copy the linklink copied!Chapter 1. Land-use governance in Korea
This chapter presents an overview of the state of land-use governance in Korea, looking first at the context of spatial planning. It stresses that the share of national urban land is small but the demand for urban land has decreased. It then discusses the main issues of governance of land use in Korea focusing in particular on the case of Busan, Korea’s second largest city. It highlights that land use in Busan is largely influenced by historical events and socio-economic changes such as ageing and shrinking population, and the city’s slow economic growth. The chapter argues that inter-departmental co-ordination for land-use seems to be strong and that the city has a comprehensive but complex land-use planning framework. It highlights the need to shift the land-use planning approach from urban expansion to urban regeneration, and to improve the sub-national fiscal system. Finally, the chapter explores some policy options to strengthen Korea’s land-use planning system.
Land use is a critical policy issue because it relates to economic growth, environmental sustainability, and social equality. Sustainable management of land resources underpins the achievement of sustainable livelihoods and even income generation as land resources are a source of food, shelter and economic development. Managing land resources sustainably is essential to ensure they contribute to providing important services such as watershed protection and biodiversity conservation, while at the same time contributing to the development of the economy. There are many policy tools that can affect land use, such as regulation for land-use planning. The land-use planning system alone, however, cannot meet the spatial objectives; policies outside of the planning scheme should be considered to attain the desired forms of spatial development for inclusive growth and sustainability, for instance fiscal instruments.
This chapter provides an overview of the land-use governance in Korea, exploring the general planning system, laws and regulations, fiscal instruments, and national fiscal scheme. Subsequently, this chapter will discuss the land-use planning practices at the local level by analysing the case of Busan Metropolitan City. The chapter ends with key policy recommendations for improving land-use governance in Korea and Busan.
copy the linklink copied!The context of spatial planning
National spatial planning has been evolving
Korea’s national spatial planning has drastically evolved since the end of the Korean War, from a focus on modernisation of the industrial structure in the 1950s and 1960s to policies focusing on globalisation and sustainable development in the 2000s. When Korea pursued catch-up development through government-led economic growth policies, the national spatial plans were also aligned. Accordingly, spatial plans played important roles in a number of areas such as urban development, housing supply and infrastructure provision. However, since the early 2000’s, spatial planning policies have placed much more importance on the balance between development and environmental conservation. Currently, the objectives of land-use planning include balanced development, improving quality of life, and minimising imbalance across regions through capacity building for self-innovation (Box 1.1).
Changes to the Comprehensive National Land Plan (CNLP) show how the policy goals of national spatial planning have shifted over time (Table 1.1). The CNLP has been implemented for more than four decades in Korea. The CNLP defines the planning hierarchy of spatial plans and responds to the government’s urban, regional and environmental priorities. It has contributed to inclusive growth by setting desirable goals and creating practical means for their implementation (KRIHS, 2013).
Currently, spatial policies pursue sustainable and balanced development, improving quality of life and enhancing regional competitiveness. The overarching vision is to create a national territory that benefits all, with no one left behind. Emphasising capacity building for self-innovation, the Korean government broadly presents four key tasks to achieve the vision of spatial planning (as below).
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1. Key task 1: Revitalise regional economies and create jobs
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Support region-led, balanced development by promoting regional hubs
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Lay foundations for creating quality jobs in regions through innovation
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2. Key task 2: Address urban decline and shrinking population by regeneration
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Implement Urban Regeneration New Deal
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Enhance regional competitiveness through connection and co-operation
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3. Key task 3: Improve quality of life through innovative construction
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Create a safe and secure living environment
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Strengthen the planned management of national land
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4. Key task 4: Respond to changes in future conditions systematically
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Condensed national land management in response to population decline, etc.
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Build national land space in an inclusive and sustainable manner
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Source: MOLIT presentation to the OECD Secretariat during the fact-finding mission.
Urban land share is small and the demand for urban land has decreased
The entire national territory of Korea spans 106 108.8 km2 of which only a small proportion is urban land. In terms of land category1, in 2016, 63.7% of the Korean territory was forest, 20.1% was farmland, and 10.7% was used for urban purposes (3.0% buildings, 1.0% factories, and 6.7% for various other purposes) (MOLIT, 2017a). In terms of land-use areas2, in 2017, urban areas accounted for 16.6% of the total territory. Excluding green areas in urban areas, only 3.9% of total land is used for residential, commercial and industrial purposes (Table 1.2).
Urban areas in Korea have expanded for the past ten years, increasing by around 446 km2. The increase has been mostly for residential and industrial purposes (MOLIT 2008, 2018a). However, Table 1.3 shows that the increase rate of urban areas decreased from 67.8% to 2.6% between 1970 and 2017, which means the demand for urban land has decreased. Considering Korea has low population growth, which is below the OECD average (Figure 1.1), and the lowest fertility rate of all OECD countries (Figure 1.2), the decreasing demand for urban land may continue.
Source: OECD Data, https://data.oecd.org/pop/population.htm (Accessed on 05 August 2018)
Source: OECD Data, https://data.oecd.org/pop/fertility-rates.htm (Accessed on 05 August 2018)
Korea has a comprehensive regulatory framework for land use and spatial planning
The national government of Korea provides the framework legal scheme and a comprehensive national planning framework for land use. In addition, the government approves and co-ordinates the land-use plans of regional and local governments. As in other OECD countries, Korea’s national government usually has three primary functions related to land-use policies. First, it enacts the framework legislation that structures the planning system. Second, it provides a spatial framework for the country that guides its development. Third, it oversees land-use plans and designates the urban planning boundaries in its country. Furthermore, the national government is the primary actor with regard to environmental protection and the designation of development restriction green zones (green belt) (OECD, 2017a).
Korea has three levels of government. Below the national government, there are 17 first-tier regional governments: 1 special city (teukbyeolsi), 1 special self-governing city (teukbyeol jachisi), 6 metropolitan cities (gwangyeoksi), and 9 provinces (do) including one special self-governing province (teukbyeol jachido). Metropolitan cities combine the functions of regional and local government. At the local level, there are 230 local authorities that have the status of city (si), county (gun) or district (gu). These local authorities are further sub-divided into 3 500 administrative units such as dong, eup and myeon (MOIS, 2017).
Source: Korea Statistics Agency, http://kosis.kr/statHtml/statHtml.do?orgId=214&tblId=DT_21402_Q001 (Accessed on 03 May 2018).
At national level, the Framework Act on the National Land and the National Land Planning and Utilisation Act provide the legal basis for the spatial planning system. On the one hand, the Framework Act on the National Land provides the extensive guidelines, rules and planning processes for the CNLP and the Do Comprehensive Plans, and these plans provide the overarching framework for land use. In addition, it presents territorial development philosophies such as no development without planning. On the other hand, the National Land Planning and Utilisation Act stipulates the other framework land-use plans such as the Metropolitan Urban Plan, the Urban Master Plan, and the Urban Management Plan. In addition, it has articles on the zoning system, in particular, the location-related restrictions such as land to building ratios and floor area ratios depending on land-use areas. The Act was enacted in 2002, combining two different laws: the Urban Planning Act which was the governing act for urban areas, and the Act on the Utilisation and Management of the National Territory which was for rural areas (Box 1.3). Finally, the Urban Planning Committee (the land use co-ordination body) is based on this law (Box 1.4).
Before 2000, the governing act for urban areas was the Urban Planning Act, while that for rural areas was the Act on the Utilisation and Management of the National Territory. The current system of land-use governance was created in 2002 when the National Land Planning and Utilisation Act was enacted. The law has become the governing act for urban and rural areas, and it brought some meaningful reform. First, land-use areas were rearranged. The previous five land-use areas were rearranged into four areas by combining “quasi-urban areas” and “quasi-agricultural areas” into “management areas”. This changed the categories from “urban, quasi-urban, quasi-agricultural areas, agricultural areas, natural environment conservation areas” to “urban, management, agricultural areas, natural environment conservation areas”. Second, the Land Suitability Assessment System was introduced for the objective sub-divisions of management areas. Management areas consist of three sub-areas: conservation and management, agricultural and management, and development and management. Based on the Land Suitability Assessment results, a management area belongs to one of the three sub-areas. Also, the Act changed the mechanism for the restriction of activities in management areas from a negative to a positive system and strengthened the degree of development density to the level of green areas. Finally, the reform established the District Unit Plans.
