Court Opinion

ID: 6039820
Source: CourtListenerOpinion
Date Created: 2022-01-13 13:42:04.837452+00
Date Added: 2024-06-11T08:52:11.260406
License: Public Domain

OPINION OF THE COURT
Friedman, J.
This appeal concerns the propriety of variances granted for two neighboring lots in Manhattan, one located at 19/35 West Houston Street and the other at 55 West Houston Street. From the early 1900’s until 1951, 19/35 West Houston Street was occupied by a four-story light industrial factory with retail space on the ground floor. The occupancy of 55 West Houston Street was similar. Prior to 1963, the buildings on these properties were demolished in order to widen West Houston Street. As a result, by 1976, 19/35 West Houston Street was improved by only a 35-car parking lot with a booth for an attendant. The use of 55 West Houston Street took the same course, and from the 1960’s to 1990 it was improved only by a gasoline service station, car wash, and parking lot. Today, like 19/35 West Houston Street, it is used solely as a parking lot.
As to the configurations of these properties, 19/35 West Houston Street occupies the entire 200-foot block front between Mercer and Greene Streets. It is L-shaped with a width of 50 feet on Mercer Street and only 25 feet on Greene Street. 55 West Houston Street, which is on the next block, occupies the entire 200 foot block front between Greene and Wooster Streets. It is also L-shaped with a width of 45 feet on Wooster Street and only 20 feet on Greene Street.
Both of these properties sit on the northernmost boundary of the SoHo Cast Iron Historic District, a district landmarked for its unique architectural character. The sites are also located in an M1-5A zoning district, which permits manufacturing and related uses. Pursuant to New York City Zoning Resolution (ZR) § 41-11, however, new residential development is not permitted in the zoning district except for joint living-work quarters for artists. Such quarters are defined as “one or more rooms in a non-residential building * * * with lawful cooking *61space and sanitary facilities meeting the requirements of the Housing Maintenance Code” and occupied by a person certified by the Department of Cultural Affairs as an artist (see, ZR § 12-10).
The controversy before us has its beginnings in 1997, when respondents, owners of the two lots (the owners), sought to build on them. The owners proposed to construct two buildings that would house a total of 185 people, have retail space on the ground floor, and occupy the entirety of each respective lot.
Since the subject lots were within the historic district, the owners were required to seek approval from the Landmarks Preservation Commission (see, Administrative Code of City of NY § 25-307), which they did. After more than nine months of review, the Commission approved the project and issued a Certificate of Appropriateness, concluding that the design of the buildings was appropriate for the historic district.
In approving the project, the Landmarks Preservation Commission required that the project’s architects design two buildings that were substantially different from one another in design, massing, and size in order to avoid creating a visual gateway to SoHo or the impression of twin buildings. In addition, the Commission required higher than typical floor-to-floor heights, as well as extensive detailing of the facades, so that each of the buildings would be consistent with the cast iron facades that typify the historic district. The extensive review process culminated in a design in which one building would be nine stories (with portions of the building being only seven or eight stories) containing 60 apartments, and the other building would be six stories (with portions of the building reaching eight stories) containing 43 apartments.
The owners also applied to the New York City Department of Buildings for permits to construct the buildings. Since the proposed development would be in violation of M1-5A zoning requirements, their applications were denied. Accordingly, the owners applied to the Board of Standards and Appeals (BSA) for variances permitting them to construct the two buildings that the Landmarks Preservation Commission had determined were historically appropriate. Opposition to the project ensued.
Among the concerns raised by the opponents of the project were the circumstances that the proposed buildings would be occupied by non-artists and contain small apartments averaging approximately 770 square feet in size, instead of the minimum 1,200 square feet required by the zoning law for artist lofts (see, ZR § 43-17) or the large 2,500 to 3,500 square foot *62lofts that are typical in the SoHo area. This, it was argued, would destroy the character of SoHo, which is a community of artists who live and work in their lofts. The SoHo Alliance (a neighborhood association founded by local artists and business people) expressed its opposition by noting that eliminating the present use of the properties as parking lots would be detrimental to local businesses because, on weekdays, only commercial parking is permitted in the interior of SoHo. Some residents expressed the concern that the height of the buildings would diminish light to surrounding properties.
