Singapore
Land value capture in Singapore
Several land value capture instruments are systematically used in the country, notably land readjustment and charges for development rights (Table 2.47). Strategic land management has a key importance, since land is a critical resource. The government is the largest landowner, and public land is often leased to private actors. Infrastructure levies are frequently used to fund and pay for the upgrading of high-rise housing estates and adjacent public infrastructure. There are no significant implementation challenges. There is no legal framework of developer obligations.
Enabling framework
Singapore is a unitary state with no second-order administrative divisions. As a small and densely populated city-state, strategic land use planning and management receive strong emphasis. Compulsory land acquisition and resettlement have been central to planned national development over the decades. The Urban Redevelopment Authority (URA) is the land use planning agency.
The Concept Plan is the planning instrument for long-term strategic land use and transportation. It was firstly enacted in 1971 and latest reviewed in 2011-2013. The Master Plan is the statutory land use plan which guides development in the medium term. It translates the broad, long-term strategies of the Concept Plan into detailed plans. It contains land use and density guidelines and must be reviewed every 5 years.
Charges for development rights
The national government charges a levy when developers or landowners request to increase the building density or to benefit from a previous change in zoning or plot ratio. An adjustment to zoning or plot ratio in the Master Plan only generates the obligation to pay the charge when landowners apply for development permission. To lift planning restrictions on leased public land, developers can file an application to the Singapore Land Authority. They will have to pay a Differential Premium, which is calculated using the same framework.
The charge amounts to a specific rate based on 70% of the increase in land value arising from rezoning or higher density. The charges are differentiated for nine land use groups across 118 geographical sectors and are reviewed every 6 months. The government publishes them on a website, which provides for greater transparency and certainty.
The charge must be paid in cash at the time the development rights are issued. Exemptions to payment may be granted for developments providing a social benefit or smaller than a specific minimum size.
There are no obstacles to implementation, as the charge, when not exempted, is always collected by the government. Property owners never appeal against the charge.
Infrastructure levy
Infrastructure levies are always collected from property owners, in the event of housing upgrading works and adjacent neighborhood improvements carried out by the government. It is important because 94% of high-rise government-built flats are sold by the government on a 99-year leasehold basis, and 80% of the resident population lives in these.
The instrument lies at the heart of a long-term renewal program which formally began in 1992, with the goal of bringing the standards of older flats closer to newer ones. The upgrading works encompass the interiors of flats and lifts, as well as common areas, public spaces and neighborhood improvements.
When the government proposes a renovation, at least 75% of residents must consent. All benefitted residents must contribute with a fee, without exemptions. The fees are calculated based on physical location, floor area and land use, but also considering the socioeconomic characteristics of residents. They are collected upon completion of the works, and the payment scheme varies with the capacity to pay of residents. The fees are destined to fund between 5% and 12,5% of the renovation works. The program is heavily subsidized by the government.
Overall, the program runs smoothly. Because residents are consulted before implementation, they rarely appeal against the requirement to pay the fee. Since the program is ongoing since the first pilot in 1989 and has a long-term perspective, it has become integrated into the routine of the public administration, and there are no present challenges in terms of administrative capacity and inter-agency coordination.
Land readjustment
Land readjustment is frequently used for the purposes of urban expansion, urban development or renewal. The national government, special purpose bodies, land developers and private property owners may all be involved in the execution of a land readjustment project. The national government collects the revenues.
For privately-led projects, at least 90% of property owners must agree to the collective sale (en bloc) of the land parcel for the redevelopment to take place. For developments older than 10 years, at least 80% of property owners must agree to the sale. If the project is publicly-led or has a public interest, participation of property owners is compulsory and may be enforced through expropriations. Land expropriations are always carried out when necessary, and compensation is paid based on the property values practiced at the market. Property owners rarely appeal against the decision of readjustment or the compensation.
If the project involves the reacquisition and construction of affordable housing units, after readjustment, property owners may choose to receive a new property or cash compensation. For existing affordable housing, the government acquires blocks of flats in order to redevelop and revitalise the area (Selective En bloc Redevelopment Scheme). Residents can then select a new subsidised home at a designated replacement site, together with their current neighbours. The scheme is limited to precincts with high redevelopment potential, i.e., precincts where the land can have a higher and better use.
Newly readjusted areas typically include publicly owned plots that can be sold or leased in the future. 100% of the costs of public improvements are typically recovered through the sale or lease of readjusted plots.
In all, the system functions well and there are no significant obstacles to implementation.
Strategic land management
The government actively acquires land for housing, industrial, commercial and public purposes, including redevelopment of housing estates. Land acquisition and subsequent readjustment, as described above, have greatly facilitated the construction of new towns, industrial and business parks, urban redevelopment of the central business district and infrastructure development in general.
Using direct government financing, property is typically acquired through purchase at market price or, if a payment in-kind is granted to property owners from subsequent development, at reduced prices. Acquisition may also occur through expropriation or transfers from another governmental agency. Since 2007, the country has moved to a market-based approach to determine compensation for land acquired using compulsory methods.
The acquired land is then rezoned and redeveloped. Development includes basic physical preparation, new roads, public utilities, administrative buildings and social housing. Development may be carried out by the government, alone or in partnership with private developers. Developers may conduct the works by themselves, too, as long as they follow previously approved spatial and land use plans.
The land may be sold or leased to private actors or transferred to a government agency. Through its vacant land sales program, the government works with the private sector to implement local land use plans. When transferred to public entities, the land is typically used for public purposes as well as for affordable housing, industrial and business parks.
Sales usually occur at market price to the highest bidder, through the Government Land Sales program. In strategic locations, the public tender may include criteria such as urban design and business, in order to select the best development project. In rare instances, such as for the two Integrated Resort sites at Marina Bay and Sentosa in 2005, land prices were announced before developers were invited to submit concept proposals, with the aim of selecting the most outstanding design and concept for the projects.
Public land leasing is a very common practice, being adopted in the publicly built high-rise housing estates and also for private development. Exemptions or discounts to payment may be given to not-for-profit entities and for projects with a public purpose. Lease length is determined by the permitted use of land: typically, 99 years for residential and commercial uses and 30 years for industrial and other uses. Leaseholders are allowed to transfer the lease in a secondary market or sublease it.
The revenues collected belong to the government and form part of the country’s reserves. The reserves are invested professionally and on a commercial basis by the central bank and two government-owned funds and investment holding companies. Annual investment income from the reserves is an important source of revenue for the government.
There are no obstacles to implementation. The government owns 90% of the country’s total land area. Through the Government Land Sales Program, the purpose and locations of sites are strategically chosen to achieve economic and land use objectives.
References
[3] OECD (2022), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 13 January 2022).
[8] OECD (2021), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 25 November 2021).
[2] OECD (2017), Land-use Planning Systems in the OECD: Country Fact Sheets, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264268579-en.
[1] OECD/UCLG (2019), 2019 Report of the World Observatory on Subnational Government Finance and Investment - Country Profiles, OECD/UCLG.