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Old Programs, New Purposes: Using Transferable Development Rights to Improve City Adaptability

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Old Programs, New Purposes: Using Transferable Development Rights to Improve City Adaptability

June 19, 2020

Like living organisms, it is the cities that can adapt to changing circumstances that are best able to thrive. COVID-19’s effects on the way people live and work require cities to be flexible in developing new programs and modifying existing programs to suit the new norm. Once-daily commuters are now more likely to work remotely at least part of the time, which could make New York City office space less expensive. At the same time, old problems remain, notably the high cost of housing, driven in part by restrictive zoning polices that limit new housing supply and stifle economic opportunity. Unaffordable housing makes those in the lower- and middle-income brackets more likely to live in crowded dwellings — with ominous consequences in the age of COVID-19. As we look to revitalize our cities in the wake of the pandemic, a new application of an old tool, the transferable development right (TDR), can play an important role in fostering an abundance of urban opportunities for all residents.

An Overview of TDRs and the Ills They Seek to Cure

TDR programs work by granting the owners of properties designated for preservation, or “sending sites,” the ability to transfer unusable development potential to other properties within a defined area, termed “receiving sites.” This potential can be applied at receiving sites to exceed the maximum floor area that is buildable under the baseline zoning code. Sending site owners can either use their TDRs on receiving sites that they also own, or sell their TDRs to others. 

Municipalities across the United States employ TDR programs to expand housing supply and simultaneously advance preservation goals, such as historic, environmental, and farmland conservation. Although TDR programs are all too often poorly designed or implemented, at their best they can make a city more adaptable to the competing needs of preservation and development over time. 

TDR programs are often framed as technocratic tools, but in a recent paper Roderick M. Hills, Jr. and David Schleicher show how programs that are properly designed and implemented can be used to build pro-development political coalitions out of otherwise opposed interests. TDRs can effectively counter the “constituency effects” of zoning law, or incentives for a law’s beneficiaries to organize interest groups and oppose its repeal or modification. Zoning codes often establish a sense of settled expectations, which provides the basis for similarly situated homeowners to protect their preferences by impeding rezoning for new development. 

These efforts, colloquially dubbed “not in my backyard” or “NIMBY” pressure, regularly take the form of acrimonious legal and political activity. Local politicians, reliant on homeowners’ votes, often bow to such pressure by vetoing new development projects. NIMBYism has contributed to the steep rise of real estate costs and rents  over the last several decades, which has far outpaced growth in wages. Higher housing costs also cut off economic opportunity by limiting the ability of poorer Americans to move into the most productive job markets, excluding them from participating in the economic booms of Silicon Valley and New York.

Writ large, NIMBY efforts make cities less flexible and adaptable to changing needs, which may hamper efforts to improve the built environment in response to COVID-19. After all, modern sanitation movements accelerated after the cholera pandemics of the 19th century, and cities may be hard-pressed to take vital measures in the face of NIMBY pressure.

Benefits conferred by TDR programs can provide powerful incentives for different constituencies to join together and lobby for development, offsetting NIMBY groups’ disproportionate political influence. Combining the popular social benefits of preservation with new housing construction forces opponents to defeat not only the proposed development, but also the popular benefits. 

New York City’s High Line provides one of the best examples of a successful TDR program. Owners of lots under the High Line, long aggrieved by the unused train track’s impediment to new development and drag on property values, were given TDRs that could be sold to owners of properties in a Special District that spanned 15 blocks along Eighth Avenue. Properties in the Special District that used TDRs could then be built above the zoning code’s default square footage limits without discretionary review by city officials. In exchange, the High Line was preserved as a linear park. 

Providing regulated property owners with a way to sell their unused development potential converted them into staunch proponents of the preservation project, which helped overcome NIMBY opposition to new development. Over 400,000 square feet were transferred to the Special District, and the High Line’s popularity fueled a construction boom and urban renewal in the Chelsea area. The TDR program transformed an emblem of blight into one of the City’s most visited and beloved public spaces, providing a model of urban development that has been emulated in cities around the world.

Using TDRs to Inform the Recovery from COVID-19

A 2015 report by City Comptroller Scott Stringer showed that nearly 1.5 million New Yorkers live in crowded dwellings, or those with more than one person per room. Analysis from the Furman Center at NYU finds that the New York City zip codes with higher rates of COVID-19 infections were also those with higher proportions of overcrowded renters. 

In light of the elevated risks that COVID-19 and future epidemics pose to people sharing rooms, it is essential that the City pursues policies that make it easier for residents and families to find accommodation that is adequate for the size of their households. Adding new apartments will make it easier for the City’s residents to find their own units, rather than crowding into shared rooms and units. Relaxing minimum unit size standards and allowing for greater construction of micro-apartments is one option. So too is permitting owners of single-family homes to subdivide them into multiple units or develop accessory dwelling units on their property, which would allow members of larger families to have separate rooms while remaining in the same household. The City of San Diego announced last fall that it would accept pre-approved, no-cost accessory dwelling unit plans. This will reduce the expense and hassle of adding affordable housing to existing single- and multi-family properties.

TDRs should be part of the City’s toolkit for adding housing as well, especially in neighborhoods with high levels of crowding. Any preservation efforts in these or adjacent neighborhoods should involve the designation of nearby receiving sites, preferably near subway and bus lines, in order to foster denser by-right development of new units. A boon to the quality of life of urban residents in its own right, the alleviation of crowding can also impede the spread of the coronavirus and limit the consequences of future outbreaks. 

Given COVID-19’s devastating impact on the economy and state and local budgets, it is now more important than ever to spur new opportunities and avoid a long-term slump. Issuing TDRs to leading businesses that relocate to the City would be a budget-friendly way to reinvigorate the local economy and increase property and income tax receipts over time. Those tax revenues could be earmarked to reduce the deficit or fund popular programs, which can expand pro-development constituencies to overcome NIMBY opposition and increase housing supply.

The world has changed quickly in the months when it appeared to be standing still. By using existing programs to adapt to the new norm, cities can continue to be drivers of innovation, economic growth, and human flourishing

John Ketcham is a summer Collegiate Fellow at the Manhattan Institute and a rising third-year student at Harvard Law School. He currently serves as managing editor of the Harvard Journal of Law & Public Policy and as treasurer of the Harvard Federalist Society. 

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Photo by Spencer Platt/Getty Images 

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