HRWC has completed an 18-month project that studied the use of Transfer of Development Rights (TDR) as a tool for protecting priority natural areas and agricultural lands. The goal of the project, funded by the W.K. Kellogg Foundation’s People and Land (PAL) program, was to provide an educational tool to help communities, developers, and residents of the Huron River Watershed understand the benefits and workings of a TDR program. The project findings are presented in the new report Potential Impacts of TDR for Michigan Communities: The Huron River Watershed Scenarios available for free download here.

Final Report Potential Impacts of TDR for Michigan Communities: The Huron River Watershed Scenarios, 3.54mb pdf file
Appendix A Excel Data Tables for Fiscal Impacts - Community, 149kb xls file
Appendix B Excel Data Tables for Fiscal Impacts - Developer, 211kb xls file Appendix C Excel Data Tables for Environmental Impacts, 140kb xls file
Appendix D Excel Data Tables for Societal Impacts, 169kb xls file
Appendix E Excel Data Tables for Transportation Impacts, 826kb xls file
Appendix F Photographs of Study Sites, 1.14mb pdf file
Appendix G Cost of Community Services for Highland Township, 350kb pdf file

For example, if a parcel of natural area is valued for both its development potential and its role in protecting local water quality and wildlife, the property owner could voluntarily sell her development rights to a developer, who would then use these rights to develop at a higher density in an urban area. The result? The natural area of the sending parcel is protected permanently while the landowner is compensated for her land’s development potential, and the developer profits from building more homes in an urban area than he could without the TDR option.

Detailed information about development rights and the components of a TDR program is available further below on this webpage. The image below is an illustration of parcel densities without TDR and with TDR Development rights transfer to protect wetlands. — MDEQ, 1995, produced by Planning and Zoning Center

Using simulation modeling for three actual developments in the watershed, the project examined the impacts of the developments as planned, and then examined the impacts of the developments had they been planned as part of a TDR program. A hypothetical TDR program served as the background for the modeling. The goal of the investigation was to examine the relative impacts of TDR and its relative application among different communities. Based on the results of the simulation modeling, this project demonstrates that, in most cases, TDR increases benefits to the community and developers by reducing the impacts (environmental, transportation, social and fiscal) associated with development while bringing to bear private funds for land preservation to meet communities’ land use goals.

For more information, contact the project manager Elizabeth Riggs at eriggs@hrwc.org or 734/769-5123 x15.

What is the difference between The Purchase of Development Rights (PDRs) and Transfer of Development Rights (TDRs)?
The following table compares the attributes of PDRs and TDRs.
Source: — Patricia L. Machemer, Ph.D., Michigan State Univ., 2006.

	Conceptual Development Right	Fungible Development Right	Nature of Development Right	Sending Area	Receiving Area	Administrative Mechanism
PDR	x		Extinguished	x		Reliance on public officials
TDR	x	x	Marketable for use	x	x	Reliance on private market

Adapted from
Transfer of Development Rights Fact Sheet: A Market Approach to Growth Management
Produced by: Mike Koles, Community Development Educator for University of Wisconsin – Extension, Winnebago County

What are development rights? Property owners have a “bundle of different rights” commonly conceptualized as a “bundle of sticks.” Several rights in the bundle include the ability to use and enjoy, exclude others, sell, lease, bequeath, mine, and also develop. These rights may be limited or regulated through laws enacted by government, such as zoning or environmental regulation. A development right is defined as the difference between existing use of the parcel and its potential use as permitted by existing law. For example, if one single-family development is allowed per every 10 acres of land and a property owner holds 30 acres, then he or she owns three development rights. In other words, a development right is equal to the unused development potential of a parcel of land.

What is the history of transfer of development rights programs?
TDR is used predominantly by counties and towns. The TDR concept was first proposed in the United States in 1961. Slow in evolving at first, by 1997 more than 40 local jurisdictions had adopted the strategy as a growth management tool and many more are currently studying its potential. More recently, about 150 programs were documented in a study Trish Machemer and Mike Kaplowitz of Michigan State University. But a follow-up study in 2002 found that actually 109 programs are in existence. Several of the well-known programs include Montgomery County, Maryland, New Jersey Pinelands, and Manheim Township, Pennsylvania.

What is the rationale behind a transfer of development rights program?
A transfer of development rights program is premised on the idea that legally certain property rights can be separated from one property owner’s bundle and transferred to another owner’s bundle to achieve certain community growth management goals. Several goals include preservation of farmland and other natural and man-made resources and providing equity to owners of land restricted by zoning or other land use regulations through the provision of compensation. TDR programs intend to shift permissible development densities from areas where development is less desirable (e.g., highly productive farmland, high quality natural features) to more appropriate sites.

Several examples of splitting the bundle of rights that may be familiar include scenic and conservation easements. Under the latter, a party acquires from the landowner the right to prevent development of a parcel of property in order to conserve the resource. The former is commonly used by land trusts to protect a view of the landscape from development.

What is the appeal of a transfer of development rights program?
Haphazard development cannot continue to occur without severe environmental, food supply, and quality of life ramifications. However, development cannot be completely halted without severe economic and equity consequences. Common sense tells us that there must be a middle ground between unmanaged growth and complete preservation. TDR programs are intended to provide the “managed growth” compromise. Development is allowed to continue in the most desirable areas as determined by the market. Preservation of environmentally sensitive and agriculturally critical areas is accomplished.

Another advantage of a TDR program is that it can provide some equity to landowners whose land turns out to be most desirable as open space or farmland. As opposed to a program that prevents development and offers no compensation, a TDR program offers financial gain through the sale of development rights. TDR can be a win-win-win situation. The environment is protected, development occurs, and landowners are compensated fairly by the market.

Basic Elements of a TDR Program

• Sending and Receiving Areas
  Sending areas are those parcels that are deemed less desirable to be developed. As a consequence these parcels “send” or transfer their development rights to properties in the receiving area. The receiving areas are those parcels that are deemed more desirable to be developed. They “receive” transferred rights, therefore, allowing development to occur at a density greater than would normally be allowed. The outcome is that managed development is clustered in certain areas, whereas, other lands remain protected.

• Calculation and Allocation of Rights
  The TDR program must clearly identify the amount of development rights that will be available to each parcel of land, the maximum density increase permitted to the developer, and the manner in which development is allowed to occur.

• Retirement of Development Rights
  There are two common methods used to administer the retirement of development rights. One method uses a conservation easement held by a governmental unit and/or private land trust, which limits the development of the land. The second method relies upon a deed restriction that guarantees the land will remain undeveloped.

Last Updated: January 2008