In many countries, the public sector is no longer expected and/or able to fund all public goods and services. Increasingly, public bodies pursue private financing for roads, parks, social facilities, climate change mitigation and adaptation measures and social and affordable housing (from here on: ‘public infrastructure’). This increasing need for private financing mirrors the public sector’s expenditure constraints, a shift towards privatization and managerial strategies, and neoliberal policies. Also, the rise of environmentalism - which has drawn public attention to the impacts of urban development, their limitation and mitigation, fiscal decentralization towards local public bodies, local taxpayers revolts, the influence of multilateral agencies, and other variables, e.g. prosperous real estate markets (or the opposite: real estate markets in crisis) - have all contributed to this fundamental and contentious shift (see e.g. Loughlin 1981; Bailey 1990; Callies & Grant 1991; Peddle & Lewis 1996; Healey, Purdue & Ennis 1996; O’Neill 2010; Burge 2010; Smolka 2013; Crook 2016; Monk & Crook 2016; Smith & Gihring 2016; Muñoz Gielen & Lenferink 2018; Catney & Henneberry 2019; Ferm & Raco 2020 and many others). As a consequence, public value capture (PVC) instruments are currently gaining prominence in public-private relationships in urban development.
This paper addresses the debates about the effectiveness of PVC instruments in general, and of developer obligations (DOs) – a type of PVC instrument – in particular. DOs are the contributions made in exchange for land-use regulation decisions. As such, they are relevant for the commitment of private developers to the provision of urban infrastructure related to their construction sites. The definition of ‘effectiveness’ rests on how Hartmann & Spit (2015) and Muñoz Gielen & Maguregui Salas & Burón Cuadrado (2017) evaluated governance approaches to land development Governance approaches to land development are sets of regulations controlling both public actions in land development and property rights to land and buildings. They are socially created and reflect ‘the influence and interests of yesterday’ in land development of today (Bromley 2000, quoted in Needham & Hartmann 2012).
This paper also addresses the effectiveness of PVC in Poland. Poland has had little success in this area to date and the need persists. The imbalance between public financial gains and losses deriving from urban development remains large. This imbalance hampers Polish municipalities in infrastructure financing (Czekiel-Świtalska 2005; Hełdak et al. 2011, 2012). The public investments required to meet public infrastructural needs in newly-developed areas, as forecasted by Polish municipalities, are not matched by the revenues from PVC tools (Śleszyński 2015; Śleszyński & Sudra 2016; Śleszyński et al. 2017; Śleszyński et al. 2021). Hence, municipalities end up investing much less than needed. Neither is this deficit of public investment compensated for by contributions from developers. These are extremely low compared to other European countries. Table 1 compares the contributions of private developers in newly-developed areas in Poland with those in three other countries: Spain, England and the Netherlands The information in table 1 for Spain, England and the Netherlands is based on diverse publications (Muñoz Gielen 2010; Burón Cuadrado 2006; Gozalvo & Muñoz Gielen 2017; Muñoz Gielen & Lenferink 2018; IHS, 2019; Ministry of Housing, Communities and Local Government 2020) and professional experience of the authors. The information on Poland is based on the experience of the authors and on four Polish case studies. These cases contain some common features that make them comparable with the cases studied in the aforementioned sources for Spain, England and the Netherlands. Namely, they involve both building within a city (e.g., old industrial areas rezoned into residential) and in urban extension areas, in the so-called ‘greenfield’ developments; the development area is mostly in private hands; there is a need for investment in urban public infrastructure; the cases involve a notable land value increase due to rezoning; they have been finished or are advanced enough to allow for an evaluation of the results. There are two locations in Wrocław:
Contributions from private developers towards public infrastructure in newly-developed areas. Comparison between Spain, England, the Netherlands and Poland
All or almost all | Almost all the required land (average between 60% and 80% development area) | Sometimes | Almost all the required land | the region and city (e.g., in Vitoria/Gasteiz 70% of all new housing in the period 2002–2005, average for Spain in that period was 8%) | Significant contributions, in land and in money | of building About 10% plots | |
Almost all | Most of the required land (30–60% development area is common) | Not often | Part of the required land | Important amount | Significant contributions, mostly in money | none | |
Part of these costs | Important part of the required land | None | None | Increasing amount since 2014 (max 30%) | Increasing contributions since 2014 | none | |
Almost all internal roads and sewerage serving the development area only, and occasionally a small share of the greenery. But no contributions to roads necessary for connection with city. | Occasionally, developers provide a minor share of the required land. | none | none | none | none | none |
Sections 2, 3 and 4 provide the theoretical framework, i.e., an introduction to the basic concepts around public value capture (section 2) and an account of the debates about the effectiveness of PVCs in general and DOs in particular (sections 3 and 4). These debates concern:
whether PVCs rest upon direct or indirect rationales; whether contributions are charged in exchange for land-use regulation decisions; whether DOs are negotiable; how DOs relate to land governance approaches; how DOs relate to the negotiation process with developers.
