Non-Negotiable Developer Obligations in the Spanish Land Readjustment: An Effective Passive Governance Approach that ‘de facto’ Taxes Development Value?

Abstract

Land Readjustment (LR) is often presented as an alternative ‘third way’ among public and private approaches to governance in urban development. Unfortunately, not much literature analyzes the effectiveness of LR, which depends on its ability to capture land value increases to finance public infrastructure. LR can capture land value increases with taxes and contributions to be levied after the readjustment, and/or with developer obligations. This paper focuses on how non-negotiable developer obligations function within the Spanish LR, and whether they succeed in delivering public infrastructure. The findings also feed into the debates about the effectiveness of public and private governance approaches and the limits of public value capture instruments.

Keywords:

• Land readjustment
• infrastructure provision
• public value capture
• taxing development value
• developer obligations

Notes

1. Similar categorizations of these three factors can be found across literature, e.g. Hong and Brubaker (2010), Smolka (2013), pp. 8, 9, Van der Krabben and Needham (2008), pp. 652, 653.

2. This floor area ratio regards a modal use, i.e. a ‘neutral’ use which translates into specific uses (social/affordable or free market housing, offices, industry, etc) after multiplying it with a factor that is based on the differences in market value of the different specific uses. So, for example, 1 m² of floor area of modal use translates into 2 m² of floor area affordable housing or to 0.5 m² of floor area free market housing. The multiplying factor here is 2 for affordable housing and 0.5 for free market housing, which means that the market value of affordable housing is four times lower than of free market housing.

3. Francisco Blanc Clavero and Gerardo Roger Fernández, interviews during 2006 and 2007; Francisco Blanc Clavero, interviews in June 2015.

4. Roger, Blanc, Rubio, Montiel, Muñoz & Cañellas, Escribano, interviews 2006.