Attempting to Add Value with Building Rights

Carrot Field: Tel Aviv Developer slang for a lot with no building rights. At least theoretically, all the land started that way. The default state of land under the National Law of Planning and Building is land with no building rights. The act of transforming this land - also known as green land - into buildable land is known as הפשרה - thawing.

In monetary value, a carrot field is considered to be at its minimum level. It usually provides little use to the inhabitants of the city, especially if it is privately held.  Possible uses include parking lots, junkyards, or simply overgrown vacant lots.  When the public owns land with no building rights in or near cities, they are often allocated as parkland. 

Some private and public lots in Tel Aviv are stuck in the process of planning, making them practically unbuildable for the time being. In the urban landscape, these lots are indistinguishable from carrot fields.  One famous example is Kikar HaMedina, the 50 dunam circus in the northeast of the city. 

 This land is held jointly by a large numbers of owners who have only been able to agree on one thing for the last 50 years: the land does not have enough building rights.  Successive plans have been proposed for the lot over the years, all intended to add to the original 150 housing units and reach a point where the owners and their inheritors will be able to agree and build.  Some of these plans have even passed the full gauntlet of local and regional planning boards.  The most recent plan builds 453 luxury apartments in 3 missile-shaped towers.  Luckily for the people of Tel Aviv, this is evidently not enough for the owners groups, and the site remains a large green dog-walking expanse for the time being.  Our largest carrot field.

This phenomenon suggests a new paradigm for establishing protected land reserves and green space in Israel: Divide and distribute the land to a group of citizens with the caveat that they must cooperate in order to build.

Building Height 4

Once the Shalom Tower had pioneered the method of re-purposing public land for high rise development, the landscape of Tel Aviv began to sprout modest skyscrapers every time a large lot became available.  One of the first followers was the Clal building on the site of the former "Silicat" brick factory.  Though this was not public land, it was an unusually large parcel in the midst of a residential neighborhood, and the owners, the Histadrut Labor Federation, were able to close down an offending industrial use and win extra building rights for a mixed use development that included parking, offices and a gas station.  

The location of the Clal Center was random at best.  Access was poor and routed through residential streets.  As a business function, it was disconnected from the commercial section of town and has remained an anomaly in its neighborhood.  Since there are no other oversized lots nearby, it will likely remain as a lone office building in an otherwise residential area.  

The Basis for Urban Value

If we count all the money ever put into a city, both public and private funds, would it be close to the total real estate value of the properties in that city? This should weight the scales towards older cities which have enjoyed centuries of continuous development. This question comes up when we peel away the building and development costs of a project and arrive at the pure land costs of the property beneath the building.

In declining cities, the land costs can actually shrink and go negative. In this case, complete houses are available for less than they would cost to build. The old housing stock actually drives away new construction in those areas.

Meanwhile,in healthy cities, the value of underlying real estate can far outstrip the building cost component of the price. In these places, the building budgets are high since the developer runs nearly no risk of putting too much money into construction (overcapitalizing). Land value in such areas springs from years of intelligent investment in infrastructure, services, and development of the surrounding natural resources.

Maybe its not the amount of money invested in a city, but the wisdom with which it is invested.

Building Height 3

Are tall buildings bad? The structure of Tel Aviv, a wide field of low apartment houses with intermittent 30-story spikes, makes the towers stand out more than they would in a gradual plan. The Shalom Tower (left) by Architects Gidon and Tova Ziv, Pearlstein Architects, and others, began this pattern in the early 1960's. The surrounding fabric was between 2 and 4 stories at the time.

In recent years, the construction of towers in the midst of low neighborhoods has drawn opposition from nearby residents, whose complaints rapidly escalate from questions of traffic and socioeconomic friction, to aesthetic and moral confrontation with the proposed projects. The future inhabitants of the towers are seen as rich intruders to quiet middle-class neighborhoods.

Some candidates in the recent municipal elections in Tel Aviv took stands against agressive development of the city, with new tower projects functioning as lightning rods for their arguments. The latest heir of the Shalom Tower tradition is a proposed project in the Old North End of Tel Aviv on the grounds of Assuta Hospital. More than 40 years after the Gymnasium was torn down to build the Shalom Tower, little has changed. Are the towers bad?

Building Height 2

The initial distortion of Tel Aviv occurred at the historic origin of her plan.  The city was created as a collection of 500 square meter residential lots intended for single family homes.  The single exception to this planning was the grand 12,000 meter lot at the north end of the central street, Herzl.  This lot was reserved for the beloved high school of Tel Aviv's founders, The Herzliya Gymnasium.  

Fifty years later, the development limits of the standard small lots were evident.  A vast field of 3 and 4 story apartment buildings extended to the horizon, and consolidation of these lots to build larger projects was made more difficult by condominium divisions of the lots.

The solution: re-purpose the high school lot as Tel Aviv's first skyscraper, the Shalom Tower. 

Urban is the new Blue

Lets look at the U.S. electoral map in a way that tells us something about urbanization. When we look at the county-by-county breakdown we get a picture quite different from the red state/blue state dichotomy. This map (provided by the NYTimes site) adds pastel red and blue to indicate the strength of party advantage by county. It also shows Obama's clear hold on the urban areas of the U.S. This is a distinction both finer-grained and more interesting than the usual breakdowns of North/South or Rust Belt/Sun Belt. Does it also indicate a mandate for recovery within America's urban centers? Jane Jacobs in "Cities and the Wealth of Nations" pointed to cities as the engines of creation of all wealth. If this is true, the new polarization of American politics is defined at the urban-rural break. Where will this lead?

Building Height - A Historical Map of the City

The tall buildings in Tel Aviv are located randomly. They don't necessarily occur at major intersections, near large public open spaces, or along the major avenues. Was the city planned? The answer is yes, and each tall building is an exception to the planning rules. What do they all have in common? They are the second or third building on existing large lots that were originally excluded from the residential fabric. Each has its own story, and I will cover many of them here. It all starts with the Shalom Tower

Where in Town am I?

It takes a few years in a diverse city to get a good feel for what to expect in different neighborhoods.  When I could estimate apartment prices well for nearly any area in the city, I found I had a lot of other information too: which areas were becoming cooler, which were filled with subdivided apartments, which were in decline. 

This information is in constant flux and is renewed through visits with friends, walking around, and checking the ubiquitous windows of real estate storefronts.

Defining this Journal

This is a journal of my thoughts on how cities create value. Value is measured in terms of quality of life for citizens, along with, more concretely, real estate value in monetary terms. Though I will try to keep a broad perspective, my immediate experience of the last 20 years is in Tel Aviv, Israel.  Many of my examples will be drawn here, close to home, in a city that has experienced surprising stability and steady increase in the value of its real estate.