Transfer of Development Rights (TDR)

Overview

On March 29, 2004 Governor James E McGreevey signed into law the nation's first statewide Transfer of Development Rights (TDR) Act. With a TDR program development potential in a specified preservation area can be purchased by private investors for use in a targeted growth area. TDR preserves open space and farmland while still accommodating growth, and eliminates sudden increases and decreases in property values that have been associated with zoning changes.

A TDR program provides municipalities with a powerful tool for redirecting growth from one area of a community to another. At its heart, TDR is a planning technique for controlling development density. With a TDR program a municipality regulates site densities by allowing higher densities on some parcels in exchange for lower densities on others.

Necessary Steps

The first step in developing a TDR program is to delineate specific areas in the community where more intense development than currently permitted by zoning regulations would be acceptable. This area is known as the "transfer" or "receiving" zone.

The second step is for the community to identify areas where zoning regulations currently allow more development than is deemed acceptable. This "preservation" and "sending" zone could include, for example, prime agricultural lands, woodlands, scenic vistas, or historic buildings or districts.

Once the sending and receiving zones have been identified, the community allocates "development rights" to property owners within the sending zone. The number of property rights distributed to each landowner should reflect either the number of residential lots they could build on their property or, in some other manner, the relative value of their property as compared to all other properties in the sending area.

Required Plans & Approvals

TDR Plan
Capital Improvement Plan
Utility Service Plan
Real Estate Market Analysis
Development Transfer Ordinance
County Approval
Initial Plan Endorsement from the State Planning Commission
Required fifth year review

Incentives

Municipalities have highlighted the following reasons, among others, for establishing a TDR program:

To increase the attractiveness of a bankrupt site to developers.
To put a vacant site back on the tax rolls.
To drive the redevelopment of an existing business district or other underutilized area.
To establish a mixed-use district.
To convert residential units to commercial uses.
To provide the municipality with more control over development plans.
To add strength to a municipal master plan.
To preserve a town greenbelt and/or other open space.
To maintain rural character.
To protect historic and cultural resources.
To obtain planning assistance, including planning grants.

Important Considerations

Municipalities need to use real estate market analyses and other planning studies to ensure that sending and receiving areas are properly balanced. The receiving area needs to contain a sufficient amount of developable land in order to sustain a demand for development credits. Similarly, there needs to be an adequate supply of development credits in the sending zone for use in developing the receiving areas.

In order to ensure that receiving area boundaries are maintained in the future, municipalities should preserve greenbelts at the early stages of the planning process or at the very latest, concurrent to the development of the receiving zone.

The Highlands Regional Master Plan, once adopted, will identify TDR sending zones in the Highlands Preservation Area and receiving zones in the Highlands Planning Area. Although the Highlands Water Protection and Planning Act states that the sending zones are mandatory and the receiving zones are voluntary, municipalities should stay fully apprised of and involved in the development of the Highlands Plan in order to ensure that local and regional visions are consistent with one another.

Municipalities should keep in mind that a TDR program does not restrict overall growth. Without the inclusion of density bonuses the amount of total growth remains unchanged, although a TDR program can accelerate growth in a receiving zone since the area of developable land has been significantly decreased. Furthermore, if a receiving zone is located in an area with high development pressures, the opportunity to develop the land at a higher density may spur growth.

In order to implement a successful TDR program, municipalities need to be dedicated to long-term planning. Early TDR planning efforts have highlighted a link between well-planned and well-designed receiving zones and equity protection for sending area landowners.

Communities with TDR Projects

Announced by the New Jersey Department of Community Affairs on February 10, 2005:

Berkeley Township (Ocean County)

Berkeley Township plans to send credits from the Pinewald section of town as well as other environmentally sensitive areas. The Township will use the credits in various redevelopment sites along and near Route 9.

Fanwood Borough (Union County)

Fanwood is proposing a unique transfer that would place permanent restrictions on structures in the Borough's designated historic district, in exchange for greater density in a proposed downtown redevelopment area near the train station. The proposal promotes redevelopment and transit-oriented development, and will be the first historic preservation TDR program in the State.

Hopewell Township (Cumberland County)

Hopewell plans to transfer credits from agricultural lands to a greenfield area west of Bridgeton. The Township is currently undergoing several initiatives to preserve land, and plans to use TDR to bolster its planning efforts.

Montgomery Township, Somerset County

Montgomery will send credits from the Sourland Mountains Region of the community to a proposed transit-oriented development at the Belle Meade station on the former West Trenton Line. Credits will be converted into commercial development in the area surrounding the train station.

Washington Township (Mercer County)

Washington Township officials are proposing to transfer development rights from approximately 7,000 acres of farmland to their designated Town Center. The Town Center is zoned for a mix of uses, with 500,000 square feet of commercial development and 1,000 residential units.

Woolwich Township (Gloucester County)

Woolwich will transfer credits from agricultural lands primarily to areas north of Swedesboro and possibly to areas south of the Weatherby residential development. The predominately-agricultural sending area consists of approximately 5,000 acres, and includes parts of the Tomlin Station Natural Heritage Priority site and the grand Spruce Run National Heritage site. The community aims to curb development in the area to maintain its rural character, while accommodating for economic development in more suitable growth areas.

Highlands TDR Demonstration Projects

Announced by the New Jersey Department of Community Affairs on February 17, 2005:

Lodi Borough (Bergen County)

Lodi is not in the Highlands Region, but is willing to accept credits from the preservation area under a provision of the law that allows municipalities in Highlands Counties to do so. The proposed receiving areas include a number of large vacant and underutilized industrial sites suitable for mixed-use redevelopment, like the BASF site.

Oxford Township (Warren County)

Oxford Township is located in both the preservation and planning area of the Highlands Region. The Township is currently working on a redevelopment plan for a recently closed textile-manufacturing site, which will provide the Township with a unique opportunity to include TDR in its community planning. The former industrial site will become the receiving area and will feature a mixed-use development compatible to the Township's existing downtown. A site the Township had originally purchased to redevelop will become a sending area and converted into usable open space.

Prospect Park (Passaic County)

Prospect Park is not in the Highlands Region, but is willing to accept credits from the preservation area under a provision of the law that allows municipalities in Highlands Counties to do so. The proposed receiving area is a soon-to-be-closed, 75-acre quarry. The borough plans to create a mixed-use development on the property, which represents 25% of the Borough's land area.