Public-Private Negotiation of the Increase in Land or Property Value by Urban Variant: An Analytical Approach Tested on a Case of Real Estate Development

Maria Rosaria Guarini,Francesco Sica,Alessandro Micheli,Pierluigi Morano

doi:10.3390/su131910958

Maria Rosaria Guarini, Francesco Sica + Show 2 more

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https://doi.org/10.3390/su131910958

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Abstract

The insufficiency of public resources in Europe, which increased due to the debt crisis of 2010, has raised the need for combined financing forms to activate urban settlement transformation processes. Among these is the partial recapture of surplus value generated by interventions that derogate from urban planning tools as a regulation form of the differential rent phenomenon. This form of financing recalls the concept of land value recapture; it consists of an extraordinary charge of urbanisation (ECU) paid to policymakers. In Italy, the national law (2014) assigns responsibility for ECU determination to local decision-makers. Their plurality of operational guidelines are generally inspired by the transformation value criterion, and are sometimes methodologically incoherent and dispersive in their modus operandi. To support policymakers in the programming of public works within the limits of their available financial resources, the aim of the present work is to test a coherent, rational and applicable procedure in the field of estimation in order to analytically determine the “surplus value” generated by the intervention ante and post urban variant. The proposed procedural model is based on the structural characterisation of multiple methodologies used in practice and in the literature. The procedure was tested on a case study in the Italian context of Rome City. The results deduced from its implementation clarify that the ECU evaluation must also appropriately weigh the mutual benefits according to the “timing” and “riskiness” of the investment.

Highlights

Due to the current scarcity of resources available for investment and for the development of settlement transformation processes, there is a growing need for public entities to find sources of funding for improving the quality of infrastructure, services, urban settlements and the lives of citizens, without increasing public debt [1].To overcome the abovementioned issue, according to some authors [2,3,4], it is possible for public entities to operate on the basis of a partial recovery of the urban land rent, taxing its change in value as the emerging rent or surplus value generated by the processes of urban transformation
In in the Municipality of Rome (Italy), in particular, there is provision for the promoters of a settlement transformation initiative to pay an extraordinary charge of urbanisation (ECU), calculated by the municipal administration, as an additional concessionary charge proportional to the differential land rent (∆V)
In Europe, this context has generated various legislative provisions aimed at regulating the privatisation of the positive externalities resulting from investments or interventions on the territory, and raising more capital for public works

Summary

Introduction

Due to the current scarcity of resources available for investment and for the development of settlement transformation processes, there is a growing need for public entities to find sources of funding for improving the quality of infrastructure, services, urban settlements and the lives of citizens, without increasing public debt [1].To overcome the abovementioned issue, according to some authors [2,3,4], it is possible for public entities to operate on the basis of a partial recovery of the urban land rent, taxing its change in value as the emerging rent or surplus value generated by the processes of urban transformation. It must be considered that the increasingly frequent use of public–private partnership (PPP) in the development of settlement transformation processes requires a careful evaluation of the resulting benefits and costs and, especially in negotiations between the parties, their fair distribution between the private promoter and the local community. This approach recalls the position expressed in 1996 by Benevolo [5], who considered both the inherent disorder associated with urban developments dominated by rent and the inherent deficit associated with non-repayable financing of urbanization works to be impermissible. On the basis of this theory-estimative reference scenario, the determination of surplus value remains a controversial issue that requires a reconsideration of the balance between the functions of public regulation and the recapture of additional private profits related back to public investments [4]

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