Transferable development rights

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Transferable development rights (TDR) let a landowner sell the right to develop part of their land to someone else who will use that right in a different place. The idea is that land has a bundle of rights, and some of those rights can be moved to another parcel. TDRs are used to guide growth, protect farms, forests, and historic sites, and help communities plan better.

Sending districts are typically areas with valuable environmental, heritage, or agricultural land that should be preserved, or parcels with unused space that could be built on more than allowed. Receiving districts are urban areas where higher density development is wanted or needed.

How it works: A landowner in a sending district sells development rights. The buyer in a receiving district can use these rights to build more densely. Sometimes the rights are stored in TDR credit banks until there is a receiving project to use them for. This helps when a sale happens before a new project is ready.

In Massachusetts, experts suggest TDR credit banks should be run by a third party, like a non-profit or local agency, to organize sales and transfers.

Why use TDRs: They help concentrate growth where it fits, reduce urban sprawl, protect important lands, and provide compensation or incentives rather than just changing zoning. They can also help avoid takings issues by letting landowners benefit from their unused rights.

Examples: Montgomery County, Maryland’s Agricultural Reserve is a well-known TDR example. TDR programs exist in more than 200 U.S. communities across several states, including Colorado, Massachusetts, Virginia, and Washington. New York City uses transferable air rights; each building has a limit, but those air rights can be sold or moved.

A famous legal case is Penn Central Transportation Co. v. New York City (1978). The Supreme Court ruled that blocking a taller building didn’t take all economic value from the owners of Grand Central Terminal, because the owners could use the terminal’s air rights elsewhere.