There are unseen upsides to the sea of cranes stacking new apartment buildings in Seattle’s South Lake Union neighborhood and parts of its downtown: the conservation of rural land in surrounding King County, and funding for infrastructure improvements in the urban core.
The Transfer of Development Rights (TDR) program, established in the early 2000s, allows rural landowners in designated areas of King County to voluntarily sell the right to develop their land in exchange for monetary compensation and a conservation easement on the property. Developers in urban areas of the county can then purchase those rights, called TDRs, in exchange for increased units or square footage on their projects.
The goal, says TDR program manager Michael Murphy, is to preserve open space and resource lands like farms while concentrating growth in urban areas already served by infrastructure. Recognizing that new development is already outstripping infrastructure investment in Seattle, the county has made another deal: In exchange for using up to 800 TDRs in projects in South Lake Union and parts of downtown, Seattle will receive a portion of the property tax revenue that accrues from new buildings to use on infrastructure improvements. The partnership received a Lifetime Achievement Award from the state last November.
“It’s a very important growth management strategy,” says Brennon Staley, strategic adviser with Seattle’s office of planning and community development. “We as a region have decided that we want to grow in the places where people can be best served by existing transportation and infrastructure and that will have the least environmental footprint, and those are places like South Lake Union.”
Overall, 144,362 acres of land have been conserved through the program, and $7.13 million worth of TDRs exchanged between landowners and developers. In just the last two years, King County sold $2 million worth of TDRs to Seattle developers, protecting over 900 acres of farmland.
The value of a TDR is determined by a number of factors, including the development potential of the “sending site” (the parcel being preserved) and the location of the “receiving site” (the project achieving greater density). TDRs are either purchased outright from property owners by the county, which then brokers them into cities, or bought and sold on a private market called the TDR exchange.
The exchange works like any commodity market, where prices are driven by supply and demand. “Basically Craigslist for TDRs,” Murphy calls it. Buyers (the developers) and sellers (the landowners) agree on a price. On average, a rural TDR on the private market is selling for between $16,000 and $18,000.
In Seattle, on average, one TDR from a rural area allows developers to build an additional 1,000 to 1,500 square feet. But developers don’t just buy one. Murphy says smaller projects might purchase as few as three, and large projects as many as 67. A few on the horizon are looking at upwards of 150.
“There is an amazing amount of growth that’s happening in South Lake Union, and almost all of those projects are using the extra floor area,” says Staley. All buildings taller than 85 feet being constructed in the neighborhood achieve that extra height by providing some public benefit — either through TDRs or fees to increase affordable housing.
When TDRs are bought and sold by the county, not on the exchange, the revenue is used to buy more development rights. Lately, the county has been focusing on preserving farmland. Those easements are written such that they protect the ability of the land to be farmed into the future.
“Whether or not the current owners or future owners choose to farm it, we can’t really control it,” says Murphy. “But we want to protect whatever it is about the land that provides the public benefit.”
City-dwellers get local produce too, as county farmers often sell their wares at urban farmers markets. Landowners get the benefit of seeing their property permanently preserved, plus monetary compensation. But Murphy warns there’s no guarantee sellers will get the price they want in the timeline they were hoping. An average of 34 TDRs were sold per year between 2000 and 2014, with 851 currently available on the private market and 1,216 in the county’s TDR Bank. Once property owners voluntarily sell their development rights, there’s no going back.
That guarantees the space will be preserved long into the future. Zoning regulations are set by political processes and can be altered, “whereas conservation easements are legal entities that run with the land over time and they don’t change,” says Murphy. “People like living here because of our open spaces,” including Puget Sound and the Cascade Mountains. “We’re using that development pressure to help protect the things we love about King County. … The TDR program is a way to achieve that protection with relatively limited public dollars.”
And in Seattle, to direct public dollars to much-needed improvements. Staley estimates the property tax revenue deal could garner $30 million for infrastructure enhancements over the next 25 years. The first payment has been earmarked for transportation projects, including the city’s Green Streets Program, which builds rights-of-way that prioritize pedestrian movement and public space over other transportation uses.
This feature originally appeared in Next City.