Like many coastal cities, Miami is facing a climate future that is already here. Even without a major storm, seawater has been washing over the streets and bubbling up from bathtub drains, a harbinger of what’s to come when a projected two feet of sea-level rise invades the low-lying, porous land of South Florida by mid-century.
The threat is not going unanswered. Based in no small part on the experience of dealing with the region’s notorious hurricanes, planners and political leaders in the metropolitan region have a good idea of what’s necessary to build resilience: a combination of hard barriers and green infrastructure, including the restoration of natural systems to absorb and distribute the inundation.
Two years ago, voters approved a $400 million Miami Forever Bond to help pay for a “stronger, more resilient future,” distributing the money across five categories: flood prevention, parks, roadways, public safety, and affordable housing. Special emphasis has gone to protecting lower-income neighborhoods, as well as the city’s legendary luxury beachfront properties. That juxtaposition—between Little Havana inland, for example, and the ritzy condominium towers of Brickell Bay Drive—has prompted consideration of how the funding could be augmented by those who can afford it most.
At Brickell Bay Drive, which is routinely flooded, a proposed park and seawall redesign incorporating green space and stormwater remediation—which is estimated to cost up to $35 million—will help keep water away from some of the city’s most iconic residential towers. The skyline will soon include two 1,000-foot luxury twin towers that will be the tallest on the East Coast south of New York City, made possible by changes in height restrictions. As such wildly successful private real estate development becomes the primary beneficiary of taxpayer- funded resilience infrastructure, officials are weighing how the private sector might play a greater role in financing the green scheme.
Jane Gilbert, chief resilience officer at Miami’s Office of Resilience and Sustainability, says when it comes to paying for resilience, all options are on the table—including land value capture, also known as land value return, a financing mechanism that recovers a portion of taxpayer-funded investments associated with increases in land values. A mounting body of evidence suggests a clear tie between green infrastructure and increased property values; and indeed, resilience infrastructure won’t just enhance property values, like parks or transit stations have been shown to do. It will allow private developments to continue to exist in the first place.
“Could we do value capture for properties just outside the [proposed] park? Maybe,” Gilbert said. “We’re going to look at every financing vehicle we can.”
Just as climate change is inspiring new paradigms in insurance, home finance, agriculture, transportation, and so many other sectors, it is forcing cities to revisit the fundamental relationship between the infrastructure that government is providing and the real estate that is being protected. The magnitude of the task—communities around the world are spending an estimated $25 billion per year on green infrastructure— necessitates a search for additional funding.
No Choice But to Invest
The relationship between government-provided infrastructure and the private sector has had a long history. Landowners, commerce, and industry have enjoyed most of the benefits of canals, railroads, bridges and tunnels, roadways, and many other facilities since the republic began investing in infrastructure in a meaningful way. Investments in infrastructure have also surged at key moments when cities have faced major problems like disease, overcrowding, and congestion.
By the end of the 19th century, cities were growing fast and trying to accommodate industry and a steady influx of immigrants. “It forced the need to invest,” said Alex Krieger, professor of urban design at Harvard University, principal at architecture and planning firm NBBJ, and author of City on a Hill: Urban Idealism in America from the Puritans to the Present(Belknap Press 2019).
“Boston had to build a subway system because it was facing utter congestion, horse manure in the streets, and a city doubling in size,” he said. The same was true for local projects most residents now consider part of the landscape, like the Charles River dam; the infilling of the city’s Back Bay, now a bustling residential and commercial district; and the creation of Frederick Law Olmsted’s Emerald Necklace, which was designed primarily as a sanitation and flood-control system, as well as a park. “The fear was that things would become completely dysfunctional and unmanageable,” Krieger said. “Things were closer to the boiling point and there was no choice but to invest.”
Cities are at a similar moment today, amid the growing recognition of the havoc that climate change is wreaking. Just as filling in mud flats made Back Bay possible, resilience infrastructure is the key to future urban development—and arguably plays an even greater enabling role, as the climate stakes get ever higher.
The current crisis does not want for solutions. Many of the systems and approaches for dealing with sea-level rise and storm surge are close at hand, according to Billy Fleming, director of The McHarg Center at the University of Pennsylvania and one of the editors of the new Lincoln Institute of Land Policy book Design with Nature Now (Steiner et al. 2019). Fleming helped curate the 25 green and blue infrastructure projects showcased in the book, which honors the ecological design tenets of pioneering landscape architect Ian McHarg.
