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Making Markets for Development Rights Work: What Determines Demand

  • Walls, Margaret

    ()

    (Resources for the Future)

  • McConnell, Virginia

    ()

    (Resources for the Future)

  • Kopits, Elizabeth

Many economists see current land use patterns as inefficient due to various market failures, and planners argue that current patterns do not follow sound planning practice. One policy of interest to both groups is transferable development rights (TDR). TDRs allow the development rights from land that is preserved in an undeveloped state to be transferred to other areas where development can be made denser. This paper addresses one of the greatest difficulties TDR programs face—insufficient demand. We develop a simple theoretical model and estimate a TDR demand function using data from Calvert County, Maryland, one of the only regions where data on individual sales are available. We find that baseline zoning is a critical determinant of TDR demand—demand is high in low-density rural areas but not in the relatively high-density residential areas. We also identify many subdivision characteristics that are significant in explaining TDR use.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-05-45.

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Date of creation: 31 Oct 2005
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Handle: RePEc:rff:dpaper:dp-05-45
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  1. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-21, May.
  2. David E. Mills, 1989. "Is Zoning a Negative-Sum Game?," Land Economics, University of Wisconsin Press, vol. 65(1), pages 1-12.
  3. Cannaday, Roger E & Colwell, Peter F, 1990. "Optimization of Subdivision Development," The Journal of Real Estate Finance and Economics, Springer, vol. 3(2), pages 195-206, June.
  4. Rolleston, Barbara Sherman, 1987. "Determinants of restrictive suburban zoning: An empirical analysis," Journal of Urban Economics, Elsevier, vol. 21(1), pages 1-21, January.
  5. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
  6. Daniel P. McMillen & John F. McDonald, 1990. "A Two-Limit Tobit Model of Suburban Land-Use Zoning," Land Economics, University of Wisconsin Press, vol. 66(3), pages 272-282.
  7. Carpenter, Bruce E. & Heffley, Dennis R., 1982. "Spatial-equilibrium analysis of transferable development rights," Journal of Urban Economics, Elsevier, vol. 12(2), pages 238-261, September.
  8. B E Carpenter & D R Heffley, 1981. "A spatial equilibrium analysis of flexible zoning and the demand for development rights," Environment and Planning A, Pion Ltd, London, vol. 13(3), pages 273-284, March.
  9. Walls, Margaret & McConnell, Virginia & Kopits, Elizabeth, 2003. "How Well Can Markets for Development Rights Work? Evaluating a Farmland Preservation Program," Discussion Papers dp-03-08, Resources For the Future.
  10. 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.
  11. 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.
  12. McMillen, Daniel P. & McDonald, John F., 1991. "Urban land value functions with endogenous zoning," Journal of Urban Economics, Elsevier, vol. 29(1), pages 14-27, January.
  13. Mills, David E., 1980. "Transferable development rights markets," Journal of Urban Economics, Elsevier, vol. 7(1), pages 63-74, January.
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