The new Dutch Land development Act as a tool for value capturing

W09 – Legal Aspects of Housing, Land and Planning 

The new Dutch Land development Act as a tool for 

value capturing 

Herman deWolff 

H.W.deWolff@tudelft.nl

The new Dutch Land development Act as a tool for value capturing 

ENHR 2007 International Conference ‘Sustainable Urban Areas’ 

The new Dutch Land development Act 

as a tool for value capturing 

Herman deWolff 

OTB Research Institute for Housing, Urban and Mobility Studies 

Delft University of Technology, H.W.deWolff@tudelft.nl 

Phone +31-15-2783668 / Fax +31-15-278 2745 

Keywords: value capturing; land development; cost recovery 

In several European countries in recent years house prices have risen sharply. On the land 

market, this has lead to an increase of the plus value, the gap between the agricultural value of 

land and the value of land to be urbanised. Because of this increase, in several countries the 

possibilities to profit from this plus value have (again) become an issue for the government. 

Also in the Netherlands, the plus value has been debated as a result of the Memorandum of 

central government on Land Policy (Nota Grondbeleid), which has been published in 2001. 

However, the government decided on an approach in which capturing the plus value will not 

be followed. 

A new legal system, the so–called Land development Act (Grondexploitatiewet), an 

amendment of the (new) Spatial Planning Act (Wet ruimtelijke ordening), will come into 

force in 2008. This Act will strengthen the position of the government in land development. 

As far as the plus value is concerned, the proposed Act chooses a strategy based on cost 

recovery: the government is able to force the developer to pay for certain costs and (public) 

facilities. 

In the paper, the main characteristics of this new Act are presented. The paper argues that, 

although the new system is formally based on the principle of cost recovery, the system also 

has some similarities with a system in which the central approach is based on capturing (part 

of) the plus value. 

Introduction 

Rise of house prices 

In several European countries in recent years house prices have risen sharply. For example, in 

the Netherlands, the development of the real price of existing one-family dwellings in the 

period 1995 – 2003 was +67% (National Board of Housing, Building and Planning, Sweden 

et al, 2005). Also in for example the UK (+110%), Spain (+78%), France (+26%), Belgium 

(+21%) the development of house prices was relatively high. If newly built houses are subject 

to the same market regime and are competitive with the existing housing stock, this rise of 

house prices will in general be also applicable on newly built houses. 

Several explanations are offered for these changes in house prices. (Boelhouwer et al., 2004) 

introduce, based on a literature study, arguments from the Neo-classical Price Theory, 

speculative or psychological effects, economic developments, demographic factors and 

Workshop: Legal Aspects of Housing, Land and Planning 

Author: Herman de Wolff 

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institutional policies. According to this research, the increase in constructions costs is only 

one of many possible explanations of the development in house prices. In (National Board of 

Housing, Building and Planning, Sweden et al, 2005) some quantitative evidence of this 

statement can be found: the rise in construction costs in for example the Netherlands is only 

+20% in the period 1995-2003. 

Plus value 

For newly built houses, this often means that – with the rise of the house prices - the residual 

value of the land that is developed also rises. This can be explained by the scarcity of building 

land: because only a limited amount of building land is available, the developer is prepared to 

pay more for the land than the agricultural value. The amount of money he is prepared to pay, 

is based on the expected profit of the development, taking into account the risk of the 

development. 

In such a case, the gap between the agricultural value of land and the value of land to be 

urbanised (the residual value of the land) has increased, in case other development costs do 

not rise disproportionately. This gap is a reality, if a planning system enables the government 

to regulate the conversion from agricultural to building land. However, the determination of 

this gap can be rather complex, and depends amongst others on the planning system and 

planning practice of the country involved. In many countries, despite the fact that the planning 

rules in for example the urban fringe forbid the change of land use, still the prices of 

agricultural land will rise because of the expected change of the use possibilities of the land, 

as for example (Plantinga et al., 2002) show for the US agricultural land market. 

The gap between the agricultural value of the land and the value of the land to be urbanised, 

in this article is defined as the plus value. 

