The Appeal of Land-Based Financing Instruments

The revenues generated by city governments and infrastructure public project proponents are insufficient to meet their growing investment needs. Land-based financing opportunities are becoming popular alternative sources and instruments embraced by city managers and policymakers at various tiers of government. Land-based tools are across three different categories—(i) land-based taxes; (ii) land use, zoning, and development financing tools; and (iii) land value capture mechanisms. Land-based taxation is an established municipal financing tool and includes property tax, stamp duty, betterment charges, impact fee, and sale of development rights. Land use, zoning, and development financing tools involve altering specific urban planning regulations that can allow additional construction and allow monetization of the unused portions of the same. Land value capture mechanisms use innovative structures and instruments that release funds from the improvement of land due to infrastructure or other similar initiatives and the potential plow back into developing/ rehabilitating other infrastructure. Public sector has engaged gainfully with the private sector in many instances to attract investments in public infrastructure by a grant of government-owned land on lease or license basis at nominal rates in return for investments in building assets like commercial properties, water supply, bus terminals, etc. Using innovative financing structures in transport sector and transit-oriented development initiatives are increasingly being used across the world, though the success is not uniform. While these innovations can lead the way in urban transformation, their success is contingent upon an enabling policy and governance framework that supports the adoption of these instruments.