After proceedings stretching over eight months, including four public hearings, and examination of 1,612 pages of documentary materials, the BSA granted the variances. Thereafter, the opponents commenced a CPLR article 78 proceeding to annul the BSA’s determination. Supreme Court held in favor of the opponents. Contrary to Supreme Court, we believe that the BSA’s determination was neither arbitrary nor capricious and was supported by substantial evidence. Accordingly, we reverse.
In order to obtain a variance, New York City Zoning Resolution § 72-21 provides that five requirements must be met: (a) there must be unique physical circumstances, including irregularity, narrowness or shallowness of lot size or other physical conditions peculiar to the zoning lot, and that as a result of such conditions, practical difficulties or unnecessary hardship arise in complying strictly with the use or building provisions of the Zoning Resolution; (b) the land in question cannot yield a reasonable return if used only for a purpose allowed by the Zoning Resolution; (c) the variance, if granted, will not alter the character of the neighborhood or district where the land is located; (d) the practical difficulties or unnecessary hardship have not been created by the owner (except that, where all other findings are made, the purchase of a zoning lot subject to the restrictions sought to be varied shall not itself constitute a self-created hardship);1 and (e) the variance is the minimum necessary to afford relief.
In assessing whether the BSA properly concluded that the requirements for a variance were met, we begin with the well-established rule that local zoning boards have wide discretion in considering applications for variances and the judicial function in reviewing a zoning board’s determination is limited *63(see, Matter of Fuhst v Foley, 45 NY2d 441, 444; Matter of Cowan v Kern, 41 NY2d 591, 598). “A zoning board determination should not be set aside unless there is a showing of illegality, arbitrariness or abusé of discretion. (Conley v Town of Brookhaven Zoning Bd. of Appeals, 40 NY2d 309.) That is to say, the determination of [the zoning board] will be sustained if it has a rational basis and is supported by substantial evidence [citations omitted]” (Matter of Fuhst v Foley, supra, at 444). The board’s determination is entitled to substantial judicial deference (see, Matter of Bella Vista Apt. Co. v Bennett, 89 NY2d 465, 471) and, even where a contrary determination would be reasonable and sustainable, a reviewing court may not substitute its judgment for that of the agency if the determination is supported by substantial evidence (see, Matter of Consolidated Edison Co. v New York State Div. of Human Rights, 77 NY2d 411, 417). Substantial evidence has been defined as “such relevant proof as a reasonable mind may accept as adequate to support a conclusion or ultimate fact” (300 Gramatan Ave. Assocs. v State Div. of Human Rights, 45 NY2d 176, 180). Here, there was substantial evidence to support the BSA’s determination. Our examination of the evidence vis-a-vis the requirements that must be met for a variance to be granted follows.
I. Uniqueness and Practical Difficulties:
Initially, as to the issue of uniqueness and the consequent difficulties in developing the sites, the City Planning Commission (CPC), which is a party to the proceedings pursuant to section 668 (e) of the New York City Charter, reviewed the variance request. After its study, it concluded that: “the subject properties * * * present a highly unique situation which the [CPC] believes is unlikely to occur in other parts of SoHo. The properties are located at the northern edge of SoHo, adjacent to the Greenwich Village neighborhood to the north. The properties have idiosyncratic lot configurations that are generally not duplicated in other parts of the M1-5A District, including having extensive frontage along a very wide segment of West Houston Street coupled with portions which measure only 20 or 25 feet between the street line and adjacent building walls.”