Besides the agricultural landowner, the different parties involved in the development process 

are candidate to have a share in these plus value. (De Greef, 1997) distinguishes between 

three types of market segments within the development market: the housing market, the 

building market and the land market. The parties that play a role in these three market 

segments might profit from the plus value. For example, if the selling price of a new built 

house is below the real market value, the new owner-occupier will profit from a part of the 

plus value. Or, if the selling price of the house is higher than the costs for constructing the 

house and the costs for buying a (serviced) building lot, the private developer or the building 

company will profit. And, if the selling price of a serviced plot is higher than the agricultural 

value of the land plus the cost for servicing the plot (taking into account the land which can 

not be sold because it is necessary for public services), the original landowner or the land 

developer will profit from a part of the plus value. 

Content of the article 

Also the government can be one of the parties that profits from this plus value. This article 

focuses on a new strategy for (partly) capturing the plus value of the land in the Netherlands, 

based on a proposed change of the legal system, the so–called Land development Act 

(Grondexploitatiewet), an amendment of the (new) Spatial Planning Act (Wet ruimtelijke 

ordening), which will come into force in 2008. 

In this article, first some attention is given to value capturing in a wider perspective. After 

this, the main characteristics of the land development context in the Netherlands are 

introduced and a brief overview of the present legal system regarding land development is 

given. Next, the paper focuses on the new Act and the main characteristics of this Act. After 



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that, the paper evaluates the new Act. To what extent can the Act be seen as a tool for value 

capturing? 

Value capturing 

Value capturing can be seen as a method or a strategy to capture (part of) the value increase to 

use it for a specific purpose. 

(Smolka, 2000) defines value capture as “…the process by which a portion of or all land value 

increments attributed to the ‘community effort’ are recouped by the public sector either 

through their conversion into public revenues through taxes, fees, exactions and other fiscal 

means or more directly in on-site land improvements for the benefits of the community”. He 

distinguishes three types of tools for value capturing: taxes, fees and regulatory instruments 

(for a variant of “in kind” contribution). 

Taking different existing systems into account, some remarks on this definition can be made: 

• The above-mentioned definition is based on the situation that a private developer will 

develop the land himself. However, there appears to be another important strategy for 

value capturing: active land development. In that case, the government is directly 

involved in land development, trying to acquire land to be urbanised. As a developer, 

the government can capture the value increase directly. This strategy is (still) often 

followed in the Netherlands. 

• In the definition, three types of tools for value capturing (taxes, fees and regulatory 

instruments) are distinguished. Besides these three, also the agreement can be an 

important tool for value capturing, for example the Planning Agreement in the UK. 

Besides this, sometimes a more integrated land development procedure exists, of 

which value capturing is one of the issues addressed (for example land readjustment – 

the German Umlegung). And as far as value capturing using active land development 

is concerned, also the instruments for acquiring land are relevant (and in using these 

instruments the way the price to be paid is determined). 

• The definition indicates that the rationale behind value capturing is the community 

effort; the revenues should benefit the community. In the debate in the Netherlands 

also some other rationales are introduced. 

In the debate about “open space tax” in the Netherlands, four different motives are 

introduced (Korthals Altes, forthcoming): (1) internalizing welfare losses resulting 

from the former users of the open space, (2) negative taking tax (if the government 

pays for compensation, than also the opposite should be possible), (3) an instrument 

to steer the development towards building on previously developed land and (4) 

acquiring money for the public purse. 

In a research project on cost recovery and cross subsidizing in regional development, 

as the result of an assessment of different opinions of some key-actors, four motives 

are distinguished based on their opinions (De Wolff et al, 2004): (1) direct benefit, 

limited to situations of exclusive use of the provided service, (2) direct benefit, 

including also situations in which other people benefit too, (3) enlarging spatial 

quality and internalising external effects of new development and (4) solidarity: using 

profitable projects to make un-economic projects possible. 

• The definition limits value capturing to value increase caused by the ‘community 

effort’. These efforts can be both measures (e.g. the construction of a road) and 

decisions (the decision to change a local binding land use plan). 

In this paper, value capturing is described as “…the process by which land value increments 

attributed to governmental measures and decisions are (partly) recouped by the public sector 



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either through acquiring the land before measures and decisions are taken (active land 

development), either through their conversion into public revenues by having the land owner 

pay for or take care of some measures, by following an integrated land development 

procedure, entering into an agreement, levying a tax or obligating the land owner to in kind 

contribution. 

