Property and flying cars - the dots connect
Are we trying to connect them going forwards or backwards?
Global real estate is complex and dynamic, but also encumbered in many cases by old imprecise processes and systems. It can be difficult to arrive at precise figures when looking at it’s size. The details from Savills an international property firm appear as good as any.
The global investable real estate asset market is worth around $228 trillion
Government is instituted to protect property of every sort. - James Madison
Should you care about your air rights?
Air rights refer to the legal rights to use, control, and own the space above a property or land. The concept of air rights has become increasingly relevant with the rise of drones and other Unmanned Aerial Vehicles (UAVs). Drones are used for among other things; aerial photography, surveying, inspection, medical and food deliveries. UAV use raises fundamental questions about property rights, privacy, safety, and regulation. Hard questions with some difficult problems to solve.
The legal framework for air rights and drones varies across different countries and jurisdictions but there are general underlying principle in countries that value personal property rights is that the person who owns the property controls the property.
In the United States, the Federal Aviation Administration (FAA) regulates the safety of airspace but does not own it. The FAA has issued rules and guidelines for commercial and recreational drone operations, including registration requirements, flight routes, and safety standards. The FAA's authority over airspace is limited and they do not have the ability to give anyone, including large UAV companies the right to transit through someones air space. You cannot give what you do not have. Property owners own the air rights to the airspace above their land.
Several legal cases have addressed the issue of air rights and drones, such as United States v. Causby (1946), in which the Supreme Court held that a property owner had a right to "immediate reaches of the airspace" above their land and that government activities that interfered with this right could constitute a taking. The owner of the property owns the air rights and it is generally accepted to be to apx c. 500-1000 feet above the property. On top of this Supreme Court ratification over 52% of US states, and counting, have fully vested air rights in the property owner to allow matters work more efficiently.
There are a number of UAV delivery programs already happening, including Walmart, Amazon and others who are operating in the US, Australia, Ireland, Europe the U.K and elsewhere. Speaking to some of the landowners in these locations, none of them have given permission for the air rights to be used. While the benefits of drone delivery is largely accepted in these locations these economic benefits are flowing one way to the UAV companies. The air rights owners want to be part of the eco-system but are not represented well.
UAVs need the right to transit. More than that they need a clear route not broken and disrupted. They need highways in the sky. Each piece of land is conceptually attached to the air above it, Supreme Courts and legislators have enshrined this. Unaggregated these individual air rights parcels have value that needs aggregation to increase it. The air rights owner wants to generate income and the flying cars needs their permission - let’s connect the dots and see what else this asset class can deliver in terms of economic growth. jonathan@skytrades.io
Air development rights | air rights - sides of the same coin
You can trade air development rights or transferable development rights which are attached to zoning measures. The problem however is this market is illiquid and has massive amounts of friction. The friction comes in many forms including from lawyers re-registering paper work thats already been checked multiple times through the years. Checking old paperwork, creating new paperwork and agents making sure everything needs to be charged is remarkably inefficient. Not to mention zoning and everything else that goes with that drawn out slow and painful process.
The rights to construct to a certain level of density above an existing building are traded with the owner of another plot. This enables them to develop at a greater density (or higher) than would otherwise have been permitted. This is mainly predicated on zoning laws and what way the local government wind blows.
In the UK the owner of a property will also own the rights to the air above the property that they could reasonably use (excluding the commercial flight paths of aircraft). This use includes gaining an economic benefit from their air space. They may, subject to planning permission, be able to develop above their property. These rights can be sold or leased, enabling the construction of ‘air-rights’ buildings in an illiquid market. Typically, air-rights buildings are constructed above existing infrastructure such as roads or railways, or over buildings such as low-rise shopping centres that may have been developed when space was at less of a premium.
Removing the need to build and get planning permission but to be able to utilise air rights as an asset for a different use case is clear.
In choosing to use the historical size of (a) market (we are) making an implicit assumption that the future will look quite like the past.
- Bill Gurley
Unlocking growth
If we cast our minds back to those days before Airbnb, to think of allowing a stranger in your home seemed crazy to many people, including those who passed on Airbnb as an investment. Or Uber, surely the TAM for taxis was too small and who wants to get into a strangers car if they don’t have a sacrosanct yellow medallion? What was unknown was the growth would not be released from assessing it on current knowledge - we needed to be assessing it from a future position. With fragmented air rights, ambitious UAV companies and tradable assets the route is clear.
How can any property owner make money from the air above their property? We have the answer jonathan@skytrades.io
Vertiports
SkyScape, the Osaka-based firm with ambitions of becoming a leader in Japan's emerging vertiport industry reveals they have landed exclusive contracts with two firms, which they believe will help establish a strong foundation in the Japanese market.
Bayards Vertiport Solutions, part of the Bayards Group, brings in over sixty years of aviation facility development experience. SafeHub Systems, based in Cincinnati, is developing a high-technology check-in and screening system.
Uncrewed operations is the ultimate ambition and companies like Eve, a spinoff of Brazilian airliner manufacturer Embraer, have disclosed plans to deploy 140 eVTOLs in Australia alone, with even bigger fleets in cities such as Paris, London and New York. Eventually, they’ll all be autonomous and uncrewed, but to start with they’ll all be piloted.
Wisk (partnered with Boeing) plans to go uncrewed from the start and earlier this month, with an eye to the 2032 Olympic Games in Brisbane, released an Advanced Air Mobility Vision white paper in partnership with the South East Queensland Council of Mayors.
Next steps
Walmart, Amazon and Alphabet plus a handful of smaller companies are using private air space to launch drone delivery services without benefiting landowners. This poses a threat to landowners' airspace rights as commercial delivery drones fly within a few hundred feet of the ground through space that historically belongs to landowners. The Supreme Court has affirmed landowners' rights, and a recent Michigan case even directly applied this principle to drones, finding that flying drones over another person's property without permission or a warrant constitutes a trespass.
Drone delivery companies have been lobbying for policies that would ignore landowners' airspace exclusion rights. Unable to convince Congress to broadly preempt state property laws, they have adopted a less conspicuous strategy by securing FAA Part 135 air carrier designations authorizing commercial drone delivery operations that disregard the airspace exclusion rights of the underlying landowners involved. While most of these pilot programs initially allow drone deliveries only within a few remote locations, the FAA is already beginning to let drone carriers expand their operations into major suburban areas.
It’s time to embrace an alternative approach that would respect, rather than undermine, landowners' long-held airspace rights.
How to make it work
To be clear I wanted more UAVs and a flying car, I also want those who own the air rights to be involved. We are helping property owners assert their airspace rights and benefit from them.
Our company is defining property owners' air rights in a marketplace so that the owners can sell, license or park the right to transit through their air space. This will allow routes to collectively form for autonomous commercial drone flights and property owners to allow or not allow the use of their space.
This approach respects landowners' airspace rights and leverages market forces to efficiently balance drone-related airspace uses with landowners' uses of that space. It will allow landowners, from municipalities to large and small property owners directly share in the new economic value created and get me my flying car.
For those who have been asking how they can support with investment and introductions please contact me directly Jonathan@skytrades.io