The views of the CPC are entitled to considerable weight since it is the agency responsible for regulation of uses and bulk with regard to zoning districts (Administrative Code §§ 25-110, 25-111) and for over-all city development (NY City Charter § 192 [f]). Accordingly, the quoted portion of the CPC report *64itself is sufficient to support the BSA’s determination that the subject properties are unique. While we recognize that the CPC had reservations about the floor-to-area ratio of the proposed buildings (a subject that we subsequently discuss), these reservations do not in any way impact on the CPC’s conclusion that the properties presented a “highly unique situation.”
Nevertheless, it is argued that a finding of uniqueness is irrational and not based upon substantial evidence because there are other properties in SoHo that are also narrow, i.e., properties that are 25 feet wide and 100 feet long. This observation does not, however, undermine the rationality of BSA’s conclusion. In this regard, the CPC specifically found that the configurations of these sites were not duplicated in other parts of the zoning district. Additionally, there is no indication that there are other undeveloped L-shaped properties in the district with 200 feet of frontage encompassing an entire city block on a major thoroughfare, namely, West Houston Street (cf., Matter of Rothenberg v Board of Zoning Appeals, 232 AD2d 568, 570). The uniqueness of these sites and the consequent difficulties in developing them was further highlighted by the CPC’s observation that “[t]he properties have been unable to be significantly developed since the widening of [West] Houston Street in 1963 [and the consequent narrowing of the lots on that street]” (emphasis added).
It is also worthy of note that the uniqueness of the sites contravenes the dissent’s concern that “piecemeal exemptions * * * could ultimately defeat the purpose of the [zoning law]” in SoHo. As noted by the BSA, there are only six sites in the entire zoning district capable of development. Consistent with the CPC’s observations, there is no indication that those sites, or any others, suffer from difficulties that would warrant a variance.
II. Reasonable Rate of Return/Minimum Variance Necessary:
It is also evident that there was substantial evidence to support the BSA’s conclusion that development of the lots in strict conformance with zoning requirements would not generate a reasonable rate of return. The focus in assessing this factor must be on whether any conforming use will yield a reasonable return (Matter of Village Bd. v Jarrold, 53 NY2d 254; Matter of Town Bd. v Zoning Bd. of Appeals, 161 AD2d 647, lv denied 76 NY2d 709; Matter of Colonna v Board of Stds. & Appeals, 166 AD2d 528). In addition, the variance sought must be the mini*65mum necessary to afford the property owner relief (ZR § 72-21 [e]).
In support of this branch of the application, the owners conducted an economic analysis of a multitude of conforming, nonconforming, and lesser nonconforming development scenarios and the return that could be realized from each, namely, 5.0 Floor Area Ratio (FAR)2 residential buildings (3.11% return), 5.0 FAR condominiums (0.63% return), as of right office buildings (0.37% return), as of right hotels (0.63% return), 6.85 to 7.95 FAR nonconforming rental buildings (9.9% return), 6.85 to 7.95 FAR nonconforming condominiums (3.53% return), 6.85 to 7.95 FAR noncomplying hotels (3.95% return), 6.85 to 7.95 FAR nonconforming office buildings (1.12% return), 6.02 FAR nonconforming rental buildings (6.38% return), and 6.02 FAR nonconforming condominiums (2.95% return). The BSA, agreeing with the detailed analysis of the owners, concluded that only the higher FAR nonconforming residential scenario would provide a reasonable rate of return. Supreme Court, however, rejected the owners’ economic analysis.
The purported flaw identified by Supreme Court was in reference to the return that would be realized by the development of residential condominiums. Supreme Court appeared to be of the view that, if the owners built lesser FAR condominiums as opposed to higher FAR rental buildings, they would achieve a reasonable rate of return. In reaching this conclusion, the court noted its disapproval of the owners’ economic analysis that examined 70 recent sales of condominium units, 43 of which were in SoHo and 27 of which were in the surrounding geographic area. The court believed that, because prices were lower outside of SoHo, this skewed, in a downward direction, the square foot value of the development so that the owners presented an inaccurate economic justification for the higher FAR variance.3 On this appeal, the opponents go one step further. Relying upon Matter of Village Bd. v Jarrold (53 NY2d 254, supra), they allege that consideration of property values outside of the strict confines of the SoHo zoning district was *66impermissible, as a matter of law. Neither Supreme Court’s nor the opponents’ proposition can be accepted.
