Montgomery County, Maryland, population 1,050,688 (2019), extends north from the District of Columbia and includes many of the suburbs that have absorbed the growth generated by adjacent Washington, D.C., including Silver Spring, Bethesda, and Rockville. As of 2013, Montgomery County had permanently preserved 72,479 acres of farmland, with over 52,052 acres of this total being accomplished by TDR alone, representing a value of $117 million.
In 1964, the county adopted a general plan entitled On Wedges and Corridors. The plan aimed at concentrating growth in a central spine served by public transportation and urban infrastructure while retaining the remaining wedges as farmland and open space. Initially, the county tried to implement this plan using only zoning. However, after a one-unit-per-five-acre downzoning was adopted in 1970, almost 12,000 acres of agricultural land was lost in the next five years.
The county concluded that farmers were reacting to a condition called “impermanence syndrome”, a feeling of resignation about the inevitability that the county would eventually become a homogenous suburb. According to this syndrome, if neighboring land is sold for development, adjacent land is rendered less viable or even impossible to farm due to complaints from subdivision residents about odors, dust, chemicals, traffic delays, and other land use conflicts common to the farmland/subdivision interface.
The 1980 Functional Master Plan for the Preservation of Agriculture and Rural Open Space and its subsequent zoning code amendments established a 93,000-acre Agricultural Reserve and reduced the maximum density allowed onsite to one unit per 25 acres, the smallest amount of land considered by the county to be capable of supporting a commercial farm. Owners of land in the Agricultural Reserve could decline to use the TDR option. But if they chose to participate, they would record a conservation easement permanently binding the density limit of one unit per 25 acres. For every five acres of sending area land placed under easement, participating property owners were issued one TDR.
Unlike many TDR programs that distinguish between farmland and natural lands, or in some cases between properties with different agricultural productivity or development capability, Montgomery County reasoned that the integrity of the entire landscape, natural as well as cultivated, deserved preservation, which is why the entire 93,000-acre Agricultural Reserve was eligible to participate. This philosophy simplified the program and made it appealing to owners of various kinds of land. The uniformity of eligibility throughout the Ag Reserve also addresses the concern about impermanence syndrome since it prevents interspersed development from introducing land use conflicts into a uniform agricultural landscape.
Montgomery County also recognized that zoning imposed on the Agricultural Reserve only reserves it, and therefore does not fully relieve impermanence syndrome. The TDR program aimed to tackle that program by motivating the permanent preservation of a critical mass of the Ag Reserve and consequently offering property owners belief in the long-term viability of agriculture here and confidence to make plans and investments accordingly.
Sending area owners must always retain at least one TDR per property of any size. They can also transfer just enough TDRs to be able to achieve the one-unit-per-25-acre maximum onsite density allowed by the rural density transfer zoning designation. In many or most cases, sending area property owners have elected to do just that and retain these usable TDRs. Because they permit onsite development of one unit per 25-acres, one out of every five TDRs became known as “super TDRs” with a much higher value than regular TDRs, prompting Montgomery County to later adopt a second Building Lot Termination program discussed below.
The allocation formula of one TDR per five areas turned out to sufficiently motivate participation from the owners of over 52,000 acres of sending site land. Significantly, Montgomery County has maintained the one-unit-per-25-acre zoning in the sending area since program inception in 1980.
Sending site owners sell their TDRs in private transactions to developers who want to exceed baseline density in receiving areas outside the Ag Reserve. At program startup, Montgomery County did not attempt to designate all of the receiving areas needed to absorb the entire sending area supply. TDR receiving areas were designated in master plan areas suitable for additional development due to location and infrastructure. Between 1981 and 2004, 82 subdivisions, or four percent of total number of subdivisions approved in this period, used TDRs (Walls & McConnell 2007).
As of 2021, Section 4.9.17 of the zoning code indicated baseline and maximum densities for ten Rural Residential and Residential receiving zones. At the low end of this range, the RNC zone had a baseline of 0.2 units per acre and a maximum density with TDR of one unit per acre. At the high end, the R-10 zone had a baseline of 43.5 units per acre and a maximum with-TDR density of 100 units per acre. However, these are theoretical maximums that often are restricted by the master plans for each receiving area. For example, a 2007 study found that the R-200 zone theoretically allowed a maximum with TDR density of 11 units per acre, (nine units over the baseline density of two units per acre), but on average the master plans allowed only three bonus lots per acre for a maximum with-TDR density of five units per acre (Walls & McConnell 2007).
When receiving site developments choose the TDR option, they must use at least 2/3 of the maximum number of development rights allowed in the respective TDR receiving zone unless the Planning Board finds that an exception should be made due to compatibility or environmental reasons. About 70 percent of receiving site developments had met this 2/3 requirement as of 2007 and the other 30 percent had received exemptions (Walls & McConnell 2007).
Minimum densities required in developments using TDR must additionally fall within ranges for various building types which vary between the ten receiving zones. For example, in the RNC zone, all of the buildings must be single-family detached homes. In the with-TDR density range of 16 to 28 units per acre, detached, duplex, and townhouse units are not required to be any percent of the total number of units, but in developments with more the 200 total units, apartments must constitute at least 25 percent but cannot exceed 60 percent of the total number of units. The percent of the site which must be in common open space also increases from 0% in the RNC to 25 percent in all receiving site developments with a with-TDR density above 15 units per acre. As with the 2/3 rule, the Planning Board can grant exceptions to the building type mix and height limits based on environmental and compatibility features of the individual receiving site.
