Land use management strategies for equitable infrastructure and urban development: Overview of strategies and tools

Erwin van der Krabben; Tiwari, Piyush; Shukla, Jyoti Working Paper Land use management strategies for equitable infrastructure and urban development: Overview of strategies and tools ADBI Working Paper Series, No. 1191 Provided in Cooperation with: Asian Development Bank Institute (ADBI), Tokyo Suggested Citation: Erwin van der Krabben; Tiwari, Piyush; Shukla, Jyoti (2020) : Land use management strategies for equitable infrastructure and urban development: Overview of strategies and tools, ADBI Working Paper Series, No. 1191, Asian Development Bank Institute (ADBI), Tokyo This Version is available at: https://hdl.handle.net/10419/238548 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/3.0/igo/ ADBI Working Paper Series LAND USE MANAGEMENT STRATEGIES FOR EQUITABLE INFRASTRUCTURE AND URBAN DEVELOPMENT: OVERVIEW OF STRATEGIES AND TOOLS Erwin van der Krabben, Piyush Tiwari, and Jyoti Shukla No. 1191 October 2020 Asian Development Bank Institute The Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI’s working papers reflect initial ideas on a topic and are posted online for discussion. Some working papers may develop into other forms of publication. The Asian Development refers to “China” as the People’s Republic of China, and to “Hong Kong” as Hong Kong, China. Suggested citation: Van der Krabben, E., P. Tiwari, and J. Shukla. 2020. Land Use Management Strategies for Equitable Infrastructure and Urban Development: Overview of Strategies and Tools. ADBI Working Paper 1191. Tokyo: Asian Development Bank Institute. Available: https://www.adb.org/publications/land-use-management-strategies-equitable-infrastructure- urban-development Please contact the authors for information about this paper. Email: [email protected], [email protected], [email protected] Erwin van der Krabben is a professor of planning at Radboud University, The Netherlands. Piyush Tiwari is a professor of property at the University of Melbourne, Australia. Jyoti Shukla is a lecturer in property at the University of Melbourne, Australia. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms. Working papers are subject to formal revision and correction before they are finalized and considered published. Asian Development Bank Institute Kasumigaseki Building, 8th Floor 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan Tel: +81-3-3593-5500 Fax: +81-3-3593-5571 URL: www.adbi.org E-mail: [email protected] © 2020 Asian Development Bank Institute ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla Abstract In the absence of concise conceptualization of planning and land use management strategies, the scope of their discussion in literature has been wide, with different nomenclature for almost similar concepts. This paper attempts to provide an overview of the models and tools used for land management by grouping these models and tools, known by different names across disciplines and countries, along a primarily urban or periurban development continuum. The objective is to streamline the discussion on land management strategies on the basis of principles on which models and tools are based rather than their nomenclature. Keywords: land use, land markets, eminent domain JEL Classification: R330, K110, Q150 ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla Contents 1. INTRODUCTION ............................................................................................................ 1 2. OVERVIEW OF LAND MANAGEMENT STRATEGIES ............................................... 2 3. PARTIAL LAND MANAGEMENT STRATEGIES .......................................................... 4 3.1 Compulsory Public Acquisition of Land ............................................................. 4 3.2 Strategic Public or Private Land Banking .......................................................... 7 3.3 Pre-Emption (or Right of First Refusal) ............................................................. 8 3.4 Graduated Density Zoning ................................................................................. 9 3.5 Land Bonds ...................................................................................................... 10 3.6 Value Capture Instruments .............................................................................. 10 3.7 Inclusionary Zoning .......................................................................................... 11 3.8 Land for Infrastructure Models ......................................................................... 11 3.9 Establishment of Markets for Transferable Development Rights ................... 12 3.10 Public Land Lease Systems ............................................................................ 12 4. COMPREHENSIVE LAND MANAGEMENT STRATEGIES ....................................... 12 4.1 Private Market Land Management Strategy .................................................... 13 4.2 Public Comprehensive Land Banking Model .................................................. 13 4.3 Collaborative Private-private Land Management Model ................................. 14 5. CONCLUSION ............................................................................................................. 20 REFERENCES ........................................................................................................................ 21 ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 1 1. INTRODUCTION To enable a proposed urban development, including its attendant infrastructure and feeder transportation, one needs to possess at least the user rights over the land on which the development is supposed to take place. That urban development can be a brownfield or greenfield development, and it may consist of, for instance, infrastructure, residential, commercial, industrial, redevelopment or mixed-use development. Depending on the scale of the development and the present ownership structure, the promoter-sponsor-developer (be it public, private, or some combination) must acquire one or more plots in a process that is called land assembly. After land assembly, further steps must be taken to make the location suitable for development. We refer to that whole process as part of the administration function of land management. Land management is a much broader term which, according to the United Nations Economic Commission for Europe (1996) comprises the process by which natural and built resources of land are put into good effect. Enemark (2005) defines a land management paradigm which includes land