This paper focuses on the strategy for value capturing in which the government influences 

what happens with the plus value of land owned by a private landowner. 

Within this last strategy, the outcome depends on the rational for value capturing. If the 

rational is the direct benefit principle, often the expression “cost recovery” is used instead of 

value capturing. In that case, the government obliges the developer to pay for certain costs 

and (public) facilities or to realise certain facilities himself 

If the rational is more comprehensive, than often the expression value capturing is used. In 

that case, the government captures (part of) the development profit or obliges the developer to 

take care of some projects of which he has no direct benefit. 

In several European countries, new instruments for value capturing have been or are debated. 

For example in Flanders (Belgium), the Spatial planning decree from 1999 introduces a 

planning profit tax; and also in the UK a new tax on windfall gains has been proposed (Oxley, 

2006). In the rest of this paper, the focus is on the Netherlands. The new Dutch Land 

Development Act will be analysed as an example of a new tool for value capturing in the 

Netherlands. 

Land development in the Netherlands 

Towards new development strategies 

Until 1990, in the Netherlands local government often was the most important party in land 

development, following a so-called active land development strategy. The land to be 

developed was bought by the local government, who took care of realizing roads, parks and 

other public facilities. A large area of building land was sold to housing associations, to 

realize social housing. Often 70% of the houses to be realized were social housing. Housing 

was seen as a “merit good”: to keep the part of the income to spend on housing relatively low, 

the price of the serviced land was kept rather low. 

In the beginning of the 1990s, this practice has changed, and private developers became more 

and more interested in buying land in areas to be urbanised. 

One of the reasons was that since 1989 the housing policy of central government has changed. 

Granting possibilities from central government to realize social housing were limited. New 

houses should for the greater part be realized in the market sector. For private developers, 

buying land in the new urban areas became less riskier than in the past, when owning land on 

which housing in the social sector were projected, was rather unpleasant. In fact, buying land 

was some kind of guarantee for participating in the development of the area. 

The presentation of a new planning policy document of central government in 1990, the 

Fourth Report on Physical Planning Extra (VINEX) (De Wolff, 1999), has been rather 

important for this change. A main issue in this report was concentration of urbanization in a 

limited number of city regions. The green and open areas in the country should be protected 

from further urbanization, and concentration of urbanization should make sufficiently 



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profitable public transport facilities possible. Originally, creating scarcity of building land was 

seen as an important policy tool for the financial feasibility of the new urban areas. The rise of 

the prices of building land was necessary for the government to be able to develop the rather 

expensive new urban areas. However, this planning policy also made it rather early clear 

which sites would be developed for urbanisation. Buying agricultural land in the areas 

involved was therefore for private developers less risky than it had been in the past. And, 

because the policy also involved a limitation of the areas to be developed, buying land 

became even more important to be able to participate in the development at all. 

Sometimes, local government itself asked private developers to participate in land 

development. The relatively poor economic situation in the 1980 has made them rather 

reserved against buying land on stock; cooperation with private developers was seen as a 

possibility to reduce risks for the government. 

These trends were intensified by developments on the housing market. The general rise of 

house prices made land development less risky. 

Nowadays the situation on the land market in the Netherlands therefore differs from the 

situation 20 years ago. More and more parties have become interested in participating in land 

development. 

This new situation, asks for a reorientation on the position of the government in land 

development. The traditional active land development often has to be replaced by a more 

facilitating land policy. The question who profits from the plus value has to be answered in a 

different context. 

From site development towards area development 

In 2004 a new memorandum on National Spatial Strategy has been approved by Parliament 

(Nota Ruimte, 2006). In the new spatial policy, development on a regional level is stimulated. 

An integrated approach on the regional level is regarded as important for improving spatial 

quality (Korthals Altes, 2006). 

One of the conclusions of the former Spatial Strategy was that in some areas the development 

of new housing areas was not enough connected to the development of for example 

recreational projects or (public) infrastructure projects. If the spatial policymaking is 

organised on the regional level, the decision about this kind of projects could be better 

connected. But not only the decision-making: also housing and other commercial 

development projects could contribute financially to make other regional projects feasible. In 

such an area oriented development strategy, the concept of value capturing becomes relevant. 

