Land Value Capture: The San Francisco case

Land Value Capture for
Affordable Housing
Nico Calavita, Professor Emeritus
San Diego State University
Solutions 2013 National Conference
on State and Local Housing Policy
Land Value (Re)Capture
What is Land Value Capture
How It Works
Negotiation-Based Case Study: Santa
• Plan-Based Case Study: The San Francisco
Eastern Neighborhoods Plan
Land Value Capture
Government actions (value creation)
Increases in land value
Community benefits (value capture)
Government actions that increase land values
include (Value creation):
Construction of infrastructure and public
Value capture:
Special-Assessment Financing
2) Plan changes/upzonings (entitlements)
Value capture:
Community Benefits
So, how do we capture, at least a portion,
of this increase?
At the time of:
1) a plan change (the approval of a specific plan, for
2) a rezoning/upzoning;
the locality requires/negotiates:
Public/community benefits (value capture)
Such as…
Possible community benefits (Santa Monica)
Affordable/workforce housing
GHG Emission and congestion reduction
Social, cultural & educational facilities
Community Physical Improvements
(Enhanced open space and
streetscape/ quality pedestrian & biking
 Historic preservation
Where did the idea of Land Value Recapture
come from?
Henry George
Most famous work:
Progress and Poverty
Cause of poverty: Land Rent
Proponent of Land Value
Taxation (Single tax)
John Stuart Mill (Unearned
increments in land value)
World wide success
Implementation of land value taxation has not been easy
One example: Great Britain – Tortured history
End of 19th century: Concerns about “Unearned increments in
land value”
1909 first planning legislation: Tax 100% of “Betterment value”
It was the start of attempts to tackle what proved to
be an extraordinarily intractable problem
Great Britain (continued)
• 1970s –Planning agreements & “planning gain”
1980s – Affordable housing added to the package of
benefits through informal negotiations
Sect. 106 of the 1990 Town and Country Planning Act: General right
of localities to require financial contributions toward the mitigation
of the costs of development, plus affordable housing
Shift from a tax on land to the extraction of
the profits of development
Who pays? Great Britain (continued)
“S106 aims to ensure the transfer of planning
gain, or betterment, from the landowner to
the local authority via the developer.” (Sarah
Monk. 2010. “Affordable housing through the planning system:
The role of Section 106,” in Inclusionary Housing in International
• The price of the land is enhanced by the
planning permission
• But reduced by the S106 commitment
• The landowner still receives a higher price
for the land
Other countries?
• Europe – Similarly to G.B., shift to the
recapture of land values “through the
planning system”
• South America. In some countries, such as
Brasil, zoning is for sale
“We actually do a lot of value capture in the
U.S., we just don’t use the term,” Gregory K.
Ingram, President of the Lincoln Land Institute
(quoted in Mark Bergen’s “Money Grab: How Can Cities
Recapture Investment in Public Infrastructure?” In Forefront,
published by Next American City on line)
Development Impact Fees, Commercial (JobHousing) Linkage Fees, Inclusionary Housing
Density Bonuses?
If that it is true, why don’t we use the terms:
“Land Value Recapture”? Or “Betterment”? Or
“Unearned Increments”? Or “Planning Gain”?
(In Spanish: “Plusvalias”)
(In Italian: “Plusvalore”)
• Planning culture
• American pragmatism
How does land value capture work?
Two typical approaches:
1) Rezoning/Upzoning --- Negotiation based
(development agreements)
Disadvantages-• Possible lack of expertise of planners
• Transparency & accountability problems with
locality/developers negotiations
Possible Advantages-Flexibility – You can get more
Localities with negotiation-based land value capture
Vancouver - Santa Monica
Long-standing tradition of community benefits
achieved through development agreements
They include:
• Parks & park improvements
• Child care centers
• Community health access
Santa Monica Land Use and Circulation Element
(LUCE) - Adopted in 2010
Fundamental goal: Additional development and increased
densities must contribute to, not detract, from the community
Focus development on the boulevards to maximize high
frequency transit and proximity of residents and workers to
daily needs
In exchange for allowing incremental increases (two tiers
above a base height of 32 feet) the developer must provide
community benefits
How “much” ($) community benefits?
