Land wealth generation and distribution in the process of land expropriation and development in Beijing, China

ABSTRACT

Based on transaction data at the parcel level in Beijing, this paper itemizes the costs incurred in the process of transferring rural land to urban development, quantifies the exact magnitude of land appreciation generated in this process and examines how the land wealth is distributed among involved parties. The main findings include the following: first, the land appreciation and the costs incurred in the process of land expropriation and primary development both differ from case to case; second, conventional comparison of the compensation for expropriated land with land granting price substantially overestimates the magnitude of land appreciation; the average and the median land appreciations account for 44.8% and 44.0% of the mean and median prices of granted serviced land, respectively; last, the compensation paid to affected farmers has improved in absolute terms during our study period from 2003 to 2014; however, because the land granting price has been escalating at a faster pace, the land wealth received by local governments has trended up.

KEYWORDS:

• Land-value stages
• financing urbanization
• land appreciation
• land wealth distribution
• Beijing
• China

Supplemental Material

Supplemental data for this article can be accessed here.

Acknowledgments

The authors would like to thank the editor and anonymous reviewers for the comments on the previous version of the manuscript.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. By “serviced land”, we mean that land lot has gone through the primary land development process, the ground has been cleared and leveled, unnecessary structures have been demolished, land has been improved with infrastructure and facilities (such as road, water supply, gas, electricity, cable and sewer) and is ready for building development.

2. In some cases, especially land granted for manufacturing development, local governments supply land at a price below the compensation to maximize tax revenue, generate gross production and increase employment. In these cases, local governments have to pay for the value gap. More detailed discussion can be found in Su et al. (2012) and Tao et al. (2010).

3. A more detailed discussion of the land expropriation policy and practice in Beijing can be seen in Du, Thill and Feng (2014).

4. Land granting through tender means that the land administration branches of the municipal or county governments issue land granting announcements and select land users based on the submitted tenders from potential buyers according to a set of criteria. Land granting through auction means that potential buyers openly bid for the land at a certain place and certain time, and the highest bidder gets the land. Land granting through listing means that, following a period of open submission of bids, land granting agents select the land users according to the bid prices by the closing date of the bidding period.

5. For land granted through TAL, the authorities usually set a floor price based on development cost and/or appraisal value. If the bidding price is below the floor price, the authorities would not grant the land but retain it for future granting instead.

6. The compensation package is determined through negotiation between the implementation agents of expropriation and the villages and farmers whose land is intended to be expropriated. The compensation of rural-built land consists of the replacement value of the house and the locational value of the land. The value of the resettlement houses is determined according to and simultaneously with the compensation standards; if the compensation is high and close to the free market value, the price of the resettlement house will also be high, and vice versa. The discount of the resettlement house is usually progressive with the size of the demolished house and regressive with the floor area that the farmers intended to buy. The price of the resettlement house the affected farmer needs to pay is usually lower than the cost of development; the value difference between development cost and discounted price is usually taken into account in the cost of primary land development in Beijing. The value difference between the discounted price offered to affected farmers and the market price of comparable commodity houses is the implicit compensation to the farmers, which is usually encumbered by land developers. That happens because, in order to incentivize developers to participate in the project, local governments usually grant them a plot of the land for commodity housing or commercial development; the profit from this commodity housing or commercial development will cover the loss of resettlement house development. Therefore, although our measurement of the land wealth received by affected farmers may be lower than the actual magnitude in some cases, it is arguably the most accurate measurement so far.

7. Land-related taxes and fees are taken as development costs to be recouped from future land users so that local governments can avoid revenue loss.

8. Data source: http://www.bjstats.gov.cn/

9. There were 5.53 ha of expropriated land left without further information; therefore, we excluded them from the calculation of costs and prices. This omission may be because the proposed expropriation area is not the final actual expropriated area.

10. Data related to land expropriation are collected from project implementation proposals, including expropriated land area, land-use types, compensation and various types of budget. Therefore, they are not necessarily the actual data. An independent cost item is also budgeted for unanticipated events. Data related to land granting are collected from land granting records, including the developable land area, accessary land area, planned land-use types, planned FAR. The audited costs of LEPD and the land granting price are the actual data.