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

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