Selling development rights is a possible fee-based instrument to develop affordable housing, but only when done strategically. As regulatory requirements that outline the planning and building permissions of a parcel, development rights allow local governments to regulate the nature and extent of a public benefit that will be reached through development. Selling development rights allows local governments and agencies to capture benefits that may result from future public intervention.
In Brazil, CEPAC (Certificados de Potencial Adicional de Construção) bonds are a way for cities to sell development rights in a way that attracts private capital. The bonds are generally sold for parcels that need redevelopment and they allow developers to build above the density limit, essentially resulting in upzoning. In São Paulo, bond proceeds make up the majority of property tax revenues for the city, and the proceeds have gone toward the construction of infrastructure, transit, and affordable housing. To ensure that low-income groups are benefiting from these bonds, the city introduced Special Zones of Social Interest, which are specifically dedicated to affordable housing.
Source:
UN-Habitat. (2021) The role of land in achieving adequate and affordable housing. UN-Habitat.
Link: https://unhabitat.org/the-role-of-land-in-achieving-adequate-and-affordable-housing