In the last several decades land development has grown at rates much larger than population growth, causing our cities to be less compact and require the use of an automobile, and our farmland and wilderness areas to be overdeveloped. Development could be curtailed through the use of large-scale transfer development rights banks, where landowners could sell the rights to develop to other landowners in already urbanized places. Over the long term, this would allow our urban land to be more efficiently developed, more compactly, and allow for public health and environmental gains that are the goals of current legislative policies.
The relationship between land ownership and the public good is often framed as a debate between the rights of each interest. This competing dynamic is the basis for an evolving tort law defining this relationship. One area of ongoing debate is the improvement of a parcel of land, the rights of owners, and the how the guiding hand of regulation can or should play a role in controlling how, where, and how much land is developed.
Development that responds to the human form by being compact, walkable, and connected is shown to be the best for the public good. It supports healthy communities and individuals, lowers overall energy consumption, reinforces regional planning objectives, and has been shown to increase economic stability in neighborhoods. Land is a finite shared resource. In the last several decades there has been an increase in the development of land that is exponential and incongruous with population growth rates, leading planners, advocacy organizations, and governments to try and restrict development through a variety of regulatory instruments. For example, in Massachusetts the urbanized area has increased more than four-fold in the past 60 years, even though population growth rose just 25%.
This paper argues that the reduction of growth in over-development of land would be better achieved by lowering the economic benefit of development and recognizing the value of development rights–separated from the inherent value of a property–that landowners hold often because of adjacent publicly owned infrastructures. By severing these development rights, landowners in areas deemed of need to be preserved could realize the value of development by selling these rights to landowners in areas sought for growth. Multiply this severance across thousands of parcels and sustainable, deed-restricted conservation can take place without the use of traditional regulatory restrictions.
The improvement of land generally is performed by an owner because there is economic value to do so. Some of that value is derived from the inherent quality of the land–the views from it or because of the minerals underneath it. However, some of the value of developing it is attributed to the abutting parcels around it and the adjacent connections it may have. These may be natural, such as land on the coastline or near a regarded mountain peak. However, for most parcels, the non-inherent, non-natural adjacent value of developing is directly dependent on man-made adjacencies by other land-owners, be they private or public.
Prior to the middle of the 19th century, there was a more clear-cut distinction between where the value of the developability of land came from. In urban areas, land primary held developable value due to its adjacencies to other parcels–for example, how close it was to the center of town, to the shipping port, or along a main thoroughfare. Land outside of urban areas were valued more for their inherent qualities–if it had a good source of water, if it had good soil, if it received an adequate amount of sunshine, or had a natural energy source such as a waterfall.
During this time, growth happened more slowly than in recent decades, partially because transportation methods were slower. Urban growth began at ports of trade and moved out from there. New towns would be started in rural areas along regional trade routes that had access to sufficient farmland and all the resources needed. Growth in the new areas was organic, often a few partially self-sufficient agrarian or manufacturing settlements that could create a surplus of goods to sell in other markets (often the ports or stations of trade). Travel time between towns made the volume of inter-regional or inter-state travel fairly low, reducing the economic impetus of large-scale extra-urban development.
With the arrival of the locomotive, the automobile, and distributed energy utilities in connection with their far-reaching infrastructures, each becoming more refined and efficient over time, the development value of all land increased not by its inherent qualities but by its adjacencies to transportation and energy infrastructures. Nearly all but the most remote of land rose its it development potential. This has given landowners significant opportunity to realize a return of a development investment of their parcel.
In the present day, land no longer needs to be near a stream for water or an energy source. The space itself, apart from its adjacencies or inherent qualities, is often simply a medium for development. A town can be created nearly anywhere, not just near a good food production area. In fact, due to the abundance of efficiently distributed inexpensive energy, no longer must land have inherent natural qualities to be suitable for development; it is easy enough to fill in tidal flats or move mountains to make land more valuable for development.
