Harnessing the Real Estate Market for Equitable Affordable Housing Provision through Land Value Capture: Insights from San Francisco City, California

Abstract

Affordable housing remains a serious problem in many countries. Even as the housing affordability crisis deepens, most cities continue to exhibit robust real estate markets with high property prices. The low-income and poor households are unable to access affordable housing and remain excluded. This paper draws from empirical research conducted in the city of San Francisco and focuses on the application of Land Value Capture (LVC) through increased Inclusionary Housing (IH) requirements after plan changes that increased density potential in San Francisco’s Eastern Neighbourhoods to evaluate its effects on the goals of increasing both affordable housing and social inclusion. Findings reveal that the increased inclusionary requirements used as LVC mechanism enabled 76.2% of all the affordable housing units produced in the Eastern Neighbourhoods to be produced by market-rate developers in 2011–2015 as compared to the rest of San Francisco, where 35.5% of the affordable units were produced from the market through inclusionary policy during the same period. The study demonstrates that upzoning underutilised land coupled with a well-planned LVC mechanism can help harness the strength of the real estate market and increase both affordable housing production and social inclusion.

The Success Factor of Public-Private Partnerships in Malaysia and Nigeria's Housing Sectors

“…In commercial talks, the public agency's abilities must be on par with those of the private sector. To get the most out of a PPP deal, it's important to have good bargaining abilities (Nzau & Trillo, 2019). A private developer may win local support by appropriately performing his social responsibilities toward the community if he exhibits "social support," which is linked to "developers' social accountability".…”

Affordable Housing Provision in Informal Settlements through Land Value Capture and Inclusionary Housing

“…Such value enhancement needs to be harnessed for the public good through a land value capture (LVC) mechanism. LVC means "requiring and using for public benefit part of any increment in land value that results from public policy and/or investment (and not by direct action by the landowner)" [64] (p. 2,3). If this increment is not captured, it will end up benefitting the new landowners only and would have harmful effects on the low-income slum residents as it will result in their displacement.…”

“…Smolka [22] argued that LVC should be used to mobilize some of the land value increments generated by actions other than those of the landowner for the benefit of the community at large. Such actions may include changes in land-use norms and regulations such as rezoning and densification [22,64,66]. LVC is seen as an efficient and equitable tool because those who did not contribute to the increased land values do not retain all the financial benefits [67].…”

Harnessing the real estate market for equitable affordable housing provision: insights from the city of Santa Monica, California

“…As we shall see, it is through this second mechanism that the City of Santa Monica was able to generate more inclusionary units. With this approach then, IH relies on LVC to capture some of the increase in land value (through increased affordable housing requirements) brought by increased density (Nzau & Trillo, 2019). With LVC affordable housing is generated "through the planning system" (Monk, 2010).…”