Description

There is a range of LVC mechanisms related to specific development areas and partners. These include: 1. High-density building rights / Air rights in which cities can generate revenue from the transfer of development rights. In this case, developers who want to build at a higher density by adding more floors (height) can purchase such floor height from neighbouring lower buildings. Typically, public facilities such as schools, libraries, or hospitals can sell their air rights to private developers. The return can then be invested in funding infrastructure assets and social services. 2. Joint redevelopment approaches whereby well-coordinated development of transit station facilities and adjacent private properties. 3. Urban Redevelopment Scheme whereby landowners and developers establish a cooperative entity to consolidate into a single site developed.

Instrument category

Land value capture (LVC)

Implementation status

Moderate - tried and tested

Enabling conditions and success factors

• Such approaches need strong local institutions and transparent and a sound legislative framework to be implemented effectively.
• Strong engagement and communication are required between the government and all stakeholders.

Instrument benefits

• Ability to access finance from the start of the construction process, generating sufficient revenue to finance much of the required infrastructure to develop and service a site or district.
• Ability to shape development policy via financing conditions, incentivising urban developers to meet public goals such as cultural heritage preservation, a proportion of low-income housing or green space allocation.

Challenges and risks to implementation

• Potentially complex processes are needed to implement and manage LVC approaches.
• Strong engagement and communication are required between the government and all stakeholders.

References

Case studies

Certificates of additional construction potential (CePACs) as a land value capture Instrument in Brazil