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David Vetter (Ph.D., Universidad de California) ha trabajado por más de cuatro décadas en temas de financiamiento y economía urbana en América Latina. He ejercido la docencia y dirigido investigaciones urbanas en Brasil durante 17 años en el Instituto Brasileño de Geografía y Estadísticas (IBGE), el Programa de Ingeniería para Graduados (COPPE), el Instituto de Planificación y Estudios Urbanos y Regionales (IPPUR) y la Fundación Getúlio Vargas. En 1990 se incorporó al Banco Mundial, donde desarrolló programas de inversión y reformas subnacionales para Argentina, Brasil, Chile y Ecuador. A fin de fomentar una mayor participación del sector privado en el financiamiento urbano, ingresó en Dexia Credit Local en 1998 en calidad de vicepresidente, y estableció programas de préstamo en Argentina, Brasil y México. Desde su regreso a Brasil en 2004, ha trabajado como consultor e investigador para varios clientes, como el Banco Interamericano de Desarrollo y el Lincoln Institute of Land Policy, donde ha sido visiting fellow desde julio de 2014. Ha escrito recientemente dos artículos para Land Lines: “Residential Wealth Distribution in Rio de Janeiro” (Distribución de la riqueza residencial en Rio de Janeiro, enero de 2014) y “Land-Based Financing for Brazil’s Municipalities” (Financiamiento basado en el suelo para los municipios brasileños, octubre de 2011).
Land Lines: ¿Cómo se involucró en el Instituto Lincoln?
David Vetter: Por muchos años, ya sea en mis trabajos de investigación y consultoría, o en el Banco Mundial o el sector privado, encontré con frecuencia información sólida del Instituto Lincoln que me ayudó. Más recientemente, el Instituto financió mis investigaciones sobre riqueza residencial y finanzas municipales en Brasil.
Land Lines: ¿Qué investigará como visting fellow y por qué?
David Vetter: Me concentraré en estrategias de financiamiento de infraestructura urbana en Brasil. Como otros países latinoamericanos, Brasil necesita realizar inversiones sustanciales en forma continua para poder mantenerse al día con el rápido crecimiento de nuevos hogares y reducir la cantidad de hogares que no tienen acceso a infraestructura urbana. Entre 2000 y 2010, la cantidad de hogares en Brasil creció en más de 12 millones, o sea, casi 7 veces más que los 1,8 millones de hogares del área metropolitana de Boston-Cambridge en 2010. Dada esta presión demográfica, la cantidad absoluta de hogares de Brasil sin acceso a infraestructura urbana siguió siendo alta en 2010, a pesar de las considerables inversiones efectuadas en la década anterior. Y los déficits de algunos tipos de infraestructura en realidad han aumentado. Entre 2000 y 2010, por ejemplo, la cantidad de hogares urbanos en Brasil sin un sistema adecuado de alcantarillado creció aproximadamente en 2 millones, que es más que la cantidad total de unidades de vivienda en el área metropolitana de Boston en 2010.
El Ministerio de las Ciudades de Brasil estimó que los sistemas de sanidad básicos (agua potable, aguas residuales, residuos sólidos, y alcantarillado) costarían más de US$80.000 millones sólo entre 2014 y 2018. Las carreteras, pavimentación de calles, seguridad pública, salud y educación demandan inversiones de similar magnitud, y estos montos frecuentemente exceden con mucho las fuentes de financiamiento existentes.
Land Lines: ¿Cómo se podría recuperar las plusvalías de estas inversiones en infraestructura para poder financiarlas?
David Vetter: Los beneficios de las inversiones en infraestructura se capitalizan en los precios del suelo y los edificios. Los foros del Instituto Lincoln sobre instrumentos notables de intervención urbana de 2013 demostraron que muchos gobiernos de América Latina están utilizando eficazmente una amplia variedad de herramientas de recuperación de las plusvalías creadas por sus inversiones de infraestructura, como puede comprobarse en el minucioso repaso de la bibliografía realizado por Martim O. Smolka (2013): venta de derechos de desarrollo; contribución por mejoras para pavimentación de calles, alcantarillado y otras mejoras; y alianzas público-privadas (APP) de recuperación de plusvalías, como en el caso de la estructuración financiera de la renovación masiva del puerto de Rio (Porto Maravilha). También sería útil contar con una cobranza más efectiva del impuesto sobre la propiedad y de los impuestos de transmisión de propiedades.
La recuperación de plusvalías puede generar una realimentación positiva, creando un círculo virtuoso que genera recursos adicionales para más inversiones. Por ejemplo, el aumento del valor generado por las inversiones aumentaría la base gravable del impuesto sobre la propiedad, suponiendo que las valuaciones se mantengan actualizadas, y los ingresos resultantes se podrían usar para financiar otras obras.
Land Lines: ¿Hasta qué punto podrían las municipalidades de Brasil aumentar la recuperación de plusvalías?
David Vetter: Según la teoría económica, el valor generado por las inversiones de infraestructura debería ser aproximadamente igual a su costo. Como la oferta de infraestructura parecería ser poco elástica, debido a las restricciones de financiamiento público, el valor de mercado generado podría exceder en realidad el costo de las inversiones.
Por ejemplo, las municipalidades de Brasil invirtieron más de US$82.000 millones en infraestructura y equipos entre 2006 y 2010 (alrededor de US$16.000 millones por año). Pero solamente en 2010, el gobierno nacional y los gobiernos estatales invirtieron también más de US$50.000 millones. La recuperación de aunque sea un pequeño porcentaje de las plusvalías creadas podría proporcionar recursos de inversión significativos. Por ejemplo, la Región Metropolitana de Rio de Janeiro está recibiendo inversiones de infraestructura masivas del gobierno nacional, estatal y municipal, y también de socios privados, para varios proyectos como el cinturón vial Arco Metropolitano y una nueva línea de metro. Algunas son concesiones o APP que reciben un financiamiento significativo a tasas de interés inferiores a las del mercado por parte de los bancos de desarrollo públicos (BNDES y CAIXA).
Land Lines: ¿Qué papel debería cumplir la recuperación de plusvalías en la política de viviendas?
David Vetter: La inversión en infraestructura crea riqueza residencial, ya que su valor se capitaliza en la venta de viviendas. Las estructuras residenciales representan alrededor de un tercio del capital fijo neto de Brasil en las cuentas de riqueza nacional, como es habitual en otros países del mundo. Dada su importancia, nos preguntamos en nuestro trabajo sobre la Región Metropolitana de Rio de Janeiro: ¿Qué genera la riqueza residencial? ¿Cuánta riqueza residencial existe? ¿Quién la tiene? Descubrimos que hay ganadores y perdedores. Por ejemplo, el aumento en el valor generado por la inversión en infraestructura incrementa la riqueza residencial de los propietarios de vivienda, pero también aumenta los precios para los inquilinos en el área beneficiada y los costos de vivienda para personas que se quieren reubicar en esa zona.
Land Lines: ¿Una política de vivienda enfocada a la generación de riqueza residencial y la equidad de su distribución sería muy distinta de la mayoría de los programas de viviendas de bajos ingresos?
David Vetter: Sería bastante distinta. La mayoría de los programas de viviendas de bajos ingresos reduce sus costos construyendo en suelo de bajo valor. El precio del suelo es bajo cuando no tiene acceso a empleo y servicios urbanos básicos, así que las unidades de vivienda social frecuentemente están en estas áreas carentes de servicios. Una política de vivienda enfocada en la riqueza residencial enfatizaría el acceso a empleo y servicios básicos, que son los determinantes clave del valor de una vivienda.
Land Lines: ¿Pero no es esto una utopía? ¿Cómo podríamos recuperar las plusvalías para ayudar a aumentar la riqueza residencial de familias de bajos ingresos?
David Vetter: Sin duda el desafío es grande. Pero la recuperación de plusvalías de familias de mayores ingresos podría subsidiar a las de ingresos menores, sobre todo a los inquilinos que se quieran reubicar en zonas que se benefician de inversiones en infraestructura.
Le voy a dar un ejemplo. La cantidad de hogares en la Región Metropolitana de Rio de Janeiro aumentó en más de 600.000 entre 2000 y 2010 (esto es el doble de la cantidad de hogares en Washington, DC en 2010). Como consecuencia, los déficits de infraestructura urbana de la región siguen siendo altos a pesar de la gran cantidad de inversiones realizadas. Un reciente estudio de impacto del nuevo cinturón vial de Rio de Janeiro (Pontual et al., 2011) exploró la posibilidad de desarrollar nuevos vecindarios completos, socialmente integrados y con todos los servicios de infraestructura, para albergar a la enorme cantidad de hogares que se esperan a lo largo del cinturón. Este desarrollo podría financiarse en parte con la recuperación de las plusvalías generadas por las inversiones masivas en infraestructura planificadas y en proceso de implementación. Parte de las plusvalías recuperadas de familias de mayores ingresos se podría usar para financiar a las familias de menores ingresos.
El estudio de impacto analizó cuál sería la mejor ubicación para estos vecindarios. ¿Qué instrumentos de recuperación de plusvalías funcionarían mejor en este caso? Es interesante señalar que el sector privado ya está desarrollando lo que se describen como “barrios verdes” en las regiones aledañas al Río metropolitano. ¿Tiene sentido planificar proyectos de vivienda individuales cuando se va a producir un aumento tan grande en la cantidad de hogares?
Land Lines: ¿Las familias de bajos ingresos estarían en condiciones de pagar por la infraestructura?
