THE GOVERNANCE OF

LAND USE
& URBAN PRODUCTIVITY
MAKING PRODUCTIVITY GREENER & MORE INCLUSIVE

Rudiger Ahrend
Head of Urban Programme
Public Governance and Territorial Development

Santiago de Chile 6/12/2016

 OUTLINE

• Why are we interested in land use?

• Land use regimes and their outcomes
• Making productivity “greener” and more
inclusive
• Planning vs flexibility: the role of
incentives from fiscal/tax regimes

2
Agglomeration benefits are not automatic

Productivity (controlling for sorting) of Mexican FUAs

3
 Large cities have benefits and costs…

• And many of those are directly affected by how

land use is governed 4
 Land and property are by far the most
important forms of capital

U$ billion PPP Disaggregated capital stock (six-country sample)

35000

30000

25000

20000

15000

10000

5000

0
Property Land Machinery & Inventories Other natural Intellectual Other non Cultivated
(buildings, Equipment resources property financial biological
infrastructure) assests resources

Note: Data includes Australia, Canada, Czech Republic, France, Japan and Korea.
Source: OECD National Accounts Table 9B
• Land use regimes and their outcomes

6
 Land use in Functional Urban Areas

Europe United States

Other Forests Agricultural land Developed land Other Forests Agricultural land Developed land

100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
More than 1 500 500 000 - 1 500 200 000 - 500 50 000 - 200 000 More than 1 500 500 000 - 1 500 200 000 - 500 50 000 - 200 000
000 000 000 000 000 000

Source: OECD calculations based on Corine Land Cover and National Land Cover Database
 The amount of developed land per capita
varies strongly across countries
Developed land per capita in urban areas
Developed land per capita in urban cores (in m²) Developed land per capita in commuting zones (in m²)
2000

1800

1600

1400

1200

1000

800

600

400

200

*All data is based on the OECD definition of Functional Urban Areas (FUAs)
Source: OECD calculations based on Corine Land Cover and National Land Cover Database
 Land use in urban cores and commuting
zones in Europe

Urban Cores Commuting zones

Number of metropolitan areas
30

30
20

20
10

10
0

0
0 200 400 600 800 1000 0 200 400 600 800 1000

Developed land per capita in m² Developed land per capita in m²

Source: OECD calculations based on Corine Land Cover data

 Developed land is growing everywhere…

Annual growth rates of developed land between 2000 and 2012

Annual % growth of developed land in commuting zone Annual % growth of developed land in core

2,5%

2,0%

1,5%

1,0%

0,5%

0,0%

Source: OECD calculations based on Corine Land Cover and National Land Cover Database
 …but per capita land use is declining in
many countries
Per capita growth of developed land in functional urban areas (cores and
commuting zones combined)
Annual percentage change in developed land per capita 2000 - 2012
1,2%
1,0%
0,8%
0,6%
0,4%
0,2%
0,0%
-0,2%
-0,4%
-0,6%
-0,8%
-1,0%
 Larger cities have lower per capita land
consumption
200%
Per capita land consumption in FUAs
150%
100% average
relative to national
50%
0%

10 12 Log Population
14 16 18

Source: OECD calculations based on Corine Land Cover and National Land Cover Database
 Differences in GDP explain only little of the
difference in land consumption
Per capita land consumption in m² (difference from

Difference from OECD mean (26 countries)

1000

800

600
mean/residuals)

400

200

-200

-400

-600
NOR

PRT

ITA
ISL

HUN

SVK

SVN
BEL

GRC

GBR

TUR
EST

AUT

IRL

ESP

NLD
USA

FIN

DEU
SWE

DNK

CZE

FRA

LUX
POL

CHE
Source: OECD calculations based on Corine Land Cover and National Land Cover Database
• Making productivity “greener” and more
inclusive

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 Land use policies to foster green and
inclusive growth in urban areas
• Need to find a balance between productivity,
sustainability, liveability and affordability

• Formal planning instruments can affect productivity

directly
– e.g. via the efficiency of public transport in cities
– by being slow to respond to change and thereby impedìng
innovation

• Land use policies are an important tool for making

urban productivity and growth greener and more
inclusive
 Housing costs have risen strongly in most
OECD countries
Inflation-adjusted property prices (1995=100)
Australia Belgium Canada Switzerland Germany
Denmark Spain Finland France United Kingdom
Ireland Italy Japan Netherlands Norway
New Zealand Sweden United States Average

