A Quick Comparison

Picture a 20-unit walk-up on a 5,000 SF lot, bringing in $600,000 a year in gross income against $220,000 in expenses — a $380,000 NOI. At a 5.5% cap rate, that prices out to roughly $6.9 million as an income property.

Now say that lot sits in a district zoned for FAR 6.0 — nearly three times the density of what's currently built. That's 30,000 buildable square feet. At a conservative $300/BSF land benchmark for the submarket, the site is worth roughly $9.0 million before even running a full residual land value model. In this example, the land is worth about 30% more than the income stream — and that gap tends to widen once a buyer factors in the tax treatment of the new building they'd construct. (This example is illustrative only — every site needs its own current analysis; see our guide on how land value gets calculated for the full method.)

Three Conditions That Tip the Scale to Land

  • Unused zoning. The bigger the gap between what's built and what's legally allowed, the bigger the land premium.
  • Recent density increases. The 2024 repeal of the state's residential FAR cap and a wave of neighborhood rezonings through 2025 expanded what many sites can support — sometimes without the owner ever rechecking. See our rezoning guide.
  • A clean path to vacancy. Free-market tenants on short leases make a site easy to deliver; heavily rent-stabilized buildings make it hard.

The Tax Incentive Most Owners Don't Factor In

Here's the piece that's easy to miss: a buyer isn't pricing your building off your current rent roll — they're pricing off what a new building on that lot could earn, under the tax treatment that new building would get. A rental project that qualifies for 485-x carries a much lighter long-term property tax load than an unincentivized building, which directly increases what a developer can justify paying for your land. That's a major reason land buyers have been able to outbid pure income buyers for older multifamily properties lately — they're not valuing your rent roll, they're valuing the 485-x-eligible building that could replace it.

If your building includes a meaningful commercial or mixed-use component, or sits on a lot that's mostly non-residential, 467-m conversion economics may be the more relevant comparison instead.

Rent Stabilization Cuts Both Ways

It's usually framed as a value-suppressor, and it is: a building with a meaningful number of rent-stabilized units is far slower and more expensive to deliver vacant, which can discount land value 30–60% below an equivalent empty lot. But the flip side matters here too — a building that's mostly free-market, on short leases, is a genuinely clean development-site candidate, and the land-value case for it is correspondingly stronger than owners often assume.

Get Both Numbers

None of this means every multifamily building is secretly worth more as land — plenty of stabilized, well-tenanted buildings in built-out neighborhoods are worth more exactly as they are. The point is not to assume either way. Before refinancing, listing, or waving off an unsolicited offer, get both numbers and see which one actually wins.