Transferable Development Rights- Case Study

This study addresses many of the basic concepts necessary to operate a transferable development rights (TDR) program. The feasibility of a TDR program is examined from legal, environmental, and economic perspectives. The study takes Athens-Clarke County, Georgia, as its case study.

The act of transferring development rights requires four elements:
1. Sending area(s) to be protected,
2. Receiving area(s) to be developed,
3. Transferable credits that symbolize and quantify the development rights being sold; and a
4. Procedure for carrying out the transaction.

The community must identify resources it seeks to protect and establish a sending area defined geographically to best protect those resources. Basically, a TDR program severs the right to develop a parcel from the land itself, but it leaves the landowner the other rights that came with the land, such as the right to exclude members of the public from the property. That land is then safeguarded with deed restrictions or conservation easements that secure the undeveloped state of the land in perpetuity.

The value of the development rights depends on how the community defines the sending and receiving areas and the credits. The local government can assign credits to each landowner in the sending area based on acreage, resource features on the parcel, or the value of an easement on the land. In some jurisdictions TDRs can be purchased to receive bonuses that have nothing to do with the size of the building; they can exempt the holder from any development requirement the city chooses, whether floor area ratio, height, parking, landscaping, or subdivision limits. For example, in Sunderland, Massachusetts, TDRs get exemptions from minimum lots size and frontage regulations.

Federal Law
There is authority under US Constitutional law and state law for local governments to create TDR ordinances. TDR programs were given federal approval by the Supreme Court in Penn Central Transportation Co. v. New York City. In that case, involving New York City’s Landscape Preservation Law, the plaintiffs argued that denial of permission to use the air rights over Grand Central Station to build an office tower was a taking of their private property under the Fifth Amendment of the U.S. Constitution, despite the fact that they could transfer the air rights through a TDR program. The Court did not find that TDRs are necessarily “just compensation” for a taking, if one occurs; however, it did find the ordinance constitutional. It held that the TDRs mitigated the financial burden on the plaintiffs and must be considered when considering the impact of the regulation in determining whether a taking has occurred.

State Law
To meet state and local procedural requirements, if a TDR program is passed, the county or state zoning code may have to be amended to state the additional level of density that can be obtained through TDRs in each applicable zone. From a practical perspective, a key component of a successful TDR program is that TDRs are the only way to achieve increased density in the designated receiving zones. If county zoning bodies allow increases in density through other means, it will significantly diminish the motivation of developers to use the TDR program.

Historic Protection
The protection of historic landmarks is the third most common purpose of TDR programs in the US. Most TDR programs that focus on protecting historic areas are designed for large cities, including San Francisco.

Fiscal Impact
Overall, the program appears affordable. The program may actually result in a gain in property tax collections if implemented in Athens, GA. Even 20 years into a TDR program, the total property tax collection decrease due to the program would be less than 1% of the annual budget. This is before any offsetting due to increased tax collections on surrounding properties or additional development caused by the program.

Summary: Jayni Foley

Dorfman, et. al., The Feasibility of a Transferable Development Rights Program for Athens-Clarke County, Georgia, February 2, 2005, available at http://www.rivercenter.uga.edu/service/tools/tdr/acc_tdr.pdf