David Vetter: En América Latina, los criterios de elegibilidad de programas de recuperación de plusvalías casi siempre incluyen una prueba de capacidad de pago. Por supuesto, la recuperación de plusvalías sólo se debería aplicar a familias que estén en condiciones de pagarla.
Land Lines: ¿Cómo respondería a los profesionales de Brasil dedicados a temas urbanos que argumentan que es imposible recuperar las plusvalías por razones legales o culturales?
David Vetter: Si bien la constitución de Brasil concede amplios poderes para recuperar plusvalías, sólo las municipalidades más grandes, como São Paulo y Rio de Janeiro, parecen usarlos. Otros gobiernos subnacionales y nacionales dedican mucho menos esfuerzo para recuperar las plusvalías de sus considerables inversiones públicas.
Ello probablemente se deba, en parte, a resistencia de aquellos que creen que la recuperación de plusvalía es legalmente imposible. Aun cuando la contribución por mejoras encuentra una resistencia similar, Silva y Pereira (2013) estiman que los ingresos totales por dicho concepto superaron los US$300 millones en las municipalidades de São Paulo, Paraná y Santa Catarina entre 2000 y 2010, a pesar de que relativamente pocas municipalidades utilizaron este instrumento. Esta cantidad no es muy significativa para estados de este tamaño, pero demuestra que las contribuciones por mejoras son viables.
Una de las razones por las que las contribuciones por mejoras fueron exitosas en Paraná y Santa Catarina fue que el Banco Mundial y el Banco Interamericano de Desarrollo exigieron medidas de recuperación de costos en sus proyectos de desarrollo municipal desde la década de 1980. Este éxito respalda la idea de que los incentivos de un programa nacional o estatal pueden fomentar el uso de la recuperación de plusvalías a nivel municipal.
Además, hay muchos casos de recuperación de plusvalías que pasan desapercibidos. En la ciudad de Rio de Janeiro, por ejemplo, la venta de suelo excedente del sistema de metro existente se usó parcialmente para financiar una nueva línea completa, y los desarrolladores instalan agua corriente y alcantarillado como condición para la aprobación de un proyecto en un vecindario de mayores ingresos, Barra de Tijuca.
Land Lines: ¿De qué manera podrían fomentar el uso de la recuperación de plusvalías los programas gubernamentales nacionales y estatales?
David Vetter: Una de las maneras sería proporcionar acceso a financiamiento como un incentivo para que las municipalidades hagan uso de la recuperación de plusvalías. El banco de desarrollo de Ecuador (Banco del Estado) utiliza este tipo de acceso para alentar a las municipalidades a usar las contribuciones por mejoras. El acceso a financiamiento se podría usar para implementar una gama más amplia de instrumentos de recuperación de plusvalías, como la venta de derechos de desarrollo y aranceles de impacto, además de las contribuciones por mejoras.
Land Lines: ¿Cómo puede estimular el Instituto Lincoln el financiamiento de infraestructura por medio de la recuperación de plusvalías?
David Vetter: Lincoln ha hecho un trabajo excelente para generar el conocimiento de la recuperación de plusvalías, por medio de investigaciones, foros, programas de capacitación y publicaciones. El Instituto podría ampliar su trabajo sobresaliente en recuperación de plusvalías en la región por medio de más foros y publicaciones, y asesorando en forma directa a los dirigentes políticos en lo que al diseño y ejecución de programas se refiere.
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Inclusionary Housing: Creating and Maintaining Equitable Communities
By Rick Jacobus
From Seattle to San Francisco to Chicago to Portland, Maine, debates are raging over inclusionary housing—the requirement that developers reserve a percentage of new residential development as affordable. Some say the policy discourages development—or, in an argument that could reach the Supreme Court, that it threatens property rights. Meanwhile, New York City Mayor Bill de Blasio faces dual criticisms that his inclusionary housing proposal goes too far, or not far enough.
This new report by Rick Jacobus, Inclusionary Housing: Creating and Maintaining Equitable Communities, separates myth from fact, charting a path forward for policy makers and showing how inclusionary housing can be used effectively to reduce economic segregation.
“In hot-market cities, skyrocketing housing prices push middle-class and low-income residents far away from well-paying jobs, reliable transportation, good schools, and safe neighborhoods,” says Lincoln Institute President and CEO George W. McCarthy. “Inclusionary housing alone will not solve our housing crisis, but it is one of the few bulwarks we have against the effects of gentrification—and only if we preserve the units that we work so hard to create.”
Through a review of the literature and case studies, author Rick Jacobus of Street Level Urban Impact Advisors offers solutions for overcoming the major political, technical, legal, and practical barriers to successful inclusionary housing programs.
“More than 500 communities have used inclusionary housing policies to help maintain the vibrancy and diversity of neighborhoods in transition, and we’ve learned much along the way,” Jacobus says. “Research shows that if programs are thoughtfully designed and implemented, they can be a valuable tool at a time when affordable housing is desperately needed.”
In particular, the report addresses the concern that inclusionary housing can impede new construction by making development less profitable. According to the report, many cities have avoided such impacts by allowing flexibility in how developers comply and offering incentives, such as the ability to build at greater densities.
Other key findings and recommendations in the report include:
The Lincoln Institute has for many years developed strategies to support permanently affordable housing, including the establishment of community land trusts and other shared-equity arrangements. The effort is in recognition of the ongoing housing affordability crisis in many cities. Stratospheric rents and home prices in hot real estate markets are displacing longtime residents and changing the character of cities and neighborhoods.
To order, visit http://www.lincolninst.edu/pubs/3583_Inclusionary-Housing.
Rick Jacobus, a national expert in inclusionary housing and affordable home ownership, is the principal of Street Level Urban Impact Advisors (StreetLevelAdvisors.com). He was the founder of Cornerstone Partnership, and he currently serves as a strategic advisor to Cornerstone.
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Although many governments in Latin America have improved the process of legalizing peripheral settlements, recognized the rights of housing, and acknowledged the United Nations’ position on evictions as violations of fundamental human rights, urban displacement continues. Forced evictions bring devastation to families and neighborhoods and hamper efforts to improve large areas of the city. By perpetuating a climate of fear and uncertainty, the threat of eviction makes people reluctant to invest labor and resources in their homes and barrios.
Evictions arise from the prevalence of illegal housing in Latin America, which is caused by rapid growth, the limited financial resources of the poor and municipal governments alike, and unclear or contested titles. Given this situation, the urban poor employ a number of survival mechanisms, including illegal subdivisions, invasions, and do-it-yourself housing, in order to meet their needs for shelter and community.
In the northeastern section of Bogotá, Colombia, known as Chapinero Alto, residents have faced 30 years of displacement and eviction attempts. Many of the families living in this mountainous urban periphery are related to the workers on the great estates that covered the sabana (high plain). As the estates were broken up and sold to make way for urban expansion, the workers were left to live in the hills, which at mid-century were considered worthless to developers.
In the early 1970s, a planned highway project through the area brought a wave of speculation and several eviction attempts. Residents and their allies at universities and religious institutions formed a massive social movement that blocked several evictions but could not halt speculation. When the highway was finally built in the 1980s, only a few families had to move to make way for the road, but another wave of eviction attempts threatened the barrios.
In the early 1990s, residents faced a new threat: sustainable development and claims by both government and private groups that the poor barrios were a threat to the fragile environment. Since then, continued pressure to remove squatters has tested the abilities of residents to defend against eviction. The uncertainty has also discouraged investment by both residents and the city government.
Development Refugees
The causes of evictions are varied, but typically displacement relates directly or indirectly to development. As the availability of serviceable land shrinks, competition and evictions force the residents of such informal housing settlements further into the periphery. In Bogotá, the expansion of the city has made Chapinero Alto one of the most coveted pieces of real estate in the city. The victims of evictions, so-called development refugees, are often accused of standing in the way of progress when they protest. They are rarely offered compensation or allowed to participate in resettlement. In cases of speculation, residents typically have little warning prior to eviction and experience the trauma of forced displacement.
Local governments play a central role in evictions, along with landowners, developers, police and armed forces. Clearing the poor residents from desirable lands not only makes way for luxury development and infrastructure projects but also frees the wealthy from daily contact with them. Governments and developers often cite the beautification and improvement of the city as justification, or claim that social problems proliferate in slums. Governments also increasingly cite environmental protection and sustainable development as justifications for eviction. Government officials and private title-holders hoping to evict squatters have used all of these justifications in their efforts to clear Chapinero Alto of poor barrios.
When families are forced to move, they lose not only their land and houses, but neighborhoods, communities and social networks. The psychological stress caused by months of uncertainty and the health effects alone can be devastating. Children often lose months of school and their parents often travel long distances to get to work. Anthropologists have demonstrated that relationships of mutual aid and social networks are dismantled as populations disperse. These social networks are a critical survival tool for the urban poor who must constantly weather economic fluctuations and uncertainty. Even when families receive compensation for lost homes, these social relations are virtually irreplaceable. Finally, displacement carries a very high risk of impoverishment. This is especially true for those who lack legal title to their land because they generally do not receive compensation.
In 1992, the Bogotá city government evicted a group of 30 families following a violent dispute with the title-holder. The city moved the families to an abandoned school where they lived for several months awaiting public housing promised to them by the mayor. As the months wore on and the promised housing solution evaporated, stress, health problems and lost income and education took their toll on the families. Several of the men left, rumors of domestic violence grew, and social relationships disintegrated. By 1997, the families were scattered around the city in whatever housing they could find.
