Wednesday, February 23, 2011

Transfer of Development Rights - or - Posing a question to our readers.

By Ariel

In states such as New Jersey, advocates of smart growth have established an interesting method of providing tools for communities to manage sprawl and growth. New Jersey's State Transfer of Development Rights Act allows municipalities to individually or jointly, create what are called "Sending" and "Receiving" zones.

If a municipality (or a collaborative set of them) can predict both a significant amount of growth but has also identified areas it wants to protect, it could create these Sending and Receiving Zones. The Receiving Zones are areas where growth is most likely already to occur, the most desirable areas and regionally competitive and designating them as Receiving Zones guarantees that they will be dense (and supportive of transit). The rights to have access to this market and the ability to build densely there (and make more money) are of value.

The Sending Zones of course are ones a region wants to protect. Farmers who would be tempted to sell their land to leap frog developers, could theoretically sell the development rights instead. Historic buildings that could be razed for the land might be saved in the same manner. New Jersey's Authorizing Act creates a framework for what essentially becomes a density market where developers can buy density directly from other land owners or from "development banks."

What is amazing is that this mechanism creates value in keeping land under - developed and provides the owners of that land access to the value as well.

Generally these seem used and good for suburban regions, or at the very least, what about using it in a dense urban environment. There are parts of Philadelphia that are more likely to see more growth in a few years, or perhaps we want to promote transit oriented development?
Perhaps, we could protect historic areas, riparian or watershed land, etc, and provide the people on whose land we are trying to protect have access to the value created in such city density market.

Aside from a comments about what an optimistic view of Philadelphia's real estate market I seem to have (and don't worry, like any cynical Philadelphian, I think its terrible), I would love to know what you think...

This is a just a thought and I would love to hear what other