Argentina
Land value capture in Argentina
Several land value capture instruments are used across provinces and municipalities, with a considerable degree of variation (Table 2.1). Infrastructure levies have widespread use, being charged to recoup the costs of public works. Developer obligations consist of in-kind contributions designed to address impacts on infrastructure, made in exchange to basic development rights. Local governments rarely adopt charges for development rights for additional development rights or rezoning. The three levels of government rarely make use of strategic land management. Provinces have not yet implemented land readjustment.
Enabling framework
Argentina is a federal republic with a two-tier subnational government structure: 23 provinces and the Autonomous City of Buenos Aires at the regional level and 2 301 municipalities at the local level (OECD/UCLG, 2019, p. 438[1]). Provinces have a strong degree of autonomy, with their own legislative, executive and judicial powers. The scope of municipal autonomy is largely determined in the provincial constitutions (OECD/UCLG, 2019, p. 438[1]).
Provinces and municipalities create the legal framework of land value capture. Four regional governments have laws concerning land value capture instruments: Buenos Aires, Mendoza, Jujuy and the Autonomous City of Buenos Aires. The principle of the social function of property is explicit in many provincial constitutions.
Developer obligations
Developers are required to make a payment, cash or in-kind, to obtain basic development rights, or for a project in disconformity with standard urban planning regulations. The charge is a compensation for the impacts of the proposed development on local infrastructure, notably due to the higher demand of public utilities and services in the area. The first provincial laws pertaining this matter date from 1951 in Mendoza, 1967 in the Santa Fe province and 1977 in the Buenos Aires province. Provinces and local governments frequently adopt this instrument.
The charge may follow an established rule or be negotiated in a case-by-case basis. If negotiated, the procedure is not rigidly structured and public agents have discretion in deciding the types of impacts to be compensated and the moment to fulfil the obligation. Developers must provide in-kind contributions of land, public space, roads or parking. As a general rule, cash substitutions to offset development impacts are not allowed.
The main implementation challenges are the lack of an adequate national legal framework and of clear local development norms and land use regulations. Local governments face low levels of administrative capacity. Developers have regarded the fee as economically unfeasible, which has reduced engagement levels.
Infrastructure levy
Infrastructure levy is a traditional instrument used to finance local public works in the country. Landowners pay a fee for public improvements that benefit their property, notably road construction, parking, street pavement and public utilities, such as water, electricity and sewage. Local governments make moderate use of this instrument and collect the revenues.
Local governments can impose the levy when the benefitted property owners are identifiable, have capacity to pay and are in sufficient number to provide funds for the public improvement. The local legislative power must approve by law each infrastructure levy that ought to be applied. According to case law of the Supreme Court of Justice, the charge cannot exceed thirty percent of the cadastral property value, otherwise it would have confiscatory purposes, what is forbidden.
The charge is paid in cash, before public service completion. Nevertheless, sometimes local norms allow payment after the improvement is concluded.
Benefitted properties are those within a certain distance to the improvement. For instance, in the Buenos Aires’ subway expansion, properties located within a radius of 400 meters of a subway entrance fell under the obligation to pay the infrastructure levy (National Law 23.514/1987). Local governments may also take into consideration floor area and position in relation to the public service.
One obstacle to adoption of this instrument is that property owners often cannot afford to pay the fee. Without the necessary funds, the goal to conduct a public improvement that is partially funded by adjacent landowners is defeated. Another obstacle is the lack of local administrative capacities to identify the affected property owners and distribute the costs proportionally.
Charges for development rights
The legal provision of charges for development rights is more recent and scattered, in comparison with infrastructure levy and developer obligations. It consists of a few isolated local regulations, and adoption is still exceptional. Examples of local regulations are the Law 6.062/2018 of the Autonomous Province of Buenos Aires, the Ordinance 2.963/11 of the city of Posadas, the Ordinance 2.854/2010 of the city of Rio Grande, the Ordinance 2.080/2010 of the city of Bariloche and the Ordinance 7.799/2004 of Rosario.
Landowners or developers whose land is located in an area that has been rezoned to allow for higher density or for more productive uses, such as from rural to urban, may have to pay a fee. Local governments charge this fee and collect the revenues. Local governments rarely adopt this instrument.
Because the charge relates to an administrative decision of rezoning, it is directly linked to an area or zone. Hence, the charge refers to that delimited zone and the right associated to it cannot be transferred to other locations of the jurisdiction.
The payment is in cash or through the in-kind provision of land, public spaces or public improvements, depending on the local norm. If in cash, the charge is calculated according to the estimated value of development rights, measured in relation to the market value of land. The charge must be paid when the project is completed. Yet, some governments provide intermediate modalities between building permit application and project completion.
The collected funds are earmarked for the purposes of investing in public space, public transport, roads, parking space and heritage protection within the collecting jurisdiction. To illustrate, in the Autonomous Province of Buenos Aires, 94% of the collected funds must be spent on housing, social facilities, transport, service infrastructure, public spaces or socio-spatial integration, while the remaining 6% must be spent on heritage protection (Law 6062/2018).
The main obstacles to implementation are the lack of local norms and of local administrative capacities. When they exist, local land use regulations and development norms are unclear. Inaccurate land registries bring insecurity to real estate transactions. The demand for building at higher density is low in second-tier cities, thereby making the adoption of the instrument less desirable.
Strategic land management
The priorities of strategic land management are construction of affordable and social housing, land consolidation, control of urban growth patterns and transformation of abandoned property into productive uses. The national, regional and local governments have special purpose bodies that are responsible for acquiring, retaining and selling land in a strategic manner. Each level of government collects their own revenues. The instrument is rarely used in the country.
The government can acquire land through market purchases, donations, expropriation or automatic forfeiture, in case of non-payment of tax obligations or building code violations. They prefer to acquire vacant or unproductive land, scattered across the jurisdiction. The government may retain the acquired land for how long it estimates to be pertinent.
The government redevelops the acquired land, building public space, public utilities, administrative facilities and affordable and social housing. Afterwards, the government may auction the developed plots to private actors or transfer them without cost to another public entity. Although the primary purpose is to improve land management, not to recoup revenues, the government does recover investments through the sale or leasing of the developed plots.
Public land leasing attends the purposes of generating public revenues, providing land for real estate development and facilitating urban development. There is no typical lease length. The ground rent must be paid annually. Public or non-profit entities may be exempt from payment, as well as entities who develop projects with a public purpose.
The main obstacles to implementation are the lack of legal framework, lack of administrative capacities, lack of coordination between public entities and lack of financing for land acquisition. Leaseholders do not consider the rents to be economically feasible. The revenues raised with strategic land management operations do not justify the costs of conducting them.
Land readjustment
The Province of Buenos Aires has a regulation on land readjustment since 1977 but has never adopted it (Article 89 Decree-Law 8912/77). A recent national programme establishes the mandatory content of legislation that provinces should enact to use land readjustment (Resolution 2/2021 of Ministry of Territorial Development and Habitat).
As of today, the legal framework at the subnational levels is insufficient, and local governments lack the necessary administrative capacities. Another significant challenge is to compel resisting landowners to participate and, when that is not possible, to expropriate their land parcels, which would be controversial and expensive.
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.