One of the most distressing consequences of urban displacement is the effect that insecurity of tenure has on all irregular settlements. Whether or not residents are ever evicted, the threat of eviction affects huge areas of developing cities and prevents investment in housing and services that is necessary to solve the problem of slums in the first place. This is one of the reasons why the problem of evictions must be addressed within the framework of human rights; until security of tenure and adequate shelter are fully acknowledged and protected as human rights, the problem of urban displacement will continue.
Evictions and Human Rights
Given the far-reaching social consequences of displacement, it is not surprising that forced evictions entail the violation of a number of human rights. Evictions obviously compromise the right to housing. The right to adequate housing has been made increasing explicit in international law. Article 25 of the United Nations Declaration on Human Rights established the right to housing for the first time in 1948. The Declaration on Social Progress and Development, the Declaration on the Rights of the Child, the Vancouver Declaration on Human Settlement and other conventions all affirm the right to housing. More than 50 constitutions recognize housing as a human right, including the Colombian Constitution of 1991.
In addition to the right to housing, the right to freedom of movement is commonly violated with eviction. When community leaders and protestors are killed or subjected to violence, the right to life and security of the person are denied, as are the right of freedom of expression and association. When children are taken from school, the right to education is affected. When police or military enter homes by force, families lose their rights of privacy. The right to work is one of the most common violations associated with evictions. Finally, the psychological and physical toll wrought by eviction compromises the right to health.
Even where governments have ratified UN conventions on housing rights, evictions often occur. The United Nations, like many other observers, clearly places the responsibility for preventing evictions on the states. The United Nations has declared that when governments fail to ensure the availability of adequate housing, they must not claim that the removal of illegal settlements is consistent with international law. Since virtually all evictions are planned, and since there are a set of internationally recognized conventions in place condemning eviction, such displacements should be guided by social policies and a human rights framework.
Policy Considerations
Based on a review of several studies on eviction and my own research in Bogotá, I suggest a number of ways in which better enforcement of human rights can improve housing policies and prevent violence. The following points should be the focus of policies aimed at eliminating forced evictions.
Only when effective mechanisms for extending tenure rights to the urban poor have been created can the problems associated with forced displacement-violence, impoverishment, stagnated urban development-be adequately addressed. One major way that current human rights guidelines can be improved is to extend the rights to protection from forced eviction and the rights to adequate resettlement. Current guidelines are most effectively enforced in cases of internationally financed development projects, but similar guidelines could be used by states to govern all forms of displacement. By extending human rights guidelines and improving the mechanisms for implementation and enforcement, national and international agencies can better meet the needs of the urban poor.
Margaret Everett is assistant professor of Anthropology and International Studies at Portland State University in Portland, Oregon. Her research for this article was funded in part by the Lincoln Institute. The complete report, “Evictions and Human Rights: An Ethnographic Study of Development and Land Disputes in Bogotá, Colombia,” is posted on the Lincoln Institute website.
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The twenty-first century will witness record growth in the number and distribution of private residential communities. Collectively referred to as common interest communities (CICs) or common interest developments (CIDs), these communities rely on covenants, conditions and restrictions to privately govern and control land use, design decisions, services and social conduct. The communities own, operate and manage the residential property within their boundaries, including open space, parking, recreational facilities and streets. Although CICs historically have been the domain of the affluent, they are now becoming a viable choice for both suburban and urban residential development. Taking the form of condominiums, cooperatives, and single- and multifamily homes, both gated and nongated private communities are spreading among diverse economic and social classes.
A Worldwide Phenomenon
The proliferation of private communities in the United States is causing an unprecedented transition from traditional individual ownership to collective governance of property, signaling a remarkable shift in the American political and economic landscape. This trend establishes a new micro-scale level of governance beneath existing municipal structures, and highlights other tensions between the public and private sectors.
Indeed, the numbers provide a clear indication of this movement’s strength. At the end of the twentieth century, about 47 million Americans lived in condominiums, cooperatives and homeowner associations (HOAs). Growing from only 500 in the 1960s to an estimated 231,000 in 1999, HOAs now comprise almost 15 percent of the national housing stock, with an estimated addition of 8,000 to 10,000 private developments each year. In the 50 largest metropolitan areas, more than half of all new housing is now built under the governance of neighborhood associations. In California—particularly in the Los Angeles and San Diego metropolitan areas—this figure exceeds 60 percent (Treese 1999).
Recent press coverage and research from Europe, Africa, South America and Asia suggest that CICs are rapidly being popularized in other parts of the world as well. Although gated communities are still rare in Britain, former prime minister Margaret Thatcher reportedly moved into such a community in South London. In South Africa, where secure communities were an unavoidable consequence of racism, post-apartheid gated developments are inhabited by all races, and not only by the wealthy. In Saudi Arabia private compounds of linked houses provide extended families with privacy and identity. Those compounds seem to be a reaction to the single residential typology imported from abroad during the country’s modernization period.
Since the economic reforms of the early 1980s, many residential areas in Chinese cities have walls to improve security and define social status. Often these developments are designed by U.S. companies and based on U.S. planning and design standards. Private communities in Southeast Asia, such as in Indonesia, are marketed as places that allow the differentiation of lifestyle and give prestige and security to their inhabitants. In Latin America sprawling gated communities at the metropolitan edges of Santiago, Chile, Bogotá, Colombia, and other cities have become the norm for a growing professional class in need of a secure lifestyle in an environment dominated by social and economic poverty. The deteriorating political and economic state of affairs in Buenos Aires, Argentina, has resulted in situations where developers and private companies provide privatized “public” services that attract large sectors of the population to private developments housing up to half a million people (Environment and Planning B 2002).
Dual Governance, Rules and Outcomes
The spread of CICs in the U.S. is driven by the mutual interests of developers and local governments, including planning officials. Developers benefit because they can maintain profits—despite the high costs of land and infrastructure—by introducing efficient land design schemes and, often, higher densities. Local governments prefer CICs because they privatize infrastructure and reduce public costs. At the same time, consumers see a way to protect their property values through the ability to control their neighborhood character by using compliance and enforcement mechanisms. CICs also provide consumers greater infrastructure options, recreational amenities and community services.
The growing fiscal crisis experienced by many local governments means they are often unable to respond to such traditional community demands as building and maintaining streets, collecting garbage, snowplowing and other services. The establishment of a separate legal mechanism within a private neighborhood association allows collective control over a neighborhood’s common environment and the private provision of common services. Perhaps more important, this trend creates a de facto deregulation of municipal subdivision standards and zoning, because cities and towns allow for a different, more flexible set of standards to be implemented in private developments. Often, the results are innovative spatial and architectural layouts and, sometimes, unusually sensitive environmental design. This shift in neighborhood governance enables a resultant shift in the design of residential developments that heretofore has not been fully appreciated.
A recent nationwide survey of public officials and developers gauges the impacts of subdivision regulations on the design of residential developments and the practices of developers in rapidly growing regions of the country (Ben-Joseph 2003). It assesses attitudes and perceptions and identifies the issues regarding subdivision regulations that members of the housing industry and the regulatory agencies feel are affecting housing development.
Excessive Regulations
As early as 1916 Frederick Law Olmsted, Jr., commented on subdivision standards and regulations.
While such regulations are intended only to guard against the evil results of ignorance and greed on the part of landowners and builders, they also limit and control the operations of those who are neither ignorant nor greedy; and it is clear that the purpose in framing and enforcing them should be to leave open the maximum scope for individual enterprise, initiative and ingenuity that is compatible with adequate protection of the public interests. Such regulations are, and always should be, in a state of flux and adjustment—on the one hand with a view to preventing newly discovered abuses, and on the other hand with a view to opening a wider opportunity of individual discretion at points where the law is found to be unwisely restrictive. (Olmsted 1916, 3)
Indeed, developers in the 2003 survey clearly expressed their frustration with the excessive and often unwarranted nature of physical improvements and standards associated with subdivision development. When asked to indicate which types of requirements present the greatest expense in conforming to regulations, an overwhelming majority (80 percent) pointed to requirements associated with site design. When asked to indicate which specific requirements they perceived as excessive, 52 percent of the respondents indicated those relating to street design and construction, with almost 45 percent indicating land dedication and 43 percent storm sewer systems (underground piping for storm water mitigation). When asked about which physical standards within each category were seen as excessive, those most frequently cited were street widths (75 percent of the respondents), street rights-of-way (73 percent) and requirements of land for open space (73 percent). Most developers also mentioned water and sewer hook-up fees (85–90 percent) and payments in lieu of land dedication (79 percent) as being excessive monetary requirements associated with physical improvements (see Table 1).
While one might expect that developers would criticize regulations as interfering in their business, it is important to note that most respondents were selective in their answers to the survey. Out of 29 requirements listed in Table 1, only 13 were considered excessive by the majority of developers, while 16 others were deemed reasonable. Such results indicate that many developers are tuned in to construction and design performance, and their attitude toward regulation cannot always be assumed to be negative.
Furthermore, the surveyed public officials (town planners and town engineers) often concurred with the developers’ observations. Generally these officials agreed that the regulatory process, such as the enforcement of subdivision regulations, has become more demanding and complex. Over the past five years, for example, 70 percent of the jurisdictions where these public officials work have introduced new requirements, and 57 percent have increased specifications, such as those for setbacks and lot sizes. Only 16 percent of these jurisdictions have decreased their specifications, mostly by reducing street widths.
