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

More documents

Recommendations

Info

The new Dutch Land development Act as a tool for value capturing 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. Workshop: Legal Aspects of Housing, Land and Planning Author: Herman de Wolff 7
The new Dutch Land development Act as a tool for value capturing 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) Workshop: Legal Aspects of Housing, Land and Planning Author: Herman de Wolff 8
Page 1 and 2: W09 - Legal Aspects of Housing, Lan
Page 3 and 4: The new Dutch Land development Act
Page 7: The new Dutch Land development Act

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

Create successful ePaper yourself

Delete template?

Save as template?