Value capture

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Value capture refers to a type of innovative public financing in which increases in private land values generated by a new public investment are all or in part “captured” through a land related tax to pay for that investment or other public projects.

Value capture refers to the process by which all or a portion of increments in land value attributed to "community interventions" rather than landowner actions are programmed in advance and recouped by the public sector. These "unearned increments" may be captured indirectly through their conversion into public revenues as taxes, fees, exactions or other fiscal means, or directly through on-site improvements to benefit the community at large.

Value capture refers to a type of Public-private partnership in which the private sector compensates a public agency for the cost of a facility that generates economic value. It is in almost all cases led by the responsible public agency.

Transportation projects, for example, can increase adjacent land values, and thus generate a windfall for private landowners. Public agencies can with proper preparation and foresight capture a portion of that windfall with any of the following methods: 1) local improvement districts; 2) public-private development of adjacent land; 3) traffic impact fees; or 4) tax increment financing districts.

Value capture can be thought of as a fully contained sub-set of land value tax, however with a much more focused domain of application as indicated here. The Lincoln Institute of Land Policy [1] offers this persepctive on value capture:

Value capture mechanisms are being implemented, with varying degrees of success, in several Latin American countries, while in other parts of the region the notion of value capture continues to meet with suspicion and resistance.

In addition of the use of value capture mechanisms to control urban growth and territorial expansion and to reduce the perverse effects of land speculation, we are interested in their applicability to circumstances characterized by the large-scale and persistent informality in land markets so typical in Latin America. These include situations where land tenure relationships are poorly defined, where land occupations are mostly irregular or illegal, and where significant land value increments are self-generated by the community, rather than by state action. This network explores whether land value increments (resulting directly or indirectly from public interventions) can be mobilized to mitigate urban poverty in general and improve the access to serviced land by low-income families in particular. [2]