The interventions featured in the book include a New York City landfill transformed into a park, a wetland in China constructed to filter pollution from a planned city of 50,000 people, and a proposal for built landforms in coastal Norfolk, Virginia, that would absorb stormwater and tides. The fundamental concept behind this approach to resilience, cultivated by the Dutch in particular over the centuries, is to blend dikes, berms, barriers, and floodgates—the “hard” or “gray” infrastructure designed to keep water out—with “soft” systems that replicate nature and let water in, to be absorbed and distributed.
The projects in the book and others like them reflect design innovation, experimentation, and some trial and error, and can serve as prototypes for different urban conditions, Fleming said. But in addition to municipal commitments, they need a higher-level organizational framework so successful green infrastructure systems can be scaled up and implemented—on a par with preparing for war, building the interstate highway system, or sending a man to the moon.
“It’s a national problem that needs a national-scale mobilization,” he said. Federal agencies like the Army Corps of Engineers, he said, will have to be set up to administer and fund the best solutions for climate adaptation.
There is always more innovating to do, just as NASA constantly improved the design of its rockets. But the basic engineering solutions, Fleming suggests, are ready to be implemented. To extend the metaphor, green infrastructure solutions are like the aircraft carriers and bombers needed for World War II: proven in terms of getting the job done, they simply needed to be built and deployed. The matter of funding was an assumption in the case of preparing for war; it just hasn’t been resolved in the case of battling climate change.
“If we decided tomorrow that this was as real a problem as cholera was in the 1870s, we would find the money,” said Harvard’s Krieger. “A consensus will only come out of a collectively understood crisis.”
An Approach with Multiple Benefits
The traditional means of financing infrastructure is centered around borrowing at the federal, state, and local levels. As federal funding generally has waned, some cities have explored new bonding mechanisms that clarify how investments in sustainability will pay dividends in the future. In Washington, DC, a green bonds program provides capital for riverways and stormwater and sewage management based on the measurable performance such efforts produce. The inaugural $350 million issuance, in 2014, was the nation’s first municipal century bond—a 100-year duration—and has become popular for its stability and greater yield.
The rationale for that approach is inherent in the Environmental Impact Bond, which, according to the financial firm Quantified Ventures, provides up-front capital from private investors for environmental projects, either to pilot a new approach whose performance is viewed as uncertain or to scale up a solution that has been tested in a pilot program.
While the most cautious investors view green infrastructure as new and unproven, in fact it is extraordinarily potent. “Green infrastructure delivers multiple benefits to society, including environmental, economic, and health outcomes,” said Eric Letsinger, founder of Quantified Ventures, which focuses on projects with positive social and environmental impact.
Green infrastructure practices can produce positive health outcomes, for example, that translate to reduced costs to local health systems and plans. Letsinger said involving other sectors in paying for resilience would address the “wrong pockets” problem—the economics scenario where one entity bears the cost of an investment that generates benefits for others—that has “historically limited green infrastructure economic beneficiaries, like health partners, from paying their share of the implementation costs.”
Similarly, some of the biggest economic beneficiaries are private land and property owners. A 2017 report published by the Urban Land Institute quantified how water management mechanisms using green infrastructure can create value for real estate projects by improving operational efficiency as well as serving as an attractive amenity. One of the key takeaways was that natural resilience systems can enhance financial viability (Burgess 2017).
“We found many examples of thoughtful incorporation of green infrastructure that led to increased property values,” said Katharine Burgess, ULI’s Urban Resilience Program vice president. Green infrastructure, she said, can pay off in terms of operational cost savings. It can be integrated into placemaking and design, contributing amenity and market value, and can provide an ancillary benefit of freeing up developable land to increase yield.
A new matrix for risk assessment and due diligence in real estate, indeed, has climate change at its center. Another ULI survey of investors and developers concluded that factors like climate risk and vulnerability to flooding had become increasingly important for those considering developing, purchasing, or investing in property (Burgess and Rapoport 2019). “It’s definitely a changing atmosphere,” Burgess said.
The bottom line for the development community seems to be what is widely intuitively understood: higher, protected ground is more valuable ground.
