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Review of Environmental Economics and Policy Advance Access originally published online on June 25, 2009
Review of Environmental Economics and Policy 2009 3(2):288-303; doi:10.1093/reep/rep008
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© The Author 2009. Published by Oxford University Press on behalf of the Association of Environmental and Resource Economists. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Policy Monitor

U.S. Experience with Transferable Development Rights

Virginia McConnell* and Margaret Walls{dagger}

* University of Maryland–Baltimore County and Resources for the Future
{dagger} Resources for the Future; e-mail: Walls{at}rff.org

To address the externalities that arise from local land uses, some communities in the United States have turned to Transferable Development Rights (TDRs) as a promising policy tool. TDRs separate the right to develop from the land itself, and create a market that allows those rights to be transferred from one location to another. If the markets work well, targeted areas are protected from development, thereby maintaining them as open space, buffers for water pollution control, wildlife habitat, or scenic vistas, or for other uses; the transferred rights are used to develop other areas more densely than would otherwise be the case. While TDRs have been established in many communities in the last 30 years, only a handful have been successful in achieving local land use goals. The design of TDR markets is complex because they must be integrated with local zoning regulations and they depend critically on local economic conditions in the housing and land markets. This article summarizes the key elements in the design of TDR programs and reviews a number of existing markets to identify which have performed well and which have not. The evolution of the successful markets is described, and lessons learned for future TDR programs are presented.

JEL Classification: Q24, Q57, Q58


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