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Conservation Tools: Transferable Development Rights - Conservation Easements - Conservation Subdivisions

TRANSFERABLE DEVELOPMENT RIGHTS

Adapted from "The Potential for Using Transferable Development Rights to Protect Georgia's Critical Open Space" by Joe Covert, Autumn Rierson, William Jones, Melissa Bledsoe, edited by Seth Wenger and Laurie Fowler, published by the Office of Public Service and Outreach, Institute of Ecology, University of Georgia, Athens, Georgia, 1999.

INTRODUCTION

Transferable development rights (TDR) programs allow local governments to preserve a community's rural character and natural, historic and scenic resources, while protecting property values and accommodating growth. TDR programs can be more attractive to developers than conventional development options.

Under a TDR program, development rights are transferred from "sending zones" which are designated for protection to "receiving zones" which are designated for future growth. Conservation easements provide permanent protection from development in the sending zone.

In 1998 the Georgia General Assembly passed legislation which authorizes local governments to implement TDR programs. These programs have been used successfully in other jurisdictions to preserve important agricultural and ecologically sensitive lands and historic landmarks; to stimulate economic growth; and to manage urban development.

HOW TDR PROGRAMS WORK

With local input, the local government establishes the sending area/s where development is to be limited and the receiving area/s, where increased development is to be encouraged. Property owners in the sending site may give up the right to develop their land and receive development credits in return. These credits can be freely sold or traded to anyone; the price of the development credit is left up to the participants and the free market, just as if the land itself were being sold. The sending site is then placed under a conservation easement, a legal agreement restricting development.

When a property owner in the receiving area purchases the development credits, he is allowed to expand development bevond current limitations. Typically the buyer is either a residential developer, who can build houses on smaller lots with development credits, or an industrial or commercial developer, who can increase the floor size of the work or sales area on the lot as dictated by the number of credits purchased (up to a specified minimum). In a successful program, the TDR credits are worth more to the seller than the unused development potential of the land and the buyer's profit from the increased development exceeds the costs of the TDR credits.

SELECTING THE SENDING AREA

Selecting the sending area is often quite simple since many TDR programs are created for the protection of specific geographic regions, such as prime agricultural land, or sensitive land adjacent to streams and wetlands. These are areas where the government has deliberately avoided providing such services as sewer and extensive road networks in order to discourage growth.

The most successful TDR programs are mandatory. These programs restrict the land use in the sending area by down zoning property. Agricultural property, for example, may be down zoned from five acre lots to 25 acre lots. Under an optional TDR program, the local government does not down zone the property. Landowners in the sending areas may continue to develop their property into five acre lots, or they may sell their development credits and voluntarily limit development on their land.

Regardless of whether the program is mandatory or optional, the local government assigns land in the sending area a certain number of credits. In many programs this is a fixed value, such as one credit per five acres. This is effective when all land has roughly the same conservation or resource value. Under the mandatory scenario described above, for example, the owner of a twenty-five acre parcel would be given five development credits. He may use one credit to build a house on the agricultural land and sell the remaining four for use in a receiving area, or he may sell all five credits and permanently prohibit all dwellings on his land. Alternatively, a TDR program could assign a higher number of credits for more sensitive or valuable lands. For example, forest might be valued at one credit per acre while wetlands might be valued at 1.5 credits per acre.

SELECTING THE RECEIVING AREA

Determining the geographic boundaries of the receiving area may be challenging. Finding an area appropriate for more dense development largely involves determining which area can best provide the necessary infrastructure such as roads, schools, water and sewer capacity, and police protection. The receiving and sending areas should not be so far apart that the population in one region suffers a net loss in economic development while the other is burdened with excessive development.

A two-tier zoning structure is established for receiving areas. The base zoning level is that level of development permitted without development credits. The upper zoning tier reflects the maximum development density allowed with the purchase of development credits. Generally this upper tier should be the development density indicated in the community's future land use map.

Overzoning must be avoided when establishing receiving areas. If, for example, a community's downtown is already zoned for industrial or commercial development beyond which the market can bear, there will be no demand for development credits. If there are multiple receiving areas, it must be determined if credits will provide uniform increases in development for each of these areas. Uniform increases are simpler but may result in uneven demand if one receiving area is substantially more attractive than others to developers. Whether this is a problem depends on the purposes and interests the TDR program reflects.

The local government must decide whether denser development in the receiving area is allowed only through the use of TDRs. Developers with other options, such as rezoning, may choose the more traditional and familiar method even if purchasing development credits would be more profitable. The valuation of development credits is left up to the free market. Price is generally determined by the number of credits assigned per acre in the sending area, the number of acres in the sending area, the demand for increased development in the receiving area and the amount of development in the receiving area that each credit permits. If methods other than purchasing development credits tan be used to increase density in the receiving area, the value of the credits will also be influenced by developers' preference for TDRs versus other methods.

TDR BANKS

Transferable Development Rights banks have been established by many local governments as a means of providing insurance to landowners in sending areas. The bank, which is funded by the government, purchases development credits from landowners if they are not otherwise able to sell them. A TDR bank can also serve as a center for contact between landowners and developers, facilitating sales and reducing transaction costs for participants.

OBSTACLES TO OVERCOME

Georgia's TDR legislation requires that a local government hold hearings prior to the designation of both sending and receiving areas, to assure the public an opportunity to fully participate in the development of the program. The legislation, however, also requires a deliberation of the governing body prior to each individual transfer. This requirement is redundant and furthers no public purpose. In fact, it delays the process at some cost to the seller of the TDR and the developer who will use it. Experience around the country indicates that TDR programs are successfully only where their use is made as easy and streamlined as possible. Unless the extra hearing provision is removed, it is unlikely that TDRs will be widely used in the state. Corrective legislation is expected to be introduced in the 2001 Georgia General Assembly.