Examining Opportunities and Challenges for Implementing Land-based Financing Instruments for Funding Climate Action

In a world where climate change is reshaping the urban landscape, the relationship between flood risk, property values, and adaptation investments has become a crucial focal point for policymakers, developers, and residents alike. This case study examines the interplay between those factors in Buenos Aires. The analysis reveals that flood-prone properties face significant price discounts, but targeted flood protection investments hold the key to unlocking a cascade of positive transformations. It quantifies the impact of flood risk on property values, revealing price discounts of 4.3% to 11% for properties in flood-prone areas. The analysis demonstrates the potential for significant land value appreciation and creation through targeted flood protection investments. By mitigating flood risk, these investments not only safeguard property values but also stimulate urban revitalization, increase density, and foster economic activity. The study showcases the immense potential for land value creation and capture, particularly in central areas, offering a tangible pathway to finance further resilience measures. But the true power lies in the synergy between adaptation investments, land use regulations, and population dynamics. When these elements are harmonized, the result is an amplified effect on welfare improvements and urban vitality. By providing insights into the spatial equilibrium effects of adaptation investments, this study contributes to the growing body of knowledge on urban resilience and the potential for land value capture.

This paper is part of a series of working papers on land-based financing instruments for funding climate action.