Property investors who want to make money out of nothing need to explore how air rights impact the value of land and properties.

Air rights have always been there, but it’s only recently that the extra space have added value to homes.

Air rights add a new dimension to extending land or a property and investors who don’t understand how they work could be missing a costly trick.

Air rights and property development

Air rights are not something for nothing – if property investors invoke their rights, the tax man will want a slice of the pie.

HM Revenue & Customs will tax the value air rights add to a property under capital gains tax rules.

CGT is applied to any building on a plot of land, any object fixed to the land, like a wind turbine, mineral rights and any air space above the land.

Your air rights

Air rights are the building space extending upwards from the land you own – including any upwards extension to any building that’s already there.

The Civil Aviation Act limits air rights.

Investors cannot build so high that a property interferes with the free passage of aircraft and local planners may place restrictions on a development’s height, covering issues like how a building impacts the skyline and the right to light of neighbours.

Rulings are rare and can vary between council planners depending on local factors, with a rule of thumb is air rights generally extend between 500 feet and 1,000 feet above a plot of land.

The importance of air rights

The price of a plot of land or a building don’t typically include air rights, but valuers are increasingly including them.

Say an investor buys a plot of land at auction that comes with a two-storey house.

Many investors would look at the plot and see a chance to add value by extending the house outwards or into the loft, but other more canny buyers might see a flat-roofed property could push upwards a floor or two to push the value even higher.

This becomes even more of a possibility with the latest government announcement to allow developers to add two storeys to a home under permitted development rights.

Some architects argue that air rights are a long-overlooked solution to housing demand.

Robert Wilson, architectural director at Granit, explains development sites are increasingly hard to find in urban areas, building upwards allows people to live in city centres near offices, shops and entertainment while releasing the pressure to develop green belt areas.

He also points out land rich but capital poor property investors can exploit an untapped source of income.

He cites the example of a client wanting to convert two one-bed apartments to two duplex apartments by going upwards from the roof.

Another of the firm’s clients is adding six penthouse flats to the top of a mansion block by exploiting air rights.

Air rights can also become a key issue with properties going under the hammer. It’s feasible that the air rights and PDR will allow distorted development values, with homes with potential for building up and out going cheaply to canny buyers at property auctions.

Air rights v right to light

Right to light stops neighbours developing their land in a way that obstructs each other’s windows.

Surveyors carry out some complicated math to arrive at how much light someone should enjoy, and if a building then interrupts that light, the wronged party can seek compensation.

Air rights can easily interfere with the right to light and any development close to another building can infringe the path of light, so developers must make sure any air rights stay within the correct parameters.

Find out more about right to light

New PDR for flats explained

Housing Secretary Robert Jenrick has revealed new permitted development rights (PDR) for the owners of blocks of flats.

Owners can now add two storey extensions to detached blocks of flats that are already three or more floors high.

The PDR comes with conditions:

• The flats must have been built between July 1, 1948 and March 5, 2018
• The block must be purpose-built as flats
• Any new floors must have the same floor to ceiling height as the current floors and can measure no more than three metres in height

New PDR for homes explained

Following on to his PDR proposals for flats, Jenrick also announced plans to rejig PDR for homes and commercial buildings from September 2020.

Owners, including landlords, can add two floors to a home without planning permission, bearing in mind the impact on neighbours and how the extension looks.

He also laid draft legislation before Parliament that will open the way for commercial property owners to demolish and rebuild as homes with fast-track planning permission.

PDR and air rights

The new PDR rules make exploiting their air rights to build higher or convert commercial property to homes much easier.

For instance, house in multiple occupation landlords can explore adding rooms to generate more rents and increase the value of a property.

Commercial landlords will also have an easier planning path to repurposing their properties as housing.

Air rights FAQ

Air rights may have been around for years, but they a new financial opportunity for developers, landlords and other property investors seeking to monetise their land and buildings in urban neighbourhoods.

They can represent a real opportunity to double up on the value of land and property in built-up neighbourhoods.

If you are unsure of your air rights, here are some answers to the most asked questions about making the most of them.

Do all land and buildings come with air rights?

Yes, although local planning restrictions may limit how high a development can go.

Do air rights apply to all properties?

Yes, air rights apply to bare land and/or buildings on that land with some exceptions, like pubs, village shops and libraries.

The idea of the new PDR is to enhance a neighbourhood without ripping out the heart of a community.

How is the value of air rights worked out?

There’s no going rate or price per cubic metre, the value of air rights depends on the merits of each building or development.

Can I keep my land and building but sell the air rights?

In principle, this is OK. For example, the owner of plush prime real estate may want to make sure views over your land are retained for tenants, which could make your air rights more valuable.

How are air rights claimed?

You took over the air rights to the property you own when purchase was completed unless the deeds show that they had already passed to someone else.