2005 BES Annual Meeting Presentation and Poster Abstracts
Markets for Preserving Farmland: The Use of TDRs in Maryland
Virginia McConnell, UMBC Economics Department Nick Kelly, Graduate Student, Public Policy
Abstract: The rate of conversion of agricultural land and open space to development has accelerated over the past several decades. The combination of larger lot sizes, more affordable housing at distant locations from center cities, and increasing reliance on vehicles has encouraged increasing rates of land conversion. As development spreads, there is a growing concern about the lost farmland, open space, and environmentally valuable areas that may have public value beyond their private value to landowners. One tool for mitigating these trends is transferable development rights, TDRs, which sever the right to develop land from the land itself, creating a market with buyers and sellers in which the development rights can be traded. Because they provide a market-based solution to land use problems, TDRs have the potential to result in efficient allocations of land between developed and undeveloped uses. Prices provide signals to landowners about the relative values of preservation and development, but landowners are allowed to make decisions for themselves about whether or when to preserve or develop their land. TDRs were first used in the United States in the 1960s, but their use has grown in recent years. Pruetz (2003) counts about 140 programs, with such objectives as preserving farmland, safeguarding unique natural areas or historic landmarks, and protecting environmentally sensitive areas. Despite their potential, only a few programs have been successful in maintaining active and efficient markets for TDRs. Some of the most successful TDR programs are in the Maryland. We analyze several of these programs and suggest what lessons can be learned from their experience.