It is self-evident that property located in the heart of the SoHo zoning district has a higher value than property located at the fringe of the district, especially on a congested, heavily traveled thoroughfare such as Houston Street, which has been described by at least one source as “a ragged edge to Greenwich Village on the north * * * [with] gas stations, lots, and unkempt buildings’ sides [that] are all that SoHo here reveals of its inner splendors” (ALA Guide to New York City, Wilensky & White [1988]). It is therefore no surprise that the owners’ analyst asserted that prices in the heart of SoHo were not reflective of the Houston Street market.
What the opponents would have the BSA do is to construct an iron curtain across the south side of Houston Street, disregard the economic realities that flow from the geographic location of these properties on the extreme fringe of the zoning district, and create an artificial method of real estate valuation — a method that ignores the time-worn adage that property values are determined, in large part, by “location, location, and location.” We are unaware of any rule of law that requires such a spurious method of real estate appraisal and, contrary to the assertion of the opponents, Matter of Village Bd. v Jarrold (supra) does not so hold.
Moreover, even if sales outside of SoHo should not have been considered, that still left at least 43 recent sales from within the SoHo district. As noted by the owners and the BSA, these sales had an average selling price significantly below what was necessary for them to obtain a reasonable return on a residential development with less FAR. Interestingly, the opponents appear to have only submitted five alleged comparable sales in their attempt to controvert the owners’ analysis, one of which had to be disregarded because it was admittedly erroneous. To the extent that these comparables showed a higher per square foot sales price, as noted by the owners’ economic analyst, three out of the five sales were either penthouse or top floor units that naturally sell for a significant premium. Thus, the BSA was well within its “justifiable range of discretion” to discount the opponents’ sales and rely upon, among other things, the 43 comparable sales submitted by the owners (Matter of Bella Vista Apt. Co. v Bennett, 89 NY2d 465, 471, supra).
It is nevertheless argued that the owners’ economic analysis was flawed because they failed to examine the feasibility of all conforming uses, specifically, joint living-work quarters for art*67ists.4 The dissent also asserts, apparently sua sponte, that the return the owners are obtaining from the properties as parking lots is itself reasonable, thereby undermining the BSA’s determination. We reject both propositions.
There is a significant question as to whether the construction of joint living-work quarters for artists would constitute a conforming use in a newly constructed residential building. This emanates from the fact that “joint living-work quarters for artists” is defined as “one or more rooms in a non-residential building” (ZR § 12-10 [emphasis added]). Here, new construction even for artist lofts would constitute the construction of a residential building, which, of course, is precluded under the zoning law (ZR § 41-11). While this interpretation of the zoning law is not completely free from doubt, it appears to be the position taken not only by the owners, but also by Community Board 2, which stated, in a letter to the BSA dated February 24, 1998, that joint living-work quarters for artists is not a conforming use in a new building. Hence, the failure to consider this alternative should not constitute a failure to consider a conforming use.
In any event, even if joint living-work quarters was a conforming use in a new building, the feasibility of lofts (whether for artists or otherwise) was explicitly considered. Thus, Mr. Whitaker, an architect who advocated on behalf of the opponents, taking into consideration the practical restrictions associated with the dimensions of the site, stated in a letter that “the footprint of each site lends itself to the creation of two lofts per floor. Each floor would require only an elevator stop, fire stairs and a small vestibule to access the front doors of the two lofts. The efficiency of such an arrangement would be in excess of 95%,” which would make a lesser FAR building feasible. Whitaker also opined that this arrangement would provide savings in construction costs because there would be fewer units and therefore fewer bathrooms and kitchens.
