Transfer of Development RightsTransfer of Development Rights(TDR)(TDR)

Transfer of Development RightsTransfer of Development Rights

A way of dealing with rights instead of land

• possession• exclusion• transfer• compensation• economic gain

Transfer of Development RightsTransfer of Development Rights

TDR creates an incentive-based approach to land conservation

– Conserving farmland and / or open space

• Sensitive areas

• Green belts

– No mandates for implementation

• A framework for a market-based approach to protecting land from excess development

Transfer of Development RightsTransfer of Development Rights

Requires enabling legislation of some sort in most states

– State delegating power to localities

– Localities then create a market

– The market consists of rights to develop

– These rights are transferred from seller to buyer

– The market is managed either by the locality or by a broker designated by the locality

Transfer of Development RightsTransfer of Development Rights

Basic Elements: Sending and Receiving Areas

– Sending Areas

• Areas intended to be preserved

• Area may or may not be restricted through zoning or other development regulation

• Owners in sending areas sell all or some of their rights to develop

• The economic gain from sale compensates owner for restricted land use regulation

• A deed restriction prohibits development on subject property permanently

Transfer of Development RightsTransfer of Development Rights

Basic Elements: Sending and Receiving Areas

– Receiving Areas

• Areas in which purchased development rights are exercised

• Intended to focus development in critical areas (redevelopment, growth centers)

• Development rights allow purchasers to go beyond existing land use regulations

Transfer of Development RightsTransfer of Development Rights

sending

receiving

receiving

sending

Transfer of Development RightsTransfer of Development Rights

What makes a TDR program effective?

– Ease of Understanding

– Managed Growth

– Adequate Incentives

– Careful Management

Transfer of Development RightsTransfer of Development Rights

Ease of Understanding

– Simple for everyone to understand

• Buyers, sellers, citizens at-large: all participants

– Creates strong political commitment

• Takes time to become successful

• Must be mandatory rather than voluntary

Transfer of Development RightsTransfer of Development Rights

Managed Growth

– Must be part of an overall comprehensive planning process

• Vision of future

• Strong (some say inflexible) zoning ordinance

• Fit TDRs into public’s expectations

• Plan must include rational areas for sending and receiving development rights (to include not only patterns of development, but infrastructural support for that development)

Transfer of Development RightsTransfer of Development Rights

Adequate Incentives

– Incentives for “senders” to sell their rights

• Value should be predictable

– Incentives for “receivers” to buy rights

• Development rights should be easier to obtain than variances or special use permits

Transfer of Development RightsTransfer of Development Rights

Careful Management

– Transactions

• TDR Bank

• Setting “floors” during slow economic periods

• Providing a broker through which unsophisticated sellers and buyers can do business

– Land use terrain

– Public Relations

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Regional authority

– Pinelands Commission

TDRs in PracticeTDRs in Practice

The Pinelands

TDRs in PracticeTDRs in Practice

Pinelands Commission

– Regional Agency in S.E. New Jersey

– Jurisdiction over 52 municipalities and 7 counties

– Required a Comprehensive Management Plan (CMP)

– Developed an inter-municipality density exchange

– 1996 amendment to Municipal Land Use Law

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Allows developers to meet minimum lot size & density requirements

• Uses off-site lands as sending areas (“out lots”)

• Density sent to receiving areas (“mother lots”)

• Used in place of variances

• Used within and between zones in the commission’s jurisdiction

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Receiving areas

• Should be next to or within already developed areas

• Should be near existing infrastructure

• Should not be located in environmentally sensitive areas

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Sending Areas

• Localities determine what they want preserved

• Scattered preservation not advised

• Encourage diversity of sending property owners

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Maintenance of out parcel

• Use on lots is diminished / limited but not banned completely via TDRs

• Agriculture, forestry & passive recreation encouraged

• May need to link sending and receiving lots via ownership (by deed)

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Tax Complications

• How liable is the owner of the “mother lot”?

• Who acts as steward for “out lot”?

– Neighbor

– Neighborhood

– Conservancy group

• Satellite parcels may be linked by tax office

TDRs in PracticeTDRs in Practice

Pinelands, NJ

– Easement vs. Fee Simple Purchase

• Fee Simple ownership is outright ownership

– Good for parcels owned by individuals

– Bad for parcels owned by groups (POAs, HOAs)

• Easements

– Difficult to manage, because rights are split between legal entities