policies, land administration functions, and a land information system. Land administration functions, which are the operational part of land management, ensure proper management of land tenure, land value, land use, and its planning and development. The administration functions of land operate within the land policies and are facilitated by the information system (Enemark 2005). Land development is the strategic part of land administration that constitutes a series of steps that are taken to achieve long-term goals. For the rest of the discussion, we refer to the strategic part of land administration as the land management strategy. A land management strategy for urban development usually encompasses the assembly of land (through securing and transferring land rights), financing of the investment in buying or leasing land, reparcelling of that land into a new grid to make it suitable for the proposed development, the provision of infrastructure and other public facilities, distribution of building plots to end-users and/or investors (that want to buy the land to build on), and the management and ownership of (part of) that land after the construction of the building(s) (Figure 1). Figure 1: Land Management Strategy for Urban Development Source: Authors. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 2 Although (public) land management strategies are often part of a more comprehensive planning process and the (private) development of land also often makes up part of integrated land and real estate development projects, it is still useful to consider the land management strategy separately from the broader planning process and real estate development. There are at least four good reasons to do so. First, land markets must be considered as markets with their own characteristics and price mechanism (as separate from the real estate market, which requires land as an input for property development, while there are other uses of land that do not require building on it, such as agriculture or mining or parks). A land management strategy should enable public and private stakeholders to act in the market in an efficient way. Second, but closely related to the first argument—public (and private) stakeholders in most countries have developed policies and tools aimed at the land market. A land management strategy can be regarded as the operationalization of a land policy and should provide the framework for the use of land policy rules and guidelines. Third, the assembly of land that rezones or reassigns property rights interferes with existing individual property rights over land and raises many legal debates over, for instance, expropriation, the protection of individual property rights, and compensation that must be paid for the compulsory acquisition of land. Fourth, since David Ricardo introduced his theory on land rent (Ricardo 1817) and Henry George published his famous work Progress and Poverty, in which he argued in favor of the nationalization of land (George 1881), political debates have questioned the so-called unearned increment in land values due to government interventions. Land policy in most countries is influenced by that debate and is often used as an instrument to cream off part of that unearned increment. This paper does not aim to go into the details of these different debates and arguments, but has a more modest and pragmatic objective, namely to provide an international, state-of-the-art overview of land management strategies used by local governments (and private stakeholders) in countries around the world aiming for an efficient and fair urban development process. Though we do refer to literature that critically reviews the working of these models, we do not have the intention to evaluate (the outcomes of) the models in terms of, for instance, effectiveness, efficiency, and/or social equity. This paper in particular wants to present the characteristics of each of these models and distinguish them from each other. This also implies that the paper is concerned only with the land management strategies that are used for infrastructure, public spaces, and urban development projects, and a complete study of land management is out of the scope.1 2. OVERVIEW OF LAND MANAGEMENT STRATEGIES The overview of land management strategies in this paper is mainly based on a literature review, discussions in the ADBI seminar on land management in Asia (Tokyo, December 2018), and the authors’ personal expertise. Land management strategies have not been conceptualized concisely in literature and the scope differs between countries and disciplines (Louw 2008). Some studies use the term ‘land assembly’ to indicate the entire process of making land available for urban development. Golland (2003), for instance, defines land assembly as the acquisition of land; land preparation; planning of the built form, streets, open spaces, and main services; sub-division of land 1 Land management for urban and periurban development obviously affects rural land markets as well, when former rural land is turned into urban. However, the paper’s focus is on the strategies and instruments to make land available for urban development (buildings, infrastructure, green space). ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 3 for buildings; and delivery of the planned form. According to Louw (2008, p. 70) a crucial aspect of land assembly encompasses changes in land ownership by acquiring required land parcels to facilitate property development and infrastructure provisions. Therefore land assembly is considered as a specific stage in the property development process. In line with van der Krabben and Jacobs (2013), we prefer to speak of land management strategies. According to van der Krabben and Jacobs (2013, p. 775), land management strategies have three objectives. Firstly, land must be made available for a proposed and desired (or mandated by government) development. Changes in the social and economic conditions over time necessitate urban redevelopment, as the landownership that currently exists is a response to past requirements (Louw 2008, p. 70). Landowners themselves may not undertake redevelopment or co-operate with it due to various constraints that they face or a preference for the status quo. Such situations require a form of land assembly—land transfers from passive to active ownership. Second, a land management strategy requires that the costs of the public works are fully or partially recovered. This could be achieved through a positive balance between the value increment from new development and the costs incurred in development. A