The Act consists of 12 chapters and 144 articles. It stipulates the land-use planning system, legal scheme of zoning regulations, central urban planning committee etc. Notably, some chapters have their own subordinated regulations such as the Guideline for the Urban Master Plan and Guideline for the Urban Management Plan. The regulations are set by the national government and they have extensive and detailed guidelines that regional and local governments should follow when making their land-use plans.
Other regulations that have a direct impact on land use and deal with individual land-use cases are: the Farmland Act, the Mountainous Districts Management Act, the Building Act, and the Tourism Promotion Act. Furthermore, some acts stipulate the land-use areas, districts or zones that can be designated to attain the policy goals pursued by the acts (Table 1.6). Once those areas, districts or zones are designated, restriction on land use is imposed directly. For example, when an area is designated as a natural reserve based on the Natural Environment Conservation Act, any new construction, extension to existing buildings or activities changing the shape of the land are strictly prohibited.
In most countries, higher levels of government develop strategic plans and policy guidelines with spatial implications to co-ordinate the territorial development of an entire region or of the whole nation, while local governments make decisions about detailed land uses (OECD, 2017a). Korea also uses a hierarchical land-use planning system (Figure 1.4). At the national level, the Comprehensive National Land Plan (CNLP) provides a general framework that focuses on socio-economic development, environmental protection and well-being and contains spatial and non-spatial elements. It has a 20-year time horizon and can be renewed every five years if necessary. The current plan, the third version of the 4th CNLP, covers the period 2011-20 (the initial version of the 4th CNLP had a 20-year time horizon (2000-20)). Although the CNLP is legally binding for lower level plans, in practice it is not particularly restrictive as it provides long-term vision and strategies for national land as opposed to small-scale land-use plans such as zoning.
Source: MOLIT presentation given to the OECD Secretariat during the fact-finding mission.
Vertical and horizontal co-ordination for land-use planning is strong
In Korea, like many other OECD countries, vertical co-ordination of land-use policies is primarily ensured by the hierarchical character of the spatial planning system; lower level plans are generally required to correspond to higher level plans (OECD, 2017b). Further, according to Article 6 of the Framework Act on the National Land, national land-use plans are classified into the Comprehensive National Land Plan, a Do Comprehensive Plan, a Si/Gun Comprehensive Plan, a regional plan, and a sector plan (Box 1.5). Plans relating to agricultural villages, maritime affairs and tourism that are governed by other ministries are classified as sector plans, all of which are placed under the Comprehensive National Land Plan formulated by the Ministry of Land, Infrastructure and Transport (MOLIT). Accordingly, these sector plans are also required to correspond to the Comprehensive National Land Plan.
In terms of vertical co-ordination, there were some reforms for devolution. For example, The National Land Planning and Utilisation Act was revised to facilitate devolution to local governments and make the land-use planning system more flexible. Table 1.7 shows how the powers of land use have transferred from national government to regional governments, resulting in the greater co-ordination authority of regional governments. The Act also made the land-use system more flexible. Attaining flexibility of land use and promoting customised land use at the regional and local levels showed good progress, but there is still room for improvement. This will be discussed in the last section of this chapter, especially for greater devolution, flexibility and mix land-use facilitation.
Horizontal co-ordination at the national level takes place mainly via two committees. One is the Central Urban Planning Committee within the Ministry of Land, Infrastructure and Transport (MOLIT). The committee mainly reviews Metropolitan Urban Plans, development restriction green zones (green belt) and other land-use planning that requires the committee’s review by law. The other is the Land-use Permission Co-ordination Committee, which was established in 2017. It co-ordinates building permits, factory construction permits and other development related activities in cases where there are disagreements between local governments (MOLIT, 2018b).
Article 6 of the Framework Act on the National Land stipulates the definition and classification of national land-use plans. National land-use plans are classified into: i) Comprehensive National Land Plan, ii) Do Comprehensive Plan, iii) Si/Gun Comprehensive Plan, iv) regional plan, and v) sector plan.
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Comprehensive National Land Plan: indicates a long-term direction for development of the national land, covering the entire territory of the country.
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Do Comprehensive Plan: indicates a long-term direction for development of the jurisdictional area of a Do or a Special Self-Governing Province, covering the entire area of the relevant region.
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Si/Gun Comprehensive Plan: indicates the basic spatial structure and a long-term direction for development of the jurisdictional area of a special metropolitan city, metropolitan city, si or gun, covering the entire area of the relevant region. The plan is formulated for land utilisation, traffic, environment, safety, industry, health, welfare, culture etc.
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Regional plan: formulated to achieve the objectives of special policies in a specific region, covering the entire area of the region.
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Sector plan: indicates a long-term direction for development of a specific sector, covering the entire national territory.
Source: MOLIT presentation to the OECD Secretariat during the fact-finding mission
Regional and local governments handle detailed land-use plans
The regional governments prepare the strategic metropolitan or provincial plans depending on their status as a metropolitan city or province. At the regional level, the Metropolitan Urban Plans and the Do (province) Comprehensive Plans provide regional frameworks and focus on similar topics to the Comprehensive National Land Plan. Metropolitan Urban Plans and Do Comprehensive Plans are created by metropolitan cities or provinces but need to be approved by MOLIT. In particular, the Metropolitan Urban Plan is the plan that adjacent cities and regions collectively establish for their strategic spatial planning goals. The planning horizon is 20 years. Although the plan is not mandatory, it can provide a guideline for the Urban Master Plan and the Urban Management Plan. Since it is a strategic plan, it contains spatial vision, land-use demand forecast, and sectoral plans such as transport, housing, and environment protection (MOLIT, 2018b).
At the regional and local levels, the Urban Master Plan3 is a comprehensive plan that establishes the basic spatial structures and long-term directions of a development within the jurisdiction of a special city, metropolitan city or city, and provides guidelines on which the Urban Management Plan is to be based. This comprehensive plan not only predicts and prepares for changes in living conditions in terms of material, spatial, environmental and socio-economic conditions, but also provides a future vision and basic framework of development for the next 20 years (with the plan being amended every five years). In particular, it covers socio-economic development, housing, transport, infrastructure, public health, disaster prevention, environmental protection, sustainability, culture, and heritage protection (MOLIT, 2017b).
The Urban Management Plan is the implementation plan and mainly handles zoning which imposes legally binding restrictions on land-use for landowners. The land-use zoning system in Korea is described in Box 1.6. In particular, the land-use areas are determined by the Urban Management Plan. Depending on the area, land use is restricted by limiting the utilisation of the land and buildings on it, for instance, through land to building ratios, floor area ratios, heights of buildings etc. (Table 1.8). As seen in Table 1.9, the Urban Management Plan assigns only one land-use area, which is considered as optimal, to a plot in order to utilise the land economically and efficiently, and to ensure an improvement of public welfare by limiting the land utilisation and its land to building ratios, floor area ratios, and heights of buildings and so on. (MOLIT, 2017b).
Although the zoning system in Korea is rather comprehensive, it is also restrictive, inflexible and complex. The three pillars of the zoning system are land-use areas, land-use districts and land-use zones. The figure below illustrates the relationship between them, which may overlap. The land-use areas are designated by their primary uses, and they are divided into four categories: urban areas, management areas, agricultural areas and natural environment conservation areas. Urban areas are sub-divided into residential areas, commercial areas, industrial areas and green areas. Management areas are sub-divided into three categories such as “conservation and management”, “agricultural and management”, and “development and control areas”. Depending on the area, architectural structures may vary by type and size, including land to building ratios, floor area ratios, and building height. The areas are determined and modified by the Urban Management Plans. The land-use districts are designated within five categories (scenic districts, disaster prevention districts, conservation districts, community districts, and development promotion districts), each of which is divided into sub-groups and managed appropriately. The land-use zones are designated to intensify or lift restrictions on areas or districts, depending on the use or forms of land and architectural structures. These zones are divided into four groups, including development restriction green zones, controlled urbanisation zones, protected fishery resources zones and urban natural park zones.
