Salt Lake City may create a program to sell land development rights as a way to protect sensitive lands while boosting density for other projects.
Though the program is still in the conceptual stages, members of the Salt Lake City Council heard an outline Tuesday to potentially create a Transfer of Development Rights (TDR) program. Council members had numerous questions about the program and took no vote.
If approved, the TDR program would be another tool that developers could use for adding density to projects. Like the city’s Affordable Housing Incentives (AHI) program, TDR’s could be used to boost the size of new builds. But unlike using AHI’s, developers would not be bound to deed restrictions to carry a certain number of affordable housing units.
In essence, the TDR program would allow one piece of land that’s eligible for development to sell those rights to another property, and, in turn, the first property would get a restrictive covenant that limits future development. The second property would then be able to use that development right to build additional height or density, as the tool could be utilized to make an economically unviable project pencil.
Nick Norris, the city’s planning director, said the ultimate goal is to protect sensitive lands. He said the areas to offload development rights are called “sending areas.” Examples of ideal sending areas would be parts of the Northwest Quadrant near the Great Salt Lake, agricultural areas in Northpoint or parcels near the Foothills, among others. Norris said areas that have a high likelihood of development would not be good candidates to sell off their development rights.
The areas that would get those development rights, known as “receiving areas,” would be able to use those rights for more density or additional floors.
“The best receiving areas are those areas where the development that’s occurring already is maxing out their development potential,” Norris said. He cited zones like MU-5 and MU-6 as good candidates, as typical developments in those zones are being built to their height limit. Norris also said a TDR could be a good option to enable projects to build beyond 180 feet.
“That’s where you start seeing the cost of that change of construction type start to make more financial sense and be more economically viable,” Norris said “It doesn’t always mean it will, but that’s kind of the minimum threshold for those things to happen.”
Bad candidates for receiving areas would be Downtown zones, where it’s common for new projects to be built below the maximum height. Norris said areas where development is not supported are also bad candidates to receive a TDR, adding, “We probably don’t want to see an MU-2 zone, for example, go up to five stories.”
How to determine TDRs
But the real question for the council would be what the TDR equation would look like. It’s unclear how much space would be needed to be in a TDR to allow landowners to sell the development rights and to entice developers to buy it, as the parameters of the program would be up to the council.
Norris spelled out an example where one square foot of a sending area would translate to one square foot of development to the receiving area. The math on the TDR program, however, is not set in stone and could be altered as the potential ordinance moves forward.
Here’s the hypothetical from Norris: say the sending area wants to sell one acre of TDR (one acre is 43,560 square feet) to a different property zoned MU-5. The zoning of the sending area doesn’t matter, Norris said, as the TDR program wouldn’t allow the zoning and allowed uses to transfer from the sending to receiving areas.
The MU-5 property wants to add two additional floors beyond its 55-foot maximum height, and the building’s footprint is 15,000 square feet. The receiving property could buy 30,000 square feet (or about two thirds of an acre) from the sending area and use that to build the two additional floors — 15,000 square feet per floor. The sending property would then have a restrictive covenant protecting that 30,000 square feet from development, and it would still have the additional 13,560 square feet left over.
Norris later noted there’s a tightrope that needs to be walked for the program to be successful. If the TDR is too costly or would require too much land, no one will use it. If zoning changes are easier, people would go that route instead.
Norris also noted that if the TDR program would be approved, any transactions would be a private deal between the two parties and would not require city approval. In other words, a TDR deal would be a way for developers to build taller buildings without going through a design review or rezoning, as those routes require city approval.
Early council reaction
Council members had a number of questions about the potential TDR program, with some expressing hesitancy and others seeming to embrace the idea. Council Member Sarah Young said she was interested in the program, as it would be a way to monetize the protection of sensitive lands.
Council Member Chris Wharton said he was struggling to think of an instance where a TDR program could be a useful tool, later adding that much of the city’s recent zoning code overhauls have greatly expanded development possibilities. Jennifer Bruno, the council’s executive director, gave an example.
“Hypothetically, an owner or a lessee of a certain Maverik adjacent to a park, might purchase the development potential in Northpoint and be able to build more height than is currently allowed by zone,” Bruno said, clearly referencing the failed proposal to build a hotel next to Sugar House Park on land that’s currently under a ground lease by the gas station chain.
Bruno added that because TDR transactions wouldn’t need council approval, it’s important to not only consider what lands need protection, but also which areas could grow taller — all without the approval of the council or community.
Norris told Wharton that yes, the city has made it easier for developers to build, but he said, “I don’t know that, as a city, we’ve looked at how to fully protect the more sensitive lands in the city, and I think that’s the missing piece of that conversation.”
Council Member Dan Dugan said the question of whether to have a TDR program comes down to the receiving area. He asked Norris if there would be a cap on the height a project could add, and Norris said the council could add a cap.
Council Member Victoria Petro asked if a TDR is the same as purchasing air rights, and Norris said it could be. He said that’s occasionally been done in Salt Lake City before, but it was mainly been done to work around city approval processes.
Petro said she’s interested to see if TDRs could be used as a community wealth building method. She asked if a place like Nico’s Restaurant, a single-story building located at the corner of North Temple and 1460 West, could sell off their development rights to a project as a type of cash infusion.
“As a community wealth building tool, I’m definitely deeply interested in that sort of concept,” Petro said.
Norris said it’s certainly possible to use a TDR in that way, but it’s also important to keep in mind how the TDR process is used when the sending and receiving areas are close to each other.
The council took no vote Tuesday, but Norris said he will take the council’s comments and feedback to develop a program and ultimately an ordinance. He said the framework of the program would start small and be brought back to the council for further input.
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