Building Coalitions Out of Thin Air: Transferable Development Rights and ‘Constituency Effects’ in Land Use Law

Abstract

Transferable Development Rights (TDRs) were supposed to be a solution to the intractable problems of land use, a bit of institutional design magic that married the interests of development and preservation at no cost to taxpayers and with no legal risk. Under a TDR program, development is limited or barred on properties targeted for preservation or other regulatory goals, but owners of those lots are allowed sell their unused development rights to other property owners. In theory, this allows the same amount of development to occur while preserving favored uses without tax subsidies or constitutional challenges. Reviewing their use over the last forty years, this Article shows that the traditional justifications for TDRs do not work. In practice, TDRs are not necessary to avoid takings litigation, are not costless to taxpayers, and do not balance the interests of preservation and development, but instead serve as yet another growth control in metropolitan areas where such controls have caused housing crises and major harms to the national economy. Assessed as a technocratic tool for solving problems in land use, TDRs are a failure.

But this Article shows that there is a case for TDRs not as a technocratic but rather as a political tool. By giving valuable development rights to some popular or otherwise politically influential owners of regulated property, a city can build a coalition for re-zonings that might otherwise be politically impossible. The effect of TDRs on politics can be positive to the extent that TDRs strengthen constituencies or land use goals that local politics systematically undercounts, as we show through an analysis of New York City’s Special District Transfer TDR program. In particular, TDRs could help break Not In My Back Yard opposition to new development by building a competing pro-growth coalition.

More generally, using TDRs as an example, the Article shows how land use law is the creator as well as creature of local politics. Existing property law helps cement anti-development coalitions, but savvy leaders could use moments in power to create stable pro-growth coalitions by enacting new laws that help mobilize new pro-growth constituencies. Understanding these “constituency effects” of land use law allows policymakers to redesign entitlements like TDRs to produce a healthier land use policies.

Keywords: Cities, agglomeration, zoning, land use, urban politics, city council, mayor, development

JEL Classification: R58, R14, R11