The Art of Planning - Columbia University Graduate School of ...

2
Urban land markets are expected to raise the efficiency of
the post-socialist city, but what happens during the transition
is alarming. For seven decades, planners made urban
investment decisions under these conditions: land had no site
value, interest on capital was not recognized, energy prices
were a small fraction of world prices, and cash wages had no
relation to the marginal productivity of labor. The emergence
of markets led to sharp shifts in relative prices. Real estate
prices have soared, passing the six-digit mark some time ago.
Low maintenance costs have, until now, allowed the current
owners to remain in their old homes despite financial hardship,
but by the same token, jeopardize the health of the structures
which are now literally caving in on their inhabitants. The
medium-to-low-densities which constitute the great appeal of
the Old Town actually act as a disadvantage in the face of
the tax increase proposal – the tax share of each household
is determined by the ground floor surface occupied by that
household which is larger in lower density developments than
in higher-rise apartment blocks.
of the Old Town was preserved throughout Soviet times. This arrangement promoted
a sense of camaraderie and equity, and facilitated community bonding. Most families
have lived here for generations and actively contribute to the unique charm that the City
is so proud of.
Photograph by Alex Maisuradze
If enforced, the proposal to increase the land tax could further
contribute to the process of household income segregation
that is already starting to change the inclusive character of
Georgia’s capital. Through a decade of buying and selling,
wealthier citizens are being relocated to the inner city districts,
while the poor are being forced to the outskirts, thus exacerbating the income contrasts
between the inner city and suburbs. As lower income households relocate to the outer
districts, the latter become stigmatized and increasingly isolated from the rest of society.
For many decades, Tbilisi functioned without land markets, as did the majority of other
socialist cities. Land was nationalized and administratively allocated (rather than subjected
to market instruments), which had a profound impact on the internal organization of the
City. The absence of land prices removed all incentives to redevelop built-up areas, the
land was never recycled and without price signals, developers preferred the simplicity
of developing at the periphery to redeveloping central areas with obsolete land uses.
To estimate land tax, the values of land were calculated based on weighted coefficients
representing amenities such as transport, infrastructure, and environmental quality. Since
demand factors were not included, these estimates were highly arbitrary.
The government faces a real dilemma: either passively watches the historic structures of
the Old Town fade away into the pages of history books, or voluntarily induces gentrification
through higher land taxes and associated land value appreciation at the expense of the
authentic neighborhood character. The city government will have to choose from these
two sub-par options, but does this mean it has exhausted all other alternatives? A more
equitable way must exist.
Editor’s note: Alex is currently exploring more equitable solutions for the future of Old Tbilisi as part of his master’s
thesis research.
URBAN