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

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The new Dutch Land development Act as a tool for value capturing - 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. Workshop: Legal Aspects of Housing, Land and Planning Author: Herman de Wolff 9
The new Dutch Land development Act as a tool for value capturing 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 Workshop: Legal Aspects of Housing, Land and Planning Author: Herman de Wolff 10
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