Section 3 also categorizes all PVC tools (including Polish ones) through the lens of some of these debates. Section 5 applies these reflections in order to analyse the effectiveness of PVCs in urban development in Poland; again, with a focus on DOs. Finally, section 6 summarizes the findings and introduces final general reflections.
When the value of real estate increases, this is due to one or more of the following ‘events’:
The owner makes his own efforts and invests in the qualities or accessibility of his property. Others, public or private parties, make efforts and investments that positively affect the qualities of the location in which the property is located (accessibility, status, proximity to economic activities, views, etc); this may include the provision of new infrastructure or the general population and economic growth, which is the result of efforts and investments made by people other than the owner. Public bodies allow more profitable use and building possibilities through land-use regulation decisions of any kind Land-use regulation decisions are those that approve a rezoning, land-use plan, additional development rights, relaxation of existing land-use regulations, issuing of building permit, property subdivision or readjustment decisions. They prescribe new use and/or building possibilities for land that usually causes a rise in its economic value.
When land is privately owned, if the increase in value is the result of the owner’s own efforts (i.e., event 1), there is usually not much discussion about who is the legitimate ‘owner’ of this increase: the owner him/herself. However, if the increase in value is the result of investments or decisions by others (i.e., events 2 and 3), there is often a question about who owns the incremental value. It is this very dependency on the efforts, investments and regulations of parties other than the owner that has long stimulated fundamental discussions about whether (part of) the increase in value of land due to events 2 and 3 legitimately belongs to the landowner or not. The terms used to name this increase often betray the normative nature of these discussions: For example, a popular topic in neo-classical theory of economic rent is the idea of taxing land value increase, which, when removed, will not affect the output or the price of the buildings built on that plot of land. Variants of this argument have been advanced by Adam Smith, David Ricardo, J.S. Mill, Alfred Marshall, A. Pigou and, specially, Henry George (George 1879; Prest 1981; Oxley 2006).
PVC policies and tools focus on capturing this value increase. The term ‘land value capture’ (LVC) refers to traditional proposals that exclude the capture of value created by efforts of the owners and of the value of the buildings (as opposed to the value of land, which if created by the efforts of others, should be captured, Smolka 2013; eds Ingram & Hong 2012). Because, in practice, it is often difficult to assess whether tools capture value increase belonging to land or to buildings, this paper uses the broader term ‘public value capture’ (PVC, thus excluding the term ‘land’) to include all instruments that capture all possible increase in the value of land and buildings, whether created by the owners or not.
This section introduces the categorization of PVC tools based on some debates about their effectiveness (Gielen, Salas & Cuadrado 2017) that are relevant for Poland As mentioned before, PVC tools in general and DOs in particular are considered effective in this paper if they succeed in providing the financial revenues necessary to pay for suitable urban public infrastructure in newly-developed building areas without public subsidy.
1Public bodies either use direct or indirect PVC instruments. Each of these builds on two different motivating rationales (Alterman 2012; Gielen. Sala & Cuadrado 2017).