Source: OECD (2014), Compact City Policies: Korea: Towards Sustainable and Inclusive Growth http://www.oecd.org/fr/regional/compact-city-policies-korea-9789264225503-en.htm.
Furthermore, the District Unit Plans exist as the lowest level of land-use plans to steer the development of small neighbourhoods and individual blocks in densely populated areas. Unlike the other plans above, the District Unit Plans are established only for particular districts, not all administrative jurisdictions. They are set up if a district requires special management to respond to expected future changes, especially for re-arrangement of existing land use and improvement of the built environment. The plans can add flexibility to the strict urban planning scheme based on the zoning system. Almost all kinds of land-use regulations such as density, height and building type can be adjusted in District Unit Plans (BDI, 2012). As of 2017, there were 9 334 District Unit Plans nationwide. Gyeonggi province has the highest number of these plans (2 012), and Busan Metropolitan City has 573 (MOLIT, 2018b).
Zoning regulations by land-use area are the basis of land-use control in Korea. Notably, there is room for zoning regulations to be improved. First, the current zoning system leads to single use land-use patterns. As mentioned above, the land-use areas do not overlap. This has the aim of utilising the land economically and efficiently, but results in promoting single use. Second, the zoning system allocates permitted uses and density into pre-determined zones, resulting in uniform and strict land-use patterns across the country (KRIHS, 2016b). For example, if a metropolitan city and a town in a rural area both have a central commercial area within their jurisdiction, the same land to building ratios and floor area ratios are applied to the area, regardless of the characteristics and socio-economic context of the neighbourhoods. Third, the current zoning system lacks a strategic planning function. Indeed, land-use areas do not provide strategic planning directions, thus actual land uses are quite different across local governments, even in the same land-use area (KRIHS, 2016a). For instance, permitted buildings in the class II general residential area are: single houses, multi-family houses, neighbourhood living facilities such as convenience stores and hairdressers, offices, sports facilities etc. Therefore, one city may use the area for residential purposes, whereas another city may add partially commercial functions to the area.
Fiscal instruments to steer land are limited
How land is used is the outcome of a complex array of interactions. While the planning profession has many tools with which to shape land use, there are other elements beyond the purview of the planning system such as fiscal instruments. Private land-use decisions are always the result of cost-benefit considerations, even if they occur unconsciously and include a wide range of non-monetary factors. Fiscal instruments play a crucial role in decisions because they influence both the costs and benefits of land use. In other words, fiscal instruments can change behaviours by providing financial incentives and disincentives. Some well-known fiscal instruments and their mechanisms are described in Table 1.10, and more fiscal instruments and detailed explanations can be found in Annex A.
Korea currently uses some of these instruments. For example, a development impact fee is charged to real estate developers to cover part of the cost of new construction. It can be charged when land is initially developed or when infrastructure is upgraded or significantly rehabilitated (Silva and Acheampong, 2015). In addition, residents can receive some financial support for repairing their traditional-style houses, although there is no financial support such as historic rehabilitation tax credits for private developers who attempt to preserve historic structures.
A new fiscal instrument was adopted in 2008 – the Conjoint Regeneration Programme (CRP). It allows two renewal projects to be combined and then permits trading of their unused floor area ratios (FAR) between two renewal projects. Under the CRP, a landowner who needs more FAR can buy it from another landowner who does not fully take advantage of the FAR on their plots. This is similar to transfer of development rights (TDR), the difference being that the former allows only for the trading of FAR, whereas the latter encourages the exchange of development rights (Park & Yang, 2012). However, CRP has rarely applied due to several reasons such as low development pressure and relatively fewer benefits.
Well-designed tax schemes are important for achieving spatial objectives. Like many other OECD countries, property tax and capital gains tax have been adopted in Korea. Furthermore, tax reduction benefit is available to promote public transport. Some metropolitan cities such as Seoul also collect congestion fees to reduce the volume of traffic in downtowns. These tax policies are well aligned with land-use policies, especially for promoting compact cities.
The fiscal system does not provide balanced incentives for planning policies
Fiscal structure is one of the elements which interacts with land-use planning. Depending on whether the fiscal system is decentralised or centralised, local governments have different incentives for land use. In particular, in more centralised settings, local governments have incentives to pursue urban containment policies. This is because, in centralised systems, local governments are funded predominantly by national transfers and will neither benefit from increased development nor suffer negative fiscal consequences. In contrast, decentralised systems face different pressures. Local governments that depend on their own revenues to fund infrastructure and services have larger incentives to increase their tax base to raise revenues. Therefore, some local governments may turn to new developments that increase their tax base (OECD, 2017a).
Local governments in Korea may have less incentive to pursue urban expansionary policies inferred from the fiscal structure. Korea has a highly centralised revenue collection system, so national transfers to local governments account for a substantial share of local government revenues (OECD, 2004). Sub-national government revenues consist of taxes, grants and subsidies, tariffs and fees, property income, and social contributions. In 2016, grants and subsidies from the national government, (i.e. the conditional grants provided to local governments to support projects of national or local interest), made up 58% of the total revenue of sub-national governments in Korea. This is the 8th highest rank in the unitary countries4 of OECD countries (Figure 1.6). In addition, some national transfers, such as local shared tax, are transferred by an equalisation formula. Local shared tax is a national equalisation scheme, the purpose of which is to equalise vertical and horizontal imbalances. It is allocated on the basis of objective needs, which are determined by an equalisation formula, and its funding base is currently 19.24% of domestic tax revenues, 100% of aggregated land tax, and 20% of consumption tax on tobacco (MOIS, 2017).
Note: Only unitary countries among OECD countries are listed above.
Source: OECD Regional Statistics, https://doi.org/10.1787/05fb4b56-en (Accessed on 05 August 2018)
Basically, regional and local governments are responsible for securing and raising funds to implement their land-use plans based on their Urban Master Plans and Urban Management Plans. In part, however, national grants and subsidies can be provided to regional and local governments to financially support land-use planning implementation. There is a national budget account especially for regional development – the Special Account for Regional Development, and some regional and local governments take advantage of the account’s budget to fulfil planned development projects (Table 1.11). In the 2000s, Korea established a Presidential Committee for Regional Development, and in 2004 the Special Account for National Balanced Development was introduced with the objectives of increasing resource transfer to regions and targeting specific national programmes at regions outside the capital region (OECD, 2012a).
In 2018, the Special Account for Regional Development had a budget of approximately KRW 10 trillion (National Assembly Budget Office, 2018). It is composed of four accounts:
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Living Base Account: used for projects whose impacts are limited to regional or local areas. Like other accounts, it is distributed to different ministries for implementing regional targeted programmes. For example, local governments can improve traditional markets, create parking spaces or build local museums.
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Economic Development Account: used for projects which have national or inter-regional interests, e.g. inter-city road buildings, inter-city railroad construction, and establishment of eco-tourism complexes.
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Jeju Account: a special account for the Jeju province
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Sejong Account: a special account for the Sejong Self-Governing City.
copy the linklink copied!The governance of land use in Busan
Land use in Busan is largely influenced by historical events and socio-economic changes
Unplanned urban growth was the legacy of the Korean War, the consequences of which are still felt
Busan Metropolitan City, located on the southeast coast, is Korea’s second largest city in population terms. It occupies an area of 770.03 km2, which corresponds to 0.8% of the national territory. Busan is an important socio-economic and political centre. It was temporarily the capital during the Korean War in 1950. When war refugees moved into Busan, the population increased dramatically from around 629 000 inhabitants in 1951 to approximately 889 000 a year later, resulting in unplanned urban development and the formation of poor quality residential areas (Busan Metropolitan City, 2015a).
Not only the historical legacy but also recent rapid demographic and economic changes call for a reconsideration of the land-use policies of Busan Metropolitan City, especially for taking advantage of an urban regeneration approach. First, the population in Busan has fallen consistently, and the ageing population is increasing rapidly. This means the pressure of urbanising land will be lower than previously, and a higher share of older people may increase the demand of city centres for better amenities. In summary, Busan faces different land-use dynamics from the demand side. Second, the slow growing economy requires Busan Metropolitan City to transform the land-use paradigm in order to supply more flexible and mixed land-use plots to meet the land-use needs of business entities. In other words, Busan needs to outline new land-use supply strategies. Given that national urban regeneration prioritises areas which suffer from depopulation, a decrease of business establishments, and increase of deteriorated housing, the case study of Busan is appropriate for taking a deeper look at land-use and urban regeneration issues.
