Southampton Town is auctioning off development rights for properties in the Southampton School District, a move that will raise revenue for the town’s Community Housing Opportunity Fund while allowing the purchasers to build with greater density.
The minimum bid for each development right is $275,000, and the town is offering 15.13 rights. If all the rights are successfully auctioned, the town would rake in a minimum of $4.16 million for affordable housing.
Whether bidding will drive up the price remains to be seen.
“We don’t have any experience doing an auction, so we don’t know for sure,” Town Planning Director David Wilcox said Tuesday. “We’re hoping we can get at least [$275,000], because that’s what the appraisal says they are worth. Time will tell. This is a new venture for the town.”
Developers may use the rights to increase the maximum number of building lots in a subdivision or to add a carriage house to a lot. Also, the development rights could possibly be used to gain permission from the Suffolk County Department of Health Services for more sewage flow than would normally be allowed in a development, according to a town press release.
The town accumulates development rights when it uses its Community Preservation Fund to purchase land to prevent it from being developed. Mr. Wilcox said the town has approximately 700 development rights banked.
Before 2014, the town would extinguish the development rights when it used CPF revenue to ensure a property would never be subject to development. But starting that year, the town began asserting its right to bank the transferable development rights, or TDRs, with the goal of creating more affordable housing.
The town could accomplish that goal by cashing in TDRs to build more units per acre at its own affordable housing developments—or it could take this new tack of auctioning TDRs and then using the proceeds to create affordable housing opportunities.
Mr. Wilcox said the TDRs that are on auction were generated from a 10-acre property the town purchased in 2006. Located on Cedar Lane in North Sea, the land was purchased for $1.5 million using a mix of both CPF money and Community Housing Opportunity Fund money, he explained. Some of the land was sensitive wetlands that would be preserved, while most was set aside for affordable housing. But with CPF money involved, it got complicated. The town discovered that because of how the purchase was structured, development would not be possible, Mr. Wilcox said. So, to recoup the money that was spent on the purchase and to replenish the housing fund, the idea came to auction the development rights.
Under the town code, because the rights originated on a property within the Southampton School District, they may be redeemed on properties only within the same district, Mr. Wilcox said. The minimum bid was determined based on an appraisal that the Town Board had commissioned, he added, noting that auctions for rights in other school districts would require new appraisals beforehand.
The town’s TDR certificates are modeled after Pine Barrens TDR certificates and the town’s auction is modeled after TDR auctions previously conducted by the Pine Barrens Commission, Mr. Wilcox said, adding, “We’re not aware of any other towns that have sold development rights, but the Pine Barrens Commission has had several auctions.”
However, he added, unlike the Pine Barrens TDR auctions, this auction does not require developers to have shovel-ready projects. Instead, purchasers may hold on to the TDRs indefinitely and could sell them.
To bid, the minimum denomination is half a development right. To register for the request for proposals, visit southampton.procureware.com. The deadline for bids is July 11 at 4 p.m. Bids may be delivered by regular mail, overnight mail or in person to the town clerk’s office. Each bid needs to be accompanied by a deposit of 10 percent of the bid amount. Winning bidders will be notified and then have 30 days to execute a contract of sale.
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