“At the end of the day, this isn’t about building codes or insurance or technology—it’s about land use,” and the hazards, shocks, and stresses related to the serviceability of land, said Harvard University professor Jesse Keenan, who led research showing lower-elevation properties in the Miami area gained value at a much slower rate than those places that were high and dry (Keenan 2018).
Keenan coined the term “climate gentrification” to describe how inland neighborhoods in the city, like Little Haiti have become suddenly sought-after. In the absence of resilience infrastructure to protect against rising seas, land that is higher than Miami’s average of six-feet above sea-level is naturally seen as a place of refuge.
Public-Private Collaboration
Is there a way to quantify the benefits of green infrastructure to spread out the responsibility of paying for it? Miami is not the only city giving the concept serious consideration. In Boston, planners have commissioned a study on a section of East Boston waterfront that includes the “potential for value capture from new waterfront development to fund resiliency infrastructure based upon existing and potential future uses” (BPDA 2018).
The study area includes a long stretch of developable land that will be rezoned from industrial and maritime use, ushering in mixed-use development with greater height and density—but that is also directly in the path of anticipated future flooding. “It’s a discussion of equity . . . [potentially having] developers help pay for infrastructure that not only protects them, but also inland,” said Richard McGuinness, deputy director for climate and environmental planning at the Boston Planning and Development Agency, the city’s planning office.
A more modest version of public-private collaboration is unfolding at the Gillette headquarters alongside Fort Point Channel in Boston, where the company is preparing to provide the right of way for a flood barrier to be funded by the Federal Emergency Management Agency. The project costs will be augmented by funds from the city’s capital budget that have been dedicated to resilience. Ultimately the company’s gesture is an act of self-preservation—the razor factory is right at the water’s edge—but city officials are encouraged by the recognition that building resilience requires businesses and government to work in sync.
Other metropolitan regions in the United States are also exploring how green infrastructure creates value, and they’re creatively harnessing that power. In Pittsburgh, a portion of some 10,000 vacant and tax-delinquent parcels are set for green makeovers—urban farms, community gardens, pocket parks and the like—that could be financed through transfer of development rights. The approach ensures that the parcels aren’t taken off the tax rolls because the development rights will get used in other areas planned for infill redevelopment. At the same time, the parks and community gardens will enhance property values in once-blighted areas, said Roy Kraynyk, a vice president at Allegheny Land Trust (Kraynyk 2017).
Meanwhile, research in South America suggests that well-established land value capture mechanisms in Colombia—which have long been used to support more traditional infrastructure projects related to housing and transit—could feasibly be put into use for resilience. A team of researchers led by Stelios Grafakos, principal economist at the Global Green Growth Institute, assessed the impact of green infrastructure on land values along a river project in Santiago de Cali, Colombia, known as the CAU Cañaveralejo (Grafakos 2019).
The hedonic pricing model the team developed, aided by GIS analysis, “quantitatively demonstrates a useful increase in land values attributable to capital investments in resilience and risk reduction. . . . Land value increases are attributable to investments in resilience measures such as the implementation of sustainable urban drainage systems, green corridors for flood management, restoration of natural floodplains, and multifunctional public space for recreation and stormwater management.”
All told, the project has resulted in an overall increase in values of $2.2 million across 48 blocks in nine neighborhoods, a boost of about 7 percent. The work, which is still underway, includes tree planting, green spaces, and bicycle and pedestrian pathways.
One of the paper’s coauthors takes the concept a step further, suggesting that green infrastructure’s most tangible benefit may be that it protects against loss. “Financing urban climate adaptation through land value capture, in some respects, requires an inversion of the fundamental premise of the concept: rather than creating value, investments in adaptation serve to preserve value that would otherwise be diminished or paid,” said James Kostaras, senior fellow at the Institute for International Urban Development.
In that framework, Kostaras suggests, “some increment of the land value that is being preserved and protected by climate adaptation interventions is mobilized as a source of funding to mitigate the impact of flooding and other climate-driven events.”
Properties in Miami that flood or sit near roads that flood have already lost $125 million in value since 2005, according to research compiled in the online Flood IQ education initiative. Future losses will easily double that amount in the next 15 years, and that projection doesn’t include any new properties that become at risk from now through 2033 (First Street).