The Uthwatt Committee discussed the introduction of a betterment levy to capture land value increase. A 100% betterment levy was introduced in the 1947 Town and Country Planning Act, and no development could take place without payment to the Central Land Board. The levy would apply where land in private ownership was sold to developers. However, the political controversy over the new regulation became clear soon after, when the subsequent Conservative government decided to abolish it with the 1954 Planning Act. Similarly, a 40% levy introduced by Labour in 1967 was abandoned by a Conservative government in 1971. The last major attempt in England to tax development gains was the Development Land Tax Act 1976, introduced by a Labour government. This betterment tax was severely modified by the Conservative administration that came into power in 1979 and was eventually scrapped in 1985 (Oxley 2006; Clusa & Mur 2007; Alterman 2009; Catney & Henneberry 2019). Categorizing PVC tools as direct or indirect is not always easy. The definition of a direct tool is that it is meant, or said to be meant to capture value created by ‘events’ 2 (public and private investments other than those of the owner) and 3 (public decisions on land-use regulations) with the argument that this value does not belong, or wholly belong to the landowner. As Polish legislation does not elaborate much on the fundaments and goals of the
However, the authors are not so pessimistic because there are also examples of countries that have successfully, or with partial success, introduced taxes based on direct rationales; the more so because many countries have been successful in introducing developer obligations (DO’s) based on direct rationales. A good example of the latter is Brazil (Gielen & Van der Krabben 2019).
Besides proposals of PVC based on a direct rationale (the community is the rightful owner of all or part of the increased value and should therefore capture it), other proposals have been put forward that are based on different, more pragmatic, ‘indirect’ rationales. This makes them
PVC tools can be charged as a periodic legal obligation (e.g., Land value taxes charge only the increase in the value of the land, while property taxes charge the increase in the value of the land and the buildings on it.
So far, these PVC tools are not related to administrative decisions about land-use regulations Land-use regulation decisions are those that approve a rezoning, land-use plan, additional development rights, relaxation of existing land-use regulations, issuing of building permit, property subdivision or readjustment decisions. They prescribe new use and/or building possibilities for land that usually cause an increase in its economic value. These contributions consist of payments by money, land, construction services, buildings, etc., and the actual moment of payment is not necessarily the same moment of approval of the land-use regulations. In fact, the payment is often deferred in time to the moment when the developer actually wants to build and therefore requests the necessary permits.
This distinction (PVC-tools charged independently or not from land-use regulation decisions) is relevant for their effectiveness (Muñoz Gielen & van der Krabben 2019). For example, property taxes are charged on all landowners independently of land-use regulation decisions, often proportionally to the market value of their property But not always, e.g., the Polish An example of a Polish DO based on indirect rationales is the contract between developers and the municipal road authority ( Most of the new buildings in Poland are not built on areas covered by land-use plans (
Non-negotiable developer obligations (N-NDO) have statutory status, which means that they are regulated, mostly in supra-municipal legislation that prescribes precisely their scope with legal standards and categorizations Supra-municipal legislation can be produced at the national, regional, state or provincial level, depending on the institutional structure of the public administration in the respective country.
Often, N-NDOs in practice offer room for negotiation, for example because prescriptions allow for interpretation, because they are ignored, or because they are prescribed after negotiations take place. Therefore, they could also be considered as negotiated DOs (NDOs). ‘Pure’ NDOs are usually vaguely regulated in legislation.
Some NDOs are more negotiable than others. When NDOs are prescribed in legally-binding local policy (e.g., land-use plans), this policy considerably reduces the room for the negotiating parties to decide which obligations can be asked for and agreed. For example, the afore-mentioned Polish negotiated contributions between the municipal road traffic authority and the developer are formally framed because the requirements of the road authority need to fit within the road and parking prescriptions of the legally-binding local land-use plan (
When NDOs are prescribed in indicative, non-legally binding local policy E.g., non-legally binding master plans, or internal guidelines with no statutory value.
