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Land Based Taxes and Land Regularization

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Presentation on theme: "Land Based Taxes and Land Regularization"— Presentation transcript:

1 Land Based Taxes and Land Regularization
Presentation by: David Amborski, Centre for Urban Research and Land Development Ryerson University, Toronto, Canada To: UN Habitat/ Jamaica Date: December 12, 2018

2 Seminar Outline Land Based Financing and Land Value Capture
Theory (Economic) of Land Value Capture History of Land Value Capture The Range of Land Value Capture Tools Applying Land Value Capture Tools to Land Regularization Summary and Conclusions Provisos

3 Land Based Financing and Land Value Capture
Land Based Financing Success depends on strong increasing land values Consequently, revenue opportunities can be enhanced by increasing land values What are the conditions or policies that support increasing land values Land based tools can be used to capture the values

4 Theory of Land Value Capture
Methods to Capture “Unearned Increments” Theory underling ‘Unearned Increments” identified by neoclassical economist David Ricardo Ricardo and “economic rents” 19th Century Policy Controversy

5 US and Canadian Context
Legislation Regulating Urban Areas is undertaken at the sub-national levels of government United States: 50 States Canada: 10 Provinces State or Provincial Legislation City Charters or Planning Documents Public Involvement at the Local Level

6 Actors in the Policy Process
Government (Local and-or Provincial) Development-Building Industry Municipalities (via their municipal associations) Public (individual or groups) Business Organizations (Chamber of Commerce)

7 Two Aspects of Land Value Capture
Land Value Creation Land Value Capture

8 Land Value Creation and Capture
Supply Enhancing the Public Realm Infrastructure Investment Demand Increasing Population and Incomes Increasing Population and Incomes Capture By either the Public or Private Sector Public Sector Capture requires use of “the tools” Increasing Population and Incomes

9 Why Use Land Value Capture?
Theoretically Sound ! Application of the ‘Benefit Principle’ Generates revenue for the Public Sector Example: The Henry George “single tax movement”…… “Site Value Taxation”

10 Overview of Land Based Financing Tools
Property Tax Applications Site value taxation Tax Increment Financing Betterment Taxes Developer Exactions Development Charges/Impact Fees Density Bonuses/ Linkage Fees Inclusionary Zoning/Housing Special Assessments/Taxes (Transit)

11 Overview of Land Based Financing Tools continued
Other Applications Transfer of Development Rights Public Land Leasing Community Land Trusts Land Readjustment Public Private Partnership/ Joint Development Sale of density/building rights

12 Objectives of Land Regularization
To provide residents with long term security of tenure for their homes To ensure that the homes/communities have adequate urban services

13 Long Term Security of Tenure
Fee Simple Ownership Long Term land Leases In each case different land based financing tool may be used to help finance services

14 Provision of Urban Services
Provided by Local Municipalities Which services are essential/most important? Hard Services…… Property Related Services Soft Services……..People Related When will they be provided? Which Services are necessary as soon as possible/essential? Which Services can be phased in over time? Implications for Financing How will they be Financed?

15 How will services be financed?
Contributions by local municipalities Contributions by senior levels of government The use of land based/land value capture tools to help finance the services Different tools to be applied depending on the form of security of tenure Fee simple ownership Long term land leases

16 Ownership: Land Based Tools
Property Tax Special Assessments Capital Gains/Betterment Type Taxes

17 Property Tax Property Tax = Assessment x Tax Rate
Tax Rate: Political Decision Annually Rates may vary by property type or use Assessment System: Policy Decision A number of options for assessment base

18 Assessment Base Options
Property Characteristic Based “Unit Value” Assessment Property Value Based Market Value (of Property) Assessment Split Rate (land and improvements_ “Site Value Assessment” (Land Only)

19 Special Assessments Based on the Benefit Principle
Imposed on Benefiting property once services are installed Questions must be addressed upon the quantum and structure of the assessment/charge The revenue generated should be used to defray the cost of the services provided

20 Capital Gains/Betterment Taxation
A tax could be imposed upon sale of a property This would be based on the increased value of the property Government permission and services contributed to the increased value A percentage of the increased value would be earmarked to pay for service provision (repay bonds)

21 Security Via Land Leasing
Public Land Leases Community Land Trusts Government Owned Land Owned by NGO

22 Public Land Leasing The land is retained in government ownership
The government may issue bonds to finance the provision of services The lease revenue is then used to repay the bond Lease rates and terms are determined by the government agency: term, rates, increase, etc.

23 Public Land Leasing: MassPort (Boston)
Massachusetts State Agency had surplus land in the waterfront They issued bonds to finance the provision of infrastructure in the area The bond was secured and repayment based on future lease revenue Very successful, Non-residential and residential property

24 Community Land Trusts Two Options/models Government owned and managed
Similar to Public Land Leasing except registration of land Managed by an NGO Community owned and more democratic In both cases financial contributions may be required to help finance services

25 Community Land Trusts Broadly used in the US and growing interest in Canada There are many variations on the model Community Based Process to set up Democratic Management ( Board) Fees can be required for numerous purposes including repayment for services

26 Summary/Conclusions Land Based Financing Tools have the potential to support service provision for land regularization. Each tool is a generic name that can be applied in a variety of ways and jurisdictions Each tool must be considered in the context of it legal basis, market conditions and political context

27 Summary/Conclusions continued
Land based financing is not a “silver bullet” in this application, it can help support/finance regularization objectives The financial contribution will relate the to “ability to pay” of the property owners/occupants An important part of the context is the senior government policy disposition toward supporting regularization including financial support

28 Summary/Conclusions continued
Also important in the context is the local municipalities fiscal capacity to subsidize and/or front end the financing of services


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