ABSTRACT
Rapidly changing demographics and unprecedented urbanization are putting intense pressure on cities to provide critical infrastructure for their residents in developing countries. Many developing-world cities face limited fiscal resources and mounting investment requirements for infrastructure. These fiscal challenges have stimulated governments to devise alternative financial mechanisms to generate funds over and above conventional property taxes. Land-based financing or land value capture (LVC) finance is a method of generating revenues from private lands that have unearned gains in property values owing to public actions (such as a change in zoning/land-use regulations) or public investments (such as infrastructure). LVC provides a promising opportunity for fiscally constrained, rapidly growing cities to strategically monetize private lands to recover and reinvest value gains from public investments or actions. Although several LVC instruments (tools) have been used worldwide, the key challenge is to understand how they work, and recognize which LVC instrument works well in each situation. This chapter focuses on seven commonly used LVC instruments that have been used in various cities across the world. The chapter introduces each of these instruments, summarizes the procedure for implementation, and presents current debates and controversies, providing an initial decision-making “toolkit” for cities searching for innovative financing solutions for infrastructure improvements.