Governmental bodies have developed increasingly complex methods of regulating development, from local zoning ordinances to regional land-use agreements and targets created by inter-governmental agencies with low accountability or authority. This regulation has been developed because municipalities are trying to control the rights of individual landowners so that they may act in greater accordance with the public good. In the mid-19th century, there was little pressure to develop marginal tracts of land due to the strong local environmental and non-regulatory forces that determined the value of improvement. The introduction of 20th century infrastructures removed these forces leaving only regulatory power of control, which is often too weak and malleable to be sustainable over generations.
Through the course of recorded history, the benefit of the lack of ability to develop broadly has been cities and towns planned at the pedestrian level, without the need for populations to have access to large-scale and expensive transportation systems. For example, in the last 30 years of the 19th century, many cities on the East Coast experienced explosive population growth. Even without extensive zoning, what was built was fairly uniform and highly compact. For example, in the Boston neighborhood of Dorchester during this time, nearly 9,000 individual landowners made a decision to build a house. Today this neighborhood has a WalkScore of 75 and “most errands can be accomplished on foot.” Its 14,000 people per square mile contrasts to Los Angeles, largely developed after the introduction of infrastructures, half as dense and difficult to traverse on foot.
This type of compact development similar to the kind created in the 19th century and before is a known solution as part of range of current policy goals. Modern planning and public health research has shown that it reinforces physically and mentally healthy communities and individuals, lowering the overall amount of carbon use, supporting equitable goals, diversifying the tax burden, reducing the per-user cost of infrastructure, and supports regional-level land-use best practices.
Many policy strategies have been proposed and adopted to support and reach these goals. In recent times, cities such as Portland, Oregon have tried to combat this economic tide by creating urban growth boundaries, often with little success. Unregulated development often simply occurs outside the boundary, acting as a release value for the economic forces and with little to no restrictions put on travel between the two zones. The forces of development are strong and multifaceted–each individual landowner has an economic interest in the property and while each parcel has differing development potential, nearly every parcel has some type of improvement value because of the issues discussed at the beginning of this paper. What were once completely inaccessible and difficult to develop hillsides can be made economically viable in very short amount of time with explosives and bulldozers. The delineation of a growth boundary is a singular approach originating from the sphere of the public good, while the reasons for the need of the growth boundary are widely varied and from many participants acting primarily outside of that sphere.
By acting together over a large region that is matched in scale with ease of travel between areas through coordinated conservation, governments can better spur landowners to act in ways more beneficial to the public good. One method of accomplishing this would be to form a transfer development rights (TDR) bank, allowing sending areas to sell their assets-as-development-rights to be bought later by another landowner in a receiving area.
This kind of coordinated conversation would not be a type of urban growth boundary. Rather than a type of singular regulatory approach to regional growth management, TDR banks are market-based conservation strategies to affect land in a reverse way that the urban sprawl of the last 50 years has done; by reducing the value of developing land parcel by parcel.
Land Ownership and Its Bundle of Rights
A bundle of rights, such as mineral or air rights, come with an estate in the land. These are physical things and come from the concept of “Cuius est solum eius est usque ad coelum et ad inferos”—the ownership of the land and everything above or below it that dates to the time of Edward I. There are also rights endowed to a land owner by an economic market and often restricted by a governing body. While all landowners have the right to develop (barring easements and other covenants in the deed), what and how much they develop is often determined by what would be most profitable. Skyscrapers aren’t built in the middle of an Iowa cornfield. The energy, complexity, and cost limit this type of development to parcels with the right amount of adjacencies to make it profitable.
All rights have the potential to be severable from the land. Owners may sever these rights from the land by placing easements into the deed. This has often been done for mineral rights through conveyance that began in earnest in the 19th century. In the early part of the 20th century, landowners have been able to abstract these rights and disconnect the use of the land in a formalized way through instruments such as conservation easements. Conservation easements began as a way of preserving tracts of land from development. Landowners can enact conservation easements because they see the value of their property in terms of what its conservation provides rather than how it could be exploited for development. Additionally, landowners can sometimes reap tax benefits by conserving their land, but only if the taxing body also recognizes the value of the land in its conservation. While most often done at the level of individual land parcels, Montana is one state that has begun a program to coordinate conservation easements as a method of wildlife conservation and engage landowners directly.
