How Transfer-of-Development Rights Will Help Your City Grow Smarter

Cities have experienced rebirth and with it changes to the urban landscape, both good and bad. Urban neighborhoods are receiving new development and employers are relocating from suburbs to city centers. This urban growth increases the tax base, funds new services, reinvigorates local economies, and attracts new investors, residents and employers. The flip side of this urban redevelopment is widespread displacement, especially to many low-income communities of color, over-speculation; and as affordable housing disappears, historic structures are demolished, more stormwater is displaced into sewer systems, and open, public spaces can be lost.

 The key question for municipal governments, especially those with a surplus of developable land and growing demand, is going to be: how can we benefit from new economic development while simultaneously preserving important land uses? To address this challenge, governments might consider the concept of “smart growth” that became popular during the past few decades in response to sprawl. Smart growth is an approach to allowing continued growth while simultaneously preventing sprawl and preserving important land uses. 

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One popular tool amongst smart growth experts is the transfer-of-development rights (TDR) market program. TDR programs can incentivize growth but protect land uses from creeping speculation and development. These programs start with a city designating geographic zones: a sending area, a region where the city wishes to preserve current uses, and a receiving area, a region where density and development are encouraged.

Developers with projects in the receiving area purchase the development rights from landowners in the sending area. The developer (the buyer) provides the landowner (the seller) with cash equal to the value of the land and in exchange the developer receives density bonuses in the form of additional units or a floor-to-area ratio increase for a development in the receiving area. The landowner can use the cash for any purpose but must sign an easement that legally binds them to preserve the land’s current use. The TDR program ensures that a city doesn’t lose any tax revenue from land preservation since it’s transferred to another property instead of eliminated. 

A TDR program can help preserve a variety of land uses without hindering development. TDRs have been around for decades but are still only being implemented in a few states. Typically, TDR programs were implemented by multi-jurisdictional government entities, like counties, to protect large open spaces on the edges of metropolitan areas. TDR programs functioned like this because the tension between vital land uses and emerging development existed on the fringes of metropolitan areas; TDR programs hoped to manage this tension in a productive way. Here’s a list of some of the land uses that TDR programs have preserved in the past:

  1. Farmland – As mentioned in the above example, a TDR program could be used to preserve farmland. To date, this has been their most popular purpose. Often, counties employ TDR programs to preserve farmland since agricultural zones are unincorporated and therefore under county jurisdiction. The farmer is paid to keep his farm in production as is and can use the cash for personal use or operation expenses. Governments that have already put this into practice are Waukesha County, WI and Montgomery County, MD.
  2. Natural Open Space – TDR programs have been used to preserve critical habitats and natural resources within a city. Often, these natural areas lie several miles out from the city center but border fast-growing neighborhoods. Open space on private property is best when preserved as is; once that land is sold and developed, critical connectivity with other public or private natural land is lost and that open space is hard to replace elsewhere. Conservation easements ensure that no housing or development of any kind will be built on a given property. Successful TDR programs for open space preservation have been implemented in New Jersey Pinelands, NJ, and King County, WA. King County’s TDR program in particular has been wildly successful, preserving 141,000 acres of open space, building 2,467 dwelling units in more productive areas, and generating $7.13 million for private landowners. King County also has a TDR bank, allowing them to keep track of all available development rights and place them into an online TDR exchange portal were developers can find and buy development rights from private landowners.
  3. Historic districts – Growing demand for dense, urban living can spur new development within older neighborhoods. This often results in the demolition of many historic buildings, decimating the social and economic character of certain urban areas. Not every building can be designated a landmark and historic districts are sometimes met with resistance since it restricts development that could potentially meet growing demand. A TDR program with historic preservation in mind still enforces a system similar to historic district designation but additionally incentivizes new development nearby. Historic corridors have been put aside as selling zones while the surrounding blocks are labeled buying zones in New York City and Pitkin County, FL.
  4. Green infrastructure and urban gardens – Most urban land markets function in a way where valuable land is likely to be developed. But this means the loss of permeable space, forcing more stormwater to runoff into aging and overwhelmed combined sewer systems. Neighborhoods also lose community gardens. Often ran by nonprofits and community groups, community gardens provide invaluable dietary and social benefits to local populations. Cities concerned with preventing the loss of urban agriculture and encouraging stormwater infiltration should implement their own version of a TDR program. The program’s structure would be inspired by King County’s example: establish a TDR Bank that purchases the development rights from existing urban gardens run by community organizations as well as publicly-owned stormwater management assets like parks and wetlands then sells those rights to developers elsewhere in the city. The funds obtained in exchange for the development rights from publicly-owned land would then be used by the city to build new green infrastructure features within neighborhoods. Additionally, the city would offer owners of community gardens the choice to have their land transferred to a community land trust. This buffers landowners from the financial stresses of rising property taxes that an easement does not protect from and connects community gardens to the surrounding neighborhood. The Allegheny Land Trust is conducting feasibility studies on a TDR program with similar features in Pittsburgh, PA.

Recently, TDR programs have been revisited as a tool for new forms of preservation. The tension between development and open space has shifted from the outskirts to the centers of metropolitan areas as demand for city-living increases. Fortunately, TDR programs can be re-imagined and constructed to facilitate an exchange of development between parcels only blocks apart. New urban land uses like community gardens and stormwater retention sites are being researched for potential preservation via a TDR program.

As cities grow or transform through new development projects, TDR programs should be revisited and seen as an important tool for planning departments. Land with vital public uses can be preserved without hindering development or reducing revenue. Despite being traditionally used to preserve large open spaces, TDR programs are becoming more flexible. King County has shown how TDR programs could function in an age of the internet. Data at the parcel-level is much easier to manage and access for cities. Therefore, TDR programs no longer have to be about one-to-one matchmaking; they can function like a true market with a virtual exchange of amassed development rights. More research is being conducted on these TDR programs; city and state governments should take notice.

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