Relief from Subdivision Regulations
Two-thirds of residential developers consider government regulations, particularly those pertaining to the design and control of subdivisions, the main culprit in prohibiting design innovation and increasing the cost of housing. More specifically, they see these regulations as an impediment to increasing densities, changing housing types, and reconfiguring streets and lots.
One way developers try to relax these regulations is through requests for relief in the form or zoning or design variances. More than half of the surveyed developers (52 percent) had to apply for some sort of relief in at least half of their projects, while 37 percent had to apply in at least three-fourths of their projects. When asked to point to the type of changes they requested, many indicated higher-density single-family projects, more multifamily units, and more varied site and structural plans. The majority of the developers in the survey responded that they sought to increase the density of housing units on their sites, but 72 percent noted that because of existing regulations they had to design lower-density developments than they wanted. Some developers reported that regulations forced them to build in greenfield locations away from major urban areas, where restrictions and abutters’ objections were less onerous.
Although almost all of the public officials (83 percent) reported that their jurisdictions require private developments to follow established subdivision regulations, the enforcement of these standards through the approval process is malleable. In some cases, when such a development is classified as a condominium, which may include attached and/or detached dwelling units, no formal review of street standards is required. In fact, the majority of public officials surveyed (61 percent) indicated that their jurisdictions allow for narrower streets to be constructed within private developments. One respondent stated, “Variances are more easily granted within private road systems since the county will not have any maintenance responsibility or liability.”
The practice of building narrower roadways and offering smaller building setbacks within private subdivisions has become widely accepted over the last decade. A street standards survey completed in 1995 showed that 84 percent of the cities responding allowed for different street standards in such developments, and that they more readily accepted the introduction of different paving materials, changes in street configurations, and the employment of traffic calming devices (Ben-Joseph 1995).
Design Benefits
Both public officials and developers acknowledge the design benefits associated with private subdivisions (see Table 2). Fifty-seven percent of officials indicated that private developments are introducing innovative design in the form of building arrangements and unit clustering. Forty-one percent felt that such developments permit the introduction of housing types not found elsewhere in their communities, and 61 percent indicated that they allow for narrower street standards to be incorporated.
While public officials see the benefits of pushing the design envelope within the confines of the development itself, many are also concerned about the social implications and impacts of these private developments on their surrounding communities. “As a matter of policy,” a survey respondent wrote, “gated private communities are discouraged as they are not in keeping with the urban form, which calls for an interconnecting network of vehicular and pedestrian movement. In addition, the walling of neighborhoods from arterial roadways should be avoided by alternatives such as the placement of other compatible uses along the periphery.”
Both developers and public officials believe that common subdivision regulations restrict alternative solutions, and they see privatizing subdivisions as a vehicle for simplifying the approval process and introducing design innovation. As one of the developers remarked, “Regular subdivision codes don’t allow flexibility. Lots are too standardized and streets use too much area. If I could build narrow streets and small lots, developments controlled by covenants and HOAs will not be necessary.” The ability to provide design choices and efficient layouts and to avoid a lengthy approval process drives both public and private sectors to offer CICs rather than typical subdivisions. Indeed, it seems that in the last decade most innovation in subdivision design has sprung from within the private domain and under the governance of community associations rather than within the public realm through traditional means.
Toward Better Subdivisions
The proliferation of CICs, with their ability to plan, design and govern outside of public boundaries, can be seen as an indicator of a failed public system. When developers and public officials resort to privatization to achieve a more responsive design outcome, and when local jurisdictions acknowledge that privatized communities provide a straightforward way to grant variations and innovation, then something is wrong with the existing parameters of subdivision codes and regulations.
For the last 25 years the subdivision approval process has increased in complexity, in the number of agencies involved, in the number of delays, and in the regular addition of new requirements (Seidel 1978). Both developers and public officials acknowledge that the application for variances and changes in subdivision regulations are lengthy and cumbersome. Therefore, it is not surprising that developers see private projects governed by HOAs as not only responding to market demands and trends, but also introducing planning and design concepts that are often not allowed or are difficult to get authorized under the typical approval process.
CICs are enabling developers to maintain profits and keep the design process relatively open-ended and flexible. The ability to operate outside the regular, common set of subdivision regulations allows developers to offer various design solutions that fit the local setting, the targeted site and the prospective consumers. In some cases these can be attractive, high-density yet affordable single-family developments, and in others low-density, high-end yet ecologically sensitive construction (McKenzie 2003).
The concept of private communities as environmentally sensitive developments may seem a contradiction in terms. However, some of these developments provide examples of responsible construction that minimizes environmental impact while maximizing economic value. In Dewees Island, South Carolina, there are few impervious road surfaces, allowing full restoration of the underground aquifer. Only vegetation indigenous to the local coastal plains is allowed. This xeriscaping approach removes the need for irrigation, fertilizers and pesticides. In addition, homes are required to use water conservation fixtures, reducing water consumption by 60 percent.
Paradoxically, while CICs are often controlled and managed by strict covenants and regulations, their initial design is very much outside the mainstream regulatory apparatus. It is precisely for this reason that they prove to be more flexible in their design solutions and more agreeable to developers, consumers and local governments.
How can such flexibility be integrated in the regular planning process? Can subdivision regulations be made more accommodating and less prescriptive? Will such an approach level the playing field and allow for more housing choices and greater design variety in the public domain? Will such changes promote developers to plan subdivisions endowed with CICs’ design qualities without their restrictive covenants and privatized shared spaces? And conversely, can CICs, while exhibiting great variation in architecture and site design features, be made less controlling in their management policies?
There are many issues raised by the spread of CICs, but none is more important than the realization that public policy and subdivision regulations must allow and promote more variety in housing styles and development options. Consumers should not be forced into CICs because they are the only type of development that offers a lively choice of features. CICs should be seen as a catalyst to change subdivision standards and regulations and as a vehicle to create a bridge between public officials and developers. Through the use of CICs developers are not only able to circumvent existing regulations, lower development costs and in some cases produce quite innovative community design solution, but also enable jurisdictions to secure new taxpayers with less public expenditure.
Not all CICs are created equal, and many are far from perfect. But, in terms of design efficiency, utilization of space, and integration of social and environmental amenities, private communities illustrate the shortcomings of many standards applied to typical subdivisions.
References
Ben-Joseph, Eran. 1995. Residential street standards and neighborhood traffic control: A survey of cities’ practices and public officials’ attitudes. Berkeley: Institute of Transportation Studies, University of California at Berkeley.
———. 2003. Subdivision regulations—Practices and attitudes: A survey of public officials and developers in the nation’s fastest growing single-family housing markets. Working paper. Cambridge, MA: Lincoln Institute of Land Policy.
Environment and Planning B: Planning and Design. 2002. Theme issue: The global spread of gated communities 29(3).
McKenzie, Evan. 2003. Common-interest housing in the communities of tomorrow. Housing Policy Debate 14(1/2):203–234.
Olmsted, Frederick L., Jr. 1916. Basic principles of city planning. In City planning: A series of papers presenting the essential elements of a city plan, John Nolen, ed., 1–18. New York: D. Appleton and Company.
Seidel, S. 1978. Housing costs and government regulations: Confronting the regulatory maze. New Brunswick: Center for Urban Policy Research, Rutgers, The State University of New Jersey.
Treese, Clifford. 1999. Community associations factbook. Alexandria, VA: Community Associations Institute.
Eran Ben-Joseph is associate professor of landscape architecture and planning in the Department of Urban Studies and Planning at Massachusetts Institute of Technology, Cambridge, MA. This article is based in part on his survey and research that were supported by the Lincoln Institute.
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Emerging concerns about climate change impacts along with changing preferences for housing options are shaping the debate over growth patterns and sustainability. Climate modeling experts expect Arizona’s Sun Corridor to become hotter, drier, and more prone to extreme weather events. In a region where summer temperatures top 110°, annual precipitation is only 9 to 10 inches, and flood events already can be extreme, adaptation to and mitigation of climate change impacts will be of paramount importance. The response will require significantly changing prevalent land use planning and development patterns in the region.
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How do the perceptions of informal settlement dwellers on tenure security translate into investment in housing improvement? Is a property title necessary to establish security or increase investment? And how are income and credit related to investment? Does the average dweller actually aspire to legalization of tenure, and if so, what is expected? Based on research conducted in two land invasions in Buenos Aires, Argentina, this article addresses these questions, focusing on two issues in particular: the concept of tenure security and the empirical measurement of perceptions of security related to investment in housing improvement (Van Gelder 2009b).
Tenure Security as a Tripartite Concept
In the face of rapidly increasing urban informality in the 1970s, organizations such as the World Bank started experimenting with programs that provided basic services to settlements and granted property titles to dwellers. The assumption was that with secure tenure dwellers would mobilize resources for housing construction more efficiently than they would under public housing programs. Self-help housing, thus, was viewed as a source of economic security and upward social mobility.
In the early 1990s, the economic dimensions of tenure legalization took on new importance in some policy circles (Bromley 1990; World Bank 1993). The mere provision of private property rights was believed to be both a sufficient and necessary condition for settlement development. It was assumed that by providing both the incentive to invest and the possibility to do so by making formal credit accessible, property rights would function as leverage for development.
Critics of this idea argued that, with respect to establishing tenure security and investment, one could better focus on the actual situation on the ground. Factors such as the official recognition of a settlement, introduction of infrastructure and services, and other factors that could strengthen de facto security of tenure were considered more fundamental than holding a legal document for a plot (e.g., Gilbert 2002).
