Local governments around the world, no matter their size or capacity, have access to an effective land-based financing tool that can help create more climate-resilient, equitable, and sustainable cities and regions. That tool is land value capture, a policy approach that enables communities to recover and reinvest land value increases that result from public investment and other government actions. Land value capture is rooted in the notion that public action should generate public benefit—and while it is technically feasible to implement almost anywhere, it is often underutilized, says Enrique Silva, director of international initiatives at the Lincoln Institute, who deems it an “untapped source” of revenue. 

In late October, Silva hosted a Lincoln Institute dialogue with guests Barbara Scholz of the German Agency for International Cooperation (GIZ) and Rudiger Ahrend of the Organisation for Economic Cooperation and Development (OECD). The Lincoln Institute and the OECD, with contributions from GIZ, are creating a compendium to showcase the successful implementation of land value capture in 61 countries. The compendium, which will be published in 2022, will offer the first global overview of a policy approach that can fund critical infrastructure ranging from public transit to affordable housing.  

With an estimated $4 trillion needed each year to improve and expand global infrastructure, Scholz said, value capture “offers a huge repertoire of instruments” that can be customized based on local needs. It can improve the financial performance of subnational governments, facilitate access to affordable and secure land and housing, protect ecosystems, and foster equitable and climate-friendly urban development. Value capture can be especially helpful in developing countries and regions, said Scholz, noting that it has successfully been used in countries including Bangladesh, Namibia, and Ethiopia. GIZ works to promote and achieve sustainable development around the world, partnering with businesses, governments, and research organizations in more than 120 countries. 

The speakers noted challenges related to value capture, including a lack of shared vocabulary that can hamper conversations among policy leaders in different areas who are working toward the same goals. Developing a shared vocabulary “is one of the big opportunities of the compendium,” Ahrend said. “It will enable dialogues” that aren’t currently possible, he added. Noting that cities will absorb 2.5 billion more people by 2050, Scholz confirmed that GIZ hopes to use the compendium to foster dialogue about urban policies, value capture instruments, and country-specific challenges and opportunities, especially in places that are experiencing rapid growth and are vulnerable to the impacts of climate change. 

“These are tools that can be applied and built in contexts where governance institutions might not be as robust as in other countries,” Silva said. “The new compendium will help us open up opportunities to consider the extent to which land value capture can not only finance urban development, but also finance climate action and climate adaptation work. This conversation is ramping up.” 

The special 75th anniversary Lincoln Institute Dialogue series continues on December 8 with a discussion about sustainability in the U.S. West. Learn more about the Lincoln Institute’s 75th anniversary and related events.  

Katharine Wroth is the editor of Land Lines. 

Photo: Octavio Frias de Oliveira Bridge, São Paulo, Brazil. Credit: iStock/thiagogleite.

Two hours east of the bustling metropolitan area of Shenzhen, China, a new city is taking shape in Guangdong Province. Formally known as the Shenzhen-Shanwei Special Cooperation Zone (SSSCZ), this 180-square-mile area is a national demonstration project that’s becoming something of a living laboratory for urban design, spatial planning, and land policy.

Initially established 12 years ago through a collaboration between Shenzhen, population 17 million, and the much smaller locality of Shanwei, population 500,000, the SSSCZ is located within the municipal boundaries of Shanwei. Home to about 80,000 people who live in scattered farming and fishing villages, the coastal area has been identified by the national government as a place that can accommodate industrial and residential overflow for Shenzhen, where developable land is extremely limited and expensive. The goal is to develop about 52 square miles of the area by 2035, when the population of the new city is expected to reach 1 million.

The Lincoln Institute recently helped organize a “Training the Trainers” course that included a field trip to the SSSCZ. One of the first Lincoln Institute programs to be held in person since the start of the pandemic, the course was organized jointly by the Peking University–Lincoln Institute Center for Urban Development and Land Policy (PLC) and Peking University Shenzhen Graduate School, and was designed to enhance the knowledge and skills of the participants in spatial planning and land policy. In addition to the SSSCZ field trip, participants attended lectures by prominent scholars and PLC specialists and took part in simulations aimed at finding land policy solutions.