Sometimes NDOs are not or almost not prescribed in local policy anyway, so the outcome of negotiations will depend mainly on specific circumstances and the negotiating skills of the parties involved. In this sort of NDO, the room for negotiation is the largest To our knowledge, the most elaborated literature about the role of discretion in the geographical and historical differences of developer obligations relates to England (e.g., Dunning et al, 2019 and Lord et al, 2019).
Public and private bodies play different roles in the different steps of land development, which are: land purchase and assembly; financing, land preparation and provision of the necessary infrastructure; land disposition. This leads to ‘active’ and ‘passive’ forms of governance in land development (Van der Krabben & Jacobs 2013; Hartmann & Spit 2015). Forms of governance can be subcategorized in order from more public and active to more private and passive: a) the nationalization of all land and public land selling, b) public land banking and public land selling, c) public-private land development, d) land readjustment and e) private land development. a) and b) include the possibility of public bodies selling land (freehold or leasehold) in its ‘raw’ state without developing it first, or instead of public bodies providing the infrastructure first and then selling serviced building plots. In a) and b) public bodies can capture the land value increase through the land price (or through a share of development profits in the case of model c), or they can prescribe in the selling contract that developers will construct the infrastructure, and, maybe, pay public bodies for other expenses. The other side of the coin is the financial risk, which may end up with a negative PVC, i.e., public bodies losing money and having to subsidize the public infrastructure.
See table 2 for an overview of the mentioned sorts of PVC tools.
Overview categorizations of public value capture instruments and Polish examples
Not many examples of this in Poland, only land-lease ( |
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contract between developers and the road traffic authority ( |
contract between developers and the road traffic authority ( |
The previous section shows that there are three variables of the institutional design of PVC tools that might influence their effectiveness: 1) the supporting rationale: direct vs indirect; 2) whether tools are charged as a condition to land-use regulation decisions or not (i.e., whether they are DOs or not); and 3) whether DOs are negotiated or not. This section further focuses on the effectiveness of DOs. Based on international comparative research, two other variables are relevant here: 1) the embedment of DOs in the governance approach to urban development, 2) and their embedment in negotiating processes (Muñoz Gielen & van der Krabben 2019).
Whether DOs are negotiable or not, in most countries their achievement depends on an agreement between the public body that tries to charge obligations, and the landowners/developers that must pay them. Most N-NDOs are compulsory in the sense that landowners cannot build if they do not contribute. But if they are not willing to build, public bodies cannot force them to contribute (except, and to a certain degree, in some types of land readjustment, in some countries, see below). This is partly why passive approaches (land readjustment and private land development, models d) and e) mentioned in section 3.4) are criticised as being ineffective: see, for example, the discussion in Spain since the 1970’s (Muñoz Gielen 2010) and in the USA in the 1960’s and 1970’s (Van der Krabben & Jacobs 2013), or the ongoing discussions in Switzerland (Lambelet & Viallon 2019) and Portugal (Morais & Correia 2019).
In land readjustment (LR) landowners share the final serviced building plots but, first, give free access to their land to allow the readjustment of properties and infrastructure provision, deliver the land needed for public infrastructure for free to the public body in charge, and pay a corresponding share of the readjustment and infrastructure costs (or alternatively deliver some serviced building plots as payment
Besides LR, other land policy instruments can influence the degree of dependency and hence also the results of DOs: expropriation (also known as compulsory purchase) and pre-emption rights (also known as right of first refusal, giving municipalities first-buyer’s right). These coercive instruments may support public bodies’ strategies, influencing the degree of dependency between public and private stakeholders (if landowners do not agree to the contributions, public bodies can threaten to acquire their land). Highly relevant here is the compensation to be paid to the landowners (based on the value of the land either in its previous or future use), which derives from normative conceptualizations, standards and approaches of legislation and valuation methods (Zaborowski 2018; Dunning et al. 2019).
Summarizing, in passive forms of governance, DOs often strongly depend upon agreement with landowners and developers, although less so when there is the possibility of compulsory LR and/or cheap expropriation and pre-emption powers. Section 5 shows how this applies to Poland.
