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Transfer of Development Rights (TDR) is a zoning technique used to permanently protect farmland and other natural and cultural resources by redirecting development that would otherwise occur on these resource lands to areas planned to accommodate growth and development.
Transfer of Development Rights (TDR) is a zoning technique used to permanently protect farmland and other natural and cultural resources by redirecting development that would otherwise occur on these resource lands to areas planned to accommodate growth and development. Under Pennsylvania law, use of TDRs must be voluntary. The municipal zoning ordinance cannot mandate that a landowner of developer use TDRs, but it can make the TDR option very attractive.
Transfer of Development Rights programs enable landowners within valuable agricultural, natural and cultural resource areas to be financially compensated for choosing not to develop some or all of their lands. These landowners are given an option under municipal zoning to legally sever the “development rights” from their land and sell these rights to another landowner or a real estate developer for use at another location. The land from which the development rights have been severed is permanently protected through a conservation easement or other appropriate form of restrictive covenant, and the development value of the land where the transferred development rights are applied is enhanced by allowing for new or special uses, greater density or intensity, or other regulatory flexibility that zoning without the TDR option would not have permitted.
Transferable Development Rights removes some of the windfalls and wipeouts associated with conventional zoning by allowing landowners in areas typically zoned for agricultural and very low density residential use to capture some of the same financial rewards available to landowners located in areas zoned for suburban and urban land uses.
An advantage of the TDR tool is its design flexibility. Experience has shown that it can be made to fit many different land preservation and growth management scenarios. For example, development benefiting from TDR receipt can be residential or non-residential. Residential developments using TDRs typically include added uses (e.g., townhouses in addition to single-family detached units), special uses (continuing care retirement communities), increased density (measured in dwelling units per acre), or flexibility with zoning’s area and bulk standards (variations on setbacks, lot sizes, etc.). Non-residential developments using TDRs typically take advantage of increased floor area allowances, maximum building height allowances, or maximum impervious lot coverage allowances through purchase and use of TDRs.
Successful use of the TDR tool will normally only occur when the zoning ordinance considers the following three “market” factors: a buyer wants what a developer can build using TDRs; a developer wants to buy TDRs and transfer them to receiving areas; and a landowner is willing to sell TDRs while permanently restricting his or her land. Simply adding the TDR option to a municipal zoning ordinance will not create development!
TDR programs have typically failed to work where real estate market forces were not factored into the program’s design. For example, where a developer can build what the market wants without the use of TDRs, he or she will certainly do so. For example, let’s say that residential subdivisions in a TDR receiving area are actively selling at a residential density of three houses or lots for every acre of total land area. The base zoning within the TDR receiving area allows residential developments to build up to three dwelling units per acre without TDR, and the TDR option allows a developer to build developments with as high as six dwelling units per acre. Even though use of the TDR option will enable the developer to build more units, the developer is much more likely to continue to build developments in the three dwelling units per acre range because that is more marketable. If however, the base zoning only allowed residential developments at a density of up to one dwelling unit per acre, but permitted up to three dwelling units per acre through purchase and receipt of TDRs, the developer is more likely to choose the TDR option, because of the market support for that level of development density.
The dollar value of a TDR, both for a sending area landowner and for a receiving area developer or realtor, depends on a number of market-related and other factors. For example, a landowner who is selling TDRs will likely have a certain dollar value in mind for each TDR he or she plans to sell. Similarly, a potential user of TDRs will have a certain price he or she is willing to pay, and this price is usually based on the value that the purchased TDR will add to the development pro-forma. A TDR deal typically occurs when some point of overlap is reached between the expectations of both the seller and buyer.
Given the voluntary nature of the TDR tool’s use in Pennsylvania, TDR ordinance provisions should be designed so that the TDR option is much more attractive to a landowner in a sending area than the conventional lot-by-lot subdivision and land development option. For example, Warwick Township, Lancaster County’s agricultural zoning district and TDR sending area allows landowners the ability to subdivide their land for non-farm residential purposes generally at a ratio of one lot for every twenty-five (25) acres. Under the TDR option, these same landowners can sever and convey TDRs at an allocation ratio of one TDR for every two (2) acres. In Warwick, a 100-acre farm can generate up to four residential lots through the traditional zoning option or 50 TDRs through use of the TDR option.
