The use of value capture -- seeking contributions from private landowners for increases in property values prompted by government actions, such as infrastructure or a zoning change -- is widespread in some parts of the world, and is being tested in the U.S. The policy needs to be better understood and not feared, says Martim O. Smolka, author of the newly published Policy Focus Report Implementing Value Capture in Latin America: Policies and Tools for Urban Development.
Many countries in Latin America, notably Brazil and Colombia, have passed legislation that supports value capture principles. Implementing Value Capture in Latin America examines three categories of voluntary and compulsory methods: property taxation and betterment contributions; exactions and broader charges for building rights or for the transfer of development rights; and large-scale approaches such as development of public land through privatization or acquisition, land readjustment, and public auctions of entitlements for additional building rights.
Value capture has long been part of the worldwide urban planning agenda. Its increasing popularity in Latin America, Smolka says, is attributed to urbanization putting pressure on serviced land and concerns about equity and affordable housing. Although in most places revenues are still low, the applications of betterment contributions in Bogotá and of building right entitlements (CEPACs) in São Paulo have generated revenues in excess of a billion dollars for those cities.
Yet value capture is often resisted by powerful stakeholders, notably landowners, opinion leaders, and academics all along the ideological spectrum, Smolka says. He advocates a better dialogue about how value capture actually works in practice, careful management, and public participation. Value capture tools are more likely to succeed when used to solve a locally recognized problem.
Smolka is director of the Lincoln Institute’s Program on Latin America and the Caribbean. A Spanish translation of Implementing Value Capture in Latin America will be published later this year.
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