Development of rural land in Oregon provokes ongoing debate. Conservationists urge preservation for farm and forest use. While private property advocates and land owners continue to promote protection of the right to develop rural land to realize its economic potential. Conflicting interest groups have argued over the best way to compensate rural land owners for foregoing development, but acceptable compromises have proven elusive.[1] The sale of transferable development rights may be an acceptable compromise for both private property advocates and conservationists alike, and is in the initial stages of implementation in Oregon.[2] The ability to transfer development rights as an interest severable from real estate could provide an outlet for property owners to realize the value of their land while protecting open space and natural resources.[3] The exchange of Transfer Development Rights (TDRs) is a market based approach. The exchange allows the owners of land zoned for exclusive agricultural and forest use to sell their development rights to land owners in areas where development is conditionally permitted.[4]
Rural land use planning has been driven recently by ballot initiative amendments to the statewide zoning plan. Oregon has had a comprehensive statewide land use management regime since the 1970s that sets urban growth boundaries outside of which high density residential and commercial development is generally not permitted. The goal of the regime is to protect rural farm and forest land from sprawl with the stated goal of promoting sustainable land use development.[5] The current landscape of rural land use planning in the state has been in flux since the passage of the ballot initiatives Measures 37 and 49 during the past decade. The rural land use debate tipped towards the protection of personal property rights with the passage of Measure 37 in 2004. The initiative requires the payment of “just compensation” to private land owners whose land is limited by land use regulations put into place after the purchase of property that lowers the fair market value of the property.[6] Local land use planning bodies were given the alternative choice to waive the regulations as applied to a petitioning land owner to avoid payment of compensation.[7] The measure put pressure on local government to waive all restrictive zoning that it could not afford to enforce. The resulting patchwork enforcement had the potential of defeating the purpose behind the statewide land use planning system.
Opponents of the measure challenged it in court and sought to counteract it with an alternative ballot initiative. Measure 37 survived a constitutional challenge even though state land use planning programs could be ignored on a case by case basis, which is arguably a limit on the state police power.[8] However backlash to the perceived commercial exploitation of the law by large developers lead to the subsequent passage of Measure 49 in 2007.[9] The new measure limits the reach of Measure 37 and instituted strict limits on the number of dwellings to three on restricted land zoned as farmland, forestland, or land in groundwater restricted areas even if the applicable land use regulations are waived.[10] Measures 37 and 49 have resulted in the alteration of land owners’ reasonable expectations regarding the use and value of their property. Furthermore, questions linger about how the loss of value caused by regulations can be quantified, and whether claims made under Measure 37 prior to the passage of Measure 49 have become vested rights that cannot be taken away by the government or the courts.[11]
Into this complex landscape, the Oregon Legislature in 2009 enacted the Oregon Transfer of Development Rights Pilot Program as part of House Bill 2228.[12] To participate in the pilot program local governments must nominate areas under their jurisdiction to be included in the exchange where there is risk that forest land may be converted into rural residential land use.[13] The initial pilot program is focused initially on forest land. Zoning restricted areas from which the rights are sold are called sending areas. And the land area where the development rights are used is called the receiving area. To qualify as sending areas, the land must be outside an urban growth boundary, not exceed 10,000 acres, and cannot currently be developed at a density of more than four dwelling units per square mile.[14]
Areas that are eligible as receiving areas for transferable development rights must be inside urban growth boundaries or likely to be included in an urban growth boundary after the next review.[15] Forest land owners can sell the right to develop their land on the exchange to receive the economic benefit that would accompany development of their property, and in return the state can be assured that high value forest land will be retained in a more natural condition.[16] The proceeds of the sale of the development rights would pass to the current owner of the forest land and subsequent purchasers of the land would take title under the restrictions of the land use planning laws in place, and in theory sale prices would be lower to reflect the limited land uses available.