In response, the owners’ architect noted that: “While it would be possible to configure the interior spaces with 2 lofts per floor averaging approximately 3,500 sf each, using Mr. Whitaker’s selling price of between $380 and $400 psf these lofts would cost between $1.33 Million and $1.4 Million each. Even at our presumed market of $300 psf the cost would exceed $1.0 Million each.”
*68It was also noted that Whitaker’s analysis was flawed because it failed to consider the various costs (i.e., real estate taxes, interest, maintenance, etc.) associated with a condominium sellout of units with such a high price, which could take three years or longer. Additionally, Whitaker’s presumed efficiency rate of 95% was virtually impossible, as the lobby area would represent almost 8% of the total square footage in a 5.0 FAR building. As to the alleged savings from fewer bathrooms and kitchens, this would be offset by the cost of providing upgraded kitchens and bathrooms as well as other amenities, which a buyer of a $1.3 million unit would expect. Finally, it was noted that, contrary to Whitaker’s assertions, West Houston Street was not a superior location to the interior streets of SoHo with commercial and residential prices significantly lower than those along West Broadway, Spring Street and other SoHo streets.
The feasibility of 1,200-square-foot lofts was also considered (although the plausibility of such a design was placed in doubt by Whitaker’s assertion that the sites lent themselves to construction of two lofts per floor, each being approximately 3500 square feet in dimension). However, the owners concluded that such lofts would have to rent for amounts approaching $4000 per month, which, it was asserted, was “well beyond the typical affordability of the [West] Houston Street market.” It was additionally noted that the height of the proposed buildings did not create views that would warrant a premium in the market,- especially on West Houston Street. Thus, the feasibility.of lofts, which apparently would be affordable only by a few very wealthy artists, was considered and obviously rejected by the BSA based upon what was undeniably substantial evidence.
The dissent raises the claim that regardless of the economic feasibility of other uses of the properties, a variance should be denied because the six to seven percent return that the owners are currently obtaining may be reasonable. Interestingly, Supreme Court did not enunciate this as a basis for annulling the BSA’s determination, and the opponents have not enunciated this argument on appeal. Thus, an issue has been framed that does not seem to be contested at this juncture.
In any event, in assessing the reasonableness of the owners’ current return, the dissent states that “case law provides some parameters, although, of course, caution argues against making too close a comparison of possibly disparate locations and time periods.” Nevertheless, disregarding the very caution *69advocated, the dissent seemingly concludes that the BSA acted irrationally in implicitly finding that the six to seven percent return currently being generated by the property is not reasonable.5
6 Central to that conclusion is a determination that a six to seven percent return is reasonable as a matter of law. We cannot agree.
We are unaware of any hard and fast rule as to what constitutes a reasonable rate of return. Each case turns on facts that are dependent upon individualized circumstances (see, Matter of Supkis v Town of Sand Lake Zoning Bd. of Appeals, 227 AD2d 779 [3.8% not reasonable]; Matter of Kingsley v Bennett, 185 AD2d 814 [3.6% reasonable]; Matter of Ryan v Miller, 164 AD2d 968 [5.7% reasonable]; Matter of Mt. Lyell Enters. v DeRooy, 159 AD2d 1015 [11.76% reasonable]). Stripped to its essentials, guidance on this issue must be controlled by the well-settled standard of rationality and the BSA’s findings meet that test (Matter of Fuhst v Foley, supra; Conley v Town of Brookhaven Zoning Bd. of Appeals, 40 NY2d 309, 314, supra).
III. Community Impact:
This brings us to the issue of community impact. In assessing this factor, it should initially be noted that neither the height nor the exterior appearance of either of these buildings is at issue. This flows from the unchallenged determination of the Landmarks Preservation Commission, which found that these buildings would be consistent in all respects with the architectural and aesthetic integrity of the neighborhood. It appears, in fact, that Community Board 2, in its February 24, 1998 letter to the BSA, conceded that the relevant issue was not height, mass, or appearance, but interior design.
