Expanding on the topic of preserving unique pieces of rural real estate and farmland
In a previous post Saving Farmland with Transferable Development Rights we provided some information on the basics of a TDR program and how with careful planning and administration it can be a significant component in channeling growth and development of building lots.
Equally as important it can be a very effective tool for preserving farmland, conservation areas and even historic places.
While not for every community, there are many that are ripe for such programs. So, what are the common features and attributes of the most successful programs around the nation?
1. Growth is good: A community that adopts a TDR program must embrace a healthy and consistent level of development activity. For many communities the interpretation of this phrase can cause a lot of debate over what is “healthy” growth.
2. Simplicity for the participants: While the establishment of a TDR program can be very complex to craft, the process must be simple and easy to understand for real estate owners and developers.
3. Synergistic: Transferable Development Right programs work best in conjunction with other Federal, state, county and/or city preservation programs.
4. Public support: Land developers must buy in to the concept and see that it makes economic sense. Real estate developers need to be assured that the addition of a TDR program is not just another way that government will add more layers of costs and/or bureaucratic hurdle on top of what many believe is already a complex process to obtain governmental approvals.
5. Fair and balanced: The rural land property owners must be comfortable with the trade-offs that come with a TDR program. Often elected officials will down zone away subdivision rights from rural property in exchange for an offsetting number of transferable development rights. This can be a slippery slope in that historically, if the program is not properly structured, value can be lost.
6. Bigger is better: Create a large and sustainable market place. The sending and receiving areas should be big enough and balanced so that there is a large number of rural property owners (sending areas) and developer opportunities (receiving areas) to allow the free market system to work.
7. Bank it: In many jurisdictions the local government has created what is known as a TDR Bank. In such cases the bank will purchase TDRs from the sending areas in order to stimulate the market or accelerate the preservation of land in a certain area. Transferable development rights can then be resold to developers who wish to increase density in receiving areas. There are many pluses to such a system; however, it is often easy for government to upset the system by controling the number that they are willing to sell and thereby over influencing the market value.
8. No way around it: Government policy requires the use of TDRs in order to increase density in the designated receiving areas. There can be no way around using transferable development rights to increase the bonus units that are obtainable through the program.
9. The Easement trade off: Land preservation easements (typically perpetual) are placed on the rural land once the TDRs are transferred off of the property.
10. City / County cooperation: In an era where many communities plan for most growth to occur in and around municipalities, inter-jurisdictional cooperation is necessary. This is especially important with annexations which can often take large tracts out of the mix which can throw the ratio of sending and receiving areas out of balance.
11. Nothing lasts forever: It is important to know these programs have a life. Once the goals of the program are accomplished the party is over. Eventually all or most of the development rights will be sold or the receiving areas developed out.
12. Administrative oversight: Without a doubt once established and active, it is essential that there be sufficient staff support to tract the transfers of TDRs, the easements that are placed on the impacted properties, as well as the bonus density that was provided. Without staff oversight, in an active market, it can quickly become a nightmare to easily access which properties still have development rights. This occurred in the early years of the Montgomery County, Maryland program, but much time was devoted to correct it. Washington, D.C. (yes, believe it or not D.C. has TDRs) on the other hand has had an active market, but fell so far behind in tracking transfers that it became mired in threats of lawsuits and bureaucratic red tape.
13. No small task: The idea of transferring development rights from one piece of real estate to another is simple enough, but to establish a successful program it truly requires broad support for all stakeholders in a community. Clear vision of the goals must be established collaboratively. This in and of itself is no small task, but for the few communities who have created successful programs, most would say that it is worth it.
In future posts on this series, we will look at some examples of successful and failed transferable development right programs. We’ll also explore some nontraditional programs.
The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com.