Busan received metropolitan status in 1963, which is equal to a province. Busan Metropolitan City is composed of 15 autonomous districts and 1 gun (i.e. rural unit of government) as local level governments. These local level governments are sub-divided into 201 dong, 3 eup and 2 myeon.
Note: Blue-coloured regions are the metropolitan cities, including Seoul and Sejong.
Source: OECD (2018), Housing Dynamics in Korea: Building Inclusive and Smart Cities http://www.oecd.org/governance/housing-dynamics-in-korea-9789264298880-en.htm
An ageing and shrinking population is Busan’s most pressing demographic challenge
Depopulation and an ageing population are the most influential factors on land use. They decrease demand for urban area development and mean large-scale and standardised land supply, such as for high-rise apartment complexes, is less valid. Also, older people tend to return to downtowns from suburban areas, since downtowns usually have better urban services such as medical and transport. Compact development and urban regeneration can be more appropriate than new development projects in peri-urban areas (Korea Planning Association, 2014).
The population in Busan has decreased consistently (Table 1.12), causing concern to the city government over the region’s land use and economic growth. Having recorded its highest population of 3.89 million inhabitants in 1995, the population of Busan fell to 3.52 million in 2017. One of the main reasons is that people move out of Busan to pursue better living conditions and job opportunities. For example, in 2017, there was a migration inflow of 529 343 people into Busan from other regions and an outflow of 565 419 from Busan to other regions, resulting in a net loss of inhabitants.
This trend reflects ongoing shifts in the Busan labour market. The population of Busan is showing ageing trends due to the combined effects of the rise of average life expectancy and outflows of the younger population towards other regions. The economically active population5 decreased from 74.2% in 1993 to 72.9% in 2017, whereas the ageing population (65 years old and above) increased from 5.1% to 15.7% during the same period (the OECD average was 16.7% in 2017). At national level, the elderly population increased from 6.4% in 1993 to 13.8% in 2017. The National Statistics Agency expects that this trend will keep increasing, reporting that the ageing population will reach 33.8% by 2037 (Figure 1.8).
Source: Author’s elaboration based on http://kostat.go.kr/office/dnro/rodn_nw/2/1/index.board?bmode=read&aSeq=364458&pageNo=&rowNum=10&amSeq=&sTarget=&sTxt= (Accessed on 15 September 2018).
Busan’s economic growth is slowing down
The gross regional domestic product6 (GRDP) of Busan accounts for around 5% of the whole country (Table 1.13). The annual growth rate of GRDP in Busan is a bit lower than the national average, and the economic index means Busan’s economy is slightly slower. In more detail, in 2017, the economically active population in Busan was 1.71 million. Activity rate was 58.8%, below the national average of 63.0%. The unemployment rate was higher than the national average; 4.6% in Busan and 3.7% in Korea.
Each city needs to enhance competitiveness in the context of a slow economy. Fostering new industries in urban areas can be one option, and will expedite mixed land use by allowing commercial and industrial functions in residential or non-urban areas. In this context, mixed land use should be promoted and the previous leapfrogging developments and satellite bed towns are no longer valid (KRIHS 2016a).
Busan has a limited supply of developable land although demand has decreased
Busan has a complicated geography. The Nakdong river divides the city into two parts; a mountainous area to the east of the river, and a plain area to the west. The geography of the city imposes restrictions on land use as there are fewer developable areas. For example, more than half of Busan’s total area is located at an altitude of 100 metres and above, and more than half has a steep incline of 10 degrees and above. As a result, Busan suffers from insufficient developable land supply. It has hill and mountain areas with steep inclines in its eastern part. In the west, which is less steep and therefore more developable, development restriction green zones are designated to preserve green open spaces. In total, the development restriction green zones cover around 270 km2, which is about 28% of the total area of Busan (Busan Metropolitan City, 2017). Urban areas are already formed in developable and less steep areas in the rest of the western part. Analysis on developable areas revealed how much land Busan Metropolitan City can exploit for the future. Developable areas are calculated by excluding from the total territory: already developed areas, unavailable areas such as those with too steep an incline, and protected areas such as natural environment conservation areas. Only 5.8% of total land in Busan is developable (Table 1.14). Some development projects are already planned which further limits the developable areas (Busan Metropolitan City, 2017). The importance of urban regeneration and high-density development in urban centres may be inferred from the analysis.
In terms of land category, in 2017, 44.9% of Busan’s territory was forest, 12.5% farmland, and 17.7% used for urban purposes; 14.2% was covered by buildings and 3.5% by factories (MOLIT 2018a). In terms of land-use areas, in 2017, urban areas accounted for 94.7%. Excluding green areas in urban areas, 23.5% of total land was used for residential, commercial and industrial purpose (Table 1.15). Over the past 10 years, green areas have decreased by 6%, whereas residential (10%), commercial (16.6%), and industrial areas (37.4%) have increased. This could signal that Busan still has land use pressure for urban functions (Table 1.16). Similar to the national trend, however, if the time span is expanded, it shows that the pressure is less than it was previously. For example, urban areas increased by 0.7% between 1997 and 2007. However, over the past decade, urban areas have slightly decreased by 0.6%.
Inter-departmental co-ordination for land-use planning seems strong
The city government has dedicated organisations for land-use planning and urban regeneration
The headquarters of Busan Metropolitan City consists of 5 offices, 17 bureaus, and 90 divisions. Among them, the Urban Planning Office is mainly in charge of land-use policies (Figure 1.9). The office encompasses the Balanced Urban Regeneration Bureau, which is dedicated mainly to urban regeneration projects. There is a total of ten divisions which handle urban planning, urban facility management, land and road policies and co-ordinate urban regeneration programmes. The district (i.e. gu) governments also have their own land-use policy bureaus and divisions.
Source: Busan Metropolitan City homepage, http://english.busan.go.kr/index (Accessed on 18 November 2018)
Several sectoral departments take part in land-use planning
Planning in Busan seems to be organised in such a way as to overcome silos. Divisions outside of the Urban Planning Office are also involved in land-use practices. For example, an amendment to the Busan Urban Management Plan would contain schools and social welfare facilities, and the education and social welfare policy divisions would take part in the amendment. As Table 1.17 shows, the Urban Planning Manual of Busan indicates what divisions should participate in land-use planning and land use related decisions (Busan Metropolitan City, 2015b). The co-ordination of sectoral issues across the metropolitan area is complicated by the fact that sectoral policies, rules and regulations in areas such as housing, transport, water, agriculture, tourism and economic development span local, regional and national scales. As for other OECD cities, the call for a more integrated approach to spatial planning presents a major co-ordination challenge. Busan has the advantage that the metropolitan territory is not composed of several administrative territorial units of the same status, and borders of the local jurisdiction correspond to the urban form. Therefore, co-ordination for land use and management could focus more on following national directives.
There is a comprehensive but complex planning framework for land use
Busan Metropolitan City has three land-use framework plans: the Metropolitan Urban Plan, the Busan Urban Master Plan, and the Busan Urban Management Plan. First, Busan, Yangsan and Gimhae, located in Gyeongnam Province, established the Busan Metropolitan Urban Plan in 2004 and renewed it in 2009. Target areas span 1 898.8 km2 and the target population is 5.2 million. The plan states that Busan functions as the core area of the Busan Metropolitan Area and the two other cities are sub-core areas. The plan provides transport plans such as roads, railways and ports, infrastructure provision plans, and environment protection plans.
Second, the Busan Urban Master Plan 2030 was established in 2011 and renewed in 2017. The planning horizon is 20 years and target planning areas span 995.7 km2. Like the Busan Metropolitan Urban Plan, it is a strategic plan. The difference is that this plan focuses on Busan, not the greater Busan area. The plan states that Busan pursues a globally competitive city and has core functions for maritime areas. As a framework of regional land use, it presents future urban structure and major roles by area. In addition, the plan provides sectoral plans: transport, logistics, ICT, water supply and sanitation, seaports and airports, and environment protection. The plan sets out the planning goals of each sector such as population, number of houses, and water supply ratio (Table 1.18).
