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Limits to Land Value Capture

Authors: Renan Pereira Almeida*, Universidade Federal De Sao Joao del-Rei
Topics: Urban Geography, Economic Geography, Urban and Regional Planning
Keywords: land value capture, land markets, taxation, urban development
Session Type: Paper
Presentation File: No File Uploaded

The recognition that public investments, such as infrastructure projects and urban renewal policies, can generate a mass of value in urban space is a fundamental point in contemporary urban policy. Land value capture instruments emerged in a variety of forms as a tool to both recover the windfalls appropriated by landowners for the sake of social justice and to finance these public investments (Turok 2016; Foldvary and Minola 2017; Yen et al. 2018; Smolka 2013; Medda 2012; Smolka and Maleronka 2018). Nonetheless, this paper identifies two key limitations of this narrative. On one hand, the generation of land value by public investment heavily relies on the desirability of the target areas and the selected type of public investment, both determined by the real estate markets. This tends to create pro-market public policies. On the other hand, when the public investment leads to land value increases, a number of political jurisdictions controversies emerge – e.g., whether the central government financed the public investment, are the local governments allowed to recover the generated land value? This work identified these two limitations through a case study in Belo Horizonte, Brazil, where large public investments occurred in the last decade in the poorest zone of the metropolis. Results indicate that the generated land value is relatively low because the type of public investments, and the area where they took place, displeased real estate markets; and the state government, who financed most of it, cannot recover this small fraction of land value.

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