“Part of the goal of the workshop was to brainstorm ways to design spatial policy for the area, and figure out how to pay for the costs,” said Shenmin Liu, a research analyst with the Lincoln Institute who helped organize the course. “We introduced land value capture tools and asked students to think creatively about the possibilities.”

The 37 participants, primarily young scholars, practitioners, and doctoral students from universities, research institutions, and planning institutions across China, met with local planners in the SSSCZ and learned about plans for the area. Those plans include developing a local harbor into a transportation hub and attracting companies involved in artificial intelligence, robotics, or other high-tech industries. Shenzhen already has firm footing in the technology sector, as the home of global companies including Tencent and Huawei.

The field trip helped the participants learn about the challenges of land policy reform in the context of a new spatial planning framework adopted in China, as well as the newly amended Land Administration Law. The latter requires better compensation for villagers whose land is taken for development, which should give farmers a fairer deal—but attaches higher costs to China’s rapid urbanization.

While the group was on site, Professor Shouying Liu of Renmin University delivered a lecture on land policy reform in China at the Office of the Administration Committee of the SSSCZ, attracting an audience of leaders and officials from various government agencies active in the cooperation zone in addition to the course participants. During the course, speakers also explored topics including land policy issues in the SSSCZ; spatial planning theory and practice; natural resource management and spatial planning; land value capture; property taxation; and smart-city development. Lincoln Institute President George W. McCarthy and Chair and Chief Investment Officer Kathryn J. Lincoln delivered virtual remarks.

Finally, the course introduced the methodology of gaming simulations for planning and land policy decisions, using the SSSCZ as a real-world case. The participants divided into five groups and took part in role-playing land use negotiations, then came up with various proposals to address the difficult land policy issues facing the SSSCZ. The gaming simulation methodology was first introduced to China by Dutch scholars through two training courses organized by the PLC and the Peking University Shenzhen Graduate School in 2018.

Each year, the Peking University–Lincoln Institute Center for Urban Development and Land Policy (PLC) offers a weeklong “Training the Trainers” course, with the goal of convening scholars and practitioners who can use the knowledge they gain to inform and develop materials for use in graduate and continuing education programs. The subject of the course varies, often targeting needs relevant to current policy reforms. Learn more about the PLC and its programs. 

Katharine Wroth is the editor of Land Lines.

Photograph: Training the Trainers course participants learn about urban planning strategies and challenges in China’s Shenzhen-Shanwei Special Cooperation Zone. Credit: Shenmin Liu. 

At some point in the last few years, it was like a switch flipped: it became clear that the electric vehicle technology revolution is real and could have significant planning and land use impacts. For the last decade or so, the spotlight has often focused on how this cleaner energy alternative could power new ridesharing and autonomous vehicle schemes, or micro-mobility innovations such as electric bikes or scooters. But some of the most illuminating electric vehicle experiments currently underway involve mass transit, including trains, trolley systems, and that most humble vehicle category, the city bus.

While China is by far the global leader in building and using electric mass transit due to its state industrial policy and carbon reduction plan, Latin American cities are emerging as significant players in this growing market. By one estimate, more than 2,000 e-buses were operating in at least 10 countries across Latin America by the end of 2020. That number is expected to rise: one analysis predicts that by 2025 the region will add more than 5,000 electric buses a year.

The push for electric buses is motivated by the urgent need to reduce the diesel emissions that cause air pollution and contribute to climate change. Widespread adoption is likely to have a significant impact, given that per capita public transit ridership is reportedly higher in Latin America than in any other region of the world.

A recent report from the International Finance Corporation (IFC), a global development organization that is part of the World Bank Group, and C40 Cities, a climate action coalition, pointed to two notable examples of cities investing heavily in electric buses. Santiago, Chile’s capital city, has a fleet of more than 700 e-buses and growing, the largest outside of China. (By comparison, there were about 650 e-buses in the entire United States in 2020, although political momentum seems to be building for an investment in the sector.) Santiago is aiming for a zero-emission fleet by 2035. In Colombia, Bogotá has undertaken an ambitious effort to put more than 1,000 e-buses into service, tied to Colombia’s larger effort to cut carbon emissions 20 percent by 2030.