A third point of view on investment in housing claims that security as perceived by the dwellers is the most important factor. Rather than legal security, as embodied by titling, perception is the actual driving mechanism behind investment. It is argued that residents invest in their dwellings regardless of legal status, as long as they think they will not be evicted and will be allowed by the authorities to remain in their homes (Broegaard 2005; Varley 1987).
The concept of tenure security thus can be viewed in three different ways: as a legal construct that often takes the form of title to property; as de facto security based on the actual situation; and as it is perceived by dwellers. However, these views are often confused or simply equated in the research literature and by policy makers, so it is important to distinguish among them in order to answer the questions posed earlier.
Legal tenure security is a formal concept that refers to authoritative documents that identify the owner of an asset recognized by state power, but de facto and perceived tenure security are empirical concepts. To understand the de facto situation, we need to study the facts on the ground and answer such questions as: Have forced evictions been rare or frequent occurrences in a certain city or area? Has the general attitude towards illegal occupation by authorities been lenient or strict? Perceived tenure security, on the other hand, resides in the mind of the dweller, and its measurement requires fine-tuned methods.
The different types of tenure security may overlap. For example, having a title may imply that a dweller also has de facto security and he may perceive his situation to be secure, but there is no necessary connection among these types. Property rights do not always have a bearing on any kind of empirical fact, nor do they have to be recognized as something meaningful in the eyes of dwellers (Van Gelder 2010). Rather, cities with extensive informality are characterized precisely by an absence of such correlations.
One problem with the titling approach is that it equates property rights with tenure security. This makes sense in situations where the facts on the ground reflect the norms of the legal system, but not necessarily when this is not the case. Furthermore, it is important to remember that if tenure security, whether legal or de facto in nature, influences investment, it must operate through psychological pathways.
The Psychological Side of Tenure Security
The literature reveals three critical issues with respect to measuring tenure security. First, whether it is considered legal, de facto, or perceived, tenure security is often seen as a yes–no issue; either you have it or you do not. Second, and related to the first issue, studies only rarely provide an indication of the degree to which tenure security contributes to (more) investment in housing, compared to other factors likely to influence investment, such as income level or the availability of credit. Third, perceived tenure security is nearly always operationalized as a dweller’s perceived probability of eviction.
These three issues expose a number of important limitations related to each point. First, the idea of viewing tenure security as a dichotomy does not fit the reality of developing countries, where tenure security is better conceived as a matter of degree. Most low-income settlements fall somewhere between being completely insecure and entirely secure. Second, to understand the strength of tenure security as a factor influencing investment, this relationship needs to be quantified and examined along with other factors likely to influence investment, such as household income.
With regard to the third point, social psychological research increasingly shows that people’s decisions are often influenced by what they feel about a situation, instead of or in addition to how they think about it (Hsee and Rottenstreich 2004; Kahneman 2003; Van Gelder, De Vries, and Van der Pligt 2009). These insights can be applied to the study of informal housing if we consider a dweller’s investment as a form of decision making under uncertainty. That is, besides operationalizing perceived security only as the perceived probability of eviction, which refers to a cognitive or thinking state, we can also examine the feelings or worry, insecurity, and fear that dwellers experience. We term this component of tenure security fear of eviction.
Does examining feelings add to understanding estimates of the probability of eviction? In the context of informal tenure, it is often suggested that dwellers think that the probability of a forced eviction is very low, in particular when a settlement is relatively consolidated. In these cases, using only perceived probability of eviction as an indicator of tenure security limits its predictive value because it is invariably low. Yet, the possibility of eviction, however small, may still generate intense feelings of worry and stress in dwellers whose decisions are influenced regardless of whether this probability is perceived as likely or not (Van Gelder 2007; 2009a).
To avoid considering (perceptions of) tenure security as a dichotomy, we can operationalize probability and fear of eviction using psychometric scaling techniques. In my research, dwellers were presented various statements about their tenure situation and asked to indicate to what extent they agreed with each statement using five-point scales that ranged from completely disagree to completely agree. For example: “The possibility of an eviction worries me sometimes,” or “The possibility that we could be evicted from this neighborhood is always present.” Both items refer to the possibility of eviction, but the second item, which measures perceived probability of eviction, refers to a chance estimate—a thinking state—whereas the first item inquires about feelings.
Separate composite scales consisting of multiple items measured the perceived probability of eviction and fear of eviction. Respondents, all of whom were heads of household, were also asked about their household income and whether they had taken out a loan in the previous years. To measure investment in housing improvement, surveyors scored participants’ dwellings on three defining elements: the floor, the walls, and the roof. The scores were subsequently combined into a housing improvement or consolidation index, the dependent variable. To isolate the effects of perceived tenure security on investment, the survey included only those heads of household who had lived in the settlement since its origin and were responsible for their home construction.
Case Study Settlements
A land invasion typically involves a few hundred people who gain access to land by collectively invading and immediately building on the site. Residents attempt to comply with land use legislation and other requirements that render the legal and technical subdivision of the land possible at a later stage. This active resident participation makes these settlements different from more irregular slums (e.g., villas miserias).
The study consisted of a structured survey as well as semi-structured interviews and focus groups with dwellers in two different land invasions in the southern cone of Greater Buenos Aires, which is known for its large-scale popular urbanization and high concentrations of poverty (table 1).
The settlements were similar in size, but differed in age and hence degree of consolidation. El Tala was one of the first invasions in the city, while San Cayetano had existed for only two years prior to the survey in 2008. Only half of the dwellers in El Tala had received legal title, creating the conditions for a valid comparison of titled and nontitled households in this settlement.
Results of Analysis
Regression and correlational analysis were employed to examine the strength of both perceived probability of eviction and fear of eviction as predictors of housing improvement. To obtain a better idea of their comparative strength, we also looked at household income. Table 2 shows that both probability and fear were significantly correlated with improvement in both settlements. In other words, both thinking about the probability of an eviction and the feelings evoked by it influence the extent to which people are willing to invest in their dwelling. The higher the perceived probability and fear of an eviction, the less improved their dwelling.
Household income was quite strongly correlated with housing improvement in San Cayetano, but not in El Tala. One likely explanation for these findings is that the most visible investment in housing occurs in the early years of settlement development. Recall that San Cayetano was only two years old at the time of the survey, while El Tala dates to the early 1980s. Another related explanation is that the current income of households, as measured in the survey, does not necessarily reflect income in preceding decades. That income fluctuation makes it more difficult to assess the valid relationship between income and investment for older settlements like El Tala.
The regression analysis in table 3 simultaneously tests probability, fear, and income as predictors of investment by looking at their unique contribution. The strength of the relationship for each separate variable is indicated by the β symbol, which can range from -1 to +1 (indicating a perfect linear negative and positive relationship respectively).
In El Tala the effect of probability of eviction is largely explained by fear of eviction. This appears to confirm the assumption discussed earlier that in cases where eviction is very unlikely, such as in consolidated settlements, fear of eviction is the better predictor of housing improvement. Stated differently, when deciding on whether and how much to invest in their dwellings, individuals are actually more influenced by how they feel about their situation and the risks involved than how they think about it. These results make a strong case for altering our view on perceived tenure security as merely consisting of perceptions of the probability of eviction. If we want to be able to predict behavior, we also need to understand how people feel.
In San Cayetano, however, a different picture emerges. Even though both perceived probability and fear of eviction are negatively correlated with investment in housing improvement, the results of the regression analysis show that household income explains most of the variance. In other words, household income dictated the investment more than perceptions of security, whether perceived probability of eviction or fear of eviction. My (speculative) assumption is that again these results can be attributed to the young age of the settlement, because financial abilities more than anything else dictate to what extent people can invest in their housing in the earliest phase of settlement consolidation.
Virtually all residents surveyed and interviewed in both settlements indicated that having a property title was important to them, and they expressed a strong desire to be legalized. This result presents an intriguing paradox: Even though forced eviction is rarely regarded as likely or even possible by residents, about half of them still gave security of tenure as the most important reason for wanting to have a title to their property. One resident of El Tala commented on different motivations for investment: “I think that there are two moments. One is in the beginning when constructing is a way of ensuring yourself that no one will kick you out. Nowadays, I think the situation is rather reversed. I don’t believe that it is worth putting money in your house if you do not have a title.”
This means that even in situations with very high de facto security of tenure, such as El Tala, property titles are still desired by residents, principally for additional security. This finding corresponds with the point made earlier about the importance of including fear of eviction alongside probability estimates as an indicator of perceived tenure security. The possibility of an eviction, however small, may still elicit strong feelings of worry and fear that can influence residents’ decisions, almost regardless of perceived probability (Van Gelder 2007)
Other frequently mentioned motivations for wanting a property title were expressed as “leaving something to my children” and ”being or feeling that I am the owner of my house.” Surprisingly few dwellers in either settlement mentioned commercial reasons (e.g., increased value of their dwelling or access to credit) for their desire to be an owner. In both settlements, more than 80 percent of the respondents thought that having title would further increase security. More than half of the residents thought they would invest more after having title, and more than half of the residents that had title indicated that they had in fact invested more after their tenure was legalized.
With respect to accessing credit, titled owners did not take out a bank loan more frequently than residents who lacked title. In El Tala only three people with a property title had taken out a mortgage loan in the previous five years versus two people in the untitled part of that settlement. More people—eight in the titled and five in the untitled areas—had taken out loans at lending institutions that charge high interest rates but do not require property as collateral. In other words, the owners did not pledge their dwellings as collateral to obtain the loans.
The majority of the respondents who had taken a loan had done so to improve or repair their dwellings. The small amounts of money borrowed and the very few loans intended for business investments raise doubts about the extent to which increasing access to credit will function as an engine for economic growth, as is sometimes suggested as a rationale for land titling programs.
