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How Well Can Markets for Development Rights Work? Evaluating a Farmland Preservation Program

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  • Walls, Margaret

    ()
    (Resources for the Future)

  • McConnell, Virginia

    ()
    (Resources for the Future)

  • Kopits, Elizabeth

Abstract

Transferable development rights (TDRs) can be used as a local planning tool to preserve land for particular uses. TDRs separate ownership of the right to develop land from ownership of the land itself, creating a market in which the development rights can be bought and sold. Landowners who sell TDRs permanently preserve their land in an undeveloped state; those TDRs are then used to increase the density of development elsewhere. In this paper, we evaluate a TDR program for preserving farmland in Calvert County, Maryland. We evaluate the performance of the TDR market over the 23-year life of the program by looking at the number of transactions and TDRs sold and the level and dispersion of prices over time. We also look closely at the influence of the county government as a participant in the market. We locate the properties that have been preserved in the county as well as the subdivisions that have used TDRs to increase the density of development. We find that the program is achieving Calvert’s farmland preservation goals and the TDR market appears to have operated efficiently, at least since 1993 when the county increased its role in the TDR market. At that time, the county began purchasing a small number of development rights each year at a fixed and known price and also began publishing a newsletter providing information about the program. These actions stabilized prices and appear to have bolstered participants’ faith in the longevity of the program. Most of the agricultural properties preserved in the program are in areas less profitable for development. The demand for TDRs to increase density is greatest in subdivisions in the northern part of the county, closer to the major urban cities, and interestingly, in relatively rural areas with lowdensity zoning. There appears to be little demand for TDRs and the associated higher density in town centers or areas zoned with residential zoning.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-03-08.

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Date of creation: 01 Mar 2003
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Handle: RePEc:rff:dpaper:dp-03-08

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Keywords: land use; farmland preservation; development rights;

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References

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  1. Jeffrey Kline & Dennis Wichelns, 1996. "Public Preferences Regarding the Goals of Farmland Preservation Programs," Land Economics, University of Wisconsin Press, vol. 72(4), pages 538-549.
  2. Stavins, Robert N., 2004. "Environmental Economics," Working paper 276, Regulation2point0.
  3. Paul Thorsnes, 2002. "The Value of a Suburban Forest Preserve: Estimates from Sales of Vacant Residential Building Lots," Land Economics, University of Wisconsin Press, vol. 78(3), pages 426-441.
  4. Mills, David E., 1980. "Transferable development rights markets," Journal of Urban Economics, Elsevier, vol. 7(1), pages 63-74, January.
  5. Heimlich, Ralph E. & Anderson, William D., 2001. "Development At The Urban Fringe And Beyond: Impacts On Agriculture And Rural Land," Agricultural Economics Reports 33943, United States Department of Agriculture, Economic Research Service.
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  8. Levinson, Arik, 1997. "Why oppose TDRs?: Transferable development rights can increase overall development," Regional Science and Urban Economics, Elsevier, vol. 27(3), pages 283-296, June.
  9. Jeffrey Kline & Dennis Wichelns, 1994. "Using Referendum Data to Characterize Public Support for Purchasing Development Rights to Farmland," Land Economics, University of Wisconsin Press, vol. 70(2), pages 223-233.
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  14. Lynch, Lori & Musser, Wesley N., 2000. "A Relative Efficiency Analysis Of Farmland Preservation Programs," Working Papers 28592, University of Maryland, Department of Agricultural and Resource Economics.
  15. Paul Thorsnes & Gerald P. W. Simons, 1999. "Letting The Market Preserve Land: The Case For A Market-Driven Transfer Of Development Rights Program," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 256-266, 04.
  16. Hahn, Robert W., 1982. "Market Power and Transferable Property Rights," Working Papers 402, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Pizer, William, 1997. "Prices vs. Quantities Revisited: The Case of Climate Change," Discussion Papers dp-98-02, Resources For the Future.
  18. Barry C. Field & Jon M. Conrad, 1975. "Economic Issues in Programs of Transferable Development Rights," Land Economics, University of Wisconsin Press, vol. 51(4), pages 331-340.
  19. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
  20. Joskow, Paul L & Schmalensee, Richard & Bailey, Elizabeth M, 1998. "The Market for Sulfur Dioxide Emissions," American Economic Review, American Economic Association, vol. 88(4), pages 669-85, September.
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Citations

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Cited by:
  1. Walls, Margaret & McConnell, Virginia & Kopits, Elizabeth, 2005. "Making Markets for Development Rights Work: What Determines Demand," Discussion Papers dp-05-45, Resources For the Future.
  2. Walls, Margaret & McConnell, Virginia & Kopits, Elizabeth, 2005. "Zoning, TDRs, and the Density of Development," Discussion Papers dp-05-32, Resources For the Future.
  3. McConnell, Virginia D. & Kopits, Elizabeth & Walls, Margaret, 2005. "Farmland Preservation and Residential Density: Can Development Rights Markets Affect Land Use?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 34(2), October.
  4. Walls, Margaret & McConnell, Virginia, 2004. "Incentive-Based Land Use Policies and Water Quality in the Chesapeake Bay," Discussion Papers dp-04-20, Resources For the Future.
  5. Janmaat, John, 2008. "Playing monopoly in the creek: Imperfect competition, development, and in-stream flows," Resource and Energy Economics, Elsevier, vol. 30(3), pages 455-473, August.

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