Nico Calavita Professor Emeritus, Graduate Program in City Planning -- San Diego State University Housing California Conference April Reframing Inclusionary Housing: “Land Value Recapture” for Community Benefits

Land Value Recapture Government actions Increases in land value Community benefits?

Unearned increments Betterment/Planning gain Plusvalore Plusvalias Tax it?

Easier said than done Perhaps we should try to recapture unearned increments in land values “through the planning system,” including: Inclusionary Housing, or more broadly Community benefits How?? Very quickly, let’s look first at a couple of European countries

IH statutes have spread worldwide ● UK ● Ireland ● France ● New South Wales ● France ● Spain ● South Australia ● Italy ● New Zealand ● The Netherlands ● Catalonia

IH as a land value recapture mechanism In Europe, IH is generally viewed as a mechanism for the recapture of “unearned increments” in land value The way this mechanism is utilized reflects the planning culture and the constitution/property rights regime in each country

Four models Explicit recapture (England and Spain) Explicit but limited (Ireland) Implicit or ambiguous (Italy, France and Canada) Not part of the planning culture (US)

Basis for IH in England Nationalization of development rights under Town and County Planning Act (1947). Section 106 of the 1990 Town and Country Planning Act Developer can be required to provide affordable housing under agreement with local authority… Trough negotiation between the developer, the locality AND the landowner

“Different councils adopt differing policies as to what percentage of social housing may be required, the level of development which triggers such provision and the method of calculating financial contributions. As inevitably, it fall to the landowner to fund these provisions, by reduction of the sale price, there is often lengthy and sometimes acrimonious discussion as to the need for and the amount of the provision.” (page 3)

Basis for IH in Spain Art. 47 of the Spanish Constitution:“…The community shall share in the increased values generated by the urban activities of public bodies.” Recapture of land values, then (plusvalias in Spanish), is mandated by the Spanish constitution Couple that with another constitutional mandate: ”All Spaniards have the right to enjoy decent and adequate housing. The public authorities shall promote the conditions necessary and establish the pertinent norms to make this right effective, regulating the use of land in accordance with the general interest to prevent speculation,” And practically you have a constitutional mandate for IH as a land value recapture mechanism.

Basis for IH in Spain (cont.) Autonomous regions adopt IH The Basque region (1994) Madrid (1997) Castille y Leon (1999) Catalunia (2002/2004)

National Law 8, 2007 (Ley del Suelo) Allocates a minimum of 30% of the square meters designated for residential development in the urban development plans to a land reserve dedicated to a VPO housing regime; i.e., non-market housing. Basis for IH in Spain (cont.)

In the US, where the “right to develop” is far more central to the concept of property rights than is the case in most European countries, IH is often justified by compensating developers for the additional costs of providing IH Public costs Is there a better way? Basis for IH in the U.S.

Are incentives necessary?

Incentives and cost-offsets displace costs onto the public, either directly or indirectly Financial incentives Fee waivers, reductions or deferrals Fast-tract permit approvals Density bonuses

Density bonuses When superimposed on existing planning framework, they raise three major areas of concern: 1) They undermine the planning process and existing regulations 2) They may lower the level of service of public facilities and infrastructure 3) They frustrate citizen participation in the planning process

Alternative: IH as a land value recapture mechanism through rezonings or land use changes, taking into account that planning is a dynamic process Now IH is superimposed on an existing framework Cost-offsets and incentives implicitly assume a static view of urban planning

Possible alternative Two-tier system Existing entitlements (10/20 percent) As part of plan changes, rezonings, etc. MORE, Much more?

IH land value recapture in the US: A beginning Colorado

2008 New Jersey Legislation It mandates that a residential development “resulting from a rezoning change made to a previously nonresidentially zoned property” should include IH. It implicitly recognizes that: Government Actions Increases in land value I nclusionary Housing (A community benefit)

How do we recapture increases in land values due to changes in land use (General Plans, Community Plans, Development Agreements, Overlay Zonings, Upzonings, etc.) for community benefits, including affordable housing? Fundamental question: Is it politically feasible? This is an approach that goes counter American attitudes toward property and land. Right time? Right place? (Bay Area). Perhaps, but….. Can we get to the Tipping Point? (“that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire”)

How would it work? Two ways: 1) Plan changes: Specific Plans, Community Plans, General Plans for small localities, etc. Based on certainty: Density increases in certain areas require established quantities of affordable housing and/or community benefits

Example : Santa Monica General Plan PROCESS § Require new development to provide community benefits § Increased ongoing public participation COMMUNITY BENEFITS MAY INCLUDE: § Affordable/workforce housing § Transportation Demand Management § Historic Preservation – TDRs § Social Services/Creative Arts § Essential Infrastructure: § Enhanced open space and streetscape § Quality pedestrian and biking connections § Shared parking solutions

2) Upzoning of single (large) properties Based on negotiation Transparency & Accountability problems with Developers—locality negotiations

Example: Montreal Inclusionary Housing Program (project based) Voluntary inclusionary zoning (as opposed to mandatory), based on existing legislative powers in Québec; thus based on negotiation Most effective in projects requiring changes to the Master plan, significant zoning changes or municipal investment in infrastructure (often brown field or industrial sites)

How much? The market value of the entitlements should be established through an economic analysis. It would be left to the political process how much of that value would be recaptured and in what form

Rental Housing Zoning Overlay or “Super” Density Bonus Ordinance “The overlay could require a greater percentage in affordability than the Density Bonus statute in exchange for grater density bonuses, additional regulatory concessions or provisions of financial subsidies.” (from the 2010 Public Interest Law Project paper “Inclusionary Zoning After Palmer & Patterson – Alive & Well in California) My criticism of density bonuses does not apply in this case

Last example Land Banking Buying land before it increases in price

Where do we begin? Criteria: Strong real estate market Significant land availability of parcels ripe for upzonings or plan changes Potential favorable staff and council Presence of local housing advocates