The city is determined to produce more than 50,000 housing units a year, including a high percentage of affordable apartments cross-subsidized by market-rate units. That ambition is widely shared and urgently needed. Yet land scarcity remains the single greatest impediment to achieving that goal. The good news is that the city already controls a vast and underutilized land resource that, if deployed intelligently, could materially change the housing equation.
Conservatively estimated, the city controls over 50 million square feet of unused development rights, largely associated with municipal properties such as public schools, health centers, police stations and firehouses. These buildings typically occupy only a fraction of their allowable zoning envelopes. Above them sit unused air rights that represent real, monetizable value and, more important, a once-in-a-generation opportunity to add housing in neighborhoods that already have infrastructure including transit access, schools and other community services.
In addition, the city shares title over large below-grade rail yards and ancillary transit facilities. These sites could yield another 30 to 40 million square feet of development potential if unlocked through decking or air-rights transfers. Together, these two categories alone represent enough capacity to support approximately 100,000 housing units on city-controlled property alone.
The central question, therefore, is not whether the city has land, but rather what financial and ownership tools will yield the best long-term public result. Should the city sell land outright? Enter into long-term ground leases? Form joint ventures or equity partnerships? There is no one-size-fits-all answer. But traditional city practice — most notably the reflexive use of 99-year triple-net ground leases — should not be the default response. In many cases, they diminish value, complicate financing and refinancing, and reduce long-term flexibility, especially in residential development.
Real estate is a prized asset, and New York City owners (public and private alike) cling to it. Even when a sale or partnership with a capable developer could produce a better economic and social outcome, the owner’s instinct is to hold on to fee simple absolute title and to alienate only some rights-typically through ground leasing. In the private marketplace, this behavior is understandable. Capital gains taxes, depreciation recapture, and the simple fact that real estate value tends to appreciate over time. But a vacant lot, or a site occupied by a one-story “taxpayer” tenant, produces negligible income and does nothing to address the housing shortage.
The city, of course, is not subject to capital gains tax, so unlike private sellers, there is no economic disincentive not to sell. Indeed, selling underused land or development rights can produce both cash and, equally important, a positive policy outcome: housing for those in need. Despite the fact that a ground lease necessarily creates uncertainty, and thus yields lower economic value day one, the city has historically favored long-term leases over sales for reasons that often seem more sentimental (or at least fearful of regret long term) than analytical. As every law student learns, “a 99-year lease is tantamount to a sale.” The city gives up control for multiple generations while retaining a reversionary interest so distant that its present value is minimal. In exchange, it often receives ground rent that is modest relative to the underlying land value and highly contentious over time.
There’s one famous example from 126 years ago: Columbia University relied on its ground lease of Rockefeller Center while Harvard University, which had a similar-sized endowment, invested in equities. By 1970, the Harvard endowment was double Columbia’s. While the ground lease may not be the only explanation, it is fair to say that an equity portfolio offers more upside opportunity (albeit with risk) but, importantly, more liquidity for investing in new projects.
Additionally, although a ground lease can provide dependable annual income and, in theory, periodic market rent resets for the lessor, it also creates an inherently adversarial relationship between landowner and building operator. The interests of the two parties diverge almost immediately. The lessee seeks flexibility, refinancing options, and predictability; the lessor seeks rent maximization and control. This tension introduces uncertainty that lenders price into their underwriting, increasing financing costs and reducing overall project value.
In theory, a ground rent obligation is sacrosanct, allowing the lessor to simply enforce its rights if the lessee defaults. In practice, enforcement is messy, politically fraught, and economically destructive. Residential projects on leased land are harder to refinance, harder to recapitalize, and often harder to maintain over time. The result can be underinvestment, deferred maintenance, and, paradoxically, lower long-term revenue for the city and worse outcomes for tenants.
By contrast, selective land sales or well-structured equity partnerships can align incentives rather than divide them. An outright sale at fair market value, particularly when coupled with deed restrictions, affordability covenants, or profit-sharing mechanisms, can produce immediate capital that the city can redeploy into housing, infrastructure, or services. Joint ventures, meanwhile, allow the city to retain an ownership stake, participate in upside, and exercise governance rights without the rigidity of a ground lease.
None of this suggests that ground leases should never be used. They can be appropriate in certain commercial contexts or where long-term public control of land is genuinely essential. But in the residential realm, especially when the goal is rapid, scalable housing production, they should be the exception rather than the rule.
If the city is serious about meeting its housing targets, it must treat land not as a relic to be preserved at all costs, but as a tool to be actively managed. Unlocking air rights, rationally monetizing public assets, and choosing financial structures based on outcomes rather than tradition will do more to produce housing than any single zoning amendment. The land is there. The challenge is using it wisely.
Dan Egers, a shareholder of Greenberg Traurig, focuses his practice on New York City land use and zoning. The views expressed are his own.
Ed Wallace, co-chair of Greenberg Traurig’s New York office, is counsel to the Citizens Budget Commission.