Transfer of Development Rights (TDR) programs can be powerful tools to help communities grow while preserving open spaces, protecting natural resources and maintaining farmland. There are over 200 successful TDR programs nationwide protecting greenbelts and historic sites. TDR programs can help mitigate climate change threats by preserving coastal wetlands or areas with chronic or severe flooding.
Rhode Island started utilizing TDRs in 2015. A workshop at the Public Library in Warwick, RI addressed TDRs. Speakers at the “Transfer of Development Rights: How It Can Work in RI” workshop explained that market trends and new fiscal analyses support state and community implementation of TDRs. The RI Department of Environmental Management (RI DEM) published “Transfer of Development Rights Guidance Manual” available free online at www.dem.ri.gov .
Scott Millar, former RI DEM Sustainable Watersheds Administrator, opened the workshop. He explained that planners and communities across much of the country face many similar challenges.
Millar explained that large minimum lot sizes for single-family homes destroy natural resources quickly in any state or region. He said, “A better alternative is for towns to determine where density is appropriate and add to existing or to create new mixed-use villages.”
Village development brings more to a community tax base than large lot subdivisions or commercial strips. Two Rhode Island studies determined that large lot single-family homes cost municipalities more in services than generated in tax revenue. Village housing units offer more tax revenue than their service cost. In Exeter, RI, this revenue difference was $2,600 per unit.
As Baby Boomers age and downsize, demand grows for smaller homes, cottages, rental units and small business sites in an easy to access setting — with apartments, cottage units and multifamily housing. People want to be close to their pharmacy, market and library. Small homes within village settings are selling quickly. Multi-family homes need not be high rises or large apartment buildings.
Millar listed these benefits of TDRs:
- TDR programs encourage rural towns to accept higher density housing in central village settings in return for preservation of significant, often contiguous, open space elsewhere in town.
• TDR programs can work at different scales. Rural towns can start small and allow appropriate density levels for their available infrastructure. Regional TDR programs work across multiple towns.
• TDR programs offer more choices than “Cluster” or “Conservation Development,” models. Rhode Island towns have successfully used these two models for over a decade. TDR programs allow mixed-use development not just single-family housing. Multiple small nodes of greater density (small villages) often work better than a few, large areas of high density (larger villages or towns).
• A TDR program begins by identifying preservation areas called “sending areas” and development districts as “receiving areas” which could be quaint villages, dense urban neighborhoods or “miracle mile” strips. Zoning ordinance amendments authorize sending area landowners to sell their development rights to receiving area landowners, towns or land trusts. Town leaders establish financial guidelines, incentives and preservation mechanisms for sending area lands. Landowners negotiate development right rates subject to local ordinance provisions and market forces.
Other TDR program models allow local governments to set a value for density bonuses bought by developers. Their fees go into an open space fund. Zoning ordinance restrictions may limit the amount, level and location of development. Programs vary across the country.
Sending area owners who sell development right or a conservation easement retain ownership and use of their land. Sending area landowners’ incentives are cash in hand, reduced annual property tax and a lower capital gains tax bill on a future land sale. Landowners may sell partial development rights for gradual development or accept a below-full-market-value offer with instant or long-term tax benefits. With retired development rights, reduced land values mean lower estate taxes for heirs.
Nate Kelly, Principal Planner at the Horsley Witten Group described TDR models where developers received a bonus for preserving a portion of a property (or another property in town) earning the right to additional or denser development. Receiving area developers may build at higher density, capture market opportunities and earn greater profits. Communities achieve conservation goals and without tax incentives to entice developers to “do the right thing.”
“We cannot contain growth in the urban services boundary. We need to concentrate that growth,” said Kelly. Malls and big box stores are becoming dinosaurs. People are focusing on their quality of life. They want their towns to have stable, positive tax bases, not increasing costs of residential services. Kelly noted growing demand for 1 and 2-bedroom, comfortable housing.
Rhode Island’s “Land Use 2025, Rhode Island’s Land Use Policies and Plan” available at www.planning.ri.gov includes rules, regulations and zoning. The Plan will “guide future land use and development… [and] present State Guide Plan policies under which State and local land development activities will be reviewed for consistency.”
Like many states, Rhode Island is updating zoning to require deed-restricted, low-income homes as part of larger development, built onsite or elsewhere. Developers may donate land within their developments, donate other land or pay a fee. This “fee in lieu” or Density Transfer Credit buys an increased density bonus ($5,000 to $30,000 per unit nationwide; typically below $10,000). Towns acquire funding to purchase development rights on high priority parcels. Towns, open space committees, or land trust representatives – not developers – negotiate directly with landowners.
Towns may use these funds to purchase future conservation easements. Land protection priorities may be scenic lands emerging from Farm Forest and Open Space or Current Use programs, wetlands, lands threatened by climate change or needed for aquifer recharge.
Successful TDR programs typically include:
- Strong real estate market and development pressure
• Distinct receiving area(s), strict sending area guidelines
• Few workable alternatives to a TDR program
• Education around livable communities and conservation with strong public support
• Capable TDR facilitators and/or a TDR bank
Communities need to agree on goals and expectations. Planning and reaching a consensus may take over a year. Updating ordinances may take up to three years. A TDR program may be refined over five to 10 years. Kelly said, “TDR is a means to an end. It is not the end in itself…. [Towns need] a clear vision on growth. TDR is just one of the tools.” He recommended implementing TDR programs thoughtfully to avoid flooding the market with developments rights, causing artificially low prices like in the early phases of Montgomery County’s program.
“People protect their own interests. They bring their own agenda but they have vital information for making the process work,” Kelly explained. Planners need to speak with local developers or receiving area landowners, not just farmers and sending area landowners. Planners must understand developers’ needs to select the best incentives. Developers want reasonable profits and a predictable permitting process (with a simple checklist). Planners should offer a real bonus – higher unit numbers, floor area, unit density or other exemptions from fees, special use permits, etc. Weak incentives or an inconsistent permitting process will discourage builders to choose conservation. High market demand will require better incentives.
Comprehensive community plans should include goals for land use, economic development, housing and natural/cultural resources and maps of sending and receiving areas. Developers need to know where to target growth and preservation. Officials can balance incentives with barriers to undesirable development. Ordinances should support comprehensive plans and TDR programs while discouraging or prohibiting “miracle mile” strips or big box store development.
Municipal leaders should quantify the relationship between sending and receiving areas.
To learn more about TDR programs, Nate Kelly recommended reading: “Beyond Takings and Givings: Saving Natural Areas, Farmland and Historic Landmarks with Transfer of Development Rights and Density Transfer Charges” by Rick Pruetz.