Value Capture as a land based tool to finance development – Martim Smolka, Lincoln Institute of Land Policy
Focusing on a sample of emblematic cases of value capture implementation in the Latin American region the analysis in this lecture considers their equity and efficiency content, and offers some comments on sustainability prospects. Smolka evaluates actual and potential revenues these instruments generate under different local, institutional, and social-political circumstances and presents policy recommendations on the relevance of this instrument to third world-countries in general, and Latin America and the Caribbean in particular, to meet the challenges of providing a sufficient supply of serviced land and social housing at affordable prices for the urban poor.
The lecture is based on an extensive documentation review of the longstanding history and recent growing popularity of value capture practices in Latin America. It covers an ample set of instruments that are actually implemented among jurisdictions and the wide variation in their effectiveness and coverage. Taking on the most successful cases/jurisdictions the analysis exposes conventional prejudices informing the resistance to their implementation more broadly. Smolka argues that resistance to apply value capture instruments are heavily loaded in misconceptions with respect to the impact on prices, legal base (e.g. alleged acquired rights); and prejudices regarding its social content. Moreover, contrary to common perception the impact of successful value capture policies on real estate development has been minimally disruptive, and that willingness to pay directly associated with the perception of received benefits. It is suggested that an improved understanding of the link between public intervention and increased land value is conducive to building fiscal and planning cultures that will strengthen property taxes, local revenues, and urban management in general.
Propositions for addressing the issue:
Value capture is still viewed primarily as a tool to promote equity in cities, rather than as a way to improve municipal fiscal autonomy and urban development in general;
Although revenues and incidence is still low, high performance otherwise ‘typical’ jurisdictions indicate that value capture policies can be broadly considered in the region;
More successful cases seem to be associated to local efforts – in the form of creative tools or special spins to address identified concrete needs.
Martim O. Smolka is an economist with a MA and PhD in Regional Science from the University of Pennsylvania. As director (since 1995) of the Lincoln Institute of Land Policy’s Latin American Program, he directs research and educational programs on issues relating to land markets and land policies. Smolka has developed (and lectured in) more than 600 educational programs for high-level public officials, members of the academia, NGO leaders and other professionals, over the last eighteen years throughout Latin America and globally.