As just seen, in passive forms of governance there is always some degree of dependency between public and private bodies. Therefore, bargaining often plays a crucial role. What is relevant is whether the legislation gives public bodies the statutory powers to condition the modification or approval of a land-use plan (the first land-use regulation decision that prescribes the use and building possibilities of land, also known as ‘rezoning’ in some countries) to the developer committing in an agreement to deploy and/or pay obligations. As far as the authors know, this happens at least in England, Spain, Portugal, Italy, Brazil, Canada, Switzerland, Indonesia, Korea and NSW Australia.
This is different from conditioning the building permit (so not the previous modification of the land-use plan) to obligations without any agreement (contract) backing it. The administrative issuing of the building permit does sometimes imply a legal obligation, based on public law, to pay or realize contributions, without any agreement securing their effective implementation. Many countries show that conditioning the land-use plan (so not the building permit) to an agreement (besides and above a possible legal obligation based on public law) is relevant for the effectiveness of DOs. First because, without an agreement, non-compliance can only be enforced through administrative law (often only the withdrawal of the building permit), while, where there is an agreement, municipalities can also enforce through civil law. Second because an agreement implies that developers have had a say in the development terms and obligations (instead of public bodies unilaterally prescribing them), which increases their commitment to deploy the obligations effectively. And third because, once the land-use plan is approved, landowners are already secure about the use and building possibilities of their land. As a result of this certainty, higher expectation values are already capitalized in the market and serve as collateral. Developers can rely on land price expectations and municipalities do not have any more leverage with which to negotiate. In other words, the ulterior issuing of building permits is less relevant in the power relations between municipalities and developers, especially if there is no agreement securing the contributions (Muñoz Gielen & van der Krabben 2019).
In another group of countries (the authors know of Canada in the 1960s and the Netherlands today), national legislation allows public bodies and developers to engage in voluntary negotiations about obligations that might result in a contract. But here, if developers refuse to reach an agreement, public bodies cannot, formally speaking, refuse the approval of the land-use plan; i.e., public bodies cannot threaten not to approve the land-use plan if the developer doesn’t sign the agreement. Signing the agreement must be voluntary, i.e., it cannot be made under the threat of not approving the land-use plan (Muñoz Gielen & van der Krabben 2019).
Based on the debates about the effectiveness of PVC tools presented in the previous sections, this section analyses the Polish case. Poland is rich in PVC tools. See table 3 for an overview.
Overview of Polish public value capture tools, legal basis and proper authorities (own elaboration)
Land-lease of urban land ( |
Ustawa z dnia 23 kwietnia 1964 r. Kodeks cywilny (Civil Code), Ustawa z dnia 21 sierpnia 1997 r. o gospodarce nieruchomościami (Real Estate Management Act) | Municipalities (municipal land) State Treasury (state land) |
Property tax ( |
Ustawa z dnia 12 stycznia 1991 r. o podatkach i opłatach lokalnych (The Act on Local Taxes and Levies) | Municipalities |
Planning levy ( |
Ustawa z dnia 27 marca 2003 r. o planowaniu i zagospodarowaniu przestrzennym (Act on Spatial Planning and Development) | Municipalities |
Statutory betterment charge ( |
Ustawa z dnia 21 sierpnia 1997 r. o gospodarce nieruchomościami (Real Estate Management Act) | Municipalities |
Informal (negotiated) betterment charge | No legal basis | Municipalities |
Informal conditions to administrative decisions | No legal basis | Municipalities |
Formal N-NDOs (traffic infrastructure) | Ustawa z dnia 21 marca 1985 o drogach publicznych (The Act on Public Roads) | Road traffic authorities - Municipal level County (poviat) level Provincial (voivodeship)level National level |
Formal N-NDO’s ( |
Ustawa z dnia 21 sierpnia 1997 r. o gospodarce nieruchomościami (Real Estate Management Act) | Municipalities |
Formal N-NDO’s in urban revitalization areas | Ustawa z dnia 9 października 2015 r. o rewitalizacji (Act on revitalization) Ustawa z dnia 27 marca 2003 r. o planowaniu i zagospodarowaniu przestrzennym (Act on Spatial Planning and Development – amendments to regulations in this Act introduced by Act on Revitalization). | Municipalities |