Third, the Busan Urban Management Plan 2020 is the implementation plan. It was renewed in 2013. The plan contains actual zoning for each plot of land, restriction on uses such as height limitation, and the current state of urban planning facilities. Since it handles detailed land use, it has a direct influence on citizens’ property rights. For example, when the plan was renewed in 2013, the main changes were to land-use areas, in particular, it increased general residential areas by 0.72 km2, commercial areas by 0.32km2 and industrial areas by 0.72 km2, resulting in changes in land prices.
In addition to the framework land-use plans, the city has many District Unit Plans. Busan Metropolitan City has the greatest number of District Unit Plans of all metropolitan cities in Korea (Table 1.19). The city has 573 districts for District Unit Plans in total. The target areas span 109 km2 (MOLIT, 2018b). Considering that this corresponds to around 15% of the total area of Busan, and around half of the total residential, commercial and industrial areas in Busan, the areas regulated by District Unit Plans are relatively larger than in the other metropolitan cities (BDI, 2012).
The land-use policy focus is shifting from urban expansion to urban regeneration
Historically, land-use policies in Busan have been aligned with economic development. During the 1960s and 1970s, Busan’s population grew rapidly, and uncoordinated urban sprawls were rampant. Land-use policies were oriented towards expanding urban areas to accommodate residents and supply housing. In the 1980s and 1990s, as the growth rate of the population decreased, policies put more weight on balanced development. In addition, especially in the 1990s, as Busan’s economy started to slow down, the direction of land-use policy changed from expanding urban areas to improving quality of life. In the 2000s, pursuing sustainable development, the city focused on revitalising old downtowns through urban regeneration.
Urban regeneration is appropriate to Busan. Like other metropolitan cities in Korea, areas of Busan’s city centre are in decline, particularly areas such as Jung-gu that has played a role as a central business district since the 1970s. Since the 1980s, however, new business districts have emerged around the central areas and the old downtowns are losing their commercial attractiveness, resulting in the decline of traditional central business districts. In addition, the population of Busan is shrinking, as mentioned above. Shrinking regions should reduce their land consumption sustainably. Restricting unnecessary urban expansion while revitalising declined old downtowns through urban regeneration projects would help to achieve Busan’s land-use policy goals, such as the paradigm shift from urban expansion to urban regeneration (see Box 1.7, Box 1.8, and Chapter 2).
Since the early 2000’s, the basis of the urban improvement scheme has begun to shift from redevelopment/rehabilitation, which was more focused on physical improvement, to urban regeneration, which places more emphasis on comprehensive socio-economic and environmental improvement. Current urban regeneration has the potential to ease issues from previous reconstruction and redevelopment projects, and to improve the urban built environment in more locally customised ways.
History of urban improvement in Korea
Urban improvement projects started in the 1960s with the Urban Planning Act. The Act allowed urban planning to handle urban improvements. In the 1960s, urban redevelopment focused on improving substandard housing and the built environment in residential areas. In the 1970s, the Urban Redevelopment Act was enacted and provided a legal basis for urban redevelopment projects. In the 1980s, the Temporary Measures for Residential Improvement for Low-Income Citizens was legislated to implement the improvement of residential areas for low-income families. In the 2000s, the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents Act was enacted to combine redevelopment, reconstruction and residential environment improvement projects. The Special Act on the Promotion of Urban Renewal was established in 2005 to promote large-scale urban rehabilitation projects. Finally, the Special Act on the Promotion of and Support for Urban Regeneration was enacted in 2013 for urban regeneration projects nationwide.
Types of urban improvement projects
Before adopting the urban regeneration scheme as an urban improvement tool, five types of urban improvement projects were used. These five types are based on two acts: the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents Act, and the Special Act on the Promotion of Urban Renewal. Mostly, these projects are implemented by the private sector, for example the housing reconstruction association which mainly consists of homeowners.
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Reconstruction: Substandard houses are re-built in areas where the built environment is in good state.
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Redevelopment: When substandard houses are densely located and the built environment is also inadequate, both housing and the built environment are improved.
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Residential area improvement: When substandard houses are densely located and the built environment is inadequate, the built environment is improved by providing new parks, roads, carparks etc. and housing condition is also improved.
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Urban area improvement: Focuses on improving commercial and industrial areas.
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Urban renewal: A “new town” project. Combining some redevelopment projects, it allows larger-scale urban improvement projects.
Issues of previous urban improvement projects
These urban improvement projects have had positive effects by upgrading housing condition and by providing urban infrastructure to enhance the built environment in urban areas. However, they have also had some side effects. First, they focus on housing provision and the physical improvement. Second, they are driven by the private sector. The principal participants want to maximise the benefits from projects which has resulted in a concentration of urban improvement projects in the Seoul metropolitan area. Third, communities are weakened. Residents who previously lived in project areas could not return due to the increase in housing prices. Urban regeneration is regarded as a solution for these issues (see Chapter 2).
Source: Song (2010), “The Study on Analyzing the Problems of Urban Improvement Projects and Improving the System for Urban Regeneration”, and Kim, Ryu, Cha & Jung (2013), “Korea’s Urban Regeneration Project on the Improvement of Urban Micro Climate: A Focal Study on the Case of Changwon City”.
The subnational fiscal system is relatively weak
There is room to introduce broader fiscal instruments in the city
The fiscal tools of local governments have the potential to shape land-use patterns by creating financial incentives or disincentives. For example, governments may provide a special levy to maintain agricultural land, establish tax exemptions to stimulate investment in brownfields, or create various disincentives to reduce the volume of traffic, encouraging compact development (OECD, 2016).
The fiscal instruments adopted nationwide are also used in Busan; development impact fee, property tax, capital gains tax etc. Furthermore, tax reduction benefit is also available to promote public transport in Busan. Still, there is room to introduce broader fiscal instruments in the city. For example, some disincentives against vehicles are helpful to achieve spatial objectives such as revitalising old downtowns. In fact, the number of registered vehicles and modal share of vehicles has increased in Busan. More importantly, inter-city driving, i.e. driving into or out of Busan, has also started to increase again (Table 1.20). This is not aligned with compact development and transit-oriented development (TOD) which are the key spatial strategies presented in the Busan Metropolitan Urban Master Plan 2030.
Local finance and tax scheme create less pressure for expansionary land-use policies in Busan
Busan Metropolitan Government may have less pressure incentives to pursue expansionary land-use policies such as developing new residential towns at the local level. In 2017, Busan’s total revenue was KRW 12.8 trillion. By source, local revenue (local tax, non-tax revenue) was KRW 5.19 trillion (40% of total revenue), national transfer (grants, subsidies, and local shared tax) was KRW 3.92 trillion (31% of total revenue), and local bonds and others were KRW 3.69 trillion (29% of total revenue).
Although Busan’s level of local revenue is similar to other metropolitan cities, compared to the average of these cities, Busan’s share of the national transfer is around 1.6 times higher (Figure 1.10). The national transfer accounts for around 31% of Busan’s total revenue, whereas the average share of the other metropolitan cities is 22%. This is reflected in the financial independence ratio. The ratio of Busan is quite low, given that it ranks fifth of eight metropolitan cities including Seoul and Sejong (Table 1.21).
Note: Other metropolitans consist of Seoul, Busan, Daegu, Incheon, Gwangju, Deajeon, Ulsan, and Sejong.
Source: Busan Metropolitan City Homepage, https://www.busan.go.kr/ghclos201801 (Accessed on 07 September 2018).
With regard to tax, most general taxes such as income tax and value added tax are allocated to the national government in Korea. Local governments principally rely on acquisition tax and property taxes (OECD, 2004). Busan Metropolitan City levies 13 taxes, but five of them – Acquisition Tax, Local Income Tax, Property Tax, Local Consumption Tax, and Automobile Tax – account for 78.5% of total local tax revenue.
