Economic Issues in Programs of Transferable Development Rights

The purpose of this paper is to investigate some of the economic aspects of a program of transferable development rights (TDRs). TDRs have recently been suggested as an instrument for achieving desired land-use patterns within a community or region. Most of the discussion has centered on legal questions; comparatively little has been said from an economic point of view, possibly because the great variety of TDR programs makes generalizations difficult.' It is a conclusion of this paper that apparently minor variations in the institutions and transfer rules governing these programs can result in significant differences in their efficiency within a land-use planning program as well as in the distribution of costs and benefits within a community. As such, a framework to assess the economic impacts of certain of these proposals seems timely. Because space precludes an exhaustive analysis of all the variations on the TDR theme we have restricted our analysis to the following type of program: