Transaction costs of implementing the transfer of development rights program in Milan

Falco, Enzo, Garda, Emanuele and Shahab, Sina ORCID: https://orcid.org/0000-0003-3788-2564 2025. Transaction costs of implementing the transfer of development rights program in Milan. Presented at: The 19th Annual Conference of the Association on Planning, Law, and Property Rights (PLPR), Cardiff, UK, 3-7 March 2025.

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Abstract

Transfer of Development Rights (TDR) programmes have emerged globally as a marketbased planning instrument aimed at managing urban growth, protecting environmental and cultural assets, and compensating landowners without recourse to expropriation. While research has increasingly examined TDR programmes from the perspective of policy design and outcomes, the transaction costs associated with implementing such instruments, particularly at the city scale, remain underexplored. This paper addresses this empirical and conceptual gap by analysing the implementation of the TDR programme in the city of Milan, Italy, one of the most established urban TDR cases in Europe. Drawing on transaction-cost economics, this study examines when and how transaction costs arise across the policy lifecycle of Milan’s TDR programme, and identifies which actors bear them. A mixed-methods case study approach was adopted, combining documentary analysis with semi-structured interviews and focus groups involving planners, developers, architects, real estate brokers, and housing association representatives. The analysis is organised around five main categories of activity: support and administration, TDR creation, contracting, TDR retirement, and policy evaluation and monitoring. Findings indicate that transaction costs are generated throughout the implementation process and are distributed unevenly across actors. Planners and public officials bear the bulk of costs during the support, administration, and monitoring phases, particularly due to the management and continual updating of the TDR Register. In contrast, private actors, especially developers and landowners, incur the highest costs during the creation and contracting phases. Key sources of transaction costs include legal and administrative requirements, challenges in calculating eligible development rights, delays related to land decontamination, and the absence of centralised market-matching mechanisms. Speculative behaviour in Milan’s TDR market has exacerbated these challenges, with multiple resales of TDRs creating artificial scarcity and driving up prices. This speculation, combined with a lack of spatial or temporal constraints on TDR application, has introduced significant uncertainty and inefficiency into the programme. While the programme benefits from a flexible market-oriented design, its full reliance on market mechanisms and limited regulatory oversight present unique risks. Compared to regional or county-level programmes, such as those widely studied in the United States, the Milan case illustrates the heightened complexity and cost burdens that can emerge in dense, high-demand urban contexts. Nonetheless, some transaction costs have been mitigated over time through policy adaptation, such as changes to the sequence of certification and planning approval. The paper concludes by offering policy recommendations for minimising transaction costs in city-wide TDR programmes, including the introduction of a publicly managed TDR bank, improvements to digital TDR tracking platforms, and the imposition of spatial or temporal constraints on TDR usage to reduce speculative practices. These findings provide critical insights for planners and policymakers in other urban contexts seeking to design or reform TDR programmes, particularly where market dynamics and urban land constraints create additional layers of complexity.

Item Type:	Conference or Workshop Item (Lecture)
Status:	Unpublished
Schools:	Schools > Geography and Planning (GEOPL)
Date of First Compliant Deposit:	23 April 2025
Date of Acceptance:	29 October 2024
Last Modified:	17 Jun 2025 09:06
URI:	https://orca.cardiff.ac.uk/id/eprint/177863

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