Conclusions
These results shed some new light on the debate over tenure security and the discussion between advocates and critics of legalization. For example, even though legal title is not a necessary condition for investment in housing improvement, it is likely to be a contributing factor in some situations. Furthermore, nearly without exception, all dwellers aspire to be the legal owner of their home. However, the social and psychological effects seem to be much greater than economic factors in valuing legal tenure.
While policy increasingly has stressed mercantilist arguments in support of titling (e.g., credit and land markets), respondents tend to stress social reasons. Besides tenure security, the ability to leave something “safe” for offspring and the simple feeling that one is the (legal) owner of one’s dwelling were cited as more fundamental motivations for the desire to be a homeowner. Formal ownership is seen by many, realistically or not, as a way of escaping marginality and as a substitute for a largely deficient social security system.
One way to improve policy and more accurately anticipate the consequences of specific interventions, which all too often take straightforward top-down approaches, is to pay more attention to the perspectives of dwellers and to borrow methods and insights from disciplines such as psychology and sociology. These disciplines offer fine-tuned measures of varied constructs that development scholars, policy makers, and land experts should consider in future research and on-the-ground programs for informal developments.
About the Author
Jean-Louis van Gelder is a researcher at the Netherlands Institute for the Study of Crime and Law Enforcement. He studied both organizational psychology and law at the University of Amsterdam and combined them into a Ph.D. on tenure security and informality in Buenos Aires. Other research interests include the role of affect and personality in risky and criminal decision making.
References
Broegaard, R.J. 2005. Land tenure insecurity and inequality in Nicaragua. Development and Change 36: 845–864.
Bromley, D.W. 1990. A new path to development? The significance of Hernando De Soto’s ideas on underdevelopment, production, and reproduction. Economic Geography 66: 328–348.
Gilbert, A.G. 2002. On the mystery of capital and the myths of Hernando De Soto: What difference does legal title make? International Development Planning Review 26: 1–19.
Hsee, C.K. and Y. Rottenstreich. 2004. Music, pandas, and muggers: On the affective psychology of value. Journal of Experimental Psychology 113: 23–30.
Kahneman, D. 2003. Perspectives on judgment and choice: Mapping bounded rationality. American Psychologist 58: 697–720.
Van Gelder, J-L. 2007. Feeling and thinking: quantifying the relationship between perceived tenure security and housing improvement in an informal neighborhood in Buenos Aires. Habitat International 31: 219–231.
———. 2009a. Legal tenure security, perceived tenure security and housing improvement in Buenos Aires: An attempt towards integration. International Journal of Urban and Regional Research 33: 126–146.
———. 2009b. Assessing fit: Perceptions of informality and expectations of legality. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.
———. 2010. What tenure security? The case for a tripartite view. Land Use Policy 27: 449–456.
Van Gelder, J-L., R.E. de Vries, and J. Van der Pligt. 2009. Evaluating a dual-process model of risk: Affect and cognition as determinants of risky choice. Journal of Behavioral Decision Making 22: 45–61.
Varley, A. 1987. The relationship between tenure legalization and housing improvements: Evidence from Mexico City. Development and Change 18: 463–481.
World Bank. 1993. Housing: Enabling markets to work. World Bank Policy Paper. Washington DC: World Bank.
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Alan Mallach is a nonresident senior fellow at the Metropolitan Policy Program of the Brookings Institution and a senior fellow at the Center for Community Progress, both in Washington, DC; and a visiting scholar at the Federal Reserve Bank of Philadelphia. He has been engaged as a practitioner, advocate, and scholar in the fields of housing, planning, and community development for nearly 40 years, during which time he has made contributions in many areas including affordable and mixed-income housing development, neighborhood revitalization, and urban regeneration. In 2003 he was named a member of the College of Fellows of the American Institute of Certified Planners in recognition of his lifetime achievements as a leader in the city planning profession.
Mallach is also a visiting professor in the graduate city planning program at Pratt Institute, in New York, and has taught at Rutgers University and the New Jersey School of Architecture. He has published numerous books and articles on housing, community development, and land use; his book Bringing Buildings Back: From Abandoned Properties to Community Assets is recognized as the standard work on the subject. His most recent book, Rebuilding America’s Legacy Cities: New Directions for the Industrial Heartland, was published in 2012 by the American Assembly at Columbia University. He is a resident of Roosevelt, New Jersey, and holds a B.A. degree from Yale College.
Land Lines: How did you become involved with the Lincoln Institute?
Alan Mallach: I have known about the Lincoln Institute for many years, and initially became involved in the 1990s through my work on brownfields redevelopment. Since then, I have served as faculty in a number of training sessions sponsored by the Institute and participated in meetings and conferences at Lincoln House. About seven years ago, Nico Calavita, professor emeritus in the Graduate Program in City Planning at San Diego State University, and I undertook research on inclusionary housing. This project led to the Institute’s 2010 publication of our co-edited book, Inclusionary Housing in International Perspective: Affordable Housing, Social Inclusion, and Land Value Recapture. Most recently, I have been working with Lavea Brachman, executive director of the Greater Ohio Policy Center, on a policy focus report that looks at the issues associated with regenerating America’s legacy cities.
Land Lines: What do you mean by legacy cities?
Alan Mallach: “Legacy cities” is a term that has come into use increasingly to replace “shrinking cities” as a way to describe the nation’s older industrial cities that have lost a significant share of their population and jobs over the past 50 or more years. Iconic American cities such as Pittsburgh, Detroit, and Cleveland are typically mentioned in this context, but the category also includes many smaller cities like Flint, Michigan; Utica, New York; and Scranton, Pennsylvania.
Land Lines: How do the issues of legacy cities engage the Lincoln Institute’s central policy concerns?
Alan Mallach: They do so in many different respects, but I think the strongest connection is around the question of how land is to be used in these cities. All of these cities have had a significant oversupply of both residential and nonresidential buildings relative to demand, at least since the 1960s. As a result of extensive demolition over decades, they have accumulated large inventories of vacant or underutilized land. Detroit alone contains over 100,000 separate vacant land parcels and another 40,000 to 50,000 vacant buildings. While this inventory is a burden, it could also become an enormous asset for the city’s future. How to develop effective strategies to use this land in ways that both benefit the public and stimulate economic growth and market demand is one of the central issues facing these legacy cities.
Land Lines: How would you compare this challenge to your work on inclusionary housing?
Alan Mallach: From an economic standpoint, it’s the other side of the coin. Inclusionary housing is a way of using the planning approval process to channel strong market demand in ways that create public benefit in the form of affordable housing—either directly, by incorporating some number of affordable housing units into the development gaining the approval, or indirectly, through off-site development or cash contributions by the developer. As such, it involves explicitly or implicitly recapturing the incremental land value being created by the planning approval process. Inclusionary housing presupposes the presence of strong market demand and cannot happen without it.
Land reuse strategies in legacy cities seek to create demand where it doesn’t currently exist or alternatively find ways to use the land that benefit the public and can be implemented even under conditions where market demand cannot be induced, at least for the foreseeable future. These approaches are often called “green” land uses, such as urban agriculture, open space, wetlands restoration, or stormwater management. It can be difficult to get local officials and citizens to recognize that the traditional forms of redevelopment, including building new houses, shopping centers, and so forth, require the existence of a market for those products. However, the demand simply does not exist in many of these devastated areas. Moreover, the demand cannot be induced artificially by massive public subsidies, even though public funds can, under certain conditions, act as a stimulus to build demand.
Land Lines: Is lack of demand evident everywhere in legacy cities?
Alan Mallach: No, and that’s one of the most interesting things about these cities. Some cities are seeing demand grow far more than others, but in most cases the revitalization is limited to certain parts of the city. One noticeable trend is that downtown and near-downtown areas, particularly those with strong walkable urban character, such as the Washington Avenue corridor in St. Louis or Cleveland’s Warehouse District, are showing great dynamism, even while many other parts of those two cities are continuing to see population loss and housing abandonment.
Part of this dynamism is driven by walkability and strong urban form (see the new Lincoln Institute book by Julie Campoli, Made for Walking: Density and Neighborhood Form (2012), which examines 12 such walkable neighborhoods and the forces behind their recent popularity). A second important factor is that these areas appeal to a particular demographic—young single individuals and couples. This group is not only increasingly urbanoriented, but is growing in terms of its share of the overall American population.
Land Lines: What other issues are you exploring in your work on legacy cities?
Alan Mallach:I am focusing on two research areas, one more quantitative and one more qualitative. In the first area, I am looking at how many of these cities are going through a pronounced spatial and demographic reconfiguration—a process that is exacerbating the economic disparities between different geographic areas and populations within these cities. While many older city downtowns, such as those of St. Louis, Cleveland, Baltimore, and even Detroit, are becoming increasingly attractive, particularly to young adults, and are gaining population and economic activity, many other neighborhoods in these cities are losing ground at an increasing rate. In many places these trends are accentuating already problematic racial divides.
My second area of research revolves around the question of what it takes to foster successful, sustained regeneration. Lavea Brachman and I touch on this challenge in our policy focus report, but I am hoping to delve into it much more deeply, including looking at some European cities that have found themselves in situations similar to those of American legacy cities. I think the experiences of cities in northern England, for example, or Germany’s Ruhr Valley, parallel changes in our own former industrial cities quite closely.
Land Lines: What do you mean by successful regeneration?