Legal system for value capturing in the Netherlands: current practice 

Until now, the general system in the Netherlands is that the value increase of land, caused by 

a change of the admitted land use in a legally binding planning document (for example from 

agricultural land to commercial development), falls to the landowner. The actual legal 

possibilities for the government for value capturing in the case a private land owner develops 

the land himself, are mainly limited to cost recovery. 

For this situation, two legal instruments are relevant: the so-called Land development 

Agreement (Exloitatieovereenkomst) and a cost recovery tax (baatbelasting). These 

instruments allow the recovering of costs of (some of) the investments done by the local 

government. The system is comprehensive: the government cannot use other powers for value 

capturing, besides these two. So for example, the government cannot refuse some kind of 

permit a developer needs as long as a payment based on the plus value has been made. 

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Author: Herman de Wolff


Cost recovery based on an agreement between the landowner and the municipality 

Often, when a landowner intends to use new land use possibilities caused by the modification 

a local legally binding development plan (bestemmingsplan), he is not able to do this without 

some kind of active cooperation from the local government. For example, the presence of a 

public accessible road, and also the connection to the sewerage system, are necessary before a 

landowner can get a building permission. Therefore, the landowner has to negotiate with the 

local government so that the government takes, if necessary, care of servicing the land. In the 

present Spatial Planning Act (Wet op de Ruimtelijke Ordening) the local government is 

obliged to make a Land development byelaw (Exploitatieverordening); in this local bylaw the 

conditions under which the local government can refuse to cooperate with a landowner that 

wants to develop the land are stated. 

However, the local government is not free in determining these conditions; the Spatial 

Planning Act gives some limitations about the extent in which conditions can be included in 

the local Land Development byelaw: 

• One of the conditions that have to be implemented in the byelaw is a financial 

contribution. The Act states that this contribution has to be limited to a contribution in 

the costs of the servicing of the land. Value capturing that exceeds the limits of cost 

recovery is not allowed. However, an individual land owner can be asked to contribute 

more: in the attribution of the costs to the different parcels which can be developed, 

the local government can make a distinction between for example parcels with more 

profitable, and parcels with less land use possibilities. As a consequence of this, a 

social housing project does not have to bear the average development costs of the area. 

Within the system, a form of cross subsidizing is realised. However, the contributions 

of the total landowners in the area cannot exceed the costs of servicing the land. 

• Another condition is that land, which is needed for the on-site public infrastructure has 

to be handed for free to the local government 

The results of these negotiations are stated in a Land Development Contract 

(Exploitatieovereenkomst) or sometimes a more comprehensive contract for some kind of 

public-private partnership. 

If the local government negotiates a higher contribution of a private landowner, which 

exceeds the boundaries of the local Land Development regulation, a judge can rescind the 

contract. In such a case, the local government has to refund the whole contribution. 

An example of this is the case of the municipality of Warmond against Polyproject, a private 

developing company. Polyproject owned land on which the municipality intended to realise 

low-priced housing. Because of the attractiveness of the area (it was situated close to the 

water), the private developer preferred to realise another type of houses, in a more expensive 

price category. The municipality agreed, but asked the developer to make an alternative 

location for low-priced housing financial possible. The developer agreed, and gave a financial 

contribution. However, afterwards, the developer went to court, and asked for refunding of the 

payment to the municipality. The Judge decided in favour of the private developer, because 

the payment was not bases on the Land development bye law. 

Cost recovery based on taxation 

In some cases, the private landowner does not need the active cooperation of the municipality 

to be able to develop the land, because his plot is already provided by the needed 

infrastructure. In such a case, still a possibility for cost recovery exists. The Local 

Government Act (Gemeentewet) makes it possible to levy a special tax for cost recovery 

(baatbelasting) of public facilities (e.g. a public road, a sewerage system, a park). 



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Using this tax, the owner of land that profits from the realisation of public facilities, has to 

pay a tax, which is based on the costs of the realisation of the facilities (including the costs of 

the land). Before a municipality can use this tax, the municipality has to state that the taxation 

instrument will be used (Bekostigingsbesluit); this statement has to be published before the 

realisation measures are started. The system is complex, and has some important limitations: 

• All land that profits has to be taken into account in this taxation. As a consequence of 

this, also the owners of land outside the development area have to pay for the public 

facilities, if the land they own profits from the measures. 

