Background

Transfer of development rights (TDR) programs use market forces to promote conservation in high-value natural, agricultural, and open space areas and encourage the preservation of open space and ecologically sensitive areas (such as wetlands), agricultural and forestland, and historic landmarks.

Under TDR programs, property owners yield some or all of the right to develop or use part of their parcel of land. Those development rights are then transferred to another portion of the same parcel of land or another parcel of land so that it can be more intensely developed.

Zoning policies were the first attempt at establishing a balance between individual property ownership and the general public’s welfare. In 1916, New York City (NYC) became the first city to enact zoning laws to combat skyscrapers that had blocked out the sun for neighborhood residents.(1) Landowners were allowed to sell their unused air rights to adjacent lots that could then exceed height and setback regulations. Later, in 1965, NYC passed the Landmark Preservation Law and created the Landmarks Preservation Commission, which sought to ensure that a “reasonable return” was given back to property owners, and provided for TDR. In the 1980s, “command and control” regulations became less popular and market-based approaches began to be considered as alternatives. As a result, TDR became an option for local governments trying to protect lands for public use and increase economic activity through development.

TDR programs have become increasingly popular. Roughly, 134 local municipalities have adopted TDR ordinances and amended local zoning regulations to accommodate voluntary TDR programs. Montgomery County, Maryland, implemented a TDR program in 1981 and, as of 2004, has permanently protected more than 43,000 acres of open space and agricultural land.(2) Pinelands, New Jersey, adopted TDR legislation in 1987 that encompasses a million acres of land and allows trades between 60 different municipalities.(3) For a list of more local municipalities that have implemented TDR programs, visit the American Planning Association.

Twenty-two states have enacted legislation, and six others have proposed legislation, to include provisions for TDR. In May 2004, New Jersey signed into law a comprehensive statewide TDR program. The bill grants municipalities the flexibility to adopt a TDR program that meets their specific growth and preservation needs to ensure that regional planning needs are taken into consideration. It also authorizes a municipality or county to establish a TDR bank to facilitate the buying and selling of development credits. Alternatively, a municipality or county may opt to use a state TDR bank (if one exists) for these purposes. Other states, like New York, Georgia, and Delaware, have enacted similar legislation, but none grant as much flexibility and authority to municipalities and counties as the New Jersey legislation. See the State Activity part of this package for information on other states’ approaches to TDR.

State enabling legislation that expressly authorizes local governments to establish TDR programs is important to help local governments create successful TDR programs. Successful TDR programs consider the following:

• A clear and valid public purpose for applying a TDR program, such as open space preservation, agricultural or forest preservation, or the protection of historic landmarks.
• Clear designation of the sending areas and the receiving areas, preferably on the zoning map.
• Consistency between the location of sending and receiving areas and the policies of the local comprehensive plan, including the future land-use plan map.
• Recording of the development rights as a conservation easement, which will inform future property owners of the restrictions and make them enforceable by civil action.
• Uniform standards for what constitutes a development right, preferably based on quantifiable measures, like density, area, floor-area-ratio, and height, should be used to determine what development right is being transferred.
• Sufficient pre-planning in the receiving area, including provisions for adequate public facilities.
• Sufficient allowable density in the receiving area to help ensure development is economically viable. If the receiving area is zoned to allow development at market capacity without the TDRs, there will be little demand for the TDRs and their market value will be diminished.

Sources:
(1) Hanly-Forde, Jason et al. “Transfer of Development Rights Programs: Using the Market for Compensation and Preservation.” Department of City and Regional Planning, Cornell Cooperative Extension, Cornell University. 28 January 2005 <http://government.cce.cornell.edu/doc/pdf/Transfer%20of%20development%20rights.pdf>.
(2) “Agricultural Facts.” Department of Economic Development, Montgomery County, Maryland. Page last update November 2003. 28 January 2005 <http://www.montgomerycountymd.gov/mcgtmpl.asp?url=/content/ded/AgServices/agfacts.asp>.
(3) Pruetz, Rick. “Transfer of Development Rights Update.” Arizona State University, College of Architecture and Environmental Design, 1999. 28 January 2005 <http://www.asu.edu/caed/proceedings99/PRUETZ/PRUETZ.HTM>.