Floor area ratio

What Is Floor Area Ratio?

Floor area ratio (FAR) is a crucial metric in urban planning that quantifies the relationship between the total usable floor area of a building and the total area of the land on which it stands. Within the broader realm of real estate development, FAR serves as a primary tool for local governments to control the bulk and intensity of construction, influencing urban density and the overall character of neighborhoods. A higher floor area ratio generally indicates a more densely built environment, common in commercial and highly urbanized areas, while lower FARs are typical in suburban or less developed regions. This ratio is fundamental for developers, investors, and city planners as it directly dictates the maximum permissible size of a structure on a given lot.

History and Origin

The concept of regulating building density through metrics like floor area ratio emerged as cities grappled with rapid urbanization, congestion, and public health concerns in the early 20th century⁴⁰. While New York City's 1916 zoning ordinance primarily focused on height and setback requirements to ensure light and air access, it was the 1961 revision that formally introduced the floor area ratio as a fundamental control on building size³⁹. The idea of controlling building bulk in proportion to the lot had been "in the air" for decades prior, circulating within planning circles and even appearing in revisions to New York's zoning codes in 1940 to limit density in residential areas³⁷, ³⁸. By the late 1940s and through the 1950s, the FAR concept gained widespread acceptance, spreading to zoning codes across American cities³⁶. Sixty years after its formal adoption in New York City, the floor area ratio remains a globally popular planning tool³⁵.

Key Takeaways

• Floor area ratio (FAR) is the proportion of a building's total floor area to the size of its lot.
• It is a fundamental metric used in zoning regulations to control building density and size.
• A higher FAR indicates greater building density, while a lower FAR suggests less dense construction.
• FAR significantly impacts land value and housing supply.
• Local governments establish specific FAR limits based on zoning districts and planning objectives.

Formula and Calculation

The floor area ratio is a straightforward calculation. It is determined by dividing the total gross floor area of all floors in a building by the total area of the land parcel (lot area) on which the building is situated. Both measurements must be in the same units, typically square feet or square meters.

The formula for Floor Area Ratio is:

Where:

• Total Gross Floor Area of Building: The sum of the floor areas of all stories of a building, measured from the exterior faces of the exterior walls or from the centerline of walls separating two buildings³³, ³⁴. This includes basements, cellars, mezzanines, and penthouses.
• Total Lot Area: The total area of the land parcel (or zoning lot) on which the building is located³².

For instance, if a proposed building has a total floor area of 20,000 square feet and is to be constructed on a lot that is 10,000 square feet, the floor area ratio would be 2.0. This indicates that the building's total floor area is twice the size of its lot³⁰, ³¹. Developers often work backward from the allowable FAR set by zoning laws to determine the maximum square footage they can construct on a given property²⁹.

Interpreting the Floor Area Ratio

Interpreting the floor area ratio involves understanding its implications for property value, urban design, and the functionality of a built environment. A higher FAR signifies that a larger building can be constructed relative to the size of the lot, enabling greater density²⁷, ²⁸. This is often desirable in commercial districts or urban centers where maximizing space is economically beneficial²⁶. Conversely, a lower FAR indicates less allowable building space per lot area, leading to less dense development, typical of residential neighborhoods with single-family homes or low-rise structures²⁴, ²⁵.

City planners utilize FAR to control building bulk, ensure adequate light and air, and manage the load on municipal services such as water, sewer, and transportation²³. For a real estate investor conducting due diligence, understanding the permissible FAR for a specific parcel is critical because it directly impacts the potential size and, therefore, the revenue-generating capacity of a future development²².

Hypothetical Example

Consider a developer who purchases a vacant lot in a suburban area zoned for residential use. The lot measures 5,000 square feet. Local zoning codes specify a maximum floor area ratio of 0.60 for this district.

To determine the maximum allowable gross floor area for a new building on this lot, the developer would apply the FAR formula:

Maximum Buildable Area = FAR × Total Lot Area
Maximum Buildable Area = 0.60 × 5,000 sq ft
Maximum Buildable Area = 3,000 sq ft

This means the developer can construct a building with a total gross floor area of up to 3,000 square feet. This could manifest as a single-story home covering 3,000 square feet of the lot, a two-story home with 1,500 square feet per floor, or a three-story home with 1,000 square feet per floor, provided other building codes and setback requirements are met. ²¹This calculation is crucial for initial project feasibility assessments.