Both cities are using innovative public-private funding arrangements. As the IFC/C40 report points out, the majority of municipal transit systems are owned either by a public agency or by a private operator with a municipal concession of some sort. But newer arrangements “unbundle” ownership and operation—essentially using the kind of leasing strategies familiar in, say, commercial airlines (where one set of companies makes planes, and a different set leases and operates them). “Asset owners own, and operators operate,” as the report put it. 

In Bogotá, for instance, the municipal transportation entity, Transmilenio, contracted with Celsia Move, an energy-focused subsidiary of multinational conglomerate Grupo Argus, to deliver the bus fleet. In turn, Celsia Move made a 15-year agreement with Grupo Express, a separate company, to operate and maintain that fleet. As John G. Graham, a principal industry specialist in the IFC’s global transport group, explains, this unbundling makes each entity more attractive to different sets of potential investors. An owner entity can expect fixed payments, and its assets can be collateralized; an operator takes much less capital risk.

Electric buses and trains entail a much steeper up-front investment than their fossil fuel rivals—double the cost or more, by some estimates. But these recent public–private partnerships have reportedly attracted commitments from more than 15 investors and manufacturers, raising approximately $1 billion to juice the deployment of 3,000 more e-buses in various cities. International financing in support of e-bus and other green projects across Latin America has come from heavyweights like the InterAmerican Development Bank and the Partnering for Green Growth and the Global Goals 2030 initiative (P4G), whose initial funding came from the government of Denmark.

As Graham of the IFC points out, the underlying economics are also evolving. An electric bus can be cheaper to maintain over time, meaning that as battery technology improvements lower that up-front expense, the so-called “total cost of ownership” over a vehicle’s lifetime should soon approach parity with internal combustion engine alternatives. Still, finding sustainable sources of support will be critical, given that financing major transportation projects—including electrification upgrades—is invariably a challenge. 

One option could be land-based financing. In Costa Rica, for example, the Lincoln Institute of Land Policy has worked with policy makers to explore land-based finance options to help offset the $1.5 billion cost of an expansion and electrification of a major train line serving the capital, San José. Throughout Latin America, notes Martim Smolka, a Lincoln Institute senior fellow and director of its Program on Latin America and the Caribbean, land value capture strategies have been used to help fund major projects, such as redeveloping former factory and industrial zones. The value capture model ensures that a portion of the increase in land values that results from municipal actions is returned to the municipality to help offset the costs for other projects, such as improving local infrastructure.

“Transportation does help structure the value of land,” Smolka says, but capturing that value can be trickier than with a more straightforward redevelopment project, given the scale of most transit projects. One effective approach, he notes, is to increase density around particularly busy transit stops, encouraging fresh development but requiring developers who benefit from rezoning to in effect pay for the opportunity. He adds that an economic impact study commissioned by Costa Rica suggested the expansion of the electric train will have a positive effect on land values, and the project dovetails with a pledge to reach carbon-neutral status by 2050.

Electric transit is still a sliver of all mass transit in Latin America, and the pandemic created new challenges. But the Latin American market may be particularly suited to capitalize on and expand this trend. Smolka observes that the region is known for embracing transit innovation, from electric trams in the 1950s to today’s Bus Rapid Transit, propane taxis, and cable car lines that serve dense, hilly informal settlements. With relatively sophisticated transit authorities and a track record of financing major projects, “they are among the best transit systems in the developing market,” says Graham.

Among other things, that means lots of data on existing routes that can support the efficient deployment of new electric buses. It’s much harder, Graham says, to “leapfrog” an electric system into a municipality with little transit track record than it is to phase the technology into an existing setup. Latin America also has an increasingly strong trade relationship with China, which manufactures an estimated 98 percent of the world’s total e-bus fleet. All of this may be putting Latin America in a leadership lane for a transition that, in time, will happen globally. As Graham says: “Electrification is coming.”

Rob Walker is a journalist covering design, technology, and other subjects. He is the author of The Art of Noticing. His newsletter is at robwalker.substack.com.

Image: Electric buses at a charging station in Santiago, Chile. The city has a fleet of more than 700 e-buses and growing. Credit: Courtesy of C40 Knowledge Hub.

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