third main objective, though politically contentious (Alterman 2009), is to capture part of the unearned increment in the land value resulting from the change in land use in the development area and to use it for public purposes. We may add here a fourth objective, namely to offer an instrument to (re)distribute land-based wealth in a fair way amongst landowners, land users, property developers and investors, and the public. To achieve these objectives, different land management strategies can be applied. We distinguish between partial land management strategies and a comprehensive land management strategy (Figure 2). Partial land management strategies deal with certain aspects of a land management strategy, while comprehensive models offer an inclusive approach covering all aspects of the process of land management. We are aware that the division that we make here is artificial to a certain extent, since the tools and instruments that are being discussed here as partial land management strategies often are part of the comprehensive land management strategies as well. Nevertheless, we think that the distinction is useful: it follows the academic literature on land policy; moreover, it relates to current policy debates in some countries on how inclusive or comprehensive land management strategies should be. The (potential) use of the strategies and the (legal) tools and instruments are obviously contextually defined. In countries where land is state owned, land management strategies follow a completely different path from countries with private ownership of land. The strategy also depends on whether the process is participative (involving landowners) or non-participative, as discussed by Shukla (2020). The use of certain legal instruments and tools is constrained by planning and land laws. Institutional capacity problems may weaken local governments’ positions in relation to land markets. In some countries, investment strategies for local governments in land markets are legally restricted. Finally, local land and real estate market conditions influence the effectiveness of both public and private sector land management strategies (respectively, for instance, in terms of scarcity of land, market power by big developers, and land prices, and in terms of real estate prices, vacancy rates, and demand for real estate). The overview of land management strategies in this paper, however, does not take these context-related variations into consideration. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 4 Figure 2: Land Management Strategies and Tools Source: Authors. 3. PARTIAL LAND MANAGEMENT STRATEGIES Possibly the most commonly applied development strategy for urban development is the situation in which a private real estate developer or end user is in charge of (or has been commissioned to) a real estate development, from land acquisition to completion of the buildings, after which the public space that is part of the development is often transferred to a public authority. Local governments may decide to support this strategy with a variety of partial land management strategies and instruments. Based on the literature, we distinguish ten types of partial land management strategy: 1) compulsory public acquisition of land; 2) strategic public or private land banking; 3) pre-emption rights; 4) graduated density zoning; 5) land bonds; 6) value capture instruments; 7) inclusionary zoning; 8) land for infrastructure models; 9) the establishment of markets for transferable development rights; and 10) public land lease systems. 3.1 Compulsory Public Acquisition of Land Land transfer from passive to active ownership sometimes requires compulsory public acquisition of land (also referred to as eminent domain, compulsory purchase, eviction, expropriation, or resumption). Compulsory acquisition is simply defined as the power of the sovereign to compulsorily acquire private land for public purposes such as building dams, roads, railways, hospitals, schools, and other public infrastructure. The most popular justification for the grant and exercise of this power to and by the government has been social welfare maximization (Benson 2008). There is a strong argument to support that individuals’ rights to property should give way to the social function of the property (Heller 2000) and priority should be given to the cumulative welfare of the society at large, over and above the personal interests of the affected landowners ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 11 capture 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 come forward that are based on different, ‘indirect’ rationales, of which the internalization of negative externalities of urban development is the most common one. These proposals do not challenge fundamental ideological principles and do not always require a detailed regulation, which make them easier to introduce”. Typical examples of indirect value capture instruments include developer obligations, infrastructure levies, impact fees, and agreements with developers, often to supply public goods and services, such as playgrounds, greenbelts, or low-rent, affordable housing (see below). 3.7 Inclusionary Zoning Inclusionary zoning, also known as inclusionary housing, can be considered as a special kind of value capture mechanism. Alongside ‘regular’ zoning ordinances, there are inclusionary zoning programs which require private developers who undertake residential development to contribute a portion of their units toward affordable housing for those who are crowded out in the upscaling residential market (Calavita and Mallach 2009, p. 15). Though mainly applied by local governments in the United States (Ellickson 1981; Calavita, Grimes, and Mallach 1997), some have suggested the use of inclusionary zoning as an instrument in (Asian) developing countries as well (Meda 2010; Turk and Altes 2014; Mukhija et al. 2015; Mishra and Mohanty 2017). 