Transferable development rights in Switzerland

Short Summary

The research project ‘Transferable development rights (TDR) in Switzerland: Simulating a TDR market with agent-based modeling’ has been elaborated in a PhD-thesis and funded by the Swiss National Science Foundation (SNSF). The objective of the project is to contribute to the scientific development of a TDR program, to explore the possible impacts of a TDR program in Switzerland and hence to provide pro- and contra-arguments to the political discussion about their implementation in Switzerland. The planned approach combines an agent-based simulation with a survey among potential landowners. The results of the survey will be used to obtain information about possible incentives for landowners to buy and sell TDRs, and to calibrate the agent-based model. Moreover, land registry data of different Cantons and transaction data of undeveloped land parcels will be included and used for the agent-based simulation.

Background and summary of the PhD-thesis

In Switzerland, since the 1940s the widespread and dynamic development of settlement has been perceived as a problem. There is general agreement that spatial planning instruments, which were introduced in 1979 with the first Federal Act on Spatial Planning and amended since, are inadequate to combat the unsustainable growth of land use and urban sprawl. The adoption of the recent popular initiative on second homes and the adoption of the revised federal planning law – amongst others – highlight the widespread claim for stricter legal enforcement, further regulations, and innovative instruments to tackle these problems. Among such instruments are 'transferable development rights' (TDR).

The main objective of this thesis is to propose a TDR market program for Switzerland, and to explore its possible impacts and implications. The thesis is presented as a collection of three chronologically and thematically linked scientific papers.

The first paper (chapter 2) presents a design for a TDR market in Switzerland, and based on that an agent-based model (ABM) for simulating the TDR market (TDR-ABM). The concept for the market design was defined and elaborated together with spatial planning and real estate experts and takes into account both the particular Swiss situation and experience in other countries. The TDR-ABM distinguishes three main types of agents: two agent types representing landowners who submit bids and asks (requests) for TDR, and an agent type representing a TDR exchange platform. The model simulates the trading of multiple units of TDR at fixed package sizes (TDR bundles) according to the rules of a multi-unit double auction with a uniform price.

The second paper (chapter 3) presents a questionnaire survey that was specifically designed to calibrate the TDR-ABM. A total of 1,976 spatial planning and real estate professionals – divided into four landowner categories – throughout Switzerland were contacted. Each person represented either a potential seller or potential buyer of TDR and received a questionnaire confronting her/him with a unique realistic planning situation. The approach to collect data with a participant-specific survey to directly calibrate the ABM proved successful, despite the quite low response rate (16.75%). Various results (e.g. probabilities to participate in the TDR market, regression models for TDR price (ask, bid) determination and adaptation) were calculated to be integrated into the TDR-ABM.

The third paper (chapter 4) is based on the work and findings of the previous two papers and presents the empirically calibrated agent-based model (TDR-ABM) and the detailed simulation results. The simulation was run with five different model settings which allowed an analysis of relevant political and economic questions for Switzerland. For example, it could be shown that the TDR prices were comparable with existing land prices in Switzerland, i.e. prices to develop land would not rise. In addition, it could be demonstrated that with the trade of TDR, it would be possible to downzone 11.4 km² of building zone land (residential zone) for which there is no demand and to develop 7.4 km² of new building zone land up to the year 2018 without any financial burden for public bodies. As a consequence, the defined building zone area would decrease. Finally, it could be shown that the popular initiative on second homes might only slightly reduce the building zone prices and thus had only a small effect on the TDR market price.

To sum up, this thesis presents the first agent-based model that simulates a TDR market. The simulation results demonstrated that in Switzerland the market-based instrument of transferable development rights could be a useful instrument to both reduce the building zone area and address the problem of the spatial imbalances in supply and demand for these zones. However, it should not be forgotten, that the TDR market is ‘supplementary to planning’, e.g. already the designation of the sending and receiving areas needs planning criteria.

Funding and support

The research project has been funded by the Swiss National Science Foundation for the period 11/2009-04/2013 and submitted as a PhD-thesis at EPFL (Doctoral program: EDCE). The project has been supported and accompanied by the following research groups and institutions:

Environmental and Resource Economics (WSL)
Landscape Ecology (WSL)
Land Use Engineerings Group (ETHZ)
Institute for Transport Planning and Systems IVT (ETHZ)
Economics and Environmental Management Laboratory (EPFL)

Publications

Menghini, G., Gemperle, F, Seidl, I., & Axhausen, K. (2015). Results of an agent-based market simulation for transferable development rights (TDR) in Switzerland. Environment and Planning B: Planning and Design. 42(1), 157–183.
Menghini, G., Hersperger, A., Gellrich, M., & Seidl, I. (2015). Ein Konzept für handelbare Flächennutzungszertifikate in der Schweiz und Resultate einer agentenbasierten Marktsimulation. disP - The Planning Review, 51(2), 49-61.
Menghini, G. (2013). Transferable Development Rights (TDR) in Switzerland: Simulating a TDR Market with Agent-Based Modeling. Thesis, EPFL, infoscience.epfl.ch/record/185906.http://www.wsl.ch/fe/wisoz/publikationen/menghini_seidl_2015.pdf