• The division of costs to be recovered should only be based on the amount of profit the 

parcels involved gain by realization of the public works. The surface of the parcels can 

be taken into account; however not for example the types of houses to be realized 

(because there is no relation with the profit) and not the initial value of the land (De 

Wolff, 2001). 

• The levying of this tax is difficult, and a mistake in the procedure can have major 

consequences, namely the judge can declare the tax non-binding (as q consequence of 

which the government has to pay all the costs itself). 

Because of the limitations, the instrument is hardly ever used for cost recovery in urban 

extension areas. 

Criticism of the current system 

Since 1990, the current system has been debated in the Netherlands. Because of the growing 

interest of private developers in buying land, the risk of so called free riders (developers who 

participate in the development, but do not pay (an equal) share in the development costs) has 

grown. Therefore, the association of municipalities and also the association of the bigger 

private developing companies pleaded for adapting the legislation. The main idea was to 

change the cost recovery system of the Land development byelaw so that it could be enforced. 

However, the first attempt to introduce a new land development tax was seriously criticized 

by the Council of State (who advises the Dutch government and parliament on legislation and 

governance). 

In the 2001, value capturing became again an issue when Central Government issued a 

Memorandum of Central Government on Land Policy (Ministerie van VROM, 2001). The 

memorandum suggested that research into some kind of “open space tax” was desirable. In a 

research project different options were presented (Korthals Altes, forthcoming). However, the 

(new) government decided negatively. 

Besides this “open space tax”, the memorandum again addressed the issue to improve the 

instruments for cost recovery, introducing a land development permit. Since then, the 

preliminary work on a new Act started, which has resulted in a proposal which has recently 

been approved by Dutch Parliament: the Land development Act. 

The proposed land development Act 

In the Netherlands, in 2008 a new Spatial Planning Act will come into force (Wet ruimtelijke 

ordening). As a part of this new act, the legal instruments for cost recovery will be changed. 

This part has been discussed separately in Parliament, and is also called the Land 

development Act (Grondexploitatiewet). 

The new system will change the current system fundamentally, al least on paper. With respect 

to the content of the system, two main adaptations will be made: (1) the possibilities for 

agreements dealing with cost recovery or value capturing are enlarged and (2) the possibilities 

for enforcing a contribution from a private developer are enlarged. 



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Agreement on financial contribution 

The new system enlarges the possibilities for cost recovery based on an agreement. The 

financial contribution a municipality can ask is not limited any more to the costs of servicing 

of land in the area involved. Also financial contributions in the interest of other spatial 

development projects can be asked. There is one important limitation: the financial 

contribution must be based on an (approved) strategic plan (structuurvisie). The Minister 

stressed during the discussion in Parliament, that this new regulation was not meant to make 

the buying of planning consent possible. 

So for example, an owner of land to be urbanised can be asked to contribute to the costs of the 

development of a conservation area elsewhere in the region, if that conservation area is also 

part of the same governmental strategic plan. In such a case, the threat that a judge can rescind 

the contract will not exist anymore. 

This change of the legal systems confirms Dutch practice. In many contracts between local 

governments and private developers regarding regional development projects, some kind of 

(financial) contribution to less profitable projects is agreed. However, nowadays these 

contracts are risky. If, for example, the developer transfers his rights to another developing 

company, it is always possible that the contribution paid will be debated. 

Enforcing: the big stick 

Besides this, the possibilities to enforce the contribution will be enlarged too. The big stick in 

the new system is not a tax, but the (not) granting of the building permit. 

A prerequisite for using this possibility is that local government makes a so-called Land 

development Plan (Grondexploitatieplan). The effect of the plan will be that a landowner, 

who asks for a building permit, cannot be granted the permit, unless the contribution 

according to the Land development plan for the area has been ensured. 

The financial contribution that can be asked is based on recovery of costs for public facilities. 