At its core, therefore, the opponents’ argument is that the addition of 185 residents, who may not be artists, will destroy SoHo’s character as a community of artists who live and work in their homes. This argument cannot be credited.
With reference to the residential use of these sites, the CPC stated: “The Commission believes the [BSA] could find residential use on these sites may not, in itself, alter the essential character of the SoHo neighborhood and that a residential development on the subject property may ultimately benefit the *70area by replacing two underutilized parcels with buildings which establish a street wall presence along [West] Houston Street” (emphasis added).
Juxtaposed against the CPC’s conclusion is the complete absence of any meaningful explanation by the opponents as to how the presence of 185 residents on the outskirts of their neighborhood will change the character of SoHo. Actually, the validity of the BSA’s determination that it will not is highlighted by a study the owners pointed to indicating that, as of 1990, SoHo and its immediate surrounding area (which included part of the South Village and Little Italy) had a population of approximately 10,000 people. In view of this, it is obvious that the character of SoHo will not be destroyed by an additional 185 people living on the northernmost fringe of the district.6
One last matter requires comment, that is, the alleged failure of the BSA to issue an Environmental Impact Statement (EIS). An EIS is only required when a proposal will have a significant effect on the community (see, Devitt v Heimbach, 58 NY2d 925; Matter of Acton v Wallace, 112 AD2d 581, affd 67 NY2d 953). Here, the extensive record before the BSA amply supports the conclusion that there will be no negative impact on SoHo as a result of the construction of the two proposed buildings. Thus, no EIS was required (see, Matter of Cathedral Church of Saint John the Divine v Dormitory Auth., 224 AD2d 95, 99-101, lv denied 89 NY2d 802).
In the final analysis, the instant controversy does not arise because of the exterior dimensions or appearances of the proposed buildings, but because many of the units inside the buildings, which are hidden from view, will be more reasonably affordable 770-square-foot units, instead of 3,500-square-foot units selling for more than $1.3 million. It is not for the judiciary to determine the wisdom of these choices. What this Court does determine, however, is that the BSA acted rationally in granting variances which permit the proposed buildings containing units of approximately 770 square feet to be built.
Accordingly, the judgment of the Supreme Court, New York County (Ira Gammerman, J.), entered January 19, 1999, which *71granted the petition to annul two resolutions of respondent Board of Standards and Appeals, should be reversed, on the law, without costs, the petition denied, and the BSA’s resolutions granting the variances reinstated.

. The difficulties in developing these sites, rather than being self-created, arose from the destruction of the buildings that had previously occupied the now vacant lots in order to widen West Houston Street.

. The floor area ratio is the relationship between the amount of usable floor area that may be constructed in a building and the area of the lot on which the building stands. In the SoHo zoning district the FAR is 5.0, or as high as 6.5 for community facilities, according to the CPC.

. The per square foot value of the property in each of its potential uses is relevant because, the higher the value, the less FAR that is required for the building to provide a reasonable rate of return. On the other hand, if the per square foot value is lower, a greater FAR is required for the building to provide an appropriate return.

. It is virtually uncontroverted that conforming or nonconforming office or hotel development would not be economically viable. Hence, the only question significantly at issue is which, of a variety of nonconforming residential uses, would be permitted.

. While the dissent questions whether the BSA even considered the issue, it is evident that the BSA did. The rates of return presented by the owners’ economic analysis included the rate of their current return on the properties as parking lots. Hence, by granting the variances requested, the BSA necessarily concluded that the current return was unreasonable.

. Contrary to the claim of the dissent, we do not advocate a general relaxation of zoning requirements for properties located at the fringe of the zoning district. The relevance of a property’s geographical location merely has bearing on the value of any proposed development and its potential community impact. Significantly, the dissent does not contend that consideration of a property’s geographical location for such limited purposes is improper.