Transfer of Development Rights

Transfer of Development Rights (TDR) programs allow increased development in areas that a community has designated for development in return for preservation of places a community wants to protect. TDR is often used for agricultural and/or open space protection, although it can be used to protect any important resource.

Generally established through a local zoning ordinance, a TDR program can protect farmland or significant natural areas by shifting development from those areas to areas that are planned for residential and commercial growth. When the development rights are transferred from the "sending" piece of property, that land is then restricted to agricultural or conservation use by a conservation easement and the "receiving" land can be developed at a greater density than generally allowed under the municipality's zoning ordinance.

In a TDR program, local governments approve transactions and monitor easements. Some communities have created "TDR banks" that buy development rights with public funds and sell them to developers and other private landowners. Other communities have contracted out the easement monitoring aspect of the program to other conservation-oriented groups, such as local land trusts. The value of development rights is traditionally based on projections about average property value changes in the sending area as well as in the receiving area.

A "TDR-less" program is similar to a traditional TDR program in that it allows development rights in a sending area to be purchased and moved to a receiving area. However, TDR-less programs use site specific appraisals to determine fair payments to and from sending and receiving sites. For instance, a proposed receiving site would be appraised to provide an estimate of the increase in profit attributable to the additional density allowed under a TDR program. The developer would then be required to spend a specified percent of the estimated increased profit on preservation of a sending site. The sending site would also be appraised to estimate the fair value of the conservation easement that would permanently restrict future development of that site. As with traditional TDR programs, local governments approve transactions and monitor easements on sending sites.