• Every project is required to produce an
economic analysis of the “enhanced value”
the project is creating as a result of greater
height and FAR, with pro formas that identify
the “internal rate of return”
• The developer prepares the economic
analysis. Peer reviewed by city’s consultants
23 development agreements – Most
projects located downtown and the
Bergamotte (former industrial) area
• The “enhanced value” analyses become the
basis for the determination of the appropriate
level of community benefits
• Largely based on five priority areas and
extensive community participation process
Possible community benefits (Santa Monica)
Affordable/workforce housing
GHG Emission and congestion reduction
Social, cultural & educational facilities
Community Physical Improvements
(Enhanced open space and
streetscape/ quality pedestrian & biking
 Historic preservation
Problems with development
agreements in Santa Monica
• Santa Monica is working now on an
additional alternative (conditional use
permit/adjudicative discretionary
approval) that would tie increased
densities to a point system
How does land value capture work?
2) Plan based – Specific Plans/Community
Plans, etc.
Advantages –
• Transparency & accountability
• Faster processing of projects
• Minimizes potential extraction
Plan-based Land Value Recapture
The Eastern Neighborhoods Plan
in San Francisco
San Francisco
A culture of planning exactions/linkages (based on
what is usually a very strong market – per square
• Commercial Linkage Fee ($20 Office, $18
Entertainment, $15 Hotel, $18 Retail, etc.)
• Transit Impact Fee (non residential: $10)
• Child Care Fees ($1)
• Open Space Fees
• Arts fees (1 percent of construction costs)
• Inclusionary requirements (15 to 20 percent;
$250,000 in-lieu-fee for a 1-bedroom unit)
Origins of ENP: Rapid
Gentrification/Displacement in the SOMA
• Dot-com boom of the late 1990s
• Super-gentrification in traditional working class
• Wholesale displacement of families and businesses,
• Aided by city policies that exempted “live-work” spaces
in warehouses and industrial structures from
processing and fee requirements
Existing infrastructure of
community-based organizations to build on
Ten year campaign: Whose city?
• Struggle for residents and workers to remain
in their neighborhood
• Establishment of the Mission AntiDisplacement Coalition (MAC)
• We don’t want to react to a city’s prepared
• Strategy: From trying to stop what the
neighborhood did not want to “What we
want” and “How do we get it”
The People’s Plan for Jobs,
Housing, and Community
• Now what? (The People’s
Plan meets the Official
between the City and
MAC): The result was the:
The 2008 Eastern
Neighborhood Plan
• Appropriate political juncture (Willie Brown-District Elections)
• Planning Department staff in charge sympathetic
San Francisco Eastern Neighborhoods Plan
Eastern Neighborhoods
The EN Plan ties increased allowable intensities of development to higher
fees Three tiers:
• Tier 1: Increase in height of eight feet or less
• Tier 2: Increase in height of nine to 28 feet
• Tier 3: Increase in height of 29 feet or more
Fee levels
Tier Residential
• 1
• 2
• 3
In formerly industrial zones the use change to different types of mixed use
requires higher IH requirements
Height Districts
Does it work always and everywhere?
No, it needs places and times with a
healthy market
• But how do cities, land owners and developers
know what level of value capture is feasible?
• “Community benefits cannot be calculated or
negotiated without using development economics
and real estate analysis, and the question is not
whether but how” (Cameron Gray, former Director
of Vancouver Housing Center)
How are community benefits through value capture
different from Development Impact Fees
(DIFs)/Inclusionary/Commercial Linkage Fees?
1. Community benefits are additional benefits
2. Community benefit levels are established at the
time of plan changes/upzonings. DIFs, IH, etc. are
due at the time of subdivision approval or later
Developers have paid the rezoned value for the land
Issues with LVR
• Faced with reduced land prices, will
landowners keep land from the market?
• How do you value land and community
• What does the desire to engage in LVR exactly

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