Source: MOIS (2018b), Statistical Yearbook
copy the linklink copied!Opportunities to strengthen the land-use planning system
The preceding sections have described the legislative, regulatory and fiscal environment that shapes land-use planning in Korea and Busan. Over a couple of decades, Korea’s system of spatial planning has evolved considerably. The country has introduced new legal frameworks to manage both urban and rural areas under the same land-use principles. In addition, new fiscal instruments, such as the Conjoint Regeneration Programme, were adopted. Furthermore, some legal rights, such as approval, were transferred from the national government to regional/local governments. These are all positive developments, however, there is still room to improve land-use practice in Korea and Busan.
More flexibility and devolution are needed in the zoning regulations
The zoning regulations need to be more flexible and regional/local governments need to have greater authority for zoning to take advantage of more customised land use. Historically, the zoning system was introduced in 1934, and the current zoning scheme was created in 1962 with the establishment the Urban Planning Act. Since then, the socio-economic environment has changed, and the changes are different across regions. However, zoning regulations are the uniform standard, therefore, they are applied to the whole national territory without considering the different context of each region. If the zoning regulations were more flexible, regional and local governments could implement more customised land-use regulation according to their own context. An alternative, for example, could be to combine specific classifications of sub-areas in the urban area (Table 1.9) to allow local governments to have broader ranges of land to building ratios and floor area ratios (Korea Planning Association, 2014). Furthermore, each regional and local government does not have the same need for flexibility. In this sense, regional and local governments need to have increased power for zoning. For example, a local government may wish to allow accommodations businesses in residential land-use areas, if the city or county has the traditional Korean houses in its jurisdiction, and the houses can be good accommodations for tourists. Current regulations do not allow the accommodations businesses in residential land-use areas in order to keep the residential environment favourable. If the national government deregulates this nationwide, it may worsen residential conditions in other regions where they do not want to allow businesses in residential areas because they do not have traditional Korean houses within their jurisdictions. Therefore, regional and local governments need to have more authority, and the national government should regulate land-use area classification, permitted uses and density only at the minimum level (KRIHS, 2016a).
All OECD countries use map-based boundary plans that classify areas into land-use zones. Although the zoning regulation is credited with protecting residential areas from developments that are negative to quality of life, it also has downsides such as inefficient use of land. Therefore, some OECD countries pursue a flexible approach to avoid the shortcomings of zoning regulation. For example, the Netherlands chooses flexibility with the new legal framework, at the same time, the new scheme allows local governments more discretion. In Amsterdam, it is anticipated that the Environmental Act will make it easier to transform plots to new uses (Box 1.10). More specifically, by 2019, environmental plans will replace the structural visions at each level of government. A major change at the local level is the adoption of one plan for the entire territory that will incorporate all applicable zoning regulations and pertinent administrative laws. All existing zoning plans will be transferred to the environmental plan and local governments will have a period of ten years to transform them (OECD, 2017c).
Are spatial polices and land-use plans responsive enough to changing conditions and concerns? Do they hamper economic development by being too stringent, imposing onerous regulatory burdens on projects? These questions have long been a source of debate in the Netherlands. The 2010 Crisis and Recovery Act was adopted in order to speed up the planning process by reducing or simplifying some of the permit requirements. At the same time, there were emerging discussions about how the spatial planning system could be further simplified and how it might better address some of the growing tensions between economic and environmental agendas that are embedded in sectoral policy responses. The impetus for reform also arose from the observation that existing environmental legislation tended to focus on protecting the local environment and residents from noise and pollution as opposed to enabling the transition to sustainable development and was further anchored in the need for place-based policies given that the different regions of the Netherlands are experiencing quite divergent trends, such as population growth in central urban regions and decline in more peripheral rural ones.
In response to these issues, in 2016 the Netherlands adopted the Environment and Planning Act, which combines a lot of legislation into a new encompassing framework. The Act merges 26 separate acts into 1; merges 120 Orders of the Council into 4; and simplifies over 100 ministerial regulations in order to create greater coherency among them. By 2019, environmental plans will replace structure plans/visions at each level of government. A major change at the local level is the adoption of one plan for the entire territory that will encapsulate all applicable zoning regulations and pertinent administrative laws. With the new legislative framework, the Netherlands chooses flexibility over certainty. In Amsterdam, it is anticipated that the new legislative and regulatory framework will make it easier to build houses and open the possibility to transform plots to new uses and foster innovation and experimentation. It is intended that the new legislation does not reduce the level of environmental protection or due diligence for new projects. The city has already adapted to some of these changes through the recent Crisis and Recovery Act. But the new Environmental Act goes much further.
Much is unclear about how the mechanics of the new legislation will operate. In part this is purposeful. The system aims to increase discretion at the local level while determining national and provincial standards and protecting the key interests at those scales where it is deemed necessary. There will be many areas where local governments and water boards, together with provinces and the national government, will need to work together on joint projects – as they have always done – but with fewer regulations guiding practice and a greater latitude for decision making in some instances. There will be a far greater reliance on collaborative planning than in the past. This entails a more active role for citizens in planning processes and a closer relationship between initiators/developers, authorities and citizens. The public engagement function will be critical in order to make sure the new system works effectively. With less formalistic rules, there may be less recourse to legal procedure, but more onus put on building consensus and mediating conflict in advance. At the same time, the planning process could easily become increasingly beholden to more powerful groups that are better placed in terms of time, energy and resources to achieve their agendas.
There is inherent risk within a more flexible approach. In more rigid, formal and legalistic systems, the interactions between the various actors are often highly constrained, which has the benefit of certainty. Under the new system emerging in the Netherlands, how these relationships play out will in large measure depend on the project at hand, but will need to balance inclusiveness, timeliness and flexibility across inherent power asymmetries of the actors involved. Within this, municipalities will need to play the role of fair broker and be extremely transparent about how regulatory requirements are being met and how and when stakeholders are included in decision making. Further, under such a system, fiscal incentives could come to play a bigger role in directing and shaping actor behaviour.
Source: OECD (2017c), The Governance of Land Use in the Netherlands: The Case of Amsterdam
Mixed land use should be promoted
Korea’s zoning system has been deregulated, implicitly encouraging and permitting partial mixed land use. For instance, the current zoning system allows commercial use buildings in residential areas. However, the current zoning regulations and planning system do not go far enough to encourage mixed land use (OECD, 2014). A shrinking population, slow economy, and life style changes require more small-sized customised development. In this sense, mixed land use will be essential in urban areas to accommodate a variety of functions and Korea has already started to deregulate for mixed land use (KRIHS 2016a). For instance, the Minimum Regulation Zone, introduced in 2015, literally allows mixed land use by minimising land-use regulations; local governments can create a customised zoning scheme within the zone, regardless of existing zoning regulations based on the Urban Management Plan. However, this has not yet been widely used because an area must meet strict criteria to be designated as a Minimum Regulation Zone. By allowing mixed land use and innovation from the private sector, the zone can enhance the city’s competitiveness as well as the quality of life of residents, therefore more deregulations are needed to activate this zone (Kwon & Park, 2017).
Incentive zoning could be used to promote mixed land use. For example, the city of New York has special mixed-use districts and each district provides zoning incentives, such as a FAR bonus for developers who provide the specific urban qualities the commission is seeking to promote in that area. These special zoning districts and incentive tools have contributed to diversity of land use and to the vitality of the city. In Korea, density bonuses and incentives are usually provided to create public open space and joint developments rather than to create mixed land use (OECD, 2014). Korea could consider using density bonuses to promote mixed land use.
Another good example of a policy tool for mixed land use is form-based zoning. California, USA adopted form-based zoning to promote mixed land use, allowing commercial and office functions in residential areas (Box 1.11). Unlike the traditional zoning regulation, form-based zoning uses physical form. In particular, form-based zoning codes regulate not the type of land use, but the form that land use may take; therefore, it uses broader categories such as “urban core”, “urban centre”, and “suburban edge”, rather than “residential” and “commercial”. The nature of form-based zoning offers more flexibility in land use than the traditional codes, encouraging mixed land use and creating characterful places (OECD, 2014).
