An Analysis of the Factors Influencing Transaction Costs in Transferable Development Rights Programmes

Transferable Development Rights (TDR) programmes have been introduced as an alternative to traditional regulatory instruments with proponents arguing that the implementation of these alternative programmes leads to similarly effective land-use outcomes with greater efficiency and equity. The evaluation of land-use policies is key to improving policy design and implementation processes, and particularly important when considering whether alternative policy instruments such as TDR deliver preferable outcomes. While some researchers have tried to identify the factors affecting TDR success, there has been little research about institutional aspects and the related transaction costs of TDR programmes, and their potential effect on policy outcomes. The presence of significant transaction costs decreases the efficiency, and can have a negative effect on the success of TDR programmes. This paper explores the transaction costs that may arise in TDR programmes with the specific objective of gaining a better understanding of which factors influence transaction costs in these programmes and why such costs arise. These factors are examined under three categories; 1) the characteristics of the transaction; 2) the characteristics of the transactor; and, 3) the characteristics of the policy. The paper also examines the different effects of these factors on different parties involved in the TDR programmes.