Assessing the monetary relevance of land value capture: the case for charges for additional building rights in São Paulo, Brazil

Abstract

Land value capture (LVC) provides a mechanism for communities to recover financial windfalls accruing to landowners from public investments in infrastructure and services or from beneficial changes in land use norms and regulations. This progressive public financing option is gaining noteworthy traction in nations worldwide. This article argues that a major new value capture tool—charges for building rights—can be a significant source of public revenue. This type of fee has the advantage not only of generating much-needed financing for urban infrastructure and services, but also of addressing a fundamental social equity issue in land policy. After briefly explaining the argument for value capture, the article describes the groundbreaking implementation of building rights charges in Sao Paulo, Brazil, with specific examples of how those charges are calculated. Also described is the successful use of Certificates of Additional Building Potential (CEPACs) an innovative tool to collect land value increments resulting from large-scale urban redevelopment projects. The article then recommends several changes that would help to maximize the revenues from building rights charges and promote more equitable urban development.