3.8 Land for Infrastructure Models Based on the idea that both road and public transport infrastructure investments— adding to improved locational accessibility—lead to higher land and real estate prices, many countries have implemented policies for integrated transit-oriented development (TOD) projects. These policies aim to integrate land and real estate development with transport infrastructure investments in different ways. We consider these policies as partial land management strategies, since they may contribute to the financing of investment in land and also serve as a value capture mechanism. Next to many more studies of how land value can be captured to finance TOD (including Cervero et al. 2004; Cervero and Murakami 2009; Ingram and Hong 2012; Murakami and Gregory 2012; Li 2013; Medda 2012; Sun et al. 2017), Suzuki et al. (2015) provide a good overview for developing countries in Asia and elsewhere of how land value capture instruments can be used to optimize and finance TOD strategies. In other contexts, many (developing) countries make use of different types of land for infrastructure models. Public-private partnerships (PPPs) have been used as successful funding mechanism for the construction of major infrastructure projects in many developing countries in Asia (ADB 2008). The most common PPP model is the build-operate-transfer (BOT) model. Less familiar is the build-transfer (BT) model, which can be considered a land value capture tool. Land for infrastructure models can be seen as a specification of the BT model. Investors are offered ‘sweetheart’ price discounts or attractive rights to develop the land as compensation for constructing the infrastructure. The advantage of these models is that the authorities are able to develop economic infrastructures without having to incur expenditure through public funds. Investors generate their returns from the commercialization of acquired land. The possible downside of the land-for-infrastructure mechanism lies in the public sector’s weak position to negotiate the terms of the concession contract as public agencies aim to balance their urban planning objectives with motives for value capture. Frequently the original owners feel cheated when they see they were bought out at ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 12 low market prices and the benefit of the value added is reaped by wealthy private developers who gain political advantage from their public sector partners. 3.9 Establishment of Markets for Transferable Development Rights In some countries such as Brazil, India, the Netherlands, and the US, markets for transferable development rights have been established to support land development. For this, usually two interventions are needed: first, the development right over land must be separated from the ownership right over land; second, a market must be created where trading of development rights can take place. The establishment of a market for transferable development rights may serve two different purposes. First, in some countries, governments decide to create a market for development rights, enabling them to raise an income from selling these rights. The income generated from selling the development rights can be used to finance the costs of urban transformation projects and/or public infrastructure (Sandroni 2010; Smolka 2013; Suzuki et al. 2015). Second, transferable development rights are sometimes offered as non-financial compensation to landowners. The transfer of development rights is based on the ability to transfer additional value from one development to the other. This compensates for losses by those whose planning and development rights are reduced due to a government (planning) intervention (van der Veen et al. 2010; Alterman 2012). 3.10 Public Land Lease Systems In countries with state ownership of land, after the development, the land remains state owned and user rights over that land are leased to the leaseholder for a certain time period. In Asia, the best-known example is the People’s Republic of China’s land lease system (see, generally, [Wu and Yang 2020]). For urban development, local governments in the PRC would usually first expropriate rural land and service that land with a basic infrastructure. Then the local government would sell the user rights of the serviced land to a user for a pre-specified use. The land concession fee is determined either by negotiated agreement or (predominantly) by competitive tendering or auction. Land leasing is the common way for local governments to capture land value in the PRC. The revenue generated as extra-budgetary revenue is used to pay for local public infrastructure development, but there is usually no direct link between the lease on a plot of land and the infrastructure provided on the plot (Ingram and Hong 2012). Land finance in the PRC is a significant type of fiscal revenue strategy for local governments to raise revenue through land leasing and land tax in the PRC (Wang et al. 2012). Other examples of public land lease systems can be found in Viet Nam (Labbé and Musil 2013) and, in a very different context, the Netherlands (Ploeger and Bounjouh 2017; Korthals Altes 2019). 4. COMPREHENSIVE LAND MANAGEMENT STRATEGIES We distinguish three types of comprehensive land management strategy: a private market land management strategy, a public comprehensive land banking strategy, and a collaborative private-private land management strategy. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 13 4.1 Private Market Land Management Strategy Fully private market land management strategies, in which a private land developer acquires land, puts in the infrastructure, and services the land with the intention to sell building plots to other developers or end users, are not very common. Private sector developers usually prefer to invest in real estate development (land and property development) and not in land development alone. Exceptions are public-private partnership land development agencies, which develop, for instance, industrial estates. As stated above, when private developers invest in real estate development they often take care of at least part of the land management activities, in which state bodies’ partial land management strategies and instruments may support them. 4.2 Public Comprehensive Land Banking Model In a public comprehensive land banking model, a public authority acts as a land developer that takes control over all aspects of the land development process, from the acquisition of the land to be developed to the ownership and management of the public space after ready-to-build-on building plots have been sold to private developers and/or end users (van der Krabben and Jacobs 2013; Valtonen, Falkenbach, and van der Krabben 2017). With such a comprehensive public land development model, local authorities are not only able to support a planned urban development (by offering building plots and public facilities), but they can achieve broader planning goals as well (e.g., reserve land for affordable housing and greenbelts; provide higher-quality public facilities; or use profits from the sale of building plots in a greenfield development to subsidize the development of a brownfield development). A crucial aspect of this development strategy is that