Seen another way, new private development in any area that is vulnerable to the impacts of climate change creates a burden for the public, because of the people and property in need of protection. As such, private-sector contributions to green infrastructure are more akin to developer extractions or impact fees, which have been charged to builders of conventional suburban development for decades to help pay for the extension of utilities to previously undeveloped areas.
News Ways to Pay for Innovation
In the reconsideration of the relationship between public investments and private development, resilience infrastructure may well become the most critical of city services, alongside police or fire protection, or water, sewer, and power facilities. Keeping water at bay has acquired an outsized importance. “There’s a centrality to it,” said Enrique Silva, director of International and Institute-Wide Initiatives at the Lincoln Institute.
Measuring the benefits of that infrastructure will be complex, Silva said. In most land value capture mechanisms, the impact of public investments is measured in a more linear fashion; for example, the land value “uplift” within a half-mile radius of a new transit station. With green infrastructure, the land value impact is spread across a larger ecosystem, potentially producing significant variation in terms of assigning financial obligations. Do the properties closest to the intervention benefit most, or do those a mile down the rivershed enjoy the protections just as much? Or should all land and property within a special “resilience district” be treated the same?
“One could argue it’s less complex with a new metro line,” Silva said. Governments, he said, will “have to make that call—defining the catchment area.”
For others, it’s an open question that natural systems are such a singular driver of increased property values. Miami developer David Martin, principal at the Terra Group, said he would like to see a “fixed funding source for infrastructure that’s not relying on macroeconomic forces that go up and down.” In his view, resilience infrastructure is one of several factors determining land value—others being things like low interest rates or the quality of the local school system.
Such calibrations are an indication of the hard work ahead, but the impetus to find new ways of financing climate action will remain strong. “The infrastructure funding challenges that local governments face are just too great to solve through business-as-usual solutions,” said Letsinger, from Quantified Ventures. “They’ll need to innovate their way up this mountain, and if we’re going to expect them to innovate, then we’ve got to give them new ways to pay for innovation.”
Letsinger and others emphasize both the urgency of building climate resilience and the real-time availability of solutions. “We don’t need to wait,” he said. “Cities now have the tools, the means, and the access to capital today to advance the resilience projects that they need.”
Calculating the Value of Green Infrastructure
Fundamentally a stormwater management tool, green infrastructure also “creates amenities that can raise property values and provide health benefits,” said Robin Hacke, executive director of the Center for Community Investment (CCI) at the Lincoln Institute. CCI works with cities including Miami, Milwaukee, and Seattle to identify and secure funding for resilience projects including green infrastructure and affordable housing. Hacke said land value capture is a “promising approach” that has been part of those conversations. Such discussions will likely gain momentum, as a growing body of research indicates that green infrastructure increases value:
“In Boston, the 1330 Boylston complex . . . saw rent increases of $300 to $500 per month for units overlooking a $112,500 green roof, soon netting about $120,000 a year” (Burgess 2017).
“High quality green environments can contribute to . . . rental uplifts of up to 20 percent” (UKGBC 2015).
“. . . the assessed property values of the Menomonee Valley industrial properties were 5.8 percent higher than they otherwise would have been without green infrastructure” (Madison 2013).
“Hedonic studies show that a reduced risk of flooding can result in a 2 percent to 8 percent increase in property values” (Clements 2013).
With such data emerging, cities seeking buy-in from developers may find that they’re standing on firmer ground. But Hacke offered a word of caution: as values rise, so does the risk of displacement. Cities must prioritize affordability, she said, and invest in projects that “protect the community’s ability to remain in place.”
Germán, Lourdes, and Allison Ehrich Bernstein. 2018. “Land Value Capture: Tools to Finance Our Urban Future.” Policy Brief. Cambridge, MA: Lincoln Institute of Land Policy.
Groves, David G., Debra Knopman, Neil Berg, Craig A. Bond, James Syme, and Robert J. Lempert. 2018. Adapting Land Use and Water Management Plans to a Changing Climate in Miami-Dade and Broward Counties, Florida. Santa Monica, CA: Rand Corporation. https://www.rand.org/pubs/research_reports/RR1932.html.
Grafakos, Stelios, Alexandra Tsatsou, Luca D’Acci, James Kostaras, Adriana Lopez, Nohemi Ramirez and Barbara Summers. 2019. “Exploring the Use of Land Value Capture Instruments for Green Resilient Infrastructure Benefits: A Framework Applied in Cali, Colombia.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.