The TDR program may provide solutions for the shortcomings of Measure 37. The failure of Measure 37 was that it valued all possible uses of the land if there were no zoning restrictions into the worth of land. The measure required the government to pay owners to operate within the established planning regulations, but it did not provide a source of funding to make the compensation payments.[17] The great benefit of TDR programs in general, and the Oregon Pilot Program as well, is that there is a readily available source of money to compensate owners with restricted land. However, this model only works efficiently if there are willing buyers and strong demand for the development rights on the open market. However, TDR programs can be complicated to administer and have not had great success in communities faced by challenges of changing land use needs and a lack of public education on the use of TDR programs.[18] Furthermore, the TDRs are floating rights which are not tied to a specific tract of land, and may not find a buyer or may not be valued at the same level that onsite development at the sending area would be worth.[19] These are just some of the potential challenges faced by the Oregon Pilot Program.
If the pilot program is successful, the program could be expanded to include farmland as well as forestland and may provide local government with a powerful tool to ensure the development of land in their jurisdiction occurs in already urbanized areas in a sustainable manner. Transferable Development Credit programs have the capability to simultaneously ensure the protection of local farm and forest lands, while respecting the preservation of the value of property rights by providing a ready method to capture the value of deferred development and providing a ready method for compensation. Time will tell if the Oregon Transferable Development Credits program will live up to its promise; however it is likely to provide a much better model for compensation than Measure 37, and ultimately provide protection for rural open space that is not borne only by rural land owners.
[1] David J. Boulanger, The Battle Over Property Rights in Oregon: Measures 37 and 49 and the Need for Sustainable Land Use Planning, 45 Willamette L. Rev. 313, 314 (2008).
[2] See http://www.oregon.gov/LCD/tdr_pilot_program.shtml#Oregon_s_TDR_Pilot_Program for an overview of Oregon Transferable Development Rights (accessed February 11, 2011).
[3] The Battle Over Property Rights in Oregon: Measures 37 and 49 and the Need for Sustainable Land Use Planning, 45 Willamette L. Rev. at 355; Jonathan M. Davidson, Rathkopf’s The Law of Zoning and Planning: Chapter 15. Growth Management: Integrating Planning, Regulation, and Infrastructure Controls, RLZPN § 15:50 (2010).
[4] The Battle Over Property Rights in Oregon: Measures 37 and 49 and the Need for Sustainable Land Use Planning, 45 Willamette L. Rev. at 356.
[5] Id.at 315.
[6] See ORS 195.305 as amended in 2007; Keith H. Hirokawa, Property Pieces in Compensation Statutes: Law’s Eulogy For Oregon’s Measure 37, 38 ENTL 1111, 1121 (2008).
[7] Id.
[8] McPherson v. Dep’t of Administrative Servs., 340 Or. 117, 130 P.3d 308 (2006).
[9] See http://www.oregonvotes.org/nov62007/guide/m49_fav.html for Arguments in favor of Measure 49 (accessed February 10, 2011).
[10] The Battle Over Property Rights in Oregon: Measures 37 and 49 and the Need for Sustainable Land Use Planning, 45 Willamette L. Rev. at 329.
[11] Id., Keith H. Hirokawa, Property Pieces in Compensation Statutes: Law’s Eulogy For Oregon’s Measure 37, 38 ENTL at 1118 (2008).
[12]See http://www.oregon.gov/LCD/tdr_pilot_program.shtml#Oregon_s_TDR_Pilot_Program (accessed February 10, 2011); Transferable development credits are codified at ORS 94.531.
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17]Property Pieces in Compensation Statutes: Law’s Eulogy For Oregon’s Measure 37, 38 ENTL at 1140
[18] See http://government.cce.cornell.edu/doc/html/Transfer%20of%20Development%20Rights%20Programs.htm (accessed February 11, 2011).
[19] See Penn Central Trans. Co. v. New York City, 438 U.S. 104 (1978) (landmark takings case that discussed how transferable development rights may not provide just compensation under restrictive zoning).
