Urban Infrastructure in sub-Saharan Africa

1. Urban infrastructure in Sub-
Saharan Africa
Harnessing land values, housing and transport
Ian Palmer
20 July 2015
Land-based financing – Conceptual Framework

2. Lagos (Niaraland.com)
• What
infrastructure?
• How is it funded?
• What is land-based
financing?
• How does land
based financing
relate to property
development?

3. The evolution of cities

4. Water,
sanitation,
electricity, roads,
transport
infrastructure;
landfills
Capital
assets
Movable
assets
(including vehicles
& IT systems)
Engineered
infrastructure
Buildings (top
structure)
private ownership)
Administration
buildings
Buildings
related to
public services
Built public
places
(squares etc)
Social
infrastructure
Infrastructure sub-division (capital items)
Buildings and
spaces
Capital
works
Public assets
Private assets
Resource
development
Bulk
Connector
Internal

5. City
operating
activity
Amountperhousehold
City
investment
activity
Amountperhousehold
Progressive evolution of cities
Required operating expenditure
Revenue targeted at operating activity
Too little revenue to cover
required expenditure
Surplus generated on
operating account
Very limited capacity for
City to invest
Can accumulate reserves,
borrow and hence invest
Required capital expenditure
Revenue targeted at investments
Most Sub-Saharan
African cities sit here
The financial viability transition of cities
Fiscal gap
Fiscal gap

6. Revenue for capital investment transition
Land-based
financing
City’s own finance
(use of reserves and
borrowing)
Service provider
funding (borrowing
and equity)
Progressive evolution of cities
1. Transfers are shown hatched as there is such variation in the level of what can be achieved based on
the state of the national economy and the commitment of national governments to support local
government financially.
2. Weak national economy implies limits to revenue which can be raised by service providers
(parastatals and PPPs) and used for infrastructure investments
3. Cities in earliest stage of development may not have sufficient property value for LBF to be effective
Notes
2
Verticalaxis(blueshaded)representsmaximumpossible
foreachinstrumentateachstageofCityevolution
Transfers and
donations
3
1

7. Development
based instruments
Developer exactions (once
off events)
‘In kind’ contributions by
developers
Negotiated payments by
developers
Development charges and impact
fees based on cost of infrastructure
Land access related
charges (once off
payments but may have
provision for scheduling
over time)
Land sales
Land lease
Sale of development rights
Land re-adjustment
Tax-based
instruments
Development charges not based on
cost of infrastructure (once off
payment)
Property tax (recurrent payment)
Betterment tax (recurrent or once
off payment)
Tax increment financing (TIFs)
(recurrent payment)
Range of Land-based financing instruments

8. Land-Based Financing Instruments
Progressive evolution of cities
Undeveloped
property
Developed property
with basic services
Increased building
height and floor
area ratios
Developer ‘in
kind’
contribution
Impact fees;
development
charges
Land sale,
land lease,
sale of
development
rights
Betterment
tax/levy
Property
tax, tax
surcharge
etc
Tax
Increment
Finance
(TIF)
City capital
account
City operating
account
Basic
infrastructure
serving individual
property
developments
Improved service
levels; higher
capacity
infrastructure
systems
Infrastructure
focused on
improved quality
of life
Advanced
infrastructure:
mass transit; CBD
upgrades; parks
etc
Focus on building
performance, green
space; recreation
City capital
account
Negotiated
‘once off’
payments for
infrastructure
Dedicated investment
account
Specific
infrastructure for
identified
properties

9. Water & wastewater
Electricity
Roads
Public transport infrastructure
All reticulated infrastructure
Bulk
Connector
Internal
Commercial & industrial
Residential (mid-high income)
Residential (low income)
Social & community
infrastructureSocial
Land
BuildingsInfrastructure
PrivatePublic
Infrastructure as part of a property development

10. Building
Internal infrastructure
Connector infrastructure
Bulk infrastructure
Social & community infrastructure
Cross subsidise infrastructure for poor households
Land
No land-
based
financing
Extreme
where all
building is
subsidised
Land and/or
internal
infrastructure
subsidised
Fullcostofpropertydevelopment
Maximum
land based
financing
including
infrastructure
for poor
households
Land based
financing for
connector
infrastructure,
possibly other
components
DIAGRAMATIC ILLUSTRATION OF LAND BASED FINANCE SPECTRUM
FOR MIDDLE TO HIGH INCOME RESIDENTAL AND COMMERCIAL
PROPERTY DEVELOPMENTS
City contributes to developer costs Developer contributes to City costs
-5 5
Rating
0

11. End
Urban infrastructure in Sub-
Saharan Africa – harnessing land
values, housing and transport