Resource information
Tradeable development rights (TDRs) are market based instruments that allow a right todevelop a parcel of land to move from one parcel to another.We examine TDRs as a potential instrument for achieving the economic objective ofallocating development to its highest value use in Victoria. TDRs are examined as atool within Victoria’s existing planning system for rural land, which has a number ofobjectives. Design considerations for applying TDRs in Victoria include the need toconsider modifying development entitlements from a right to apply (RTA) to a right todevelop (RTD). It will also be important to address potential infrastructure externalities.Additional challenges include developing a suitable metric, addressing potentialdevelopment hotspots and non-quantity development attributes, considering potentialleaks, clarifying distributional impacts, and addressing credible commitmentmechanisms.We consider the potential for TDRs to contribute to a series of land use outcomes. Wefind that using TDRs to protect agricultural does not appear to address underlyingmarket failures that may contribute to excessive urban sprawl and encroachment onagricultural land. TDRs offer a potential source of adjustment income, although otherinstruments may assist in a more effective and transparent manner. TDRs can bedirected to protecting native vegetation; however, Victoria has existing and emerginginstruments in place to target this objective. Finally, TDRs offer potential for the moreefficient allocation of well specified development rights, which would requiremodification of the existing planning framework to accommodate the designchallenges noted above.
