Definition
Floor Area Ratio (FAR) is a zoning metric that expresses the relationship between a building’s total gross floor area and the size of the lot on which it sits. It controls development density by limiting how much total square footage can be constructed relative to land area.
In simple terms: FAR determines how much building you can place on a piece of land.
Formula
FAR is calculated as:
FAR = Total Building Floor Area ÷ Lot Area
Example
- Lot size: 10,000 square feet
- Permitted FAR: 2.0
Maximum buildable floor area = 10,000 × 2.0 = 20,000 square feet.
That 20,000 SF could be:
- One 20,000 SF single-story building
- A 10,000 SF footprint over 2 stories
- A 5,000 SF footprint over 4 stories
FAR regulates total bulk, not necessarily height or footprint (those are controlled by separate zoning rules).
Why FAR Matters in Development
- Controls density: Higher FAR = more buildable square footage.
- Impacts land value: Land often trades based on allowable buildable SF.
- Drives feasibility: FAR determines revenue potential for underwriting.
- Shapes skyline and neighborhood scale: Municipalities use FAR to manage growth.
FAR vs. Other Zoning Controls
- Height limits: Cap building height in feet or stories.
- Setbacks: Require buildings to be set back from property lines.
- Lot coverage: Limits percentage of lot covered by building footprint.
- Open space requirements: Mandate minimum landscaping or usable outdoor space.
FAR works together with these rules. Even if FAR allows more square footage, height or setback rules may constrain actual buildable mass.
Bonus FAR and Incentives
Many cities allow developers to exceed base FAR through incentives such as:
- Providing affordable housing units
- Including public amenities or plazas
- Participating in density transfer programs
- Purchasing transferable development rights (TDRs)
These mechanisms increase allowable buildable area in exchange for public benefits.
FAR in Financial Underwriting
Developers often value land based on “price per buildable square foot.â€
Example
- Lot size: 20,000 SF
- FAR: 3.0
- Buildable SF: 60,000 SF
- Land price: $6,000,000
Land basis per buildable SF = $6,000,000 ÷ 60,000 = $100 per buildable SF.
This metric is often more relevant than simple price per lot SF in urban infill projects.
Residential vs. Commercial FAR
- Low-density residential: FAR may be 0.5 – 1.0
- Suburban commercial: FAR may range 0.5 – 2.0
- Urban mixed-use: FAR may range 3.0 – 12.0+
- CBD high-rise: FAR can exceed 20.0 in major cities
Common Pitfalls
- Assuming FAR equals height allowance.
- Ignoring exclusions (mechanical space, parking garages, or basements may be excluded or partially excluded).
- Not accounting for efficiency losses (common areas, corridors).
- Overlooking transfer restrictions on unused development rights.
- Failing to confirm zoning overlays or special districts.
Investor & Developer Checklist
- Confirm base FAR and any overlay district modifications.
- Verify what counts toward FAR (gross vs. net floor area definitions).
- Evaluate feasibility under height and setback constraints.
- Assess whether bonus FAR or TDRs are available.
- Underwrite land based on buildable SF, not just lot size.