Valorization and the Recovery of Public Investment

Martim Smolka, November 1, 1997

Two of the most significant and pressing issues facing urban planners in Latin American cities today are: land speculation, with all its implications regarding the unaffordability of land by low-income families and inefficient patterns of land use; and the lack of funds for serviced land, that is, land invested with appropriate infrastructure to meet social needs. Most Latin American urban landscapes are characterized by either the occupation of unserviced land, usually on the peripheries, or immense expanses of serviced but vacant land.

In July the Lincoln Institute cosponsored a conference in Rio de Janeiro to explore why, even though the principle of value capture could address these problems, it is not more widely implemented. The aim was to investigate potential responses and obstacles to capturing land value increases due to public investment and development. More than 30 public officials, planning professionals and scholars from major and mid-size Brazilian cities discussed the following issues:

The legal, economic and political nature of land value increments, including public and private claims to land value as an element of larger property law systems. The land component of value-based property taxes illustrates methods of recapturing a portion of such increases for public purposes.

Ambiguities surrounding the implementation of value capture schemes. Some considerations are that the affected population has limited payment capacity, development is unprotected by the state, and land has no clear tenure relationship.

Some of the socially perverse effects of land value programs, in spite of their apparently inherent ‘progressiveness.’

The implementation of Porto Alegre’s progressive property tax reform. Although it has been upheld against a constitutional challenge by an intermediate court, the tax reform is likely to be the subject of a future decision by the Brazilian Supreme Court.

The effective results of initiatives undertaken in Sao Paulo to capture value increments through the negotiation of building and development rights in socially redistributive linkage operations or public/private associations.

Conference cosponsors, the Brazilian Institute of Municipal Administration (IBAM) and the Institute for Urban and Regional Research and Planning of the Federal University of Rio de Janeiro (IPPUR), will use the information on value capture generated at these sessions as the basis for a publication for IBAM members in over 350 Brazilian cities and towns. Particular efforts will be made to incorporate reports of value capture experiences from cities other than Sao Paulo, Rio de Janeiro, Curitiba and Porto Alegre, which tend to be the focus of most existing research on the issue. In addition, the cosponsors will organize another workshop to develop materials for a pamphlet explaining the basic instruments and implementation procedures of value capture schemes. It will be distributed to public officials throughout the country.

Martim Smolka is senior fellow for Latin America Programs at the Lincoln Institute.