Form-based zoning or form-based codes emerged in the 1980s as a way to revitalise and promote walkable, mixed-use, sustainable communities and to counter urban sprawl (Parolek et al. 2008; Talen, 2013). Form-based zoning is one of the new approaches to assigning the suitable physical forms necessary when taking the regional context and conditions into consideration. Form-based zoning has many differences compared to conventional zoning regulations, as shown in the following table.
Form-based zoning uses physical form, rather than separation of land uses, as its organising principle (Talen, 2013). In other words, form-based zoning codes regulate not the type of land use, but the form that land use may take. This “avoids labelling areas as ‘residential’, ‘commercial’ and so on, using instead the broader categories ‘urban core’, ‘urban centre’, ‘general urban’, ‘suburban edge’ and so on. It focuses on regulating the shape and style of buildings and their relationship to the street” (Duany and Talen, 2002; Parolek et al., 2008; Hirt, 2012). The nature of form-based zoning offers more flexibility in land use than the traditional codes, encouraging mixed land use and creating characterful places. Form-based zoning includes types and styles of building, public space design and the linkages between urban spaces. Of course, they are also partially included in conventional zoning and other innovative zoning regulations. However, the most significant feature of form-based zoning is its goal-oriented characteristic. Form-based zoning is established based on the specific policy goals and images of cities as well as the general urban context. In other words, it is an approach to assign development forms suited to achieving specific goals of urban planning, such as compact and mixed-use environments, walkable neighbourhoods and sustainability. In addition, form-based zoning fosters “predictable results in the built environment and a high-quality public realm” (Talen, 2013) and can be a good methodology to achieve compact city and mixed land-use goals. As mentioned above, form-based zoning is a unified development codes template for urban planning and urban and architectural design. This consistent approach avoids the possibility that some intended policy goals, such as mixed land use, may be blocked by conflicting layers of regulatory systems.
Source: OECD (2014), Compact City Policies: Korea: Towards Sustainable and Inclusive Growth.
Broader fiscal instruments could be employed to meet spatial objectives
Korea and Busan currently use some fiscal instruments to shape spatial outcomes. For example, the floor area ratio (FAR) trading scheme in the Conjoint Regeneration Programme (CRP) could be said to be aligned with spatial outcomes since it allows more density in urban centres, at the same time, it can keep places where preservation is required. However, other elements of fiscal instruments could be used further. There are many other fiscal instruments that could be drawn on to complement spatial policy objectives (Table 1.23, Annex A). The instruments that are presently being used in Korea and Busan are bolded in the table. Given that Korea, particularly Busan Metropolitan City, needs to promote more compact development, some fiscal instruments such as brownfield redevelopment incentives and transfer of development rights could be considered.
Brownfield redevelopment initiatives can create a powerful incentive for private developers to take on projects in areas that could be more expensive to develop due to the presence of existing structures, higher land costs and complex ownership rights. According to Alberini et al. (2005), incentives for brownfield redevelopments, such as subsidies or tax rebates, can provide an important inducement to develop brownfield sites. Such financial incentives can be set at national, regional or local levels. For example, New York City offers grants to property owners and developers to clean up and redevelop brownfields (Silva and Acheampong, 2015). If Korea and Busan employ such incentives, they could encourage more density in urban centres and, in turn, preserve greenfield.
Transfer of development rights (TDR) is a market-based incentive programme whereby landowners forfeit development rights in areas targeted for preservation and then sell the development rights to buyers who want to increase the density of development in areas designated as growth areas by local authorities. It is a useful tool that can be used to steer development away from undesirable areas, such as areas that are poorly linked to infrastructure and transport and that lack services, and towards areas where these features exist (Nelson, Pruetz and Woodruff, 2013). While prevalent in the United States, TDR also exists in other OECD countries, such as France, Italy, and New Zealand (Silva and Acheampong, 2015). Although the floor area ratio (FAR) trading scheme has already been adopted in Korea, TDR is a broader instrument, since it allows not only FAR but also development rights to be traded. Therefore, TDR could be a policy option to promote compact development and urban infilling which requires higher density.
Transportation has a direct impact on how land is used. Busan Metropolitan City needs to consider a congestion charge. The city has already used some transport related instruments; public parking fees have steadily increased, and free public authority car parks have been changed into paid car parks. However, traffic congestion is still a serious policy issue and may also have a negative effect on containing urban sprawl. Busan has not yet introduced a congestion fee; it has been discussed but has not reached a consensus. Seoul Metropolitan City in Korea has collected a congestion charge in certain areas, such as the Namsan tunnel, since 1996. In addition, London and Stockholm have attracted the most attention internationally for their congestion charging schemes which started in 2003 and 2006 respectively. These types of charges can be structured in a number of different ways. Ideally congestion charges will be structured in such a way as to encourage drivers to consider the marginal social costs of their decisions to drive as opposed to marginal private costs (OECD, 2017c).
Greater co-ordination between land-use plans is required
Although the Urban Master Plan, based on the National Land Planning and Utilisation Act, is the higher-level land-use plan, and other individual plans are generally required to correspond to the Urban Master Plan accordingly, some individual plans such as housing district development plans would have a more direct influence on land use. Alternatively, Korean authorities may need to request that the Urban Planning Committee review the land-use plans based on individual laws in order to increase consistency among land-use plans (Korea Planning Association, 2014).
Urban regeneration plays a central role in land-use planning in Korea and has its own planning scheme. For example, the Special Act on the Promotion of and Support for Urban Regeneration stipulates that regional governments should establish the Urban Regeneration Strategic Plan, and local governments should establish the Urban Regeneration Master Plan. However, land-use planning should be aligned with not only the Urban Master Plan but also other land-use plans such as the Urban Areas and Residential Areas Environment Improvement Plan. This will be discussed further in Chapter 2.
Monitoring and evaluation of land use should be improved
The lack of monitoring and evaluation makes it difficult to identify which policies work well at the local level and which do not. Furthermore, the aggregate effects of the land-use regulations on regions or the country are hard to estimate because no systematic information exists about the characteristics of regulations at the local level. According to KRIHS (2016a), it has not yet been examined whether the sub-divisions of land-use areas and their permitted uses are suitable for accomplishing land-use policy goals. Since the land-use areas shape the foundation of land-use control in Korea, they need to be evaluated regularly and revised if they are not appropriate (Korea Planning Association, 2014).
Busan Metropolitan City’s spatial strategy would benefit from the development of key indicators that can be monitored to assess whether spatial objectives are achieved. This may include indicators on changing land use, new investments and environmental protection (OECD, 2016). Considering Busan needs to promote more compact development, the core compact city indicators (Table 1.24) can be a good reference. The indicators allow the city government to measure the compactness of Busan, and also reveal the impact of the compactness on economic viability, affordability, and environment sustainability (OECD, 2012b).
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A wide range of policy instruments can be applied to control, regulate and stimulate desired development outcomes in OECD countries. Many fiscal instruments operate as taxes and exactions levied on developers to raise revenues and mitigate the negative impacts of development. Others are structured as incentives in the form of subsidies, tax credits, and development rights to encourage economic agents to take actions aimed at improving the conditions of the built environment and protecting the natural environment (Silva and Acheampong, 2015). A key point is that, in many cases, the statutory instruments of planning alone are unlikely to produce the desired outcomes. Fiscal instruments can provide a critical inducement to meet spatial planning objectives (OECD, 2017c).
Brownfield redevelopment incentives create an important inducement for private developers to take on projects in areas that can be more expensive to develop because of the presence of existing structures, the need for soil remediation, higher land costs and complex ownership rights. A study by Alberini et al. (2005) explored the impact of economic incentives for brownfield redevelopments versus liability relief or regulatory relief such as fast-track planning approval processes. Their study, which was based on a survey of real estate developers in Europe, found that economic incentives, such as subsidies or tax rebates, can provide an important inducement to develop brownfield sites, particularly for experienced developers in the case of contaminated sites. Echoing this, in a review of brownfield policies in select European countries, Thornton et al. (2007) find fiscal incentives, entailing either direct such as tax incentives or indirect such as structural policy, public credit programmes and pilot projects forms of funding, are important inducements for brownfield redevelopment – particularly in the cases of the most complex and contaminated types of sites.