Where effective agricultural zoning is not already in-place, some municipalities have down-zoned the TDR sending area when establishing their TDR programs to increase the attractiveness of this option to landowners. Similarly, some municipalities have down-zoned the TDR receiving area(s) when establishing their TDR programs, so that the TDR option results in more uses, more development, or other flexibility when compared to conventional development approaches but without having levels of development far in excess of levels that would have been allowed prior to introduction of the TDR option.
Municipal officials must insure that their TDR programs are designed to require use of the TDR option as the only means to achieve the highest possible density in the receiving area. Where a developer is able to simply obtain a zoning change to allow a higher residential density or greater non-residential density in the receiving area without the use of TDRs, the TDR tool will not be used.
In Lancaster County, four municipalities with TDR programs have taken active roles in facilitating TDR transactions. These roles include helping to fund the purchase of TDRs within their municipalities, banking purchased TDRs until needed by local developers, selling TDRs to developers through a public bid process (required by PA law), and reinvesting funds obtained through TDR sales for new TDR purchase transactions. These townships’ funds to purchase a farmer’s or landowner’s development rights have been leveraged with available funds of the Lancaster County Agricultural Preserve Board and used to purchase agricultural easements. As a result, the County’s funding pool is available for a greater number of easement purchase transactions than would otherwise be available if limited to County/state funding alone.
In 2000, the Municipalities Planning Code was amended making the TDR tool available to regional planning organizations who want to transfer TDRs across municipal boundaries without having to first enact a joint zoning ordinance. Under this amendment, multi-municipal TDR transfers may now occur where a county or multi-municipal comprehensive plan has been adopted.
The TDR tool is similar to Pennsylvania’s county agricultural conservation easement purchase programs, but there are several differences:
Establishing a TDR program within a municipality or region involves the following basic steps:
The transferable development rights tool is one of many tools available to municipalities and regional organizations to use in permanently protecting valuable agricultural, natural, and cultural resources and managing growth. The TDR tool can be “mixed and matched” with these other tools to increase its utility and effectiveness. For example, a large parcel whose permanent protection is desired by the landowner can be divided into different portions depending on the conservation tool best suited for each portion. A large portion with sensitive environmental features could be protected through the donation of a conservation easement, while another portion best suited for continued agriculture could be used to convey its TDRs through sale to a realtor or developer. There are tax advantages and other financial gains made available to a landowner by combining various conservation tools as appropriate.
The TDR tool can also be combined with other planning and regulatory tools, such as the Traditional Neighborhood Development (TND) tool. The TND tool promotes sustainable development by providing for a mix of residential, non-residential, institutional, and public recreational uses in a compact form with coordinated streets, sidewalks, and open space areas (village greens, pocket parks, etc.). In Honey Brook Township, Chester County, a TND overlay ordinance is being established to create a new village within an otherwise rural, agricultural municipality to accommodate future anticipated population and housing growth in a planned fashion. Use of the TND overlay is an option available to landowners and developers wanting to develop inside the planned village boundaries. However, use of the TND option requires a landowner or developer to purchase a minimum number of TDRs from the Township’s prime agricultural areas. Additional purchased TDRs can be used by these same landowners/developers to expand the types of uses they can develop, increase residential density or commercial intensity, or obtain modest flexibility from other basic ordinance provisions. (See the Conservation Tool Traditional Neighborhood Development (TND)).
The use of transferable development rights is enabled through the following sections of the Pennsylvania Municipalities Planning Code:
John Theilacker, AICP, was the original author of this document.
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Text may be excerpted and reproduced with acknowledgement of ConservationTools.org and the Pennsylvania Land Trust Association.