More recently, landowners who choose to conserve the land from further development have been able to sell these rights to another parcel owner. When sold, the process is called the transfer of development rights. Currently, the value of a parcel is most often determined in the context of zoning, when a government agrees with the landowner that the preservation of their undeveloped or underdeveloped land would benefit larger the larger use of land under its governance. In order to compensate the owner and to give the rights market value, the governing body needs to establish areas or parcels that are able to utilize these sold rights. Often this occurs by relaxing the zoning requirements of a non-contiguous parcel receiving the development rights. By coordinating conservation easements, governments can achieve land-use goals by coming from the point of view of the landowner rather than as the heavy hand of restricting use through zoning.
An Evolving History of Transfer Development Rights
TDR programs started with two parcels, one to send rights and one to receive. It has evolved from there to encompass larger collections of parcels. Several programs spanning entire regions or states. Each iteration being an advisory model, a regulatory enforcement model, or a blend of both. The first TDR is thought to be in New York as historic preservation of Grand Central Terminal, in the case Penn Central Transportation Co. v. New York City. Owners of the building were able to realize the value of their ability to develop by selling their right to do so to another parcel owner across the street. That owner was able to build a taller building and Grand Central Terminal was preserved as a landmark building for the public good. In this way, TDR is a concept as a way to stabilize the forces of development in a relatively small context of one urban parcel to another. New York City continues to have a robust TDR program across the city. It has the advantage of a single governmental entity able to administer programs.
Transfer development rights have been used to preserve open space and farmland at a larger level where county governments have the authority to regulate land use, such as in Lancaster County, Pennsylvania. These instances have required governmental agencies overseeing larger tracts of land to issue directives of how other municipalities can institute TDR but do not set up the coordination of such programs. Another good example of this is New York state providing guidance for municipalities concerned with loss of open space to create their own program, such as in New Paltz.
Increasing in scale and policy complexity, the largest formal transfer development rights management area is the New Jersey Pinelands Development Credit Program. This program spans four rural and suburban counties and is primarily aimed at limiting growth and development in across the seven counties identified as part of the Pinelands National Reserve. Here, TDR is a method of keeping the rural land rural.
In Washington State, TDR is being used to keep the urban areas sufficiently urban, by seeking to remove new land from development and limiting supply. The state has begun a program in the Puget Sound area–Greater Seattle–to combat urban sprawl, which has caused environmental damage to the area.
Other states, such as Rhode Island, are furthering the connections between land use (conservation and development), environment, transportation, and traditional industries such as agriculture and fisheries. Rather than regulatory control from the government, they are asking the citizens to map out areas to conserve and areas to build up, including landowners and land users in the discussion.
Examples of Inter-Municipal Coordinated Conservation
Coordinated action on land use is complex and requires cooperation from a range of government bodies as well as landowners. Four examples are described here.
New Jersey Pinelands Development Credit Program
This state program is considered one of the first inter-municipality preservation areas. It has focused on preserving the Pinelands area, established in 1981, and covering 1,700 square miles in the area roughly between the northern suburbs of Philadelphia and the Atlantic Ocean. Fifty three municipalities participate. The program began as a response to strict regulations imposed upon landowners within areas designated for preservation. Landowners were able to realize part of their economic value by selling their development rights to a bank. Credits are given to landowners based on agreed set criteria and applied to each parcel: Every 39 acres is given a credit, and wetlands are granted 2/10ths of credit. Parcels less than 10 acres with existing non-residential development are not given credits. Each existing single-family house on a parcel reduces its credit by 25%.
Since its inception, 11 parties have purchased an unspecified amount of credits. However, one large residential developer has purchased 80 of the available credits. One hundred and eighty-eight landowners have severed 258 credits, often in fractions of credits.
