land use planning obstacles to property rights in the philippines arturo g. corpuz september 2008...
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Land