Value Capture – Key Documentation

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There have been countless reports advocating for Value Capture from all levels of government, institutions and academia.

Review these twelve key reports:

UN Founding Document: The Vancouver Action Plan
Part D. Land

Recommendation D.3 Recapturing plus value

Excessive profits resulting from the increase in land value due to development and change in use are one of the principal causes of the concentration of wealth in private hands. Taxation should not be seen only as a source of revenue for the community but also as a powerful tool to encourage development of desirable locations, to exercise a controlling effect on the land market and to redistribute to the public at large the benefits of the unearned increase in land values.

The unearned increment resulting from the rise in land values resulting from change in use of land, from public investment or decision or due to the general growth of the community must be subject to appropriate recapture by public bodies (the community), unless the situation calls for other additional measures such as new patterns of ownership, the general acquisition of land by public bodies.

Specific ways and means include:

  • Levying of appropriate taxes, e.g. capital gains taxes, land taxes and betterment charges, and particularly taxes on unused or under-utilized land;
  • Periodic and frequent assessment of land values in and around cities, and determination of the rise in such values relative to the general level of prices:
  • Instituting development charges or permit fees and specifying the time-limit within which construction must start;
  • Adopting pricing and compensation policies relating to value of land prevailing at a specified time rather than its commercial value at the time of acquisition by public authorities;
  • Leasing of publicly owned land in such a way that future increment which is not due to the efforts by the new user is kept by the community;
  • Assessment of land suitable for agricultural use which is in proximity of cities mainly at agricultural values.

    This lengthy 2011 report, Innovative Land and Property Taxation, by the United Nations Human Settlements Programme, examines property taxation around the world. It sees value capture financing as a robust mechanism that minimises funding volatility, and shares the risk of large infrastructure projects. It argues that taxation measures like value capture promote the most efficient functioning of urban environments and land markets, and notes that the potential for value capture is present in the information held and limited revenue on land collected by many local governments. However due to a lack of political will, local governments and communities forgo revenue by not levying as extensively and capturing the value that they could.

    This 2011 joint report Land and Property Tax – A Policy Guide, by the UN Human Settlement’s Program and the Global Land Tool Network, runs through case studies of local revenue generation through improvements to land. It argues that incremental land values are a crucial source of local revenue, and outlines various options for a land-based tax system for different urban and political contexts.

    World Bank – Unlocking Land Values to Finance Urban Infrastructure, George E. Peterson 2009,

    “the ability of cities to finance their needed infrastructure will depend . . . on their ability to capture a portion of these windfall gains” “and channel them into infrastructure finance” “land-based financing has become an important element of urban infrastructure finance”

    The 2010 ‘Australia’s Future Tax System’ or ‘Henry Review’, in its consideration of land taxes, examines developer contributions, suggesting that the formulation of developer contributions and charges ought to be more transparent and possibly replaced by dedicated revenue from a general and uniform land tax. The report considers land-based financing of infrastructure and developer charges to be an “effective way of encouraging the efficient provision of infrastructure to the areas where it is of greatest value and of improving housing supply”.

    The Business Council of Australia’s 2013 report Action Plan for Enduring Prosperity, recommends an increased and more uniform land tax to reduce corporate tax. In the absence of such a broad-based land tax however, it recommends value capture initiatives as a means to fund infrastructure projects.

    An annotated bibliography of 127 academic articles relating to value capture for transport infrastructure, titled Financing Transit Systems through Value Capture, published in the American Journal of Economics & Sociology.

    A 2012 report by PriceWaterhouse Coopers for the Property Council of Australia, Tax Increment Financing to Fund Infrastructure in Australia does not advocate value capture in the form of a betterment levy but, recognising our lagging infrastructure standards, recommends a more general property tax, the revenue from which could be locally dedicated to finance needed infrastructure projects. It notes that financing from land values both encourages the most necessary and ‘valued’ infrastructure to be built as well as ensuring a reliable and long-term revenue stream.

    This 2013 report Planning New South Wales Infrastructure for the Twenty-Second century by the Public Accounts Committee of the NSW Legislative Assembly, considers various innovative methods of funding future transport priorities. The proceedings look back at the history of value capture in New South Wales, in the building of the harbour bridge and through to the 1970s and 1980s when they were effectively levied for rezonings.

    This 2012 Grattan Institute report Can We afford to get our cities back on the rails? looks at the history and future options of rail financing in Australia. It examines the effectiveness of betterment levies in the building of the Sydney Harbour Bridge, the Melbourne City Loop and currently in London’s CrossRail project, particularly in avoiding government debt in financing infrastructure and avoiding funding deficiencies partway through a project.

    Committee for Melbourne 2012 Report Moving Melbourne on Public Transport over the next decades – recommends “examining value capture techniques, that could be utilised to increase the pool of funds available to invest in critical transport infrastructure projects”.

    Dr Chris Hale for Melbourne City Council on City Rail Funding: International Background and policy options for funding transit:

    Value capture theory is now well-developed, and it rests ultimately on the recognition that major urban rail exercises, especially those serving the CBD and inner city, generate profound economic benefits. Traditionally though, Australian jurisdictions have done little to convert these broad-based benefits that accrue to the economy as a whole into a specific cash flow stream to assist with project delivery.