Practical Applications

Floor area ratio has wide-ranging practical applications across various facets of commercial real estate and urban development:

• Development Planning: Developers use FAR to ascertain the maximum size of a structure they can build on an investment property. ²⁰This dictates the number of units in a residential building or the total square footage for an office or retail complex.
• Property Valuation: The allowable FAR directly influences property valuation, as land zoned for higher density development typically commands a higher price.
  ¹⁹* Urban Planning and Zoning: Municipalities implement FAR regulations to control urban density, manage traffic flow, ensure adequate public services, and preserve neighborhood character. ¹⁸For example, the New York City Department of City Planning provides detailed zoning resolutions that include FAR limits for different districts, impacting everything from residential property to mixed-use developments.
  ¹⁷* Infrastructure Impact: FAR helps urban planners assess the potential strain on existing infrastructure (e.g., water, sewer, transportation) that a new development might impose, correlating floor area with potential occupancy and demand for services.
• Housing Policy: Floor area ratio plays a significant role in housing affordability discussions. Strict FAR limits can restrict the supply of housing by preventing developers from maximizing land use, potentially driving up housing costs in high-demand areas. ¹⁶Recognizing this, some states, like California, have policies encouraging higher minimum densities on sites identified for housing to accommodate growth and promote affordable housing types.
  ¹⁴, ¹⁵

Limitations and Criticisms

While floor area ratio is a widely adopted tool in urban planning, it is not without limitations and criticisms. One common critique is that FAR often imposes a "one-size-fits-all" approach to development, potentially limiting design flexibility. ¹³While it controls the total bulk of a building, it doesn't directly dictate the building's shape, height, or footprint, which can lead to tall, slender structures if other zoning controls are not in place.

Furthermore, strict FAR limitations, particularly in areas with high housing demand, can inadvertently exacerbate housing shortages and reduce housing affordability. ¹²By restricting the amount of building space on a given plot, FAR caps can prevent developers from achieving economies of scale in larger projects, thereby increasing the per-unit costs of housing. ¹¹This can lead to under-development of sites, especially near transit and services, conflicting with goals for vibrant, pedestrian-oriented urban centers. ¹⁰Critics argue that balancing FAR with other zoning parameters like height limits, minimum unit sizes, and parking requirements is crucial to avoid unintended negative consequences for urban development and market analysis.
⁹

Floor Area Ratio vs. Building Coverage Ratio

Floor area ratio (FAR) and building coverage ratio (BCR), sometimes called lot coverage, are both important metrics in real estate development, but they measure different aspects of a building's relationship to its lot.

While floor area ratio accounts for all floor areas within a building, it is indifferent to their distribution across the lot. This means a building with a high FAR could be very tall and slender, or shorter but cover a larger portion of the lot. In contrast, the building coverage ratio specifically measures the building's footprint on the lot, without considering its height. Confusion can arise because both metrics contribute to regulating density and managing the physical form of buildings within a given zone. However, FAR focuses on the total usable space created, whereas BCR focuses on the amount of land occupied by the building at ground level, impacting factors like open space and landscaping requirements on a parcel.

FAQs

What does a high floor area ratio mean?

A high floor area ratio indicates that a large amount of building space is permitted relative to the size of the land. This typically results in taller or larger buildings and a higher population density or commercial activity in that area. It is common in urban centers or commercial districts.

How do zoning laws affect floor area ratio?

Zoning laws directly establish the maximum allowable floor area ratio for different areas or districts within a city. ⁸These regulations are set by local governments to guide development, control density, and ensure that new construction aligns with the community's vision and capacity for services like public utilities and roads.
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Is floor area ratio the same as density?

Floor area ratio is a measure of building density, but it's not the only way density is measured. While a higher FAR leads to a higher density of building space, density can also refer to residential density (dwelling units per acre) or even population density. ⁶FAR is a specific regulatory tool used to achieve desired levels of density within zoning.
⁵

Can floor area ratio be increased?

In some cases, the allowable floor area ratio for a property can be increased, often through a rezoning process or by participating in incentive programs offered by a city. For example, some cities offer floor area bonuses for developments that include affordable housing units or public amenities. ³, ⁴However, these changes typically require extensive review and approval by planning authorities and may involve a public review process.
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Why is floor area ratio important for property owners?

For property owners, especially those looking to develop or redevelop land, understanding the floor area ratio is crucial because it determines the maximum size of the building that can be constructed. ¹This directly impacts the potential income generation from the property (e.g., number of rental units, total commercial space) and can influence the property's overall market value.