Vertical Subdivisions & Other Improbable Events

(Image: Potrero Power Station, in 2020)

It’s been a long time since I’ve written anything public, and mostly this is because there hasn’t been much that I wanted to write about over the last few years. The pandemic, the ongoing national crisis of racism as amplified again in the summer of 2020, and the uprooting of my personal life over the last year, have all made it hard for me to put anything out there. I am not an expert in public health or policy or relationships. I am an architect, and architecture has seemed like such a silly thing to write about in the face of all of this grief and trauma.

But. Some things are getting better. We have vaccines now, and treatments, and the risks of the pandemic have lessened. We have opened up a national conversation about justice, equity, and diversity, and are slowly turning those conversations into action in our personal and professional lives. I am coming up on a personal milestone, which has allowed me to realize that I have survived the past year, while remaining true to myself. I still think that where and how we live matters, that what we build matters, and that the work I do matters. Since 2020, I’ve started to learned how to design and build affordable housing, the kind of housing that we desperately need in an expensive place like San Francisco, and I’ve been proud to count myself as part of the solution to providing housing as a human right.

And with this slow sea change of grief into something a little bit brighter, a little bit more hopeful, I am back here at this blog to write about things that are important, and things that I think others may enjoy, and also, like today, things that are just interesting.

Recently I learned about the existence of vertical subdivisions. I am not a developer or real estate attorney, so if you are, this may seem utterly banal, but to someone who builds buildings, this is a bizarre concept. In a vertical subdivision, a parcel (plot of land) is subdivided, or perhaps stratified is a better word, into a layer cake of parcels stacked on top of each other. The ground plane, the area below the ground, and the space above the ground, can all be subdivided into different parcels, and sold, leased, or financed separately. I was already familiar with the concept of air rights, but with air rights, a property owner sells the square footage that they could have built on their site to a nearby property, so that that owner can build that square footage on their own property. They do not actually sell air. With a vertical subdivision, the property owner is literally selling the air above their land - the parcel they are selling only exists in the sky.

In practice, this means that a building with, say, a parking garage below grade, a retail space at grade, and a hotel or apartment building above, can sell each of these “parcels” separately, which may be appealing for complex tax and legal reasons. This may have a financial advantage over owning the entire building as one, and simply renting out the various pieces of the building to separate tenants. But conceptually, I find this wild. What happens if I buy the hotel that sits on top of the retail podium and the parking garage, and something happens to the podium (perhaps a truck crashes into it), and now I no longer have access to my parcel, which I own? What if the building collapses in an earthquake, and my parcel no longer exists in a physical sense? I’m sure these questions have concrete answers that have been worked out by courts, but the idea that some real estate dude said to himself, “You know, why don’t we just sell someone the air over our building,” and everyone else went along with it, is truly bizarre to me. It’s as if someone said, “Let’s take the ‘real’ out of ‘real estate’ and see if anyone notices,” and no one did. Or more accurately, they realized there was money to be made, so they embraced it.

So: when is a building not a building? Answer: when it’s an “income stream”:

In days when a building owner thought that he owned a building and not an income stream that could be monetized, there was less interest in vertical subdivisions, and they were done mainly on a reactive basis. Real estate investors today tend to view their properties as financial assets and are willing to deploy more sophisticated approaches to unlocking value on a proactive, strategic basis. (from LP Legal)

If you thought there was anything “real” about real estate, think again! That’s not a structure you own - it’s an income stream, and the more ways you can slice and dice it, the better.

This leads to some interesting architectural problems, because at some point, the imaginary divisions of a vertical subdivision run into the physical constraints of an actual building (no matter what your building owner thinks he owns). The building code contains many requirements about how to separate buildings on different parcels, to reduce the risk of fire spreading between properties. How can you protect your property, which exists in the air and is structurally supported by the entirely separate property below, from fire, when the only way to reach your property is by a connection from the property below? I have no answers.

I would hate to be the architect trying to explain this to a building official who is unfamiliar with the concept - and I should know, because I have been in a similar situation a few years ago. In that case, my project was the rehabilitation of a 1920s building that shared a basement with the building next door. Both buildings were built around the same time, prior to any city planning codes or building codes. Fortunately, both buildings and their shared basement were owned by the same owner, which simplified things enormously for the design team. But from a building code perspective, these were two different buildings. By code, there needed to be a fire wall separating the basement below each building, at the property line. By property rights and planning code, there had to be an access to the part of the basement underneath my building, which was required by law (by planning code) to include some parking. That access came from the building/property next door, through the shared basement. We had to have a meeting with the fire official and planning official so they could fight it out. No opening between basement areas, in which case, no parking would be possible? (Except parking was legally required, so this would be illegal.) Or yes an opening, to allow the parking, but then it would not comply with the building code for fire separation? (Also illegal, in a sense.) Ultimately, the agreement was this: an automatic closing fire door, installed above the opening, that would shut in case of fire, to keep the two basement areas separate from each other. This door ended up being installed on the side of the basement that belonged to the other building. I can’t imagine how much more complicated it would have been if the two buildings were owned by different owners.

My current affordable housing project, fortunately, does not contain any such exotic real estate inventions. But some of the other parcels within the same development, do. And even on a mundane site, we have our usual problems: we can only get so close to the property line above ground, but what about below ground - can our foundations touch the property line, that imaginary boundary, underground? The building next door is getting built at a different time than ours - can we count the open courtyard between buildings for fire separation purposes, or do we need to assume that it might get filled in by the later construction? How much space do we leave them to allow them to be code-compliant at that future date? Etc.

The last few years have been a series of events that, while perhaps not unforeseeable, were certainly not ones I expected to face in my lifetime. The last pandemic was what, over a hundred years ago, 1918? The upheaval of the summer of 1969 was when my parents were still children. And I thought, a year ago, that I knew who I was, who my family was, and maybe even what might be next for me. Turns out, it’s just been one catastrophe after another, between COVID, police violence, and everything else going on in the world - war, disease, climate change and extreme weather, from the day the sun didn’t rise over San Francisco in September 2020 to the last few months when the rain would not stop. Can I make this all somehow connect back to the arcane real estate tactic that I find so fascinating? No. It’s all just a bunch of improbable events, existing together in this mixed-up world.