local authorities can use the net income from buying (usually farming) land and selling building plots to pay for all the necessary public facilities for the development area. This public comprehensive land banking model differs from public strategic land banking because of its objectives: while strategic land banking is mainly used to secure land for future urban development and to transfer it from passive to active ownership when the time is right, the aims of the comprehensive model are to develop the whole location, except for the buildings, and to achieve these broader planning goals. Apart from the supposed planning-related benefits, several authors warn of the financial risks for municipalities relying on this development model without a serious risk management strategy (Buitelaar 2010; van der Krabben and Jacobs 2013; Valtonen, Falkenbach, and van der Krabben 2017), due to the effects of changing housing market conditions on demand for and price of building plots. Others have discussed the effectiveness and efficiency of this model (Hartmann and Spit 2015), and the degree of discretional power municipalities have to apply this model and how they make use of that (Woestenburg, Spit, and van der Krabben 2019). We are aware of only a few countries making use of this development model. In Europe, extensive use of the development model seems to be limited to Finland (Viitanen et al. 2003; Valtonen, Falkenbach, and van der Krabben 2017), Sweden (Caesar 2016), and the Netherlands (Needham 1992; van der Krabben and Jacobs 2013; Buitelaar and Bregman 2016). We are not aware of the use of a similar development model in Asia. The PRC’s land development model, based on its state ownership of land, has similarities but differs in comprehensiveness: Chinese cities would usually lease unserviced land to private developers, requiring the developers to install the public facilities. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 14 4.3 Collaborative Private-private Land Management Model Collaborative private-private land management models have sometimes been termed ‘sleeping beauty’—potentially interesting but rarely useful in practice (Alterman 2012, p. 765). We distinguish them into urban land readjustment models (also referred to as land consolidation and land pooling) and land trust models (distinguished into bank trusts and community land trusts). Urban land readjustment models have been promoted for a long time by international development organizations such as UNHABITAT (2012), the World Bank, the Lincoln Institute for Land Policy, and the Japan International Cooperation Agency, while the Asian Development Bank has successfully introduced land trust models in several Asian countries (Kanda 2016; Yoshino et al. 2018) for the self-finance of infrastructure costs and the fair distribution of development gain offered by these models. A Private Trust Law has been approved by the Cabinet in Thailand and is being reviewed by the Council of State, which will facilitate the introduction of a land trust (Urapeepatanapong et al. 2016; Piewthongngam 2020). 4.3.1 Urban Land Readjustment As a mechanism for land consolidation, urban land readjustment (ULR)—also known as land pooling, replotting, land reassembly, reparcellation, repartition, Kakaku seiri (in Japan) and Umlegung (in Germany)—assembles and reparcels land by possible swapping of land positions among landowners without the need for any transaction, so that part of the land can be used for public services and infrastructure that benefits existing landowners as well as the city. Land readjustment is also used for planned development of urban fringe lands. A government agency assembles (often irregular) land parcels and then subdivides them into a planned grid layout of streets, open spaces, and serviced lots. Some of the plots are retained for cost recovery, while the remaining plots (slightly reduced in area) are transferred back to the landowners for development or sale (Archer 1992, p. 155). The process is most popularly used when land parcels are fragmented, and existing boundaries are in conflict with proposed planning outlines. The mechanism supports land-based financing of the proposed development plan in the sense that in addition to land required for infrastructure development, a portion of land is retained by the public agency for commercial sale in the market to recover the cost of development. The underlying assumption of ULR is that all necessary public infrastructure costs will be paid from the development gain that results from the proposed development. Reparcelling of the land results in higher land values for participating landowners as well. Urban land readjustment also differs from alternative development strategies because all individual land and property owners in an urban land readjustment project share the development gain (and the risks) of the (re)development of the area equally (van der Krabben and Lenferink 2018, p. 115). Compared to the compulsory acquisition of land, which requires huge upfront cost, land readjustment is financially less burdensome for public agencies, particularly for developing economies. Unlike in the case of compulsory acquisition, where landowners at times lose all their land in return for monetary compensation, under land readjustment they receive back a new parcel of land, proportional in size or value to the original land parcel, that offers them the opportunity to benefit from the new development. The size of land received after readjustment is smaller, but the value is raised due to infrastructure improvements and other developments caused by the project. As much care as possible is taken to minimize displacement by allocating the new land parcel near to each owner’s original parcel. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 15 Land assembly and development through land readjustment generates desirable outcomes for all stakeholders by creating planned development patterns, increasing land values, and limiting displacements. This is not to say that the process is free of challenges. Often it is difficult to get landowners on board when they do not recognize the social function of property, or distrust the motives, commitment, and abilities of the government and sponsors, and are consequently less motivated to contribute a portion of land for public amenities (Hong and Brain 2012). Also, lack of representativeness of original landowners in the planning process, unclear or unrecognized land titles, and poor ownership records make it logistically difficult to implement the process (Hong and Brain 2012; Price 2020). ULR has been used in many EU countries, but not in the United Kingdom and Ireland. While Germany, Finland, the Netherlands, Italy, Denmark, France, Spain, and Norway have long traditions in using ULR (although in some of these countries the instrument has indeed appeared a ‘sleeping beauty’), other countries in Europe (Albania, Armenia, Croatia, Georgia, Kosovo, Moldova, Montenegro, Serbia, and the Russian Federation) have also used forms of land consolidation. The Netherlands has a more than 100-year tradition of agricultural land readjustment, but until recently lacked regulation for urban land readjustment (van der Krabben and Needham 2008). With the introduction of a new planning law in 2018, however, ULR regulation has now been introduced here as well (van der Krabben and Lenferink 2018). Globally, different forms of land readjustment can be found in Asia (the PRC; India; Indonesia; Japan; Nepal; the Democratic People’s Republic of Korea; the Republic of Korea; Taipei,China; Thailand; Turkey; and Pakistan), in Africa (Egypt, Kenya, Morocco, and Zimbabwe), in North and Central America (Canada, Mexico, and the United States), in South America (Chile and Colombia), in the Middle East (Israel, Lebanon), and in Australia (Home 2007; Demetriou et al. 2011). Particularly, in Japan (Sorensen 2000), the Republic of Korea (Kresse et al. 2020), and Taipei,China (Lin 2005), ULR has proven to be very successful in transforming traditional places in modern cities. Different countries have used different models for land readjustment, though the underlying principles have been the same. In general, an urban land readjustment scheme has the following characteristics (van der Krabben and Lenferink 2018, p. 116): All property owners are invited to temporarily transfer their property rights to a third party to allow the reparcelling of the land. (…) The land readjustment scheme can only be implemented when all property owners participate or can be enforced to participate. (…) After a decision has been taken, the third party will reparcel the land into building plots that match the layout of the new development plan for the location. Consequently, all owners are assigned a building plot to build on, equal to their original share, either in value or in size (if not, compensation takes place). The value increase of the land as a result of the land readjustment will first be used to cover the costs of the process and to make land available for necessary public facilities related to the new development. The remaining will go to the owners. In some countries, also the costs for the realization of public facilities are paid out of the value increase. The participation of landowners is necessary for ULR to materialize, and different authorities have different regulations around this. Some require the voluntary participation of all; others require majority participation (the rest could be without consent); and some are compulsory. In Japan, land readjustment has been well utilized, in place of compulsory acquisition, to provide land for roads, parks, and riverway improvements (Shultz and Schnidman 1990). Land readjustment in Japan is executed under the Land Readjustment Act. In ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 16 some cases where land readjustment has been used, public utility projects (such as sewers and gas mains) have also been included, though not mandated under the Land Readjustment Act. The infrastructure and public facilities are financed through the sale of financial resource land, which is retailed by the project authority executing land readjustment. For projects which require a larger outlay, the cost of public facilities is shared by the national, prefectural, and local governments. An agreement by two-thirds of the affected households provides an automatic legal mandate for land readjustment to proceed. However, in practice, very rarely is this mandate used to force the remaining one-third of households to participate against their will. Project authorities make serious and patient attempts to obtain a consensus among all the households, which results in drawn-out implementation and deal-breaking delays. Taipei,China and the Republic of Korea have followed similar processes for land consolidation to Japan. In countries such as Malaysia and Thailand, where the Japan International Cooperation Agency (JICA) is providing technical assistance for land consolidation, the procedures used are similar to land readjustment in Japan. However, these countries also have provision for, and occasional resource to, compulsory acquisition of land under the Land Acquisition Act (Agrawal 1999). Land readjustment in Indonesia requires agreement by at least 85% of landowners covering at least 85% of the area as a basis to implement the project. Once the agreement of 85% of landowners is achieved, land from the remaining 15% of households is acquired compulsorily. Legal provisions for compensation in cases of compulsory acquisition in Indonesia are frequently inadequate. This has resulted in the pressured participation of even those who do not initially consent to land readjustment (Guild 2020). Lin (2005) analyzed the Neihu land readjustment project in Taipei,China. The land use prior to the project in this area was agriculture. The city required industrial sites to relocate scattered illegal factories and land to augment the housing supply. These objectives were achieved through a land readjustment project. Lin (2005) argued that land readjustment has not solved the problem of co-ownership. The readjusted land that had a single owner was bought by developers, but land under co-ownership saw few transactions, and was largely bought by speculators. For a land readjustment project to succeed, it is important that the readjusted sites and developable land can be marketed effectively. In the Republic of Korea, land readjustment serves broader social goals beyond the provision of urban services, including for low-income housing (Shultz and Schnidman 1990). Western areas of Germany use compulsory land readjustment primarily in peripheral areas for town expansion and renewal projects that are implemented by the local government (Shultz and Schnidman 1990). These projects do not require landowner consent (Shultz and Schnidman 1990). With local authority approval, land readjustment projects can also be undertaken by owners or developers. Due to the compulsory nature of land readjustment in Germany, it takes one to three years for replatting and two years or less for the installation of services, compared to five to ten years in other countries. A significant part of the project cost (as much as 90%) for the provision of roads and open space is borne by landowners (Shultz and Schnidman 1990). In Germany, unlike other countries with land readjustment programs, contributions from landowners to the cost of public projects usually take the form of cash rather than land to be sold to recover costs. There is, however, an upper limit of 30% of the market value of the land, or the land itself, that can be taken from landowners by the local authority for public use. Land readjustment, called land pooling in Australia, is used only in the one state of Western Australia (Shultz and Schnidman 1990) where financing and transforming privately-owned land into planned, serviced building sites has been attempted. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 17 Another variant of ULR has been used in Lebanon in its reconstruction of the war-torn Beirut Central District (BCD). In this model, the redevelopment of BCD was handed over to a private company, Solidere. Instead of reparcelling the land to previous owners, landowners were allocated equity shares in the development company, Solidere, in proportion to their land contribution. The company also issued shares in the open market, which allowed it to raise cash from investors for development purposes. An enabling legislation locked property owners in a compulsory association with investors and the shares replaced the deeds. The right to occupation or return for property owners was extinguished (Home 2007). Li and Li (2007) discuss the case of vertical land readjustment in Hong Kong, China, as a high-rise high-density city with limited opportunities for traditional horizontal land readjustment. Most crucial is the demand for residential buildings, for which the government often relies on the redevelopment of old urban residential buildings to increased height and density. While absolute ownership of all land rests with the government, the leasehold ownership of land is distributed among apartment owners as an undivided share. This is popularly known as the tenancy-in-common system, where tenancy implies leasehold (and not rental tenant) ownership held in common by the owners rather than by a single owner (Li and Li 2007). Using the case study of Lai Sing Court, Li and Li (2007) explain the concept of vertical land readjustment, which means the redevelopment of an existing residential site in a way such that the original owners receive back a proportionate share of housing in the new development that has more units than in the previously existing building. The process requires the cooperation and participation of the original owners, as well as of the developer and authority. Land readjustment in this case reduces the risks for the developer, as the requirement to secure upfront financial commitment to buy property rights from the owners is not there. The gain from the project for developers is through the sale of extra floor area after completion of the project. The original owners have the flexibility to sell their strata contracts in the open market (Li and Li, 2007). The original owners, on the other hand, work together under dedicated leadership provided by the chairman of the owners’ association. In summary, a joint coordinated effort from all stakeholders and fair distribution of benefits of redevelopment have underpinned the success of this model (Li and Li 2007). A perceived major drawback of land readjustment is the long gestation period for project execution and fulfillment (Shultz and Schnidman 1990). Japanese land readjustment projects, for instance, often face numerous administrative appeals filed by property owners who object to the property redistribution scheme. Resolving the conflicting interests of numerous owners in a large infrastructure project can take more than a decade. Another drawback of land readjustment programs is that they lead to speculation in real estate and a rise in land prices, as a result of to which objectives such as providing low- and moderate-income housing become untenable. In another criticism, Hong (2007) argues that the use of state power to take private property should only be for valid public purposes with just compensation. When the boundaries of private properties are readjusted to facilitate private redevelopment, the purpose can no longer be justified as purely public. As per the constitution, Hong (2007) contends that the basis for a land readjustment agency to assemble and transfer private use rights for private development is unlawful. Not without reason, opponents have accused public authorities of using these public powers for private or unacceptably mixed public-private gains. Using the German land readjustment system as an example, Davy (2007) analyzes the legal issues associated with land readjustment. He argues that in 2001, the First Chamber of the German Constitutional Court ruled that compulsory land readjustment ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 18 does not equate to compulsory acquisition. Rather, land readjustment “would only use the legislative power to determine the content and scope of property”, which is within the legal right of federal and state governments according to Article 14 of the German Constitution. The court also ruled that since the acquisition of land is temporarily and largely for private use, the constitutional provision that governs the reasonableness of compulsory acquisition could not be applied in cases of compulsory land readjustment. This ruling has enabled the use of compulsory land readjustment for assembling land for redevelopment projects in Germany. However, treating compulsory land readjustment as a service to private landowners has constrained the government’s ability to procure land from property owners for public purposes or for land value capture to finance local infrastructure (Davy 2007). We observe that land readjustment can be a time-consuming process, as its implementation requires that land is assembled through consensus rather than coercion. Coercion is only the last resort when all attempts for consensus have been exhausted. Consequently, land readjustment, although preferable for its voluntariness and acceptance, takes much longer than other planning instruments for assembling land. In terms of acceptability and applicability of land readjustment, small lots and lots with suboptimal shapes have larger tendency to be redeveloped. Regarding ownership, lots occupied by the city are more likely to be assembled, while private owner-occupation reduces the likelihood of assembly (Lindenthal, Eichholtz, and Geltner 2017). Lindenthal et al. also argue that the likelihood of joint redevelopment increases when landowners have the same occupation and/or the same socio-political beliefs and religion. A similar mechanism has been used in the case of Japan, where there has been wide application of land readjustment. It has been argued that Japanese society, where working culture is organized in groups, instills a collaborative and consensual decision-making that facilitates the implementation structure of land readjustment. Within this organizational framework, it may be asserted that in Western cultures, which underscore the importance of individual freedom and self-expression over collective or state control, land readjustment projects like in Japan would be difficult to propose and implement. Sorensen (2007) disagrees with this characterization, contending that proposals for the readjustment of land in Japan have been just as contentious and fiercely contested as in other countries. 