In allocating these costs, the initial value of the plot (e.g. the standardized costs of land 

acquisition) and the future value (based on the possible use of the serviced building plot) are 

taken into account. As a consequence of this, the owner of land that was originally used for 

cultivation under glass has to pay less than the owner of meadowland. And also the owner of 

land of which the future land use is social housing, has to pay less than the owner of land 

reserved for detached housing. Therefore, the Land development plan contains an estimation 

of costs and profits of the development of the area. 

The kind of costs that can be recovered, are limited. These are stated in the implementing 

order of the New Act (Besluit ruimtelijke ordening). 

In the draft of this order, the following types of costs are taken into account: 

- The costs of all kind of surveys that has to be done (e.g. acoustic, archaeological, 

environmental) 

- The costs of making the land in the area suitable for building: cleaning up the soil, the 

groundwork 

- The costs for realizing public facilities inside the area to be developed 

- The costs for realizing public facilities outside the area to be developed, including 

the costs for compensation (necessary to develop an area elsewhere because of the loss 

of ecological values, of green areas and of water areas) 

- the costs of the management of the project (including making spatial development 

plans for the area, tendering for selecting an company for making the lay-out for the 

area) 



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- The costs for compensation of the damage caused by planning 

- The costs of interest (including the costs of temporarily exploitation of the area – 

taking possible profits into account) 

- The costs for acquiring the land (e.g. the value of the land). 

As far as the costs for public facilities are concerned, the order indicates which kind of public 

facilities can be taken into account: 

- Public amenities as far as the costs are paid by the municipality and are not adjusted in 

the normal charges 

- Sewerage system 

- Roads, parking facilities in the “open air”, other investments in the public space, and 

costs of the water system 

- Infrastructure for public transport facilities, as far as these are not adjusted in the 

normal charges 

- Green areas (parks, playing grounds, nature areas) 

- Streetlights and fireplugs 

- Street furniture, fences, etc. 

- Build up parking facilities, as far as these lead to optimizing the land use in the area 

and the improvement of the quality of the public space and are mainly used by the 

inhabitants and the users of the area, as far as the costs are paid by the municipality 

and are not adjusted in the normal charges 

- In the interest of environmental protection, archaeological or public health necessary 

facilities. 

Besides the limitation of the type of costs that can be recovered, another limitation is in which 

extent these costs can be recovered. 

The Act introduces three criterions, which are applied cumulative: 

- Profit: only costs for measures of which the area of part of the area profits can be 

recovered. 

For example, if outside the area a subway is realised without any station nearby, the 

costs cannot be recovered. 

- Causality: only if the measures are in some way connected to the project, the costs can 

be recovered. For example, if the municipality tries to recover costs for an “old 

project” these cannot be recovered 

- Proportionality: if the measures are also profitable for other persons, the costs can only 

be recovered proportionally. 

For example, if surrounding areas without a park will also use the park that is realised 

in the new urban area, the costs can only partly be recovered. 

Besides these three criterions, also a fourth one should be taken into account. The costs can 

only be recovered to what is financial feasible within the project. So if the costs the 

municipality wants to recover exceed the profits for the developers, the possibilities for cost 

recovery are limited. 

In Parliament, there was some discussion whether a more general payment for certain costs 

outside the area to be developed could be introduced. An amendment has been approved, 

which makes it possible that cost recovery takes place as a contribution to a fund. However, 

the strategic plan for the area (structuurvisie) should indicate for which kind of projects the 

fund would be used. And also the above-mentioned criterions apply. 



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Relation between the voluntary and the enforcement phase 

The two possibilities of cost recovery based on the Land Development Act, using an 

agreement or using the possibility to threat with not granting the building permit, also differ in 

its effects. If it comes to enforcement of cost recovery, the effect is more limited than if a 

private agreement is used. 

In practice, these two possibilities can be combined. In those cases, the procedure can be as 

follows. 

1) In the beginning of the development process, the government negotiates with 

landowners in the area about the main ideas for the development. If the different 

parties come to an agreement, of which an intended change of the binding local land 

use plan (bestemmingsplan) can be part of, also the financial contribution is taken care 

of. The parties are free to determine the amount of money to be paid and the way the 

amount is divided among the different landowners. 

