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 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 Workshop: Legal Aspects of Housing, Land and Planning Author: Herman de Wolff 3
The new Dutch Land development Act as a tool for value capturing 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 Workshop: Legal Aspects of Housing, Land and Planning Author: Herman de Wolff 4
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The new Dutch Land development Act as a tool for value capturing

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