Land Value Recapture in Italy : A Detailed History, TDR Practices and Case Studies

Land value recapture has always been a controversial subject. In many countries there have been and there are different experiences that deal with the common objective of sharing with the wider community the benefits that derive from the development of land. Different approaches are the consequence of diverse private property regimes, planning legislations and histories of land ownership. However different the approach, the objective remains unchanged and prompts new research and practices. Approaches vary from the imposition of taxes on the increase in the value of land to compulsory acquisition at existing use value, transfer of development rights involving case-by-case negotiation, and in-kind contributions. The importance of capturing at least a part of the increase in the value of land, also known as betterment value, has been discussed within planning literature with examples from all across the world (Alterman, 2010). Several expressions exist within the literature to refer to the increase in the value of land caused by government action. Betterment value, planning gain, windfall gain, unearned increment are some of the various terms used for expressing the same meaning (Bowers, 1992; Healey et al., 1995). The issue that underpins the need to recover part of increases in land value has to do with the necessary condition to make developers and landowners contribute to the construction of the public parts of the city and share with the wider community part of the unearned increment which has accrued to them. Hans Bernoulli (1946) in his major volume “Die Stadt und ihr Boden - Towns and the Land” pointed out the importance of public ownership of land for the implementation of plans and generally for the realisation of a good land policy. In the preface to the Italian translation of Bernoulli’s work, Luigi Dodi (1951) wrote: “the awkward question of urban land [...] is at the basis of nearly all of the current planning issues and [...] affects the possibility of bringing about the ideal city”. Further, Bernoulli wrote: “whoever talks or writes about Planning often easily skips this prejudicial problem and prefers looking at the most attractive part of urban design.” A short definition of betterment is thus deemed as essential for the purpose of this work and would help understand the differences that exist between betterment value and the broader concept of urban rent. The Uthwatt Committee report (1942 para. 260) defined betterment as: “any increase in the value of land (including the buildings thereon) arising from central or local government action, whether positive e.g. by the execution of public works or improvement, or negative, e.g. by the imposition of restrictions on other land.” For the purpose of this work, betterment value can be described as the increase in the value of land that is determined by changes in the planning regime. This means that it is concerned with the rise in the value of land caused by the granting of planning permission for a higher value use (Healey et al., 1995). Thus, the focus is on betterment produced by the planning activity and decisions and specifically by the granting of planning permission. Other forms of betterment deriving for example from infrastructure improvements, provision of new services and all the other factors which determine the value of a piece of land (e.g. accessibility) are not taken into consideration in this work. To express how, in general, the concept of the increase in the value of land is perceived and its impact on the society as a whole it may be useful to report the words of Campos Venuti in Oliva (2010a:15) who stated: “land rent represents the main pathological factor of the real estate regime and it is responsible for all its perverse effects on cities, (...) the environment and landscape.” These effects involve: speculation; overdevelopment and reduction of resources available for other kind of investments in other sectors of the economy; the need to provide for more infrastructure in general (e.g. roads, trains, buses and public services and facilities); increased stresses on individuals who have to travel longer to and from work, and so on. Campos Venuti referred to the increase in land value in general, however this increase is produced, and does not distinguish between the causes which determine it. Saraceno, as reported in Oliva (2010a: 21), describes the phenomenon very clearly: : “there is no doubt (...) that landowners who benefit from the increase in the value of land cannot be considered among the production factors; the attribution of such increment to landowners would result in taking away a share of national income from the categories which produced it.” Such increments accrued to landowners are not the fruit of personal investment or generally the consequence of individual efforts nor the result of some specific public investment. It is more the product of the expansion of the city at its edges and of an increase in economic activity, and it is the existence of the society itself, organised as a community, which is the reason why permissions for development projects and development control are needed. If a community is not able to capture betterment it may overall under-invest in new infrastructure or even decide to refuse granting planning permission which would result in the entire society being worse off (Bowers, 1992). Thus, the importance of collecting betterment derives from ethical as well as economic and practical issues. It is argued that the community which has produced betterment can justly claim it back; and a developer who has benefited from the granting of planning permission or from some form of public improvement and investment should be taxed in order to contribute to the costs borne by the local authority, which represents the community interest (Camagni, year unknown). Nevertheless, the distinction between betterment value due to the granting of planning permission and betterment as resulting from some public investment, e.g. a transport infrastructure or a school, is not at all straightforward. This makes it rather complex to collect betterment resulting from planning permission only.