Transfer of Development Rights

“Ecocity” type TDR illustration by Richard Register

Transfer of Development Rights (TDR) is a real estate transaction tool established in zoning ordinances that make it possible to buy and transfer the rights to develop from one piece of property to another. Most commonly, TDR is used to protect natural or open spaces from development or to save historic buildings. Hundreds of thousands of acres of land and hundreds of buildings have been preserved in the United States that otherwise would have been developed or demolished and replaced with new development.

The market-based technique can also be used to encourage the voluntary transfer of growth from places where a community would like to see less development, or sending areas, to places where a community would like to see more development, or receiving areas.

The sending areas can be environmentally-sensitive properties, open space, agricultural land, wildlife habitat, historic landmarks or any other places that are important to a community. The receiving areas should be places that the general public has agreed are appropriate for extra development because they are close to jobs, shopping, schools, transportation and other urban services. An ecocity zoning map is the key tool for directing where the development rights should come from and go.

How TDR works

If the owners of real estate can sell their land for development, but there is good reason not to development there, ordinances in some jurisdictions make it possible for developers to “sever” those rights from the deeds. The people selling the development rights get the money, but they and any future owners are prohibited from developing the property from then on. The developer who bought the development rights is then allowed to shift them elsewhere and build more than would otherwise allowed by the local land use and zoning policies.

TDR is driven by the profit motive. Sending site owners permanently deed-restrict their properties because the TDR program makes it more profitable for them to sell their unused development rights than develop their land. Developers buy the development rights and use them to increase the density of receiving site projects; they do that because these larger projects are more profitable than the smaller projects allowed when development rights are not transferred. In addition to making property owners and developers happy, TDR solves a seemingly intractable dilemma for communities: it gives them a way to achieve critical land use goals using little or no public funding.

It should be emphasized that TDR requires willing sellers and buyers; no condemnation, no compulsory purchase by eminent domain, no forced market-value compensation. As a result of the particular design of the ordinance according to local conditions – its climate, sun angles, history, etc – the deal is attractive for all parties.

Other related ecocity tools supporting TDRs:

  • Ecocity zoning map
  • Restoration tax credit incentive
  • TDR bank
  • Form-based codes

Working with top national expert on TDR, “Saved by Development” author Rick Pruetz, Ecocity Builders recommends the creation of high-density centers contrasting with surrounding areas that have open space. It is also important that high-density areas also incorporate natural features like creeks, greenbelts, or shorelines as public amenities so that high density urban areas are enriched by natural features. This is an important quality of life issue.

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