HIP Tool: Transfer of Development Rights for Affordable Housing

A transfer of development rights (TDR) program relocates development potential from properties in designated “sending areas” to sites in designated “receiving areas.” A TDR transaction involves: (a) selling the development rights from a sending site, thereby preserving the sending site from future redevelopment; and (b) purchase of those development rights by the owner of a site in the receiving area to be allowed to build at a higher density or height than ordinarily permitted by the base zoning. Typically, TDR sending areas are located in rural and resource lands. However, a TDR program can be structured to allow urban affordable housing preservation projects to qualify as a sending site (e.g., mobile home parks, high-rise low income apartments).


Background

Although a TDR program is most commonly considered a means to preserve farmland, forest or open space, it can also be used to preserve affordable housing in urban areas. Manufactured home parks are an important source of affordable, single family homes in many communities, but are increasingly threatened by encroaching urban development or redevelopment. By allowing manufactured home parks to qualify as a sending area in a local or regional TDR program, their development rights can be purchased and existing use preserved. The transaction then provides revenue for park maintenance and improvements.

Similarly, TDR could be applied to preserve affordable housing in high density urban areas at risk of redevelopment. Unique affordable housing options such as residential hotels, single-room occupancy (SROs) or efficiency units in historic buildings or gentrifying neighborhoods can be at risk for redevelopment. The development rights of these buildings could be highly valuable and worthwhile contributions as sending areas of a TDR program. It may be helpful to partner with other cities or counties to develop the attractiveness of the areas within the TDR; see interjurisdictional cooperation for more information.

It is important to structure receiving site incentives so they do not de-emphasize bonuses for affordable housing provision. If affordable housing is a community priority for a receiving site, it should be prioritized in a menu approach to TDR incentives, so that a developer should not be given a choice to achieve bonus density by picking between including affordable housing in a project and/or using TDR credits. Rather, jurisdictions are encouraged to set up a system that requires some affordable housing or contribution to the provision of affordable housing prior to being able to use TDR incentives.

Tool Profile

Focus Areas

  • Urban Centers
  • Expensive Housing Markets
  • Innovative Single Family Techniques

Project Types

  • Multifamily
  • Ownership
  • Rental
  • Subsidized

Affordability Level

  • Less than 80% AMI

Housing Goal

  • Affordability