Transferable Development Rights Are a Tool for Apportioning Increased Density

 

States using Transferable Development Rights (2009)

We all know the city needs to grow.  Unfortunately, all too often the NIMBY response is that development and density would be much better “over there” somewhere. What if it could? What if development goals could be achieved at the same time lower density could be selectively preserved?

There’s this legal thing called Transferable Development Rights and it could be selectively used to deal with the “over there” without impacting overall development.  Here’s how it works …

Simplified diagram of how Transferable Development Rights work

Let’s say there are two parcels each having the ability to build 10 homes. Parcel A wants to build, Parcel B doesn’t. Let’s also say Parcel B wouldn’t mind a few extra bucks for doing nothing.  These two parties can get together and decide that Parcel A can purchase the development rights from Parcel B. Parcel B gets paid for not developing in exchange for extinguishing the ability for future development in perpetuity.  The city gets their 20 homes, the developer gets the increased density they want without a complex zoning case and Parcel B stays as it is forever.

While likely a new concept to you (it was to me), it’s been used as a vehicle to preserve some spaces in exchange for increasing density elsewhere.  In fact, the lead image from 2009 lists 33 states having employed this maneuver, mostly clustered in the northeast US and Florida (where a lot of New England lawyers retire, I expect).  It’s also been used a few times in Texas.  The graph shows two dots in Texas but since 2009, a cursory look finds cases in Austin and Denton that have occurred since then.

In the Austin case, the city wanted to place a transit hub on someone’s land so they gave him twice the development potential on the remaining portion of his parcel.  In Denton, a master-planned community received increased density in exchange for leaving over 100 acres as undeveloped forest and prairie.  That’s over 100 acres of forever green space, with the same number of homes.  Those adjacent new homes also became more desirable by bordering the perpetual forest. Win-win.

Now a landowner can’t just decide one day they’re going to sell their development rights to whomever is walking by.  There has to be a seller and a receiver. The municipal government has to OK the plan.

A Selective Tool

I keep underlining “selective” because this isn’t a panacea for the NIMBYs … unless they’re willing to extinguish their development rights without payment out of the goodness of their hearts.  But we also know there’s usually a money factor somewhere in those hearts. I assume more than a few NIMBYs would sell their rights as long as the buyer’s development was far enough away. But don’t think you can get paid for your rights and transfer them to a developer on the Moon.

You also have to have City Hall back up these deals.  They’d have to stop granting (essentially free) zoning changes to developers when there are nearby properties willing to sell enough development rights to make the project work.  City Plan Commission would have to ask developers if they had sought nearby development rights as part of their deliberations.

So selective, not silver bullet.

Applying to Pink Wall Development

I use the Pink Wall because it’s top of mind these days, what with my sitting on their new development task force and everything. But what I’m writing could be applied in many neighborhoods in Dallas.

In a nutshell, the Pink Wall consists of some 30 individual condo complexes and one rental complex.  Many of the buildings are in poor repair but with no desire to sell to a developer.  Some want to sell and increase their density significantly.  Could these parties get together and hash out a plan to sell and transfer development rights that ultimately result in the same overall density?

Could that poorly maintained building take that money and restore their complex to shiny new? Yes. But they could just as easily pay residents a windfall and remain in poor shape.  To some extent, aside from perpetuating an eyesore, it doesn’t matter. The complex that sold and extinguished their development rights will forever remain at the same density even if they sell in the future.

The area enjoys some limited redevelopment (which will happen anyway) that is woven into the classic buildings that remain.

PD-15, slightly east of Preston Road bounded by Northwest Highway, Pickwick Lane, Baltimore Drive and an alley.

Specific to the PD-15 task force, could say Diamond Head Condos sell their development rights to the other parcels in PD-15 for a windfall? Yes.  In fact I encourage this thinking.  Being across the street from the Athena tower, it’s in a less desirable location compared with Preston Place, Diplomat and Royal Orleans that have no tower blockage north and south.

Once developers pay for those rights, whenever Diamond Head is ready to sell, the parcel can more easily be purchased by the city to aid in flood control.  Wha-wha-what???

In June, I wrote about how Preston Place’s underground garage could be sealed off and used to sequester water during flood-level rains to stop cars floating down the street several times a year. Once sealed, their garage roof could be turned into a 2 acre neighborhood park.  I’ve been told by a few that it would work and that Dallas has similar water vaults elsewhere that do just that.

But Preston Place isn’t the best place for a park as it’s on Northwest Highway.  But Diamond Head, shielded from the highway by the Athena tower would be a much better location.  So let’s say that Diamond Head is worth $XXXX. Builders buying their development rights might chisel what remains down to $XX. Councilwoman Gates spoke about a new surcharge on (sewer?) bills that’s being instituted specifically for fixing water problems.  When Diamond Head is ready to sell, would the city have enough in the kitty to buy the property and build the vault with a 2 acre park on top? In the end, Diamond Head would get the same money but in an unconventional way.

If the city could be convinced …

  • Density would be steered to better positioned and more valuable properties (win).
  • An area well beyond the Pink Wall would be dry during torrential storms ensuring a statue of Councilwoman Gates (win).
  • The neighborhood would get 2 acres of green space (win) along with basking in the increased property values such an amenity would bring (win).
  • New development is also worth more bordering the park (win).
  • The city would get the same or increased tax revenues that development brings (win).
  • And if you want to add a green cherry on top, the water vault could be used by neighboring properties to water their lawns rather than just running down the drain (win).

By my count, in this one case, smartly using transferable development rights would be a win-win-win-win-win-win-win.

Sure, it’s a longshot project. But how many longshot projects have gotten done when enough of the right people … neighbors … were involved.  And I get that most of you don’t live in Pink Wall turf, but I’m sure there are other neighborhoods in need of creative solutions that transferable development rights could help solve.

Just keep in mind selective, not silver bullet.

 

Remember:  High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement.  If you’re interested in hosting a Candysdirt.com Staff Meeting event, I’m your guy. In 2016 and 2017, the National Association of Real Estate Editors has recognized my writing with two Bronze (2016, 2017) and two Silver (2016, 2017) awards.  Have a story to tell or a marriage proposal to make?  Shoot me an email sharewithjon@candysdirt.com.

One Comment

  • Raises the issue of whether, from a public policy perspective, it should ever be legal to downzone an condo development site, even if the HOA unit holders agree to do it to themselves. Could be better if deal includes a city commitment to condemn the site after an agreed upon period of time, probably at a predetermined price.