Transfer of Development Rights (TDR)
Case Study

Montgomery County, Maryland
Farmer standing in field.

Montgomery County, Maryland lies adjacent to Washington D.C. The southern portion of the county experienced significant levels of suburban sprawl in the 1960's and 1970's. In contrast, most of northern Montgomery County was characterized by rural landscapes with vast expanses of open space, meadow, and farmland. In an effort to preserve the character of existing rural areas, local decision makers adopted a rural preservation plan and changed its agricultural zoning density from one housing unit per two acres to one housing unit per five acres. Although this curbed the density of development in the region, it did little to curb the pace of development and the subsequent loss of open space and agricultural lands. The local task force charged with addressing this problem was hesitant to downzone any further in the interest of protecting the investment potential of these lands for local owners. After careful consideration, the county instituted a TDR program.

The Sending Area:

Aerial view of farmland.
To establish the TDR program, a 110,000-acre area, called the Agricultural Reserve, was established and over 90,000 acres in this Reserve were rezoned to a Rural Density Transfer Zone (RDTZ). After rezoning, density in the RDTZ was limited to one unit per 25 acres for development. This density provided an obvious disincentive to building on sending sites, but the program provides other incentives that protect the economic investment of local farmers. If these landowners choose to enter into the TDR process, the density that they can transfer reverts back to the original one unit per five acres. This provides a significant incentive to participate in the TDR program and unique opportunity to preserve farmland. In return for this increase in development potential, farmers place a permanent deed restriction on the land precluding it from future development.

The Receiving Area:
Residential dwellings.
The County also identified specific receiving areas as part of the TDR program. These areas are appropriate for higher density development because they are readily served by essential public services such as transportation, wastewater and public water supply. Receiving areas were also rezoned and assigned two densities: a baseline density for developers who have not acquired TDRs, and, a higher development density for those who have. For example, one such receiving area is normally zoned at 5 units per acre, but a maximum of 7 units per acre can be allowed for those developers who have acquired TDRs. Again, this provided the receiving incentive.

The Benefits to Farmers:
Farmers feeding cows.
For a farmer in the RDTZ, several benefits can be realized. First, agricultural activities are protected in this zone and fewer people in the area makes for easier farming. Second, the development equity of their land is protected and expanded farm uses are allowed. Lastly, once TDRs are sold, land within the RDTZ can still be purchased at agricultural value to expand farming operations. In essence, a farmer can retain the title to his or her land and continue farming while still realizing the development equity of his or her land as needed by selling TDRs.

The Benefits to Others:

Anyone can buy TDRs- farmers, brokers, developers, investors, etc.; however, TDRs may only be used in designated receiving areas within the County. TDRs may be purchased on a speculative basis for resale, as the buying and selling of TDRs is market driven. Most developers have found it more profitable to buy TDRs to achieve higher densities in receiving site projects.