Letting the Market Preserve Land: The Case for a Market‐driven Transfer of Development Rights Program

The inequities inherent in conventional zoning‐based policies leave urban‐fringe jurisdictions unable to meet the growing demand for permanently preserved open space. Allocating marketable development rights (MDR) among all landowners treats this problem directly. It also leaves open the option of allowing the market to allocate land to undeveloped uses. This paper uses a simple market model to develop a framework that describes the mechanics of such a program and allows comparison with other commonly considered policies. The paper then addresses several concerns policy makers have raised about a market in development rights. Finally, the paper looks at alternative regulatory responses to perceived market failures. The analysis suggests that an MDR program offers significant advantages over existing preservation efforts. ( JEL Q2, Rl, R5)