The number of bonus units allowed per TDR can be increased for receiving sites in two policy areas for specific building types. In a Non-Metro Station Policy Area, one TDR can yield two bonus apartment units. In a Metro Station Policy Area, one TDR can allow two bonus detached, duplex, or townhouse units or three bonus apartment units.
At receiving sites in Commercial/Residential and Employment zones, with-TDR residential bonus is expressed as FAR. Generally, each TDR yields 2,400 square feet of additional residential floor area. However, in a Metro Station Policy Area, each TDR allows an additional 4,400 square of residential floor area.
Montgomery County’s TDR program worked well by observing eight of the ten factors found in those US TDR programs that have preserved the greatest amount of sending area land: Demand for bonus development; Customized receiving areas; Strict sending area regulations; Few alternatives to TDR; Market incentives that make TDRs attractive to buyers and sellers; Strong public support for preservation; Simplicity; and Promotion/Facilitation. Factor 10 is a TDR bank, a mechanism found in four of the top 20 US programs in 2009 but not in Montgomery County. In fact, Montgomery County formed a TDR bank in 1982 but eliminated it in 1990 because developers could easily find TDRs on the private market (Pruetz & Standridge 2009). Private transactions are greatly facilitated by real estate professionals who broker TDR sales.
Regarding Success Factor 6, a 2007 study found that Montgomery County did not provide developers certainty in the use of TDRs. Instead of allowing the use of TDR by right, Montgomery County, at least in 2007, negotiated final densities via an extensive process of development review (Walls & McConnell 2007).
The early success of this program was partly caused by Montgomery County’s building boom in the 1980s that generated high demand for TDRs. TDR use at receiving sites peaked in 1983 at over 1,100 units and remained above 200 units per year for the rest of that decade. Receiving sites used less than 200 units per year in the 1990s, coinciding with a decline in the development of new subdivisions in general in Montgomery County in that decade (Walls & McConnell 2007).
The ability to use TDRs in suburban subdivision receiving sites was another reason for success. The receiving sites that used the bulk of the TDRs were in lower density zones including the RE-2 (baseline 0.4 units per acre, with-TDR density 1 unit per acre) and R-200 (baseline of two units per acre and with-TDR density of 11 units per acre). Although the R-200 allows a theoretical with-TDR density of 11 units per acre, the density actually achieved averaged five units per acre: two units baseline and three units per acre bonus using TDR (Walls & McConnell 2007).
Reasonable TDR prices also motivated TDR use in the early years of the program. TDR prices fluctuated from about $3,800 to roughly $7,500 between 1983 and 1990, but averaged approximately $5,000 per TDR. In the 1990s, prices ranged from $6,000 to $11,000 and averaged about $8,000 per TDR. By 2007, TDRs were selling for $20,000 on average, with some selling for as much as $45,000 each (Walls & McConnell 2007).
Building Lot Termination
Super TDRs, meaning those that allow development at the one-unit-per-25-acre density in the sending area, might be ten to 20 times more valuable than the regular TDRs that cannot be used in the sending area and only have value if they are transferred to a receiving area. In effect, this creates two separate TDR markets. In 2008, Montgomery County adopted a Building Lot Termination (BLT) program aimed at motivating sending site property owners to sell BLT easements that extinguish the right to build a dwelling unit on an eligible lot in the Ag Reserve.
Under BLT, eligible sending sites must meet seven requirements including: Agricultural Reserve zoning; at least 50 acres in size; at least 50% Class I – III soils or Woodland Classification 1 or 2; and capable of supporting an on-site waste disposal system. In addition, all regular TDRs on a sending site must be severed before or simultaneously with the termination of a building lot.
BLTs purchased by Montgomery County are retired, but may be resold if no BLTs are available on the private market. Developers can also buy BLTs directly from owners of land in the Ag Reserve. BLTs increase density at receiving sites. BLTs are required to achieve incentive density on sites zoned Commercial Residential (CR) (59-C-15.87 and Life Science Center (LSC) (Chapter 59-C-5.473). BLTs can also gain public benefit points allowing increased density on receiving sites zoned CRT and EOF.
According to a 2016 presentation, receiving sites in the CR zone must use BLTs to achieve at least 7.5% of incentive density floor area, with each BLT yielding 31,500 square feet of incentive density and nine public benefit points. In the LSC zone, receiving sites must use BLT to gain 50% of the incentive density floor area above 0.5 FAR.
The County Executive annually sets the base value and maximum easement value that the county will pay for a BLT easement through its Agricultural Land Preservation Fund. The exact price paid by the county ranges between the base and the maximum price depending on the features of the specific property. These values are based on recent prices paid for TDRs, agricultural easements, BLT easements, and fee simple acquisition of agricultural land. In 2013, the base value was set at $222,390 (70 percent of FMV) and the maximum value was set at $254,160 (80% of FMV).
As of 2016, 41 BLTs had been created representing the preservation of 1,025 acres of land in the Ag Reserve. As of March 2021, the Montgomery County website indicates that 61 BLTs had been created and 37 had been sent.
Pruetz & Standridge. 2009. What Makes TDR Work? Success Factors from Research and Practice. Journal of the American Planning Association. Vol. 75, No. 1, Winter 2009.
Walls, Margaret & Virginia McConnell. Transfer of Development Rights in U.S. Communities. Washington, D.C.: Resources for the Future.