The United States loses more than 4,000 acres of farmland and natural areas to development every day. Traditionally, state and local governments have had two "first generation" regulatory environmental policy tools at their disposal to protect prized farmland, open space, and important historic buildings. Agencies could either pass regulation to restrict development or buy and retire the property along with the rights that run with it. But in recent years, property rights advocates have challenged these regulations by invoking the "takings" clause of the U.S. Constitution, making it difficult for elected officials to pass new development laws. And, while acquisition appeals to many communities since it permanently protects land from development, it is a costly alternative, particularly in periods of fiscal austerity. A better alternative to these two approaches is a program of Transferable Development Rights (TDRs), which is a market-based tool used by states and cities to protect property rights and save money.
TDRs turn on the notion that property rights are a "bundle of sticks." It is possible for a landowner to sell or transfer one stick, such as the right to develop, while retaining all other sticks in the bundle of rights to the land. As of 2003, 134 TDR programs were in place at the state and city level in 25 states. Of these, 61 had environmental protection as their primary goal, 17 used TDRs to preserve environmental areas and to protect farmland, and seven were exclusively to promote historic preservation (Pruetz, 2003). Of these, more than one-half are located in four states: California and Florida, where environmental protection issues are of major importance, and Pennsylvania and Maryland, where farmland protection issues are important.
To set a TDR program in motion, public officials work with community residents to determine which areas they want to develop and which ones they want to preserve. To restrict development, the community then transfers the right to develop away from restricted areas to more suitable development sites. Areas to be preserved are known as "sending sites," while areas targeted for development are the "receiving sites." (Sending sites may also be called "selling sites," and receiving called "purchasing.") TDRs permit landowners in the sending area to sell the right to landowners in the receiving area who are able to build at greater density/intensity than would otherwise be allowed under current zoning. The sending landowner's property is then permanently restricted from the transferred development, usually by a recorded deed restriction. In contrast to regulation, TDRs compensate landowners for keeping land in its current use, rather than selling it for development.
Among the most well-known TDR programs are those in Montgomery County, Md., and the New Jersey Pinelands. Established in 1980, the primary goal of the Montgomery County program is to protect farmland from further development. To date, it has helped to preserve 68,000 acres of farmland in the suburban county.
The New Jersey Pinelands program was established in 1979 to preserve roughly 1 million acres of cedar swamps, oak and pine forest, and berry farms between Atlantic City and Philadelphia. Between 1981 and 1991, 3,200 development rights were severed from sending area properties, resulting in the permanent protection of 5,900 acres of land in the nation's most densely populated state. During that same period, 1,900 development rights were used in receiving areas.
Other examples where TDRs have been implemented are Lake Tahoe (California-Nevada); Boulder, Colo.; New York City; San Francisco; Chicago; and King County, Washington. Among the newest of these is King County's, which in 1998 adopted a three-year TDR Pilot Program proposed by County Executive Ron Sims. Beyond protecting rural forest and farmland, threatened and endangered species habitat, regional trail corridors, and open space, the TDR program increases residential density within the urban unincorporated area and King County's 39 cities where the infrastructure already exists to support housing projects. In order to transfer development rights between cities, both jurisdictions must adopt a formal agreement.
The King County program uses conservation easements to permanently protect sending sites. This acts to keep the sending areas in private ownership and preserves land at minimal Public expense. In exchange for the conservation easement, the county grants sending site landowners TDRs, who in turn sell them to private developers who wish to build at increased densities in the urban areas; at a receiving site each TDR translates into two additional units above base zoning density. At the close of 2007 the current market price of TDRs was $26,000 with nearly $7 million exchanged in the private TDR market. The chart below shows the TDR transaction history in King County.
1. King County's TDR conservation easements do not authorize public access to the land, unless the private landowner specifically agrees to it.
The county also established a TDR Bank, which promotes transfers by serving as a broker that buys, holds, and then sells development rights. In December 2004, the King County TDR bank acquired 990 development rights from the threatened 90,000 acre Snoqualmie Forest. The $22 million transaction permanently protected an area on Interstate 90 that is twice the size of Seattle. Since that time, the TDR Bank has sold some of these TDRs in two separate transactions to developers in downtown Seattle -- one in 2006 for $930,000 and the other in 2007 for $400,000. The revenue from these TDR sales is now being used to purchase development rights from rural lands -- in this way the King County TDR Bank has established a revolving fund for continued land preservation well into the future.
The King County TDR program has now permanently protected more than 91,500 acres -- a protection area more than twice that of any other TDR program in the United States.
Rather than rely on first generation regulatory approaches, states and cities are increasingly finding success with more flexible second generation tools, such as TDR programs. To better balance quality of life concerns with economic growth and constitutionally protected property rights, state and local officials should devise TDR programs that suit their areas' unique development needs.
King County TDR Website
http://dnr.metrokc.gov/wlr/tdr/
New Jersey Pinelands Development Credits
www.state.nj.us/pinelands/
Montgomery County Website
www.montgomerycountymd.gov
William Fulton, Janice V. Mazurek, Rick Pruetz, and Chris Williamson, TDRs and Other Market-Based Land Mechanisms: How They Work and Their Role in Shaping Metropolitan Growth, Brookings Institution Center on Urban and Metropolitan Studies, June 2004
http://www.brookings.edu/reports/
2004/06metropolitanpolicy_fulton.aspx
Rick Pruetz, Beyond Takings and Givings: Saving Natural Areas, Farmland and Historic Landmarks with Transfer of Development Rights and Density Transfer Charges, Arje Press, April 2003
www.beyondtakingsandgivings.com
Virginia McConnell, Elizabeth Kopits, and Margaret Walls, How Well Can Markets for Development Rights Work?, Evaluating a Farmland Preservation Program, Resources for the Future, March 2003
www.rff.org/Documents/RFF-DP-03-08.pdf
Darren Greve
Manager, King County TDR Program
Water and Land Resources
King County Courthouse
Seattle, WA 98104
(206) 263-0435
(206) 296-0192 (fax)
darren.greve@kingcounty.gov
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