Boulder County Noncontiguous Planned Unit Development
Boulder County’s planned unit development (PUD) policy promotes a mixed-use approach to all development. Nonurban area landowners located within approved sending areas may transfer their PUD rights to a receiving district following a set of criteria and in consultation with adjacent landowners. The voluntary program, coordinated by the county government, covers 750 square miles.
Collier County Transfer of Development Rights for the Rural Fringe Mixed Use District
Like the Boulder program, this is an intra-county program, and located in southwest Florida. It was adopted in 2004. One credit is granted per five acres. To date, nearly 1,500 credits have been issued. The program is voluntary for landowners and covers about 2,300 square miles.
Regional Transfer of Development Rights in Puget Sound
Like the Pinelands program, this is an inter-county program and spreads across four counties that make up the Seattle Metropolitan area. Seventy-one cities across more than 6,800 square miles are covered in the program. Each county has began developing its own TDR program, using their authority to enforce and respond to local needs, and this program is a way for the state to coordinate these efforts. This has been organized as a partnership between the county governments, state agencies, and non-profit advocacy organizations, working from federal grants to promote the legislation that supports regional cooperation.
Transfer Development Rights in Massachusetts
Massachusetts has been named as having some of the most outdated land use laws. However, the state has already started to put in place some of the frameworks that are required to create a successful statewide or regional transfer development rights program that could go beyond an advisory program. The state could leverage existing legislation and benefit from a transfer development rights bank to support the goals of municipalities, advocacy organizations, legislative directives, and state agencies. The possibilities for a broad-based transfer development rights program can bring better land-use best practices across generations and become a national model for other states and metropolitan regions to replicate.
Massachusetts covers 10,555 square miles and composed of 351 cities and towns, each with their own zoning regulations and the authority to enforce them. Because each municipality is relatively small in terms of budget and staff (apart from a few major cities), each has limited time and money to devise a TDR system, coordinate it with adjacent municipalities, and administer it for generations. They already have a difficult time taking into account broader interests.
Filed legislation such as the Land Use Partnership Act of 2009, authorizes cities and towns to start a TDR, but does not coordinate it among them. Only two towns and one county currently have a TDR program in place; Raynham, Framingham, and Barnstable County, affecting about 12% of the state’s land area (and most of this area being the county).
However, if a state agency were charged with being a clearinghouse for municipalities and landowners, actively engaging them, and coordinating sending and receiving areas across municipalities, there might be a better chance for success. Its in the best interest of the state to take on this role, as to coordinate it existing scattershot of legislative directives and bills aimed at the same goals as what a TDR Bank could accomplish, such as The Community Preservation Act of 2000, section 40B of 2004, and H.1859 of 2013.
One of the goals of the Community Preservation Act of 2000 is to create funds to preserve open space, through the purchase of easements or properties, through fee or eminent domain. While bestowing such ultimate power to municipalities provides them with the strength against uncooperative landowners who do not have any interest in the public good, it is a heavy hand approach giving landowners little incentive to work toward the goals. If we wanted to restrict growth to only existing urbanized areas and leave non-urbanized areas untouched, it would be prohibitively expensive for municipalities to purchase–even through eminent domain–all of the parcels (or even a partial interest) that would be needed to have a fully successful conservation program. A sampling of purchases of the last 14 years across the state shows about $16,000 an acre being spent. Further, if ballot measures such as Oregon’s Measure 37 or Arizona Proposition 207 were to spread to the Commonwealth, a CPA program would be entirely unsustainable.
Many of the projects completed by the CPA involved the local municipality purchasing the development rights. Wouldn’t it be more beneficial of tax dollars for cash-strapped municipalities (and CPA funds) to allow other landowners to purchase these restrictions through a TDR bank program? Creating a TDR bank would allow the CPA to coordinate and administer rather than acquire. For the nearly half of the municipalities in the state that have chosen to participate in the CPA program, it could be an excellent community vehicle for determining sending and receiving zones for participation in a state-wide TDR bank.
