size unless the area is an atrium or an open-air feature.

In New York, Mayor Bill de Blasio said the proposed rules would “stop luxury developers from gaming the system.”

“Artificially tall mechanical spaces that serve no purpose but to boost views of top-floor apartments violate the spirit of our zoning regulations,” Mr. de Blasio said in a statement.

But the Real Estate Board of New York, the industry’s influential lobbying arm, said the rules were too restrictive and at odds with engineering trends, such as the future need for large spaces for batteries to support renewable energy.

At a recent public hearing, engineers and architects said the proposal would drive up the cost of construction.

Bart A. Sullivan, an engineer in New York who has worked on high rises around the world, said supertall skyscrapers need large unoccupied floors for complex mechanical and structural equipment, including elevator motors, heating, ventilation and air conditioning.

Developers, he said, could work within the proposed restrictions but would have to spend more on structural features.

“Most anything is possible if you throw enough money at it, but these projects have to make sense from an economic point of view,” Mr. Sullivan said. “They are tying the hands of the design professionals.”

There are legitimate reasons for large areas in buildings for mechanical and structural features, he said. At 432 Park Avenue, clusters of unoccupied sections throughout the tower allow wind to flow through and stabilize the building.

That tower’s structural engineer, Silvian Marcus, said that without the large, open-air mechanical floors, 432 Park Avenue would noticeably sway and be unacceptable to residents.

“When they come home, they want to feel like they are at home and not like they are on a boat, airplane or motorcycle,” he said.

Mr. Marcus used a similar engineering technique at Central Park Tower, which at 1,550 feet tall will be among the most slender residential skyscrapers in the world. More than a fifth of its height will remain unoccupied.

The developer of the building, Gary Barnett, said he believed the city’s proposal was reasonable, but he said that critics had mischaracterized the mechanical spaces in Central Park Tower.

“There is one void and everything else is truly necessary mechanical space, amenity space and high-ceiling retail space for the first Nordstrom in New York City,” Mr. Barnett said.

Some supporters of the new legislation argue that the rules do not go far enough to curb supertall buildings. They would largely apply to neighborhoods around Central Park and would not touch other areas with high rises, including Midtown and Hudson Yards.

City planners first noticed the trend of using mechanical spaces in new buildings several years ago.

But a turning point emerged over the past year and a half when Rafael Viñoly Architects, which designed 432 Park Avenue, unveiled plans for another building, a futuristic, barbell-shaped 32-story residential tower on the Upper East Side. It would top out at 510 feet tall, thanks to a 150-foot-tall midsection devoid of residences.

Neighborhood associations, along with Mr. Janes, the planning consultant, filed a complaint with the city’s Department of Buildings, noting that “the project includes a huge void, which is larger than necessary for any mechanical use.”

But without changes in building rules the tower would be likely to avoid legal challenges: The developers described the super large midsection as an open area with structural features.

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