Keenan, Jesse M., Thomas Hill, and Anurag Gumber. 2018. “Climate Gentrification: From Theory to Empiricism in Miami-Dade County, Florida.” Environmental Research Letters 13 (5). https://iopscience.iop.org/article/10.1088/1748-9326/aabb32.
Madison, Catherine. 2013. Impact of Green Infrastructure on Property Values within the Milwaukee Metropolitan Sewerage District Planning Area. Milwaukee, WI: University of Wisconsin Milwaukee, Center for Economic Development (May). https://dc.uwm.edu/cgi/viewcontent.cgi?article=1015&context=ced_pubs.
2021 David C. Lincoln Fellowship Symposium: Measuring the Value of Land
January 28, 2021 - January 29, 2021
United States
Offered in English
SHARE
The David C. Lincoln Fellowships in Land Value Taxation were established to encourage academic and professional interest in land value taxation through support for major research projects. This program honors David C. Lincoln, founding chairman of the Lincoln Institute, and his long-standing commitment to land value taxation studies by encouraging scholars and practitioners to undertake new work on the theory of land value taxation and its application to contemporary fiscal systems.
The 2019-2020 program focuses specifically on identifying practical land valuation methods that could be employed by assessors and public finance officials to measure changes in land values induced by public investment. Research projects use a data set that offers 12 years of land sales, improved sales, and assessment data from a large urban county.
This event provides an opportunity for current David C. Lincoln Fellows to share their research on land valuation methods and receive feedback from valuation practitioners and other experts.
Assessment, Land Value, Land Value Taxation, Land-Based Tax, Property Taxation, Valuation, Value Capture
Course
Desarrollo Urbano Orientado a Transporte: Aspectos críticos e implementación en América Latina
March 2, 2020 - April 3, 2020
Online
Free, offered in Spanish
Profesor: Erik Vergel
SHARE
Descripción
Este curso ofrece una introducción a la relación entre el transporte, la movilidad y los usos del suelo, y profundiza en el concepto de Desarrollo Urbano Orientado al Transporte (DOT) con énfasis en la movilidad sostenible. Se aborda la relación de este concepto con una serie de instrumentos de planificación y gestión urbana asociados a las inversiones en transporte masivo e infraestructura de transporte no motorizado, especialmente con la idea de captura de valor y los instrumentos de financiación del desarrollo urbano. Se discuten las etapas de formulación y evaluación de propuestas DOT, los impactos de las inversiones en transporte sobre el desarrollo y casos emblemáticos de DOT a nivel global.
Relevancia
Actualmente, las ciudades de América Latina y el Caribe realizan importantes inversiones en sistemas de transporte masivo, las que pretenden responder a los retos de un crecimiento urbano en rápida expansión y que incentiva el uso de vehículos motorizados privados. El concepto de Desarrollo Urbano Orientado al Transporte (DOT) surge como una alternativa frente a este crecimiento urbano de baja densidad y con baja demanda de los sistemas de transporte público, y busca promover formas urbanas compactas en áreas servidas por transporte masivo, la infraestructura para transporte no motorizado, la mezcla de usos del suelo para reducir la necesidad de viajes largos, y el mejoramiento del espacio público amigable para los peatones.
El curso pretende revisar críticamente los métodos más utilizados para el cálculo de plusvalías. El método comparativo de mercado, muy usado en Latinoamérica, no es seguro y está viciado por ofertas especulativas. Por otro lado, el método residual permite un mejor acercamiento al valor posible de la transacción. De esta manera, se profundiza en las bases metodológicas de la valoración de lotes a través del método residual, y se estudian los casos concretos de Colombia y Brasil para analizar las ventajas y limitaciones del método para su uso en zonas de expansión y en áreas consolidadas. Por último, se realizan ejercicios de aplicación de acuerdo a los ejemplos abordados.
Relevancia
América Latina casi duplicó su tasa de urbanización entre 1950 y 2010, y es hoy la segunda región más urbanizada del planeta. Esta rápida urbanización genera una fuerte demanda de tierra dotada de servicios, y presión hacia los gobiernos para proveerlos. La inversión pública en infraestructura, servicios y equipamiento urbano, así como la normatividad que permite un uso más intensivo de la tierra, genera cambios significativos en el valor del suelo, los que se conocen como plusvalías urbanas. América Latina tiene una larga historia de políticas de recuperación de plusvalías, y varios países han aprobado legislaciones con consideraciones explícitas sobre la captura de valorización del suelo. La efectiva aplicación de estos instrumentos requiere métodos robustos de estimación de los incrementos de valor del suelo.
