Description

This mechanism allows governments to increase land or property value through a regulatory decision, an investment in infrastructure or an amenity. This land-value increase enables governments to raise their collections by implementing additional taxes, betterment charges or other assessments that help pay for the original investment costs. Examples include strategies for governments to extract the uplift in value, including land value taxation, negotiated extractions, tax increment financing (TIF), special assessments, joint development, betterment levies, transportation utility fees, and impact fees.

Instrument category

Land value capture (LVC)

Implementation status

Moderate - tried and tested

Enabling conditions and success factors

• Tax-based LVC approaches need strong local institutions and transparent and a sound legislative framework, including tax collection processes, 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

Land value capture for the Sabarmati Riverfront regeneration in Ahmedabad, India

Betterment levies for urban infrastructure financing of Alfonso Lopez Plaza in Manizales, Colombia