Essential to the development of affordable housing is effective land administration and policy. One tool in land administration is land value increment taxes, which is when taxes are used as a kind of value capture for increased land value from public infrastructure improvements or changes in approved land use. Land value increment taxes allow the broader community to benefit from increase private property values. Even though this kind of tax has been implemented to fund infrastructure in many places, it is rarely applied to social housing policy, except in a couple countries, including Colombia.
In Colombia, land value increment taxes were used to self-finance the provision of serviced land to meet affordable housing needs in Bogotá’s New Usme project. The project has three major value capture mechanisms: first, land acquisition before project release, reducing the risk of land speculation; second, existing landowners on the project site could entrust their land to the project instead of having it expropriated; and third, the use of land value increment tax. These three interconnected mechanisms ensured an affordable development both for local government and residents.
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