Alan Mallach: That’s a very important question. I think there’s often a tendency to see a particular event—the Olympics in Barcelona or a major building like the Guggenheim Museum in Bilbao, Spain, for example—as evidence of regeneration, rather than, at best, a discrete spur to more substantial change. I believe that regeneration has to be a function of change in three fundamental areas: first, the well-being of the population, reflected in such measures as higher educational attainment and income or lower unemployment; second, a stronger housing market and greater neighborhood strength; and third, the creation of new export-oriented economic sectors to replace the lost industrial sector. Population growth alone (that is, reversal of historic population decline) may or may not be evidence of regeneration. It is more likely to follow these three changes rather than lead them.
Land Lines: What do you see as the future of America’s legacy cities?
Alan Mallach: I see a very mixed picture. As shown in the policy focus report, certain cities are doing far better than others. Pittsburgh and Philadelphia are showing strong signs of revival, while Cleveland, Detroit, and Buffalo are still losing ground. I think legacy cities are facing two daunting challenges as they look to the future.
The first issue is what the new economic engines of these cities will be. The cities that have been more successful up to now tend to have the most significant clusters of major national research universities and medical centers. These institutions tend to dominate their cities’ economies. While they have helped cities like Pittsburgh and Baltimore rebuild in the post-industrial era, I think a lot of questions remain about their sustainability as long-term economic engines.
The second question is demographic. Downtowns may be drawing young, single people and couples, but many of these cities’ residential neighborhoods were built around 100 years ago as communities mainly for married couples to raise children. Now they are falling apart, including many neighborhoods that have remained stable until relatively recently. This demographic of married couples with children is shrinking across the country and even more so in our older cities. Today, only 8 percent of the households in Baltimore, for example, fit this description. I believe that the future of these neighborhoods is very important to the future of their cities, and I am very concerned about their prospects.
Land Lines: In spite of these challenges, how do you think your work is making a difference?
Alan Mallach: The fact is, many cities are making progress. Pittsburgh has done an excellent job building on its assets to develop new economic engines, while Baltimore and Philadelphia are making impressive strides in reorganizing many of their governmental functions to better deal with their vacant and problem property challenges. Baltimore, for example, has initiated a program called Vacants to Value, which integrates code enforcement and problem property work with larger market-building strategies. I have been fortunate to be directly involved in this work in some cities, including Philadelphia and Detroit; elsewhere, I’m always gratified when local officials or community leaders tell me that they use my work, or that they have been influenced by my thinking. It makes all the effort very much worthwhile.
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David Vetter (Ph.D., University of California) has worked for more than four decades on urban finance and economics issues in Latin America. He taught and conducted urban research in Brazil for 17 years at the Brazilian Institute of Geography and Statistics (IBGE), the Graduate Engineering Program (COPPE), the Institute of Urban and Regional Planning and Studies (IPPUR), and the Fundação Getúlio Vargas. In 1990, he joined the World Bank, where he developed subnational investment and reform programs for Argentina, Brazil, Chile, and Ecuador. To push for greater private-sector participation in urban financing, he joined Dexia Credit Local in 1998 as vice president and established lending programs in Argentina, Brazil, and Mexico. Since returning to Brazil in 2004, he has worked as a consultant and researcher for various clients, including the Inter-American Development Bank and the Lincoln Institute of Land Policy, where he has been a visiting fellow since July 2014. He recently authored two articles for Land Lines: “Residential Wealth Distribution in Rio de Janeiro” (January 2014) and “Land-Based Financing for Brazil’s Municipalities” (October 2011).
Land Lines: How did you become involved with the Lincoln Institute?
David Vetter: For many years—whether I was doing research, consulting, or working at the World Bank or in the private sector—I quite often found solid information to help me from the Lincoln Institute. More recently, the Institute financed my research on residential wealth and municipal finance in Brazil.
Land Lines: What will you research as a visiting fellow and why?
David Vetter: I will focus on strategies for financing urban infrastructure in Brazil. Like other Latin American countries, Brazil continually needs to make substantial investments to keep pace with the rapidly growing number of new households and to reduce the number of them without access to urban infrastructure. From 2000 to 2010, the number of households grew by more than 12 million—an increase nearly 7 times the 1.8 million households in the Boston-Cambridge Metro Area in 2010. Given this demographic pressure, the absolute number of Brazilian households without access to urban infrastructure remained high in 2010, despite sizeable investments over the previous decade. And the deficits of some types of infrastructure actually increased. From 2000 to 2010, for instance, the number of Brazilian urban households without adequate sewage systems rose by nearly 2 million—more than the total number of housing units in Metropolitan Boston in 2010.
Brazil’s Ministry of Cities estimated that basic sanitation (potable water, waste water, solid waste, and drainage) would cost more than US$80 billion just for 2014 to 2018. Highways, street paving, public security, health, and education demand similarly high investments, and the amounts required often greatly exceed existing sources of financing.
Land Lines: How could value captured by these infrastructure investments help to finance them?
David Vetter: The benefits of infrastructure investments are capitalized into land and building prices. The Lincoln Institute’s 2013 forums on Notable Instruments for Urban Intervention showed that many governments in Latin America are effectively using a wide variety of tools to capture value created by their infrastructure investments, as detailed in Martim O. Smolka’s comprehensive review of the literature (2013): sale of development rights; betterment levies for street paving, drainage, and other improvements; and public-private partnerships (PPPs) involving value capture, as in the financial structure of Rio’s massive port renovation (Porto Maravilha). More efficient collection of the real estate property and transfer taxes help as well.
Value capture can generate positive feedback, creating a virtuous circle that generates additional resources for further investments. For example, the increases in value generated would increase the base for the property tax if real estate assessments were conducted in a timely manner, and the resulting revenue could be used to finance further investment.
Land Lines: To what extent could Brazilian municipalities increase the use of value capture?
David Vetter: According to economic theory, the value generated by infrastructure investments should roughly equal their cost. Because the supply of infrastructure would seem to be inelastic due to public finance constraints, the market value generated can actually exceed the cost of the investments.
For example, Brazilian municipalities invested more than US$82 billion in infrastructure and equipment from 2006 to 2010 (about US$16 billion per year). But in 2010 alone, state and national governments also invested more than US$50 billion. Capture of even a relatively small percentage of the value created could provide significant resources for investment. For example, the Rio de Janeiro Metropolitan Region is receiving massive infrastructure investments from national, state, and municipal governments, as well as from private sector partners, for various projects including the new Arco Metropolitano beltway and a new Metro line. Some are concessions or PPPs with significant financing at below-market interest rates from the public development banks (BNDES and CAIXA).
Land Lines: What role could value capture play in housing policy?
David Vetter: Infrastructure investment creates residential wealth, as its value is capitalized into housing value. Residential structures represent about one third of Brazil’s total net fixed capital in the national wealth accounts, as is typical for other countries around the world. Given this importance, we ask in our own work on the Rio de Janeiro Metropolitan Region: What generates residential wealth? How much residential wealth exists? Who holds it? We found that there are winners and losers. For example, the increase in value generated by infrastructure investment increases the residential wealth of homeowners, but it raises prices for renters in the benefitted area and housing cost for homebuyers wishing to locate there.
Land Lines: Would a housing policy focused on generating residential wealth and the equity of its distribution differ from most low-income housing programs?
David Vetter: It would be quite different. Most low-income housing programs keep unit costs down by building on low-cost land. Land price is low when it lacks access to employment and basic urban services, so affordable units often end up in these poorly serviced areas. A housing policy focused on residential wealth would emphasize access to employment and basic services, as they are among the key determinants of housing value.
Land Lines: But isn’t this utopian? How could value capture help to increase the residential wealth of lower-income families?
David Vetter: The challenge is certainly great. But value capture from higher-income families could allow cross subsidies to lower-income ones, especially renters who wish to locate in the areas benefiting from infrastructure investments.
Let me illustrate. The number of households in the Rio de Janeiro Metropolitan Region increased by more than 600,000 from 2000 to 2010 (that’s twice the number of households in Washington, DC, in 2010). As a result, the region’s urban infrastructure deficits remain high despite high investments. A recent impact study of metropolitan Rio de Janeiro’s new beltway (Pontual et al. 2011) explored the possibility of developing whole new socially integrated and fully serviced neighborhoods to hold the huge expected increase in the number of households along the beltway. This development could be financed in part by capturing value generated by the massive infrastructure investments planned and being implemented. Part of the value captured from higher-income families could be used to finance lower-income ones.
This impact study analyzed where such neighborhoods might best be located. Which value capture instruments might work best in this case? It is interesting that the private sector is already developing what they describe as “green neighborhoods” in the outlying regions of metropolitan Rio. Does it make sense to plan individual housing projects when such large increases in households are involved?
Land Lines: Would lower-income families be able to pay for infrastructure?
David Vetter: In Latin America, the eligibility criteria for value capture programs almost always include a test for capacity to pay. Of course, value capture should only be applied to families who can afford it.
Land Lines: How do you respond to the Brazilian professionals working on urban issues who argue that it is impossible to capture value for legal or cultural reasons?
David Vetter: Although Brazil’s constitution provides broad powers for value capture, only the largest municipalities, such as São Paulo and Rio de Janeiro, appear to be using them. Other sub-national and national governments are doing much less to capture the value of considerable public investments.
This failure is probably due in part to resistance by some who think that value capture is legally impossible. Yet while betterment levies meet with similar resistance, Silva and Pereira (2013) estimate that total revenue from them exceeded US$300 million among municipalities in the states of São Paulo, Paraná, and Santa Catarina from 2000 to 2010, even though relatively few municipalities employed them. This amount is not very significant for states of this size, but it does show that betterment levies are feasible.
