Nico Calavita Panel 1


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Tools for Ensuring Equitable Urban Investments - National and International Models

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Nico Calavita Panel 1

  1. 1. Land Value CaptureNico Calavita, Professor Emeritus San Diego State University Crafting the New Normal December 7 – 2012 -- San Diego
  2. 2. Land Value CaptureGovernment actions (value creation) Increases in land value Community benefits (value capture)
  3. 3. Government activities that increase land values include (value creation):1) Construction of infrastructure and public facilities2) Plan changes/upzonings
  4. 4. Golden Triangle
  5. 5. Costa Verde
  6. 6. Seattle’s ManifestoSeattle is a very attractive place for new commercial and housing development. Rezoning or upzoning can provide significant economic benefit to property owners and developers and the public should share in those benefits. As sound public policy, an appropriate portion of this benefit should be captured for public reinvestment. Where did this idea come from?
  7. 7. Henry George 1839-1897 Most famous work: Progress and Poverty Cause of poverty: Land Rent Proponent of Land Value Taxation (Single tax) World wide success
  8. 8. Lincoln Institute of Land Policy founded by Cleveland industrialist John C. Lincoln (1866- 1959) in 1947Programs:• Valuation and Taxation• Planning and Urban Form• International StudiesSchalkenbach Foundation established in 1925 – New York
  9. 9. CA & San Diego Roots• Former City of San Diego Councilman Floyd Morrow• Common Ground & Basic Economic Education
  10. 10. Implementation of land value taxation has not been easy Mechanics of recapture have been troublesome One example: Great Britain – Tortured historyEnd of 19th century: Concerns about “Unearned increments”1909 first planning legislation: Tax “Betterment value” It was the start of attempts over 70 years to tackle what proved to be an extraordinarily intractable problem
  11. 11. Great Britain (continued)• 1970s –Planning agreements & “planning gain”• 1980s – Affordable housing added to the package ofbenefits through informal negotiationsSect. 106 of the 1990 Town and Country Act: General right oflocalities to require financial contributions toward the mitigation ofthe costs of development, plus affordable housingShift from a tax on land to the extraction ofthe profits of development
  12. 12. Who pays?“S106 aims to ensure the transfer of planning gain, or betterment, from the landowner to the local authority via the developer.” (Sarah Monk. 2010. “Affordable housing through the planning system: The role of Section 106,” in Inclusionary Housing in International Perspective) • The price of the land is enhanced by the planning permission • But reduced by the S106 commitment • The landowner still receives a higher price for the land
  13. 13. “Different councils adopt differing policies as to what percentage of social housing may be required, the level of development which triggers such provision and the method of calculating financial contributions. As inevitably, it falls to the landowner to fund these provisions, by reduction of the sale price, there is often lengthy and sometimes acrimonious discussion as to the need for and the amount of the provision.” (page 3)
  14. 14. Negotiation-based – Criticisms in UK• “Negotiated bribery corrupting the planning system”• “Much of the planning gain that is obtained is bad practice, violating the fundamental principle that planning permissions cannot be bought or sold”
  15. 15. Result (still UK)• Recent enactment of legislation that mandates fixed-standard charges locally mandated by the planning authority namely, the Community Infrastructure Levy. (Similar to US Development Impact Fees?)• Negotiations allowed only for affordable housing and site specific contributions Greater transparency, simplicity, predictability, fairness and efficiency??
  16. 16. Negotiation-based: Vancouver (It works?!?!?)• Most development is a site-specific zoning• Resulting land value increases (the land “lift”) is largely recaptured (the rule of thumb is 80%) in the form of Community Amenity Contributions (CACs) – Voluntary, kind of• The CACs are determined throughnegotiation, based on a project pro forma
  17. 17. Vancouver Responsible and flexible Presumably: • It does not discourage development, while • Maximizing potential extractionKey to its success: An experienced and sophisticated staff
  18. 18. Other countries?• Europe – Similarly to G.B., move from attempts at direct taxation to recapture of land values “through the planning system” • South America. In some countries, such as Brasil and Columbia, zoning is for sale
  19. 19. US“We actually do a lot of value capture in the U.S., we just don’t use the term” Gregory K. Ingram, president of the Lincoln Land Institute (quoted in Mark Bergen’s “Money Grab: How Can Cities Recapture Investment in Public Infrastructure?” In Forefront, published by Next American City on line) How? Development Impact Fees, Commercial (Job-housing) Linkage Fees, Inclusionary Housing, etc. Why we don’t use the term?
  20. 20. Who pays the cost of development Impact Fees, Commercial Linkage Fees, Inclusionary Housing ? Incidence ControversyHow are they different from the British/Vancouver experience in terms of development process timing?Fees not paid at the time of rezoning. Developers pay them at the time of subdivision processing (or even later) They have paid the rezoned value for the land
  21. 21. • The result is immense opposition from the development industry and the business community• In the case of Commercial Linkage Fees it is the fear of losing economic competitiveness by raising the cost of commercial development that makes commercial linkage fees so politically difficult to enact• Vitriolic opposition of residential developers to IH, and that leads to incentives, such as…
  22. 22. Fee waivers, reductions or deferrals Fast-tract permit approvals Ad hoc density bonuses Financial incentivesBut these incentives have public costsIncentives and cost-offsets displace costs ontothe public, either directly or indirectly
  23. 23. Density bonusesWhen superimposed on existing planning framework, they raise three major areas of concern:1) They undermine the planning process and existing regulations2) They may lower the level of service of public facilities and infrastructure3) They frustrate citizen participation in the planning process
  24. 24. What if?Alternative: IH as a land value recapture mechanism through rezonings or land use changes, taking into account that planning is a dynamic processNow IH is superimposed on an existing framework Cost-offsets and incentives implicitly assume a static and rigid view of urban planning
  25. 25. The same thing for job- housing/commercial linkage fees• Apply them at the time of a rezoning (negotiation-based) or a land use change; when a specific plan, community plan or a general plan is approved