2) If the local government starts the formal procedure to make the local land use plan, it 

has to decide whether the enforcement of cost recovery will be necessary. For 

example, if one of the landowners in the area has not come to an agreement yet, there 

is a risk that he may become a free rider. In that case the municipality has to make a 

land development plan. The deadline for making this plan is when the local land use 

plan is made. If the government is late, it is not possible anymore to make a land 

development plan. In that case, the possibility to enforce cost recovery is not available 

anymore. 

3) However, if local government does make a land development plan, the consequence is 

that from that moment on all cost recovery has to follow the land development plan. 

So for example, if the landowner wants to come to an agreement after all, it will not be 

possible anymore to agree upon a contribution that exceeds the contribution possible 

based on the land development plan. Or, more precisely, a judge can rescind this 

agreement. 

4) The land development plan has to be updated every year. If at the end of the project 

the costs are more than 5% lower than originally expected, the municipality is obliged 

to refund the surplus paid by the landowners who has been forced to contribute to the 

development. The landowners that contributed voluntarily need not be refunded. 

Land development and value capturing 

The system of the new Land Development Act in the Netherlands is primarily based on cost 

recovery. This is a political choice; in explaining the system to the Parliament, the Minister 

argues several times the choices made, by stating that it is not the intention to introduce an 

instrument to prune away the profit of private landowners. 

However, some elements of the new system do have strong characteristics of a system based 

on value capturing. 

Voluntary phase 

In the first phase of the development, in this negotiation phase, there are hardly any rules for 

cost recovery. The municipality has the possibility of not changing the legally binding land 

use plan (bestemmingsplan). Using this as a big stick, the municipality can negotiate a 

contribution to different projects within the municipality. The only prerequisite is that the 

projects have to be connected in a strategic plan (structuurvisie). For a pro-active 

municipality, this need not be a problem. A landowner who wants to develop, and is pressured 



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(for example, because the land bought is a loss making possession as long as it is not 

developed) can be tempted to pay much more than just the development costs for the area. 

Unlike the old system, a judge cannot correct the municipality anymore: agreements that 

exceed just cost recovery are allowed in this phase. 

Enforcement phase 

Besides this, also in the phase of enforcing, the system is not a pure cost recovery system and 

offers a municipality that chooses to operate strategically some possibilities for value 

capturing: 

The system indicates which kind of costs can be recovered. However, besides the costs for the 

management of the project, the extent of the costs to be recovered is not standardized. The 

only limitation is found in criteria profit, causality and proportionality of which the last one 

may have the biggest impact. 

An example of rather open type of costs is the costs for compensation of the loss of green 

area. A strategy might be that the municipality decrees a local rule, in which the way of 

compensation is regulated. These regulations might be made rather generous: that makes it 

possible that several uneconomic projects are realized, paid out of the area development. The 

question whether and to what extent the landowners profit of these projects is rather simple to 

answer: without the compensation, the area could not have been realized. 

Another strategy might be to stretch the borders of the area to be developed, and make 

projects in the surroundings part of the project area itself. For example, the development of 

green areas (recreational areas) can be made part of the project. In such a case, the costs can 

be recovered as being part of the project. But this is limited to as far as the area profits and 

only in proportion. The municipality has to argue that these projects are profitable for the 

area, and to what extent. However, this is rather subjective and gives the municipality the 

possibility to round up to the area to be developed. A strategy can be to let the function of an 

area change: the new public park to be realized can be defined as a local park for the new 

area. If the area is presented as a relatively green new urban area, it is difficult to argue that 

the costs of the park can only be taken into account to a certain extent. 

Another strategy might be to improve the quality of the plan area itself. For example, to 

improve the quality of the public space, to make the area more sustainable by realizing for 

example a separate sewerage system, energy saving public lightning, etc. 

Also, the municipality decides upon the housing program in the area. In allocating the costs, 

the municipality is allowed to take the future value of the building plots into account. The 

owners of land for houses in the market sector or other commercial development can be 

obliged to pay more. So, the municipality can influence the profit of a landowner by adjusting 

the housing program of the area. 

Still the system has one important limitation: the value captured has to be invested in spatial 

development projects: this applies both in the voluntary phase and in the enforcement phase; 

in the enforcement phase the kind of projects might be a little bit more limited because of the 

limited list of costs that can be recovered 

Besides this, the landowners are protected because there is a maximum of cost recovery in the 

financial feasibility of the projects, although this maximum only applies in the enforcement 

phase. 