Such financial incentives can be set at national, regional or local levels. For example, in the United States, a federal brownfield tax incentive was introduced in 1997 which entailed fully tax deductible environmental clean-up costs, including petroleum clean-up. This programme was ended in 2011. Meanwhile, examples from cities abound – for instance, New York City offers grants to property owners and developers to clean up and redevelop brownfields. Critically, these incentives do not extract value from urban development, but rather provide a subsidy to developers undertaking desirable behaviours that will presumably benefit the community as a whole by revitalising unused spaces. It bears noting that property and landowners in the immediate vicinity of such revitalised sites stand to financially benefit through higher property prices due to the presumed effects of neighbourhood revitalisation, which can be significant (De Sousa, Wu and Westphal, 2009). If brownfield redevelopment has strong positive effects on property prices in the neighbourhood, it is possible to finance redevelopment incentives through value capture instruments, such as betterment levies (Silva and Acheampong, 2015).
Historical rehabilitation tax credits are widely used across the OECD to encourage the perseveration of historic structures. They affect land use by maintaining historically established uses and densities. Like brownfield redevelopment incentives, they do not generate income but rather provide a subsidy for private individuals to undertake desired rehabilitation projects. There is an ongoing debate in the literature regarding the equity of historic rehabilitation tax credits. While the residents or developers who privately benefit from these credits contribute to the maintenance of a community’s cultural and architectural heritage, others maintain that such taxes lead to rent-seeking behaviour and the listing of unworthy projects as heritage sites (Swaim, 2003).
Transfer of development rights (TDR) emerged in the 1960s as a tool for historic preservation – but their use has since proliferated, particularly in the United States, to address a wide range of planning goals, including the promotion of affordable housing and the protection of environmental resources (Linkous, 2016). TDRs are a market-based incentive programme that are generally structured so that landowners forfeit development rights in areas targeted for preservation and then sell those development rights to buyers who want to increase the density of development in areas designated as growth areas by local authorities (Nelson, Pruetz and Woodruff, 2013). As such, they are a useful tool that can be used to steer development away from undesirable areas, such as areas that are poorly linked to infrastructure and transport and that lack services, and towards areas where these features exist. Similarly, they can be used to preserve natural open spaces, maintain historical and cultural assets, farmland and other local assets (Nelson, Pruetz and Woodruff, 2013).
Simply put, TDRs transfer development potential, such as the density, from an area that is to be preserved to an area where there will be clustered development. If this is done as a one to one transfer, the average density of an urban area will not change, but it will be redistributed such that some areas can be maintained as open natural space for example. In receiving areas – to which the density rights are being transferred – developers are generally permitted to exceed the baseline level of development determined by the zoning code, which would generally require community buy-in (Nelson, Pruetz and Woodruff, 2013). Therefore, TDR is often combined with density bonuses in order to create the incentives for developers to buy the development rights in the first place (Tavares, 2003). As far back as 1916, New York City’s zoning code made provision for the transfer of development rights between properties. While increasingly prevalent in the United States, TDR programmes also exist in other OECD countries, such as France, Italy, New Zealand and Turkey (Silva and Acheampong, 2015). Silva and Acheampong (2015) note that legal issues and administrative complexity represent some of the key challenges confronting its application in other countries.
Use-value tax assessments are a specific type of targeted property taxes. They follow the same logic as TDRs – they provide an incentive to landowners to maintain and preserve land in its current state as opposed to selling it for new development. Typically, use-value assessments are structured for the preservation of farmland or forested lands. They can be a particularly important incentive in areas near urban locales that have strong pressures for expansionary growth leading to suburbanisation and peri-urbanisation. Use-value tax assessments tax agricultural or forested land use at a lower rate than other uses in order to reduce the incentives to develop (Anderson and Griffing, 2000). For example, in the Netherlands there is differentiated treatment for farmland with exemptions for property tax and the real estate transfer tax. In the United States, use-value assessments typically require that the owners of the land be actively engaged in farming and have rollback provisions to recover lost tax revenues if the land is developed (Heimlich, 2001).
Split-rate property tax is used to promote redevelopment of obsolete buildings and facilitate revitalisation in older downtowns by placing proportionally higher taxes on land than on built structures. This makes it more expensive to hold on to vacant or underutilised centrally-located sites. Split-rate property tax is used in many OECD countries including France, Australia, the United States, Denmark and Finland (Silva and Acheampong, 2015).
Development impact fees have to be paid by landowners for the construction of infrastructure, which directly services their plots. They are often charged when land is initially developed but may also be due when infrastructure is upgraded or significantly rehabilitated. Impact fees cover additional costs arising from the arrival of new residents and are usually paid by real estate developers, who in exchange obtain the permission to develop. Development impact fees may focus narrowly on the costs of infrastructure provision in the immediate vicinity of developments but may also include costs for infrastructure at greater distances from a development. They are relatively common instruments that exist in OECD countries (Silva and Acheampong, 2015).
Development impact fees force developers to bear part of the cost of new construction. As development becomes more expensive, urban expansion slows down. Burge and Ihlanfeldt (2006) show that impact fees spur the development of smaller homes in inner suburban areas and of medium and large homes throughout all the suburban areas. The authors attribute the increased construction in inner suburban areas to new multi-family houses being built. This is supported by another study that finds evidence that impact fees reduce the spatial extent of US urbanised areas (Geshkov and De Salvo, 2012).
Betterment levies (sometimes called special assessments) are also charged to capture the increase in property values due to a public action, such as the rezoning of land or the provision of infrastructure. In contrast to impact fees, which are generally related to the provision of infrastructure that services a particular property, betterment levies are more broadly defined and can also capture the windfall gain that occurs from the rezoning of a plot or the provision of a public service to an area. Furthermore, they can be charged over larger areas to capture the increase in property values in an entire neighbourhood that benefits from a new public transport connection. Whereas impact fees are charged at the time development occurs, betterment levies can be charged at any point in time at which a public action causes an increase in property values (Silva and Acheampong, 2015).
Despite the conceptual differences between impact fees and betterment levies, in practice they may not be clearly distinguishable. In Germany, impact fees can, for example, be charged on entire neighbourhoods that benefitted from rehabilitation measures that are not necessarily related to particular plots. As such, these fees have characteristics that are in many respects similar to betterment levies (Silva and Acheampong, 2015).
Dedication is a kind of exaction. In particular, developers are required to donate land or public facilities for public use (Silva and Acheampong, 2015). The tap fee is another form of exaction charged on utility connections in most countries to allow cost-recovery in tying new development into existing infrastructure network (Brueckner, 1997; Ihlanfeldt and Shaughnessy, 2004). The linkage fee is used to collect money from large scale commercial, industrial, and multi-family developments to provide for affordable housing, job creation, and day care facilities. In the US, for example, linkage fees are primarily used by local governments in areas where the cost of housing is extremely high, such as California and Massachusetts (Evans-Cowley, 2006).
Property taxes are levied on the whole value of real estate (i.e. the combination of land, buildings and improvement to the site). Special assessment tax may be proportionately levied on homeowners and landowners for parcels of real estate which have been identified as having received a direct and unique “benefit” from public infrastructure projects. Such charges may be levied against land when drinking water lines and sewers are installed or when streets and sidewalks are paved. A land value tax is levied on the unimproved value of land only. Levied as ad valorem tax on land, it disregards the value of buildings, personal property and other improvements (Silva and Acheampong, 2015).
Notes
← 1. Categories of land divided by main use and registered on the cadastral (a comprehensive land recording) record.
← 2. Only one area determined by an urban or gun management plan is assigned to a plot , in order to utilise the land economically and efficiently and to ensure improvement of public welfare by limiting land utilisation, land to building ratios, floor area ratios, heights of buildings, etc.
← 3. Metropolitan governments can also formulate the Urban Master Plan.
← 4. A unitary country is the opposite of a federal country where powers are not concentrated.
← 5. Economically active population comprises all persons over 15 year old, either male or female, who furnish the supply of labour for the production of economic goods and services.
← 6. Gross regional domestic product (GRDP) is a sub-national gross domestic product used to measure the size of a region’s economy. It is the sum of gross value added in the region.
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