Land Value Capture and Tax Increment Financing: Overview and Considerations for Sustainable Urban Investment

Simon Hugh Huston 1 * , Ebraheim Lahbash 2

European Journal of Sustainable Development Research, Volume 2, Issue 3, Article No: 34.

https://doi.org/10.20897/ejosdr/2666

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Abstract

The paper reviews the notion of Land Value Capture (LVC), its advantages and disadvantages and relevance to for urban growth management. LVC encompasses a wide range of mechanisms, applied in very diverse contexts to monetize ‘windfall’ gains, accruing to landowners because of growth, infrastructure or place-making projects. Despite widespread conviction that a proportion of these ‘unearned increments’ should somehow be harvested for the wider public good, contention, legal and pragmatic challenges remain. As policy makers confront population pressures, transport needs and inequality, LVC can help bridge infrastructure funding gaps, accelerate housing provision and temper polarisation. Betterment taxes, Tax Increment Finance (TIF) or participatory instruments like land readjustment can target ‘planning gains’ capitalized into land and property values near stations, historic monuments or upgraded precincts. As well as flagging instrument diversity and variable contexts, the literature suggests LVC mechanisms work best in a joined-up policy context. Ironically, spatial LVC schemes like TIF are most likely to fail when the regeneration need is most acute. In America, inadequate governance, scrutiny or auditing undermined schemes to fund transport or improve the public realm. In Europe LVC exists in a variety of modalities but three European examples, suggests it remains underutilized. London megaprojects, UK regional housing schemes and French sprawl, illustrate that policy makers have yet to adequately capture unearned increments.

Keywords

land value capture, TIF, LVT, project funding, developer obligations, betterment, unearned increment, windfall gains, planning gain

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Citation

Huston SH, Lahbash E. Land Value Capture and Tax Increment Financing: Overview and Considerations for Sustainable Urban Investment. European Journal of Sustainable Development Research. 2018;2(3):34. https://doi.org/10.20897/ejosdr/2666

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