One reason why betterment levies were successful in Paraná and Santa Catarina was that the World Bank and Inter-American Development Bank have required cost recovery in their municipal development projects since the 1980s. This success supports the idea that incentives of a national or state program can encourage use of value capture at the municipal level.
In addition, many cases of value capture seem to go unnoticed. In the City of Rio de Janeiro, for example, the sale of excess land from the existing subway system partly financed the expansion of a whole new line, and developers provide water and sewerage trunk lines as a condition for project approval in a higher-income neighborhood, Barra da Tijuca.
Land Lines: How might national or state government programs encourage greater use of value capture?
David Vetter: One way would be to provide access to financing as an incentive for the municipalities that use value capture. Ecuador’s development bank (Banco del Estado) uses such access to encourage municipalities to employ betterment levies. Access to financing could be used to provide access to a broader range of value capture instruments, such as the sale of development rights and impact fees, as well as betterment levies.
Land Lines: How can the Lincoln Institute encourage infrastructure financing through value capture?
David Vetter: Lincoln has done an excellent job of generating knowledge about value capture through its research, forums, training program, and publications. The Institute could scale up its excellent work on value capture in the region through more forums and publications, and by directly advising policy makers regarding program design and implementation.
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The potential for sharp and unpredictable assessment increases is an important source of dissatisfaction with the property tax. Rapid price rises that are accurately and promptly reflected in assessed valuations can leave homeowners responsible for cash payments on paper gains that are unexpected, uncontrollable, and possibly short-lived. Two decades ago, this situation paved the way for adoption of California’s Proposition 13, which rejected fair market value as a basis for assessment.
Increasing valuations do not necessarily produce a corresponding rise in property tax bills, since a higher assessment base could raise equivalent revenue with a smaller tax rate. This solution is not feasible, however, when prices increase disproportionately only in particular neighborhoods or for particular types of property.
What other means are available to address price volatility and its impact on property tax rates? A number of states have recently introduced limitations on annual valuation increases. These measures avoid extreme assessment increases but may still allow assessments to match fair market values at some point in the future. They substitute a non-market value basis for assessment and diminish uniformity by distinguishing between those properties that are assessed on the basis of current values and those that are not.
Assessment Limitations in Washington and Texas
In the November 1997 elections, voters in Washington state approved a referendum generally limiting increases in assessed valuation to 15 percent a year on all classes of taxable property. If a property’s market value rises more than 60 percent, one year’s assessment may reflect no more than one-quarter of that increase. A similar measure strongly supported by business representatives was passed by the Republican legislature but vetoed by Gov. Gary Locke (D), who would have limited it to homeowners.
This case raises an important point concerning uniformity and distribution of the tax burden. Phase-in provisions ease the burden on owners of rapidly appreciating property but correspondingly increase the relative share of the tax borne by owners experiencing slower growth, or no growth, in property value. While tax limitations are generally promoted as protection for homeowners, residential benefits may pale in comparison to commercial gains.
Supporters of the Washington referendum urged passage “to soften a tax blow that could be devastating to a homeowner on a fixed income.” Yet major funding for the campaign came from industrial giants, including Microsoft, Intel, Hewlett Packard, Boeing and Weyerhaeuser. Opponents, including King County assessor Scott Noble, argued that the tax benefits “will go disproportionately to the large corporations that are bankrolling the campaign because of their much higher property values.” On the other hand, restricting such provisions to residential property introduces another level of non-uniformity to the tax.
Texas voters chose this split valuation alternative in November, approving a measure that limits increases in assessed values of residential homestead property, but not business property, to 10 percent a year. The president of the Texas Taxpayers and Research Association said this provision will “keep a terribly hot neighborhood from getting sort of a sticker shock.”
Critics saw the irony of this action. One wrote, “If the Texas Legislature had offered voters a chance to cap appraisal increases on their homes a few years ago, lawmakers would have been lauded as heroes. Angry homeowners were storming the offices of appraisal districts in the early and mid-1990s, demanding relief from double-digit increases in the appraised value of their homes and the prospect of significant property tax hikes. . . Nothing happened. Now that appraisal increases have fallen to three percent or so, the Legislature is offering voters a chance to cap the increases by changing the state Constitution. . . .” Ironically, before the price rises of the 1990s, Texas tax protests centered on whether assessments reflected falling property values quickly enough in the regional recession of the 1980s. For example, Harris County, which includes Houston, saw challenges to one-quarter of all its tax valuations in 1984 and 1985.
A Legislative Approach in Montana
Annual increases of 10 or 15 percent do not necessarily prevent assessed valuations from reaching full market levels. However, Montana lawmakers responded this year to dramatic value increases with an even more drastic measure. After studies reported that residential and commercial property values had increased by an average of 43 percent statewide since the last reassessment, the legislature required this change to be phased in at a rate of only two percent annually-taking 50 years to enter the tax rolls completely. Court challenges to this provision could raise an interesting question as to how long a phase-in period is compatible with state constitutional provisions requiring uniformity in assessment.
Assessment Reform in Ontario
Large valuation increases may be due to assessment lags as well as to price rises. One of the most startling examples of outdated tax valuation is found in Toronto-a surprise to U.S. observers who normally expect a high level of administrative efficiency from their northern neighbor. At the September conference of the International Association of Assessing Officers (IAAO) in Toronto, a panel of speakers brought together by the Lincoln Institute explored this situation. The potential for huge valuation increases stems not so much from extraordinary market activity as from extraordinary assessment inactivity. Metropolitan Toronto has not had a full-scale reassessment since1954-and that was based on 1940 market values.
Attorney Jack Walker described the public as generally supportive of current tax reform efforts, which encompass the entire province of Ontario. By contrast, a 1992 reassessment proposal for Metropolitan Toronto alone sparked such protest from residential and small business taxpayers that the proposal was abandoned. As a result, the 1997 measure explicitly addresses the concerns of many taxpayers groups. Professor David Amborski of Ryerson Polytechnic University explained that it would ensure current value assessments and regular updates. In addition, it will eliminate the business occupancy tax, permit different tax rates for different classes of property, provide special treatment for senior citizens and disabled taxpayers, and reduce taxes on agricultural and open space lands.
Thus, Toronto has also chosen to soften the impact of large assessment increases at the expense of uniformity. In this case, where municipal valuations were so out of date, the net effect may be judged an improvement in assessment equity. It will be important to evaluate the experiences of other jurisdictions struggling with the challenge of balancing uniformity and acceptability to see if they can make the same claim.
Joan Youngman is senior fellow and director of the Institute’s Program in the Taxation of Land and Buildings. An attorney specializing in property tax issues, she also writes a column for State Tax Notes, published by Tax Analysts.
Notes
Joseph Turner, “Ref. 47 Debate: Do Tax Savings Justify Change?” Takoma News-Tribune, October 23, 1997, p. A1 (quoting Rep. Brian Thomas (R-Renton))
2 Tom Brown, “Big Guns Back Property-Tax Lid,” Seattle Times, October 24, 1997, p. B3.
3Clay Robison, “Measure Would Cap Hike in Residential Appraisals,” The Houston Chronicle, November 2, 1997, p.2.
4Michele Kay, “Tax Appraisal Cap on Ballot,” Austin American-Statesman, October 20, 1997, p. A1.
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When Jim Brown joined the Lincoln Institute as president and CEO in May 1996, he had served on the faculty of Harvard University for 26 years and headed the Joint Center for Housing Studies at the Kennedy School, considered the most prestigious research center on U.S. housing issues. As he prepares for retirement from the Institute after nearly nine years, he says that the most surprising aspect of his tenure has been his role in expanding the organization’s international programs, especially in Latin America and China.
“The Institute’s programs on U.S. land use and tax policy were well-established and ably directed by senior fellows on the staff,” Brown noted, “but the need and demand for training and research on these topics remain critical in the new market economies that have emerged over the past few decades. Public officials, policy makers, academics and stakeholders in the private sector all have been very receptive to and eager for our educational programs, and we have developed a lively exchange of knowledge and mutual respect.”
Brown expanded and reorganized the Institute’s academic agenda by integrating research and educational programs into three academic departments: Planning and Development; Valuation and Taxation; and International Studies. This structure encouraged each department chair to develop a curriculum, sponsor research, offer educational programs and disseminate information to fit the needs of various constituencies.
“I wanted to empower others to do their work in their own program areas, and I think the results have been very positive,” Brown commented. “The Institute is more widely known today because of our enhanced commitment to curriculum development and special demonstration projects, as well as varied outreach efforts to share the results of our work. We are fortunate to have the financial resources to be able to develop programs and offer them to those who need and can benefit from this information.”
The Institute offers more than 75 courses, conferences and seminars annually at Lincoln House and at locations around the globe to public officials, practitioners and private citizens. In addition, the Institute’s research and graduate student fellowship programs have been greatly expanded over the past five years.
“I’m very pleased with how the staff has developed numerous ways to disseminate our sponsored research and information about our programs,” Brown added. “These include the Land Lines newsletter; books, working papers and other academic publications; our annual catalog; and our Web site. Advances in online communication have challenged us to continue to find ways to reach new audiences.”
As the Institute board, staff and faculty prepare for the next generation of presidential leadership, we offer our sincere thanks to Jim Brown for reinvigorating the organization’s academic mission, the scope of research and educational programs, and approaches to learning and communicating information about the many facets of land policy.