Formal N-NDO’s in developments against land-use plan | Ustawa z dnia 5 lipca 2018 r. o ułatwieniach w przygotowaniu i realizacji inwestycji mieszkaniowych oraz inwestycji towarzyszących, ‘lex developer’ (Act on Facilitation of Housing Development and Accompanying Facilities) | Municipalities |
Informal NDO’s | No legal basis | Municipalities |
Selling of public land, freehold or leasehold: the predominant form of governance in Poland is: i) public bodies selling raw land to developers, which develop it (governance approach a/b, see section 3.4), or ii) developers buying land from private owners and developing it (approach e). Public bodies, especially municipalities, only develop land if they own it already and are willing to do so, which does not happen often In the western parts of the country, after the Second World War, much of the land was distributed among the state, municipalities and public institutions. Even today public institutions own vast amounts of land here (e.g., Wrocław), which makes it much easier to conduct an active planning policy. In contrast, in the central and southern parts of the country, the majority of the land is private (e.g., Cracow). Warsaw is a special case where, because of the destruction of ca. 80% of the city during the war, a special governmental decree was introduced (s.c.
Property tax ( There are examples of countries in which property tax provides higher revenues (e.g., the US -Sjoquist & Stephenson 2010 and Spain - Muñoz Gielen, 2019b) or lower revenues (e.g., the Netherlands), related to the total municipal budget (Muñoz Gielen, 2019a).
Planning levy ( The four studied cases confirm the marginal character of the revenues generated by the planning levy.
Statutory betterment charge ( The four studied cases confirm this: or they did not see the use of this statutory betterment charge, or its revenues are not expected to be relevant.
Besides these formal PVC tools, some other, informal, marginal tools have been developed:
Informal (negotiated) betterment charge: sometimes municipalities make clear to the developer, after the land-use plan is approved, that the municipality is not able to construct the necessary public infrastructure. Municipalities are formally responsible for public infrastructure, but no sanction exists for not constructing it. Municipalities then also make clear that they wish the developer to agree to construct the infrastructure himself. Sometimes municipalities offer a contribution towards the costs, depending on the public interest of the infrastructure. Thus, developers might just wait and nothing happens, or build the infrastructure, possibly with a public contribution. This is thus a sort of non-statutory betterment charge, i.e., a voluntary and negotiated contribution in exchange for public investment in infrastructure Of the four studied cases, only in one case could this informal betterment charge possibly have been used to make the developer construct a small park. Informal conditions to administrative decisions: there are contributions negotiated as conditions to administrative decisions that do not fit within the definition of land-use regulation decisions given in this paper For example, a municipality prescribes one-way circulation in the only road that connects the city to a large shopping centre so long as its owner does not voluntarily contribute to improving this road. Another example is when developers must compensate for cut down trees by planting new trees in public spaces; therefore, the developers must ask the greenery department of the municipality for permission to plant new trees in public spaces; then, the greenery department asks the developer to pay for other improvements in these public spaces or to pay for overhead costs (e.g., greenery design). These sorts of informal conditions to administrative decisions are rare. None of the four studied cases showed it.
Formal N-NDOs (traffic infrastructure): in order to obtain a building permit ( The formal sequence is that the road traffic authority must first certify the connection to a public road and, if such a connection does not exist or is insufficient, the road authority will only certify this provided it has an agreement with the developer. The negotiations and the sealing of the agreement might take place before the issuance of the planning permit ( In the four studied cases, all of them developed under a MPZP, this tool was used to make sure that the developer pays most of the construction costs of internal roads, if there are such, with a contribution from the municipality towards those streets that are also relevant for the rest of the city. However, most of the necessary land for these roads, if not all, was or will be delivered by public bodies. In smaller developments, made possible with a planning permit (DWZ), the results are even worse: they often do not have real access to the infrastructure (no sewage, no road). The road may be just a theoretical one (not paved, just drawn on a plan).
