The View from Colombia’s Private Sector

Between 1970 and 1989, 17 progressive urban reform projects were submitted to the Colombian Congress, but all failed due to opposition from the conservative party supported by the influential private sector including the construction industry and real estate developers. In 1989, after three years of parliamentary debates, Law 9a (for urban reform) was approved, despite opposition from FEDELONJAS, the entity representing the real estate and development groups. After the law was approved, FEDELONJAS brought a lawsuit before the Constitutional Court with reference to the owners’ loss of rights of those lands that were not developed during the time defined by the master plan (Plan de Ordenamiento Territorial or POT). The court ratified Law 9a, and the real estate sector protested throughout the country for what was deemed unfair expropriation without compensation. The law was considered “communist” and dangerous for the private capital linked to construction and real estate.

The city of Cali, with 2.5 million inhabitants and a large housing deficit in the early 1990s, applied Law 9a with its threat of a property taking to a large area of the city whose lands were held by a small number of owners. In anticipation, developers and builders in Cali suggested that these landowners join together in an association to develop a large amount of social housing on their properties.

As a result of this positive experience, the Cámara Nacional de la Construcción (CAMACOL, the national union of the construction industry, including developers, constructors and promoters of urban projects) supported these development processes in other cities, especially Bogotá and Medellín. The way was paved so that the private real estate sector accepted Law 388 in 1997, which was an enhancement of Law 9a, and that support has revolutionized urban land management in Colombia. The new law grants municipalities the authority to manage urban land, promotes the master plan (POT), allows urban value capture and generates instruments for land use regulation.

By 2000, discussions were no longer focused on lawsuits but rather on the advantages of obtaining land to develop projects at a lower price. The Colombian construction and real estate sectors have entered the twenty-first century with a proactive attitude toward the public capture of the land value increments (plusvalías) and other instruments of urban land management. They now understand that this legislation releases land for development, generates land sharing in large projects, and facilitates the production of social housing. Urban land prices have been moderated, and the financial capital is now used more efficiently for home building in Colombian cities. Opposition to the reforms remains, especially in intermediate-sized cities, but it is not as strong as in the 1970s and 1980s.

The change of attitude in the private real estate sector brings its interests closer to other social and collective concerns. It is clear that the proprietor owns the land, but that the right to develop land is owned by the public and may be granted through instruments such as the participation in plusvalías, transfer of development rights, or the sale of building rights. Profits from urban land development are now better distributed among all three stakeholders: the capital investor, the landowner and the municipality.

Oscar Borrera Ochoa is an economist and private urban consultant in Bogotá. He was president of FEDELONJAS from 1981 to 1990.