Transferable Development Rights

Transferable development rights, the general name for the mechanism underneath the development rights work Michael Stern has made a subject of his own, answer a question a landowner asks before signing anything: can the power to build leave the land that earned it, and if it does, what is left behind? The Wikipedia entry gives the standard answer. Developers buy the development rights of parcels inside a designated sending district and carry them to a receiving district, where they raise the density of a new project, and the legal idea underneath is that land ownership is a bundle of separate rights, one of which is the power to build.³

Sending areas and what they give up

A sending area is a place where growth is unwanted. The Georgetown Climate Center’s toolkit describes the usual candidates as undeveloped land with natural or agricultural value, and explains that counties and towns fix the boundaries through zoning ordinances and maps.⁴ An owner there may sever some or all of the unused development rights and sell them as credits, and in doing so agrees to forgo building and to protect the land with a conservation easement, so the credits become a commodity that trades apart from the soil.⁴ Chester County’s planning guide adds that the sending parcel is then restricted from development permanently, and that in Pennsylvania the rights must be conveyed by a deed recorded with the county recorder after the municipality approves the transfer.⁵

Not every sender is a farm. Wikipedia notes that sending districts can also be newly designated historic sites, or parcels whose buildings do not use their available size and so carry an excess that can be conveyed to other parcels, possibly adjoining ones.³ That second kind is the New York case, and the remaining entries here, beginning with air rights, is about it.

Figure

Two kinds of sending ground

	Conservation sending district	Underbuilt urban parcel
What it holds	Farmland, wilderness or a newly listed historic site	A building smaller than its lot allows
What the owner sells	The right to develop the land at all	The capacity the building leaves idle
Who typically receives	A receiving district in an urban area ripe for growth	A parcel nearby, possibly one that adjoins it
What the program is for	Steering growth and preserving land	Letting floor area reach a lot that can use it

Receiving areas and the bonus

The receiving side is drawn with equal care. Colorado’s hazard planning guide says a program needs an adopted plan that names both the areas to protect and the areas where growth is encouraged, and that a developer in a receiving area buys rights either from a bank or directly from a sending owner to lift a project above its base zoning, in the form of more buildings, more height, more units or whatever the jurisdiction chooses.⁶ The bonus can take many shapes. The Cascade Land Conservancy overview that Tacoma publishes lists extra floor area in Redmond, extra height in Issaquah, extra lot coverage in Miami Dade County and looser limits on paved surface, and stresses that in the strongest programs buying credits is the only way to exceed the base zoning.⁷

The arithmetic has to close. Colorado’s guide gives the test in one example: if a credit sells for $10,000 and adds only $13,000 of value to the receiving project, the margin may be too thin for anyone to use the program, so planners are told to consult valuation specialists before fixing rates.⁶ Chester County puts the same point as a market analysis the ordinance must reflect, and warns that the receiving area must also have the water, sewer, road and school capacity for the density it will absorb.⁵

Banks, ratios and who runs the program

Between seller and buyer sits a question of timing. Wikipedia describes credit banks that store rights already bought when no receiving project is ready, with Massachusetts recommending that a third party such as a nonprofit operate the bank.³ Georgetown adds that programs may be run by governments or by consultants and nonprofits, may work inside one jurisdiction or across several, and may be mandatory or voluntary, and that a bank makes the program more predictable for both sides at the cost of staff to administer it.⁴ The Cascade overview names the King County bank as an example and records that Malibu and San Luis Obispo seeded their banks with public money, selling the credits on to developers to create a revolving fund.⁷

Two numbers govern value. The overview calls them the allocation rate, how many credits a sending site may sell, and the exchange rate, how much extra a buyer receives per credit, and notes that some programs allocate two to five times what the zoning would allow in order to tempt owners to sell.⁷ Georgetown makes the same observation about small coastal lots, which may need generous ratios before a sale is worth an owner’s while.⁴ Colorado’s guide describes a related tool, the purchase of development rights, in which the rights are bought and extinguished rather than moved, lowering the stock of buildable sites in the whole jurisdiction.⁶

Figure

The national picture, as the Cascade Land Conservancy tallied it

transfer of development rights programs counted in the United States

181

of them aimed at historic preservation

15

aimed at infrastructure and urban design

12

the zoning yield some programs allocate to a sender as an incentive

2 to 5 times

The preservation branch

The landmark version is older than most of the conservation programs. The Los Angeles Conservancy credits New York with adopting the first such program in the United States in 1968, as part of its landmark law, and counts more than two dozen jurisdictions with preservation programs since, including the floor area transfers that have run in downtown Los Angeles since 1975.⁸ Historic Boston’s account of the New York rule describes it as a 1968 response to pressure on protected buildings, meant to let an owner draw value from capacity the designation had frozen while the building stood, and it records that by 2013 the provision had been used only a handful of times even though many designated buildings sat well below their permitted bulk.⁹ Today’s certification for those transfers has its own entry, as do the special district versions for the Theater Subdistrict and the High Line corridor.

Figure

Setting up a program, in Colorado's six steps

1. 01
   PurposeTie the program to the comprehensive plan and to hazard reduction goals.
2. 02
   WhereDecide whether it applies to all districts or only to mapped sending and receiving areas.
3. 03
   ValueSet allocation rates and prices, by studying comparable programs or by fresh research with owners and economists.
4. 04
   AdministrationChoose an existing institution or build internal systems to bank credits and handle transactions.
5. 05
   SpecificsDecide how much bonus is granted and whether it is by right or needs a hearing.
6. 06
   AdoptionDraft and adopt an ordinance consistent with the other land use rules.

A pier as a sending site

New York has also tested the idea on public land. In 2014 the president of the Hudson River Park Trust wrote in amNewYork that a state law signed the previous November allowed the park to sell unused development rights from its piers, but only under local zoning, so that at the time the Trust had no mechanism to transfer anything and the method would have to be built through a public review with three community boards.¹ She added that piers limited to park use could not claim unused floor area, since the park act caps structures on them at a tenth of their surface.¹ Two years later The Architect’s Newspaper reported a council subcommittee approving the sale of Pier 40’s rights to a 1.7 million square foot project across the highway on Washington Street, with the proceeds committed to repairing the pier’s piles and the remaining rights on the pier reserved for use on the pier itself.²

So the landowner’s question has its answer: yes, building capacity can leave, and what stays is a recorded restriction that binds every later owner. Wikipedia’s summary of American court rulings is that a right an owner could still use elsewhere is one reason a designation is not treated as taking everything of value.³ The land keeps its easement, the receiving lot keeps its added bulk, and the register keeps the proof.