Formal N-NDO’s ( So, in total, there are three different sorts of It can be levied only in the case of a land subdivision made according to a valid land-use plan (MPZP), and only if landowners apply for it. It was applied in only one of the four studied cases and it delivered a negligible amount of money.
New formal N-NDO’s: in 2015 the Act on Revitalisation ( Ryś 2020 and own sources about the cities running pilot implementation of this Act on revitalization (Wałbrzych, Łódź and Bytom).
New formal N-NDO’s: in 2018 the ‘
Informal NDOs: so far, the formal DOs are not very effective, which has stimulated informal, marginal NDO’s. There is some discretional room for negotiating DOs in exchange for approval of the land-use plan (MPZP), so municipalities sometimes use this, often at the edge of legal possibilities, to try to obtain some contributions: they decide not to adopt or modify the plan if the developer doesn’t voluntarily take the initiative to construct some infrastructure and/or donate land towards it Here problems might arise when municipalities include such contributions in contracts because they easily can be fought in the courts (Prejs 2017), so developers must provide the infrastructure before the approval of the MPZP or municipalities must approve the MPZP and trust that the developer will indeed construct the infrastructure afterwards. This means that often these informal NDOs are not agreed on paper, but only orally or in a unilateral letter of intent from the developer.
The case of
The case of
In the case of private land development, Polish municipalities do not dispose of coercive land policy instruments and therefore there is very high dependency on agreements with the developers and landowners in order to secure contributions.
Poland has at its disposal a land readjustment regulation ( For example, in Israel, properties can be compulsorily readjusted and municipalities often proceed with this. However, there is no legal provision (neither within the LR-regulation nor outside of it) that obliges landowners to provide the infrastructure or pay for it. As a consequence, after the readjustment of properties and the delivery of the property title of part of the land to the municipality, often the infrastructure is not provided so the development does not take place. Therefore, municipalities seek agreement with landowners or developers representing them in order to finance the public infrastructure (Muñoz Gielen & Mualam 2019). Turkey also has an LR-regulation which, until the 1980s, was used frequently, but it allowed only contributions for on-site, ‘hard’ infrastructure not exceeding 40% of the development area and excluding the costs of infrastructure provision. Consequently, since the 1990s, municipalities prefer large-scale developments to follow a straight private sector-led approach, while LR is still applied mostly in smaller developments (Sense Turk & Belgin Gumru 2019). Korea had a well-functioning LR in the reconstruction period after the Korean war (1962–1983), but this was abandoned because it allowed only for the costs of direct necessary public infrastructure and did not allow additional value capture (e.g. no social/affordable housing). Since then, municipalities prefer, as in Turkey, a straight private sector-led approach (Kresse et al. 2019). Switzerland has a totally voluntary LR-regulation in place that does not support PVC (except in the Vaud canton; Lambelet & Viallon 2019). Portugal has had an LR-regulation since 1999 (
Polish municipalities can exercise a pre-emption right to acquire the land, but this is only possible in a limited number of cases (buying back leased public land, historical monuments, land needed for public use and especially in designated urban regeneration areas). Also, land prices are established by the market, which includes profit expectations about the future use possibilities and leads to high compensation sums.
Finally, when public bodies want to expropriate land for public infrastructure, there are two cases. The first case is ‘soft’ infrastructure (e.g., schools, greenery, public facilities) for which necessary land can be expropriated only through the normal procedure, which is long, complex and expensive because the compensation is based on the future use and building possibilities. The only alternative is thus to negotiate with the landowners and pay high prices. The second case is road infrastructure which, as for railways and airport infrastructure, follows a special expropriation procedure, much faster than the first, but leads also to high compensation sums.