400

350
Sweden
300 Ireland
Norway
250
UK
200

150

100
Germany
50 Japan

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
 Overly restrictive land use policies can harm
inclusiveness via rising housing costs

• Land use regulations

Annual change house prices

6%
should aim to 5%
prevent sprawl… 4%

(2000-2012)
• …but have to provide 3%
2%
sufficient space to
1%
construct housing 0%
for growing -1%
populations -2%
-3%
• Otherwise, housing
-4%
costs rise -1,0% -0,5% 0,0% 0,5% 1,0%

Annual change in developed

land per capita (2000-2012)
 Overly permissive land use policies will
likely affect productivity and sustainability

Sufficiently high density of high quality is needed

• Many cities have densities similar to when they
were much smaller
Low density neighbourhoods that were once at the
urban fringe are now within urban cores without having
densified
• Sufficiently high densities are needed to adapt
urban form, allow for efficient public transport
and build housing for greater populations
• Public spaces need to be of high quality in denser
environments to ensure well-being
 Car use is lower in denser regions
Regions with 10% less developed land per capita have 0.75 fewer cars
per 100 inhabitants
1ha
0.14ha
0.018ha
0.025ha

0 30 60 90 120
Number of vehicles per 100 inhabitants

European TL3 regions Estimated relationship

Source: OECD calculations based on Corine Land Cover and National Land Cover Database
Note: The positive relationship between land cover and car ownership is robust to controlling for per capita GDP levels and country fixed-effects.
 Regions that had more compact patterns of
development grew faster
40%
20%
0%
-20%
-40%

-10 -9 -8 -7 -6
Log urban fabric per capita

Effect significant at 99% level

• Planning vs flexibility: the role of
incentives from fiscal/tax regimes

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 Incentives matter: How to make planning
more flexible and foster good land use?
Public policies aimed at steering Public policies not targeted at
land use land use
• Spatial planning • Tax policies
• Transport planning • Transport taxes and subsidies
• Land use planning • Fiscal systems and inter-
• Environmental regulations governmental transfers
• Building code regulations • Agricultural policies
• Energy policies

How land is permitted to be used How individuals and businesses

want to use land

How land is used

 Aligning fiscal and tax incentives to land
use objectives

Fiscal and tax systems incentivise:

i. local governments’ planning policies
ii. land use decisions by firms and by
individuals

Incentives need to be better aligned with

land use objectives
 Examples: How fiscal and tax systems
influence land use

In some countries, local In some countries, ownership of

governments obtain a large share single-family homes receives
of revenues from business taxes preferential tax treatment

Local governments have

Residents have incentives to live
incentives to allocate as much
in low-density neighbourhoods in
land as possible to commercial
sub-urban areas
uses to maximise tax revenues.
 Differential taxation of property types affect
land uses

10
Annual change in per capita
land consumption in m²

-5

-10

-15

-20
0% 20% 40% 60% 80% 100% 120% 140%

Effective tax rate on single-family homes relative to effective tax

rate on apartments
 Examples: How fiscal and tax systems
influence land use

Many countries make expenses

Agriculture is heavily subsidised
for commuting by car tax
across most of the OECD
deductible

Lower costs of commuting

provide incentives to live further
Without subsidies, agricultural
from the place of work (often in
land uses would change
peri-urban areas) and increase
car reliance
 Key message: Need to pay greater attention
to incentives

• By paying greater attention to the incentives

that public policy provides for land use,
planning can become less restrictive and
more effective
• Taxes and fiscal systems matter most
• Regulatory and economic instruments need
to be combined
 Effective governance mechanisms are a
prerequisite for a successful
implementation
 Incentive-based land use policies
require monitoring and evaluation

• The use of fiscal instruments to steer land use

can result in land patterns that are more
desirable but at the same time less
predictable
• Systematic evaluations of land use policies
are lacking
• Knowledge about evaluation practices is rare
– data on land use and land use regulations is
scarce
 GOVERNANCE OF LAND USE

HTTPS://YOUTU.BE/JUV3GEVERB4

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 Thank you

The presentation draws from:

Ahrend, Farchy, Kaplanis and Lembcke (2014), “What Makes Cities More Productive?
Agglomeration economies & the role of urban governance: Evidence from 5 OECD Countries”
OECD (2017), The Governance of Land Use
OECD (2015) The Metropolitan Century: Understanding Urbanisation and its Consequences

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