The state has another kind of quasi-proto TDR bank in place, but without the needed sending and receiving areas, and with little coordinated communication or engagement of either landowners or municipalities. In addition, it is limited in scope to affordable housing only. The Massachusetts Comprehensive Permit Act: Chapter 40B, established in 1969, seeks to encourage higher density development of affordable housing (often near public transit stations or as in-fill to existing urban areas). It gives flexibility to local Zoning Boards of Appeals to approve affordable housing developments if a quarter of the units have long-term affordability restrictions. Thus, it seeks to centralize the decision to build at higher densities through an often unelected body using sometimes arbitrary standards.
In addition to legislative affairs, agencies are issuing guides and creating policies that lay the foundation for a statewide TDR program. The Department of Environmental Affairs and the Department of Transportation have taken steps to encourage conservation, with their Smart Growth Toolkit and the new GreenDOT policy and office.
Regional planning authorities such as the Pioneer Valley Planning Commission and the Metro Area Planning Council have included TDR language into their documents; however there currently is not a specific TDR program at the regional or state level. Non-governmental advocates, such as the Massachusetts Smart Growth Alliance, also are calling for policies and legislation that would be supportive of a TDR program.
GreenDOT and TDR
Existing land use practice has happened partially because transportation policy, funding, and implementation has opened new areas for development. In essence, the transportation infrastructure of the last 50 years has been the main driver for increasing the value of privately-owned land to which landowners have benefited.
This is where the state has an opportunity to fully connect transportation and land use. Since 2009, Massachusetts has had a new agency that pulled together previously disparate transportation agencies. The legislating that created the Massachusetts Department of Transportation included language calling for an office of sustainability within the new department. MassDOT secretaries since have interpreted this into a combined set of sustainability goals called GreenDOT and have raised the GreenDOT coordinating office to the level of Assistant Secretary.
GreenDOT goals are pulled from transportation sources, but also from public health and environment department goals. The main goal is to achieve “mode shift” in transportation throughout the state. Specifically, we don’t have the money or the space to build or maintain more highways or add more lanes. We’ve achieved a kind of infrastructure peak. But we need population growth in order to fuel our economic growth, so we’re going to have to start directing our transportation resources to create more integrated infrastructure for pedestrian and bicycles. Because the mode of walking and biking require things to be closer together we also need to funnel new development toward compact growth. 
GreenDOT could be an impetus for setting up a state-level coordinated conservation easements through the TDR instrument. Changing how transportation functions through a set of goals will also require the use of land use policies that encourage the compact growth, and while some of that can happen from regulatory functions such as zoning, there will need to be incentives set up for landowners not to develop as they please and be compensated for their presumed loss.
Through the Department of Housing and Community Development, if the state took the role to administer or designate the administration of a state-level TDR land bank that would support the bulwark of new policies and allow landowners from different municipalities to be compensated. One cited issue where TDR is not effective is for rural areas where there isn’t demand for development–in fact that there needs to be a stable market for development for TDR to be most successful. Cities and towns in the Boston metro have a fairly stable market–the last real estate downturn was mild for the area, especially compared to the rest of the country. A state-wide TDR program could share that wealth because it would allow rural landowners to conserve their land and concentrate development around existing infrastructure in the state.
Transfer development rights can be a powerful tool that allows landowners to voluntarily participate, and communicates to the market in more exact terms than previous methods (such as where a new road was built) what a governing body sees as most beneficial development areas under its control.
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 Though we could argue that many skyscrapers have recently been built in the middle of desert. This has been made possible through the selling of minerals through the right of extraction exercised by the landowners. This is a complex method of transfer of the value of mineral rights and the prime enabler of landowners in non-mineral rich areas to realize the value of their own development rights by flooding the market with these minerals in the form of inexpensive energy than can be efficiently distributed.
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