Urban infrastructure in sub-Saharan Africa

1. Urban infrastructure in Sub-
Saharan Africa
Harnessing land values, housing and transport
Presented by Stephen Berrisford
20 July 2015
Comparative Assessment of Land-based financing in
Sub-Saharan Africa, India, Brazil and Colombia

2. Background: DPU workshop, 1-
2 June, London
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3. LBF: the international context
• North America, Europe, Japan, Australia etc –
all have rich, long LBF experience
• note: it’s contested and controversial
everywhere: it doesn’t just take “capacity,
political will and resources” to make it work
(though they help)
• What can we learn from experiences in
countries a little bit more like SSA countries?
• Contributions at the DPU workshop from:
• Edesio Fernandes and Mariana Fix – Brazil
• Sudeshna Mitra – India
• Alan Gilbert – Colombia

4. Brazil 1: helpful laws
1988 Constitution and 2001 City Statute
• social function of property
• separation of right to own land from right to
develop
• obligation on municipalities to plan
• CEPAC – ‘certificate of additional
development potential’
2004 São Paulo Land Use Law
• OODC – ‘charges for additional building’
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5. CEPACs in operation
What worked
• ‘non-trivial’ revenue volumes
• 2004-2102: in São Paulo
alone $2,5 billion (= 22,5%
of total property tax
revenue) – and that in
only 2 areas (‘UOs’)
• auction better than
trying to value increment
calculation
• predictable(ish) revenue for
infrastructure investment
• developers able to plan
ahead
• integration of slum upgrading
obligations (instead of cash)
Ongoing challenges
• really only working in big
cities with sophisticated
capital markets
• and in those cities, only in
areas where market demand
is high
• strong critique: worsening
sociospatial segregation
• city governments haven’t
always supported new FAR
with new infrastructure
or
• city governments have spent
carelessly because so much
money available in particular
‘urban operation’
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6. Colombia (mainly Bogotá)
City land prices rising
fast recently
2004 2010
Value of urban land
below USD 114/sqm
70% 20%
Long history of land value
capture
• ‘Betterment’ (‘contribución
de valorización’ since 1921
• City Land Bank
(‘metrovivienda’) since
1999
• Payment of plusvalia since
2007
• Forced use of idle land
since 2010
• Property tax (’impuesto
praedial’
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Note new instruments
developed to capture
rising land values

7. Bogotá: (very) rough summary
• Betterment
• widely used, more in Medellín than Bogotá
• best results in better-off areas
• when other source of infrastructure finance available, it’s preferred to betterment
(or plusvalia)
• Land-banking
• failed to compete with informal land supply
• many legal challenges from private sector
• Plusvalia (30-50% of land value increment in urban operations)
• widespread failure
• key part of radical city master plan (‘Pedro’s POT’)
• difficulties in valuation methodologies, landowner resistance, complex rules
• Forced landuse
• 15-25% social housing for developers, and forced sale of vacant plots
• very low success rates, mainly due to resistance
• Property tax
• up to date valuations increased city’s taxable value by 173% in four years (2008 –
2012)
• protests against apparent subsidising of higher value properties
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8. India – a lot going on
More than 100 years of land-based financing
(introduced by British legislation in 1800s to
provide for Improvement Trusts)
Different instruments used in different states. But
most commonly used in Tamil Nadu, Andhra
Pradesh, Karnataka, Maharashtra and Gujarat.
Most common instrument –‘area based
development charge’ in terms of town planning
law
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9. The area based development
charge
• widely applied
• generally accepted
• but rates are not updated, so not enough
money raised
• revenues are not buoyant (because area-
based, not value based)
• acknowledged to be yielding insufficient
revenue, but response is not to update rates
but develop additional instruments and levies
– which makes for a more complex regulatory
environment, and more difficulties for city
government
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10. The experience of supplementing
area-based development charge
• Mumbai introduced TDR (1991) – succesfull, but attributable to
natural constraints on land supply and not emulated successfully in
cities with less land scarcity
• Maharashtra (2010) changed from ‘Rs/sqm’ to ‘percent of land
value’ – which is an official (not market-related) value – hence
some, limited buoyancy
• Gujarat land readjustment – aimed at cost recovery rather than
land value capture per se – bogged down with valuation
methodologies
• Many new fiscal instruments have failed legal challenges because
they’re not permitted i.t.o. town planning legislation – some states
have started amending town planning laws
• Payments for regularization – increasingly used, but controversial
• Impact fees – considered and tried – but fail because of absence
of reliable, up to date capital investment plans, which makes it
difficult to establish the required rational nexus
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11. Some initial lessons for SSA
• land-based finance is a no-brainer but it isn’t easy
• common themes running through the international
experience:
• where value has to be calculated, valuation
methodologies are an obstacle
• resistance by vested interests – expressed in
litigation as well as political pressure – makes
implementation hard work for officials, so strong
political leadership is needed
• city government capacity is crucial – land records,
GIS, municipal finance, property tax system, city
planning. LBF is part of city governance and city
financial management.
• it is important to be clear about the underlying
purpose of any LBF instrument – why is it needed,
how will it work, what rules have to be made and
applied?
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12. Alan Gilbert’s reflection
After studying the different LBF instruments
introduced in Colombia for 30+ years:
“if you have vaguely honest mayors and
elites and vaguely effective municipal
administrations then some of these
ideas could work”
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13. End
Urban infrastructure in Sub-
Saharan Africa – harnessing land
values, housing and transport