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Transfer of Development Rights

The intent of transfer of development rights (TDR) is to concentrate development in areas where it is wanted and to restrict it in areas where it is not. To do so, a sending and a receiving area are designated. Property owners in the sending areas who do not develop their properties to the full extent permitted by the law may sell their unused rights to property owners in receiving areas. The technique may be used to preserve open space, to limit development in an ecologically fragile area, or to achieve historic preservation goals, among others.17

One might ask, "Can this not be done with conventional zoning simply by permitting high densities in some areas and low densities in other areas?" In a literal sense, the answer is yes. However, in a practical sense, the answer may be no. Assume that the intent of the community master plan is to keep development very sparse in a particular area. If the community simply zones that way—say, a minimum lot size of 10 acres for a singlefamily house—it may have imposed large losses on property owners. Even if it can win in court, the municipality has created a constituency opposed to the plan. On the other hand, if it gives the property owners salable development rights, both their motivation and grounds for suit are eliminated. If the municipality wishes to preserve old buildings in a historic zone, one way to do it is to let the property owners there have salable development rights. When they sell their development rights to property owners in an area where the municipality wants growth (the receiving area), they will no longer want to tear down their old buildings since, having sold their rights, they can no longer redevelop at higher densities.

Won't the property owners in receiving areas object to, in effect, having to buy off owners in sending areas? Not necessarily, since if purchasing development rights is not profitable, receiving area property owners will not purchase them. Presumably a market in development rights will develop, the price moving to a position high enough to motivate owners in the sending area to sell, yet low enough to make purchase profitable for property owners in the receiving area.

For the municipality, the technique, like zoning itself, is essentially costless. The payments to some property owners come not from the municipality's taxpayers but from other property owners. Whether the municipality's taxpayers may ultimately pick up some of those costs in the form of higher rents and higher prices is another issue.

This technique was the object of some controversy during its first years, in part because it appeared that it might be susceptible to some abuse. After all, if the owners of land in "rocky promontory" or "trackless swamp" were given salable rights, that would be a windfall, and yet a developer elsewhere might still be willing to pay for them. However, despite initial doubts, the technique is proving itself. For a particularly successful example, see the box on pages 153-155. For a study of the conditions under which TDR seems to work best, see Rick Pruetz and Noah Standridge.18

A glass-roofed arcade connects two parallel streets at the AT&T headquarters building in Manhattan. Some willingness to deviate from the rigidities of traditional Euclidean zoning is usually necessary to achieve an interesting and unusual result like this.

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