Not only Poland, but also many other countries encounter problems with high compensation sums because it is the future use that must serve as the basis for compensation; for example the Netherlands (Muñoz Gielen 2019a) and Portugal (Morais & Dias 2019). Some countries tried to prescribe the previous uses as the basis for compensation, but have not always been successful in actually lowering compensation sums until the 1980s, in Italy, the compensation in case of expropriation was based on its previous use, but, since then, judicial scrutiny has brought paid compensation amounts closer to the future use value (Pogliani 2019). In 2007, the Spanish government, pursuing an effective (i.e., cheap and excluding speculative values) expropriation, prescribed that compensation sums must be based on former uses, but it is not yet clear whether this provision will endure judicial scrutiny (Muñoz Gielen & Lora-Tamayo Vallvé 2018).
Thus, Polish municipalities do not have coercive instruments to force development because neither LR, nor pre-emption rights nor expropriation are feasible and/or affordable. Hence, Polish municipalities largely depend on (formal and informal) agreements with landowners and property developers. This ends up most of the time with municipalities having to purchase the necessary land from private owners based on market prices or, if lucky, for a lower price from other public agencies that happen to own land in the development area This was the situation in the case studies. Only in the
The evidence presented in this paper suggests that Poland shows serious shortcomings when it comes to committing landowners and property developers to finance public infrastructure in newly-developed urban sites through developer obligations (DOs). In this regard, Poland deviates from the practice common in many other countries. Also, it seems that public value capture (PVC) tools other than DOs do not fill this gap which, in turn, leads to a worrying lack of proper public urban infrastructure in urban development. The authors believe that the improvement of PVC tools therefore invites further exploration and already feel confident to offer deeper insight into possible improvements to DO instruments.
As broad, and theoretically well-thought, as the set of PVC tools in Poland may seem, these tools are rather ineffective in practice. This is to say that Polish PVC tools fall very short of providing enough financial means for proper public infrastructure in newly-developed areas. The only PVC tools that, to the best knowledge of the authors, provide significant revenues are public urban land lease (
Landowners selling their land after rezoning should be charged a planning levy (
The same applies to the two formal DOs (i.e., the
Beside these formal tools, several informal tools have been developed, however, not a single one of them is capable of rendering satisfying results. Adding to this general failure of PVC tools, most urban development in Poland is done without land-use plans, based on
There are many possible explanations for the general failure of PVCs in Poland. An obvious one is the lack of any longstanding tradition of property tax and, as of today, the lack of political will to disrupt this
The second possible explanation is the lack of feasible or affordable coercive land policy tools common in many other countries, i.e., land readjustment, pre-emption rights and expropriation. This makes Polish municipalities highly dependent on particular agreements with landowners and developers. Again, this is not a uniquely Polish phenomenon.
Where Poland stands in sharp contrast to most developed countries is in its denial of the basic principles of bargaining processes in urban development: an effective development control system (urban development must follow land-use plans) combined with the possibility of approving these land-use plans contingent upon a developer’s contractual commitment to contribute. As mentioned before, a dichotomy exists in Poland in that a development is possible pursuant to a land-use plan (
The Polish case is extreme by international comparison. True, there are other countries where it is formally forbidden to make the approval of a land-use plan contingent upon signing of a contract (e.g., the Netherlands today, or Canada in the 1960s). However, in these cases, negotiations are perfectly normal and allowed, as long as they are voluntary. In practice, a development agreement that includes contributions is
Often, Polish municipalities approve the land-use plan before there is any specific development initiative, i.e., before a developer submits an application for building. Therefore, when it does happen, there is no more practical possibility of requiring a development agreement. When a developer submits an application and comes to speak with the municipality, the land-use plan is already adopted and hence the land prices have already capitalized the increase in value. Developers are comfortable with waiting precisely because the land-use plan is already approved (or, in the areas without any land-use plan, because developers expect no problems in obtaining an
It appears as if Poland has chosen a theoretical and ineffective approach to PVCs, instead of opting for a pragmatic approach: to use the impact of land-use plans and planning permits on land markets as a tool to restore the equilibrium in the balance of power between public and private parties in urban development; between public interest and private economic goals. Polish legislation should explore the possibilities of making the approval of a land-use plan and planning permits contingent upon a developer’s contractual commitments to contribute. The 2015 Revitalisation Act and the 2018