Arlington's TDR program misses Montgomery's high standard
Arlington recently created a Transfer of Development Rights" (TDR) program. It's a good start, but so far, it leaves out some of the most valuable components which have made Montgomery County's a model successful program, protecting the county's rural and historic land in a way that works for farmers and developers.
Though they have existed for nearly 50 years, TDR programs have recently gotten far more publicity and taken on a more integral role in urban planning. Normally, zoning allows each specific plot of land a certain amount of density. In a TDR program, that density becomes essentially disconnected from the land. It can be traded, usually on an open market, to landowners in other areas.
To use a simple example, take a farmer at one end of a county who owns some farmland (let's call it "Greenacre"). He has the right under agricultural zoning to subdivide his property into ten residential lots. But instead, he could choose to sell those ten TDR "density credits" to a developer at the other end of the county who owns land zoned for apartments (call it "Condoacre"). Condoacre might only be zoned for 20 units total. But after purchasing the TDR credits, that developer could legally add an additional ten residential units to an apartment building he'd like to construct on that property. With the purchase of the TDR credits, he may now build a 30-unit condo building on Condoacre, while Greenacre is forever restricted to agriculture.
TDR programs bring multifaceted benefits. They can protect historic properties situated on land zoned for high intensities whose owners might otherwise be inclined to demolish the historic structure to build a larger building. They can protect agricultural farmland at distant corners of a region. They can work to focus growth on particular highly transit-served neighborhoods. And they can do all this with a less heavy-handed approach than merely downzoning distant property to less intense uses, a politically (and possibly legally) charged decision that leaves many landowners angry at their land losing value. This way, the farmer's land can stay undeveloped and he can recover the investment return he has grown to expect.
In fact, a TDR program made it possible to save New York's Grand Central Terminal from the wrecking ball that buried the crosstown Penn Station.
Designers of a TDR program need to make two primary choices. First, will the program encourage TDRs in some way, or just allow them as a possible option? Second, will it create a TDR "bank" to which landowners can sell their density, or must each sale go directly to a particular receiving project? If the sales take place directly, must the buyers and sellers consult the government for approval each time? Arlington and Montgomery have answered these questions in different ways.
To encourage or not? In Montgomery County, landowners in an "agricultural preserve" area may build on their lots at one unit per 25 acres, or they may keep the land agricultural and sell their density credits at the rate of one unit per every five acres. Landowners, therefore, get a fivefold increase in density by selling to developers elsewhere. This program created dense neighborhoods like Bethesda and Silver Spring. Nearly every farmer would find it economically unwise to subdivide his land when he could sell its density for such a windfall. In other programs, however, such as Arlington's new and little-used one, landowners can only transfer density at most one-for-one. In practice, Arlington's program is structured such that a property's transferable density is often less than what would be available if an owner actually built on the original property, changing the entire economics of the arrangement.
To bank or not? In some localities, a landowner with density to sell may simply unload his TDR credits into a "TDR bank". Later, a developer can simply buy the number of credits he needs from the bank at his leisure. Some of these programs set up a specific price for the density, and the seller gets paid immediately. Elsewhere, the density might sit in the bank until a buyer and seller can agree on a price. Either way, a bank assures a selling landowner of his right to trade his density.
In non-bank programs, as in Arlington, individual sellers and buyers must come together individually to negotiate a sale, then get approval from the governing body for every transfer for every parcel. In practice, a landowner can't know if he may sell his density unless the time is exactly right for a receiving parcel to acquire that exact amount of TDR credit.
Montgomery County initiated one of the earliest and most successful TDR programs many years ago. Virginia only recently amended its state code to authorize such programs. Arlington County was the first jurisdiction in Virginia to use new state enabling authority to develop TDR guidelines. Unfortunately, Arlington's system seems to miss the point.
A TDR system is not the right tool to use where the jurisdiction merely wants additional density on a receiving parcel. If that's the case, they should simply increase the by-right density or height available on that site. Instead, TDRs are most useful when the locality wants to protect the sending parcel in its current form.
Unfortunately, when the Arlington Board discussed the new TDR proposal in November, nearly all of the discussion focused on the wrong point. Currently, while nearly every zoning district in Arlington maintains a height restriction, the Board can raise it where the "community benefits", like affordable dwellings or historic preservation, outweigh community costs. Any developer who cares about his bottom line will take advantage of the cheapest option to achieve the density he wants. If including affordable dwelling units or contributing to a public arts fund is cheaper and easier than buying density from a nearby parcel, that's what he'll do.
Meanwhile, this overlooks the small-time landowner in the county with an historic resource on his hands. Unless someone can offer him cash to buy his on-site density, he might simply knock down his historic building to construct a condo project. To avoid this type of destruction, he needs to be able to sell his density to a developer who can use it somewhere, and get at least as much money as he could by redeveloping his property.
One ideal place for this extra density is Rosslyn. It's the tallest and most dense section of the County, with arguably the best transportation infrastructure in the region. But Rosslyn has an absolute 10.0 Floor-Area Ratio cap, which Arlington's Board has no discretion to increase without changing to the underlying zoning, even if the excess would only be density transferred from elsewhere. And, any transfer of density needs to be approved, project-by-project, by the Arlington Board, depriving sellers of the confidence that they could sell their development rights.
If a developer can attain a 10.0 maximum FAR in Rosslyn merely from contributing to County "community benefits" funds, and he can't exceed 10.0 FAR through TDRs, why would he go through the expensive and time-consuming proposition of locating and buying density from our historic resource owner? Arlington should borrow some of the strengths of other programs. It's unclear whether the Virginia Code authorizes TDR banks right now, but the current arrangement has left the program virtually unused.
In the future, it would also be great if the program could allow transfers not only within Arlington, but from more rural parts of the region into Arlington. Of course, to make that work, counties would have to work out ways to handle shifting the tax and density burden between counties. But such a system would really let Virginia use TDRs to protect its rural land, as Montgomery has done between its Agricultural Reserve and urbanizing downcounty communities.
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