Transfer of Development Rights
(TDR)
Transfer of Development Rights

A way of dealing with rights instead of land
• possession
• exclusion
• transfer
• compensation
• economic gain
Transfer 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 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 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 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 Rights
sending
receiving
sending
receiving
Transfer of Development Rights

What makes a TDR program effective?
– Ease of Understanding
– Managed Growth
– Adequate Incentives
– Careful Management
Transfer 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 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 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 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 Practice

Pinelands, NJ
– Regional authority
– Pinelands Commission
TDRs in Practice

The Pinelands
TDRs 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 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 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 Practice

Pinelands, NJ
– Sending Areas
• Localities determine what they want preserved
• Scattered preservation not advised
• Encourage diversity of sending property owners
TDRs 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 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 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