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However, if all the possibilities above mentioned could be used will also depend on the way 

the judges in the Netherlands will deal with the new Act. One argumentation line could be 

that as long as the original value of the land is not endangered, the examination of the judge 

should be rather modest. However, there is a risk that the protection of the landowner will 

prevail, and the judge will thoroughly examine the municipal land development plan and 

assess if the costs recovered do meet the criteria of profit, causality and proportionality. 

Even if the Dutch new system is seen as a pure cost recovery system, it has some gaps. The 

lists of cost that can be recovered, is limited to the costs of realization of public facilities. 

Besides these costs, also the future maintenance of these facilities has to be paid. The Dutch 

system cannot enforce the payment for these costs by the private landowners. 

Some concluding Remarks 

The Dutch new Land Development Act shows a system with a close relation between cost 

recovery and value capturing. That puts the political choice for not implementing some kind 

of profit tax a little bit in perspective. 

In spatial development where products are by definition unique, standardizing of development 

costs is not realistic. So if a system of cost recovery could function, it needs to have some 

open ends. And in the Netherlands these open ends seems to make it possible that cost 

recovery is applied in a sometimes rather liberal way. The strategic use makes to a certain 

extent value capturing possible. 

On the other hand, the new Dutch system obliges local government to give insight in the way 

financial contributions from private landowners are determined and will be spend. The Land 

development plan is a public document and even open to public participation and objectives. 

Value capturing is not a “black hole”, but is has to make clear that the financial contributions 

are used for the development of the area and will improve spatial quality. 

Taking the new spatial development policy into account, in which integrated area 

development is becoming more important, the strategic use will often be necessary to realise 

these governmental ambitions. And even if the formal borders of the system are explored, this 

strategy is expected to have sufficient social base, also amongst most of the private 

developing companies. 

Reference list 

Barker, Kate (2004). Review of Housing Supply Final Report – Recommendations Delivering 

Stability: Securing our Future Housing Needs, HMSO. 

Boelhouwer, Peter, Haffner, Marietta, Neuteboom, Peter & De Vries, Paul (2004). House 

Prices and Income Tax in the Netherlands: An International Perspective. Housing Studies 19 

(3), 415-432 

De Greef, Johan (1997). Het gevecht om het residu – gemeente versus marktpartijen op grond 

van de residuele waardemethode. Universiteit van Amsterdam. 

H.W. de Wolff - Realisation of new urban areas and sustainable development (1999). In: Land 

Reform and sustainable development. Ed. Robert W. Dixon-Gough. International land 

management series. Ashgate. 



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De Wolff, H.W. (2001). Development of land for new urban areas: in search of a new 

approach. In: Transactions in International Land Management, Volume 2. ed. Robert W. 

Dixon-Gough and Reinfried Mansberger. International land management series. Ashgate. 

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of Housing, Spatial Planning and the Environment. 

Korthals Altes, Willem K.(2006) Towards Regional Development Planning in the 

Netherlands. In: Planning, Practice & Research, 21 (3), p. 309 – 321 

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Why is this simple remedy hardly ever used? 

Ministerie van VROM (2001). Grond voor nieuw beleid - nota Grondbeleid (memorandum on 

land policy). 

Ministerie van VROM (2006). Nota Ruimte - ruimte voor ontwikkeling (National spatial 

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National Board of Housing, Building and Planning, Sweden and Ministry for Regional 

Development of the Czech Republic (2005). Housing Statistics in the European Union 2004, 

Boverket Publikationsservice. 

Oxley, Michael (2006). The Gain from the Planning-Gain Supplement: A Consideration of 

the Proposal for a New Tax to Boost Housing Supply in the UK. European Journal of 

Housing Policy, 6 (1), 101 – 113. 

Plantinga, A.J., Lubowski, R.N., Stavins, R.N. (2002). The effects of potential land 

development on agricultural land prices. Journal of urban economics. 52 (3), p. 561-581 

Smolka, Martim O. (2000). Value capture for Urban Development: An Inter-American 

Comparison. Research Paper of the Lincoln Institute of Land Policy. 



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The new Dutch Land development Act as a tool for value capturing

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