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Special Purpose Districts – A Brief Overview

Special Purpose Districts – A Brief Overview

Within the global epicenter of real estate development that is New York City, there exist several “Special Purpose Districts” that define the city’s unique character and pose distinct opportunities and challenges for real estate investors and developers.

Special Purpose Districts (SPDs) in New York City are areas with zoning regulations specifically tailored to a certain neighborhood’s character, goals and needs. Each special district designated by the City Planning Commission stipulates zoning requirements and/or zoning incentives tailored to distinctive qualities of a certain neighborhood that may not lend themselves to generalized zoning throughout the city and standard development. One of the rationales behind SPDs is to maintain certain qualities and characteristics of particular neighborhoods to shape the city’s makeup and character as a whole.

One example of a SPD, albeit a more recent one, is the Special Hudson Yards District. The Special Hudson Yards District was established to promote a mix of uses and densities, provide new publicly accessible open space, extend the Midtown central business district by providing opportunities for substantial new office and hotel development, reinforce existing residential neighborhoods and encourage new housing on Manhattan’s Far West Side. One of the key components of the Special Hudson Yards District was the approval of high-density development, promoting the development of skyscrapers such as 30 Hudson Yards, mixed-use spaces encouraging the mix of residential, commercial and retail spaces to foster a new and vibrant urban community, and public spaces offering residents and visitors a place to escape the city’s hustle and bustle.

Hudson Yards is a great example how SPDs can be used to transform a neighborhood. The Special Little Italy District is one example of how SPDs can be used to preserve a neighborhood’s character. The Special Little Italy District was established to preserve and enhance the historic and commercial character of this traditional community. Special use regulations protect the retail area along Mulberry Street from redevelopment, which other regulations encourage residential property rehabilitation and new development on scale with existing buildings.

SPDs are argued to have an overall positive impact on New York City by creating opportunities for a broad range of development opportunities from luxury high-rise towers to rehabbing historic residential buildings, promoting economic growth by attracting residents, business and tourists, and promoting innovation by providing developers and architects with opportunities to push urban design boundaries (in certain SPDs).

There are, however, inherent challenges when working within a SPD. First, navigating the SPD regulations can be an arduous process. The assistance by experienced zoning and real estate counsel can help overcome this hurdle. Additionally, the SPD regulations could throw a wrench in a project if it is later discovered that an original idea of the developer is actually prohibited in the particular SPD in question restrictions. Lastly, SPD developments may face a higher level of resistance from local communities concerned about the impacts on their neighborhoods.

Overall, real estate investors and developers must be prepared to tackle complex regulations, address community concerns, and, in some cases, invest significant capital to comply with building requirements. Anyone interested in investing in NYC real estate should be sure to investigate if a particular property of interest falls within one of NYCs Special Purpose Districts.

By Michael Mulia

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