Executive summary
The global population living in cities has doubled over the last 40 years and will increase another 1.5 billion to reach 5 billion by 2050. This will drive intense demand for land equipped with infrastructure. Land use and infrastructure will also need to become consistent with global environmental challenges: cities will need to become climate neutral, reduce other environmental footprints and deal with unavoidable global warming. This will require new investment in sustainable public transport, water supplies, renewable energy, and green open space, among others.
Used appropriately, land value capture (LVC) can contribute to meeting these challenges. LVC encompasses a set of policy instruments that allow governments to capture the land value uplifts generated by public interventions, such as infrastructure investments or administrative actions, like land use changes. However, despite the benefits that can be provided by LVC policies, the success of countries in applying them varies greatly. In addition, a lack of a common analytic framework hinders the exchange of good LVC practices and innovative policy ideas.
This Compendium assesses the LVC practices of 60 countries across the globe. It presents a common taxonomy of LVC instruments that facilitates comparative analyses. Using unique cross-country survey data, it reviews the legislative and administrative frameworks and the barriers to LVC implementation.
The OECD-Lincoln taxonomy standardises the terminology and definitions for the following LVC instruments, allowing for meaningful cross-country comparisons while minimising confusion.
Infrastructure levy: taxes or fees levied on landowners possessing land that has gained value due to government-initiated infrastructure development
Developer obligations: cash or in-kind contributions that defray costs for additional infrastructure or services that need to be provided due to private development
Charges for development rights: cash or in-kind contributions payable in exchange for development rights or development potential above a set density baseline
Land readjustment: the practice of pooling fragmented land parcels for joint development, with owners transferring a portion of their land for public use
Strategic land management: the practice of governments actively buying, developing, selling and leasing land to advance public needs and recoup value increments borne through public action
The majority of countries lack a legal definition of or justification for LVC. Incorporating these definitions into law can reduce legal disputes and promote citizen support, two major obstacles to LVC across countries.
Legal disputes are most common for the infrastructure levy, as fees are charged for public works initiated by the public sector. Legal disputes for developer obligations and charges for development rights are less common, as fees are levied as a response to private development initiatives.
Local governments play a critical role in the implementation of the infrastructure levy, developer obligations and charges for development rights. Responsibilities for land readjustment and strategic land management, however, tend to be shared more with the national government, other public entities, and private sector actors, including landowners.
Lower-income countries tend to award less discretion to local officials for implementing LVC compared to high-income countries, mainly due to fears of corruption and lack of trust in local governments.
The most common obstacle in LVC implementation is resistance by property owners. Lack of administrative capacity is also a common obstacle, especially in lower-income countries.
All countries surveyed, excluding Uganda, use some form of LVC at least on an occasional basis. Developer obligations are the most used instrument, followed by strategic land management. Charges for development rights are least common.
European countries rely more on developer obligations and strategic land management, while the use of charges for development rights is more common in the Asia-Pacific. The use of land readjustment in the Americas is particularly rare.
Lower-income countries rely more on strategic land management and land readjustment than higher-income countries but make little use of developer obligations. This may be due to rapid urbanisation in lower-income countries necessitating urban conversion of rural land, made possible through active public development of land and land readjustment schemes. A lack of local government administrative capacity and fear of corruption in lower-income countries can also make implementing developer obligations difficult, as they require negotiations with private developers.
Eliciting greater public support is key to successful implementation. Land value increments are collected more successfully when consultation channels with landowners and stakeholders exist and the benefits from a proposed public intervention and/or administrative action are clearly laid out at the outset. However, consultation processes with property owners that are affected by LVC instruments are lacking or insufficient in many countries.
Establishing clear and fair rules for LVC through legal definitions, legislation and effective law enforcement is important. LVC is better accepted by landowners when charges are derived from the amount of land value uplift a public improvement generates, as opposed to being charged based on public costs. Considering the socioeconomic status of landowners by differentiating LVC charges based on income levels improves public reception while fulfilling redistributive goals.
The successful implementation of LVC requires developing greater local government capacity. In most countries, local governments have responsibility for determining which landowners are affected by LVC, setting the fees, negotiating with landowners and developers, and managing land assets, among others. However, in many cases, local governments lack the capacity to carry out these tasks. National governments need to provide lower-level governments with adequate administrative support, policy guidelines, and accurate cadastre and land transaction data for LVC implementation. Local governments should also take greater action on capacity building for LVC. In addition, spatial planning frameworks should clearly define the roles of different levels of government in preparing plans and land-use regulations that serve as the baseline for LVC administration.