El curso presenta conceptos fundamentales, discute argumentos y analiza evidencias sobre la relación entre las prácticas urbanísticas del sector público y privado, el comportamiento de los mercados de suelo y los sustentos legales de la gestión social de la plusvalía del suelo urbano. Se revisará una variedad de alternativas de instrumentos diseñados para redistribuir los costos y beneficios de la urbanización. Serán discutidos instrumentos urbanísticos de gestión de derechos de desarrollo, de uso del suelo conforme a su función social, y de regulación urbanística del mercado de suelo. Los instrumentos que se analizarán tienen en común una visión amplia del territorio y de las acciones que permitan su adecuada gestión.
Relevancia
Los recursos públicos disponibles para satisfacer las carencias de infraestructura y servicios en las ciudades de América Latina son escasos y se distribuyen de manera desigual en el espacio, tanto en cantidad como en calidad. Al realizar inversiones en infraestructura y servicios públicos, el Estado genera una valorización del suelo que beneficia a determinados propietarios, sin que sea el resultado del esfuerzo o inversión de éstos. Lo anterior produce una transferencia de recursos públicos a entidades particulares, sin posibilidad de recuperar los costos de la obra pública. La gestión social de la valorización permite avanzar hacia una distribución más justa de los costos y beneficios del proceso de urbanización, así como disciplinar y reducir los efectos indeseados del mercado de suelo y avanzar hacia ciudades más equitativas y sustentables.
Curso de Desarrollo Profesional – Edición Especial
En las ciudades de América Latina suele ser creciente la lista de problemas a resolver en vista de la carencia de fuentes de financiación. Las políticas de recuperación de plusvalías ofrecen un camino para enfrentar este tema, y este curso busca difundir las lecciones de la experiencia de América Latina en ese sentido. El curso explorará los desafíos involucrados en la transferencia internacional de ideas, incluida la relevancia del sistema local de España para comprender la universalidad de los principios que informan las políticas de suelo.
El curso tiene una orientación multidisciplinaria que permitirá a los participantes entablar un diálogo constructivo y comparativo desde los fundamentos urbanísticos, económicos y jurídicos de la recuperación de plusvalías partiendo de postulados generales y universales, así como conocer soluciones locales a problemas no resueltos en la gestión urbana contemporánea. Este curso es desarrollado por el Programa para América Latina y el Caribe en colaboración con la UNED (Universidad Nacional de Educación a Distancia – Madrid, España).
Development, Economics, Legal Issues, Public Finance, Public Policy, Urban, Urban Development, Urbanism, Value Capture
How a New Land Policy Could Help Unwind Apartheid in Cape Town, South Africa
Inclusionary Housing is a Form of Land Value Capture, or Land Value Return
By Will Jason, October 18, 2019
SHARE
Looking at the South African government’s map of “the social tapestry of Cape Town,” it’s not difficult to see the legacy of apartheid. The map shows many pockets of racial integration, but most nonwhite residents live in the Cape Flats, an expansive area southeast of downtown that extends far out to the urban fringes. This area includes the city’s infamous townships, built in the twentieth century to segregate black and mixed-race residents.
Whites, who make up only 15 percent of the population, occupy the northeastern and southwestern suburbs, the Atlantic shoreline, and much of the urban core, or City Bowl, so-named because it is surrounded by Devil’s Peak, Lion’s Head, and the iconic Table Mountain, the latter of which was voted one of the world’s New Seven Wonders of Nature.
The City Bowl is where Amazon recently moved into a new eight-story office building. Developers advertise newly built projects in the neighborhood like the 17-story Sentinel, “a super-modern glass and aluminum building offering the most contemporary architectural statement in the City Centre,” and the Onyx, an 11-story “jewel in the crown of Cape Town” featuring “hotel-style residents’ amenities in the form of a gym, outdoor cross-training track, a day spa with sauna, bar, and kitchen, as well as a sky terrace with dramatic harbour, city and mountain views.” Two of the Onyx’s penthouses came accessorized with a Jaguar SUV.
In Cape Town and the rest of South Africa, formal racial exclusion—enforced under centuries of colonial rule and sustained during the mid- to late-twentieth century by apartheid—has given way to economic segregation. Whites make up only a tenth of South Africa’s population, but nearly two thirds of its elite, according to the World Bank, which designates the country as the world’s most unequal. The top 10 percent of households possess more than 70 percent of the nation’s wealth.
Land is at the core of the problem, and one potential solution
After centuries of deep social divisions, Cape Town’s jobs, schools, and efficient transportation—sources of economic opportunity—are concentrated downtown and in affluent suburbs. Most residents can’t afford to live in those areas, and endure long commutes from townships and other far-flung neighborhoods, many lacking parks, hospitals, or, in some cases, basic infrastructure for water and sanitation.
Reversing such entrenched inequality will require a massive effort with many different solutions, but the city is poised to adopt a new policy that could help. Known as inclusionary housing or inclusionary zoning, the policy originated as a way to combat segregation in another nation with a history of racial oppression—the United States.
The mechanics of inclusionary housing are simple: owners of real estate projects are required to sell or rent some of the new homes or apartments to lower-income residents at prices they can afford. In some cases, property owners can provide the affordable housing at a nearby location or pay into a housing fund. Cities can specify how much affordable housing is required, and exactly how low the rent or sales prices need to be.
Inclusionary housing is a form of land value return, or land value capture, a type of policy that allows the public sector to tap the gains from rising property values that result from public sector actions—construction of a new road, for example—rather than those of the individual property owner, and use the value increase for the public’s benefit. One common source of property value increase is a change in the density of a neighborhood or individual property.
“Inclusionary housing is rooted in the understanding that much of land’s value is generated by actors other than the property owner,” said Enrique Silva, director of international initiatives for the Lincoln Institute of Land Policy.
Willard Matiashe, a researcher for the Development Action Group, a housing policy organization in Cape Town, described inclusionary housing as “one way of sharing the land value windfalls linked to additional development rights that the city gives to developers.”
Inclusionary can be a tool for spatial justice
Now used in more than 800 U.S. communities, inclusionary housing first gained traction in the 1970s, partly in response to a practice known as exclusionary zoning, by which cities used land-use regulations to prevent less affluent, often nonwhite renters or home buyers from moving to desirable neighborhoods. Common exclusionary measures include prohibitions of apartments or smaller homes.
South Africa enforced its segregation through more explicit land-use laws, most notoriously the Group Areas Act, which established different sections in cities for each race. Beginning in the 1960s under this law, Cape Town forcibly removed 60,000 nonwhite residents from an area near the city center known as District 6, bulldozed their homes, and relocated them to the urban fringes.
Cape Town under the Group Areas Act. Illustration by Myriam Houssay-Holzschuch, Olivier Ninot, and Emma Thébault
After the end of apartheid in 1994, the new democratically elected government immediately recognized the importance of land in addressing inequality. In an early white paper, the government committed to establishing “socially and economically integrated communities, situated in areas allowing convenient access to economic opportunities as well as health, educational, and social amenities.” Two years later, it enshrined these ideas in the new constitution.
But breaking the cycle of segregation has proven difficult. In response to an urgent need for basic housing, the post-apartheid government has built millions of homes for low-income South Africans, but they are located mostly at the urban periphery where land is cheap. These homes provide shelter but little access to opportunity.
“South Africa has acknowledged in law that they need to have a strategy for desegregation and they’re in search of practical tools to achieve that goal,” said Rick Jacobus, who has studied inclusionary housing and recently traveled to South Africa on behalf of the Lincoln Institute to learn and advise public officials.
Momentum behind inclusionary housing in South Africa is building
South Africa’s policy makers first put inclusionary housing on the agenda in 2004 as part of a national housing plan, and in 2007 the Department of Housing produced a framework for national legislation. However, these efforts fizzled in the face of opposition from the real estate industry, a downturn in the housing market, and technical concerns.
In the absence of a coherent national policy, cities have experimented with their own policies. The country’s largest city, Johannesburg, adopted the country’s first municipal inclusionary housing policy in 2008 for high-priority transportation corridors, although the policy was rarely used. Johannesburg recently adopted a new citywide policy, but it allows developers to meet the requirements simply by building market-rate homes or apartments of a smaller size—an indirect way to reduce the rent or sale price.
These initial efforts have been relatively modest, but there is now a stronger legal foundation for inclusionary housing in South Africa, thanks to another piece of legislation enacted a few years ago. In 2013, South Africa’s parliament enacted the Spatial Planning and Land Use Management Act (SPLUMA), which established spatial justice as one of the core development principles that should guide local land use, stating that “past spatial and other development imbalances must be redressed.” Now advocates in Cape Town are relying on that law to push for more aggressive affordable housing policies.
In Cape Town, momentum behind inclusionary housing has been fueled by a real estate boom that began in the early 2010s. Home prices have increased faster in Cape Town than elsewhere in the country, in part because of a strong luxury market and demand from foreign buyers, who are drawn to the dramatic landscape and Mediterranean-style climate. The market has cooled recently amid a national economic slump and a 2018 water crisis, but prices in some neighborhoods are still double what they were just five years ago. Only a fraction of Cape Town’s households can afford the average-priced house in the city.
The central business district in Cape Town. Photo by Amy Cotter.
Building on the legal foundation of SPLUMA, an activist group called Ndifuna Ukwazi (“Dare to Know” in the regional Xhosa language) began in 2017 to file objections against real estate projects for which developers sought changes in the regulations—to build above the allowable height, for example. These challenges have led some developers to voluntarily add affordable housing to their projects, but the process has been ad-hoc, often with weak enforcement.
Last month, Ndifuna Ukwazi escalated its campaign with a lawsuit against the city over its approval of a proposed mixed-use tower called The Vogue, which would become one of Cape Town’s tallest buildings and promises to be “iconic in both form and function,” with “undulating balconies and roof gardens” and “top-level penthouse apartments which will all enjoy panoramic views over the Atlantic Seaboard.”
Among the handful of Capetonians who could afford an apartment in the development, nearly half are white, Ndifuna Ukwazi said in its lawsuit, even though whites make up only a sixth of the city’s population.
“Every new exclusive development that is approved by the city without affordable housing entrenches a system of racial segregation and unequal access to services,” the group said in a statement.
Developers are at the table
Such pressure has made developers more open to an inclusionary housing policy. Last year, developers sat down with advocates, experts, and city officials in a series of dialogues, hosted by the Development Action Group and the Lincoln Institute. Developers said they would prefer the certainty of a citywide policy if it could eliminate the risk of challenges to individual projects, which can create costly delays.
“Developers in the room were saying, ‘give us the number so we can factor that into our proposals,’” said Matiashe of the Development Action Group.
Nigel Burls, a Cape Town planning consultant who works on behalf of developers but did not participate in the dialogues, said developers might support an inclusionary housing policy if it doesn’t make projects infeasible.
“If it seems to be addressing a problem and it’s not seen to be penalizing developers, the developers will jump on the bandwagon,” Burls said. “It has to be carefully structured and it has to be carefully thought through. It has to be done in a manner that it doesn’t kill development.”
The city is making efforts to enact such an inclusionary housing policy. In a concept document released last year, Cape Town proposed to tie inclusionary housing to zoning change or additional development rights that increase property values. A draft policy is expected sometime in 2020.
“If we can get a policy together that speaks to more equitable ownership and benefit from the land and land value, it’s an incredibly important moment,” said Gail Eddy, a research officer for the city of Cape Town who is helping to craft the new policy.
By itself, inclusionary housing would not solve Cape Town’s problems of segregation and unaffordable housing. The policy would only work in neighborhoods that can attract market-rate development, which excludes large swaths of the city where infrastructure is poor. It would not produce nearly enough homes and apartments to meet the needs of the poorest residents.
Nevertheless, an inclusionary housing policy would establish the principle that the whole community has a claim on land and its value, and that the city can use land to redress its inequalities.
“Inclusionary housing is a statement that land should be used for the benefit of the public—in the case of Cape Town and South Africa, to help reverse longstanding patterns of exclusion,” said Silva of the Lincoln Institute.
Will Jason is associate director of communications at the Lincoln Institute of Land Policy.
Photograph: Cape Town, South Africa, with Table Mountain as the backdrop. Credit: kavram/iStock via Getty Images.
SHARE