4.3.2 Land Trusts A land trust model combines individual ownership rights with collective landownership by separating the ownership of land and structures on the land (Fujii 2016). The entrustee, who can be either a trust bank or a cooperative, acquires ownership of land from the original landowners in a certain area and manages and develops that land on behalf of the entrusters (the original landowners). By entrusting their land to the trust bank or community land trust, the entrusters can benefit from the entrustee’s efforts to pool all land and invest in the development of that land in a more effective way. In Yoshino et al. (2018), we find the example of a real estate trust. Residents living in small landed houses may increase the efficiency of their land utilization by consolidating the land and building apartments or office blocks on it. The mechanism used is that land owners entrust their land to the trust bank, and the trust bank builds a large building on the consolidated land to effectively utilize the land. Landowners who contributed land receive apartments in the building and part of the profit generated from commercial leasing of space in the building as dividends from the trust bank (Yoshino et al. 2018, p. 8). Similar to the land readjustment mechanism, the consolidation of land results in more profitable development and the original owners can share in these ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 19 profits. In a land readjustment scheme, the original landowners will receive full ownership of land and properties again after the readjustment has been completed; in a land trust model, the original landowners receive user rights, while ownership of the land remains with the entrustee. In the latter case, the original landowners will additionally receive part of the profits as dividends from the trust bank. A simplified model of land trust is presented in Figure 3. The entruster may decide not to give away the property immediately and instead leave it with the entrustee after defining certain conditions for the beneficiary to receive the profit (Yoshino et al. 2018). The land trust (or entrustee) receives trusts of real property or land from the entrusters and takes on the brokerage and appraisal of entrusted properties to the beneficiaries (Yoshino et al. 2018). Figure 3: A Model of Land-Lease Arrangement Organized by a Land Trust Bank Source: Authors’ adaptation of Yoshino et al. (2018, p. 7). The application of the above model has been explained by Yoshino et al. (2018) in the context of the densely populated city of Tokyo, where small landed houses are common. The original landowners may maximize the use of their property by consolidating land through a land trust that can then construct a high-rise residential building to actualize the development potential of the land. The original owners may benefit by securing a bigger apartment unit in the new development, while also receiving part of the development profit as dividends from the trust bank. Yoshino et al. (2018) advocate the land trust model as an inclusive method of land assembly where the original landowner can be party to development returns (see Hossain and Yoshino [2020]). Also, there are financial incentives for those investing privately in infrastructure projects which are otherwise unfeasible for the government, particularly in developing countries. However, this method has been rarely used outside Japan, and therefore its practical challenges in developing Asia are yet to be examined. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 20 5. CONCLUSION We aimed with this paper to prepare an overview of land use management strategies and instruments encountered in different parts of the world. We by no means had the intention to assess the effectiveness, efficiency, and/or social equity of the different strategies, but rather wanted to describe their basic features and how and where they are applied. For further reading of studies that have assessed the working of these strategies and instruments, we refer to many of the references used in this paper. We conclude with a warning to the reader. Though some of these strategies and instruments may seem attractive to countries in which they are missing or not used, international transfer of policies and instruments is often not without problems. Attention to (differences in) institutional contexts, cultural expectations, legal procedures, and market conditions is essential when considering in one country the use of strategies and instruments that have been successfully applied in another. ADBI Working Paper 1191 Van der Krabben, Tiwari, and Shukla 27 van der Krabben, E. and Needham, B. (2008) “Land readjustment for value capturing: a new planning tool for urban development.” Town Planning Review 79 (6): 485–506. van der Veen, M. (2009) Contracting for Better Places: A Relational Analysis of Development Agreements in Urban Development Projects. Amsterdam: IOS/Delft University Press. Viitanen, K., Palmu, J., Kasso, M., Hakkarainen, E. and Falkenbach, H. (2003) “Real estate in Finland.” Publication B107 in Real Estate Studies and Economic Law. Helsinki: Helsinki University of Technology, Institute of Real Estate Studies, Espoo. Von Braun, J. and Meinzan-Dick, R. (2009) ‘Land Grabbing’ by Foreign Investors in Developing Countries: Risks and Opportunities. IFPRI Policy Brief 13, April 2009. Woestenburg, A., Spit, T. and van der Krabben, E. (2018) “Land policy discretion in times of economic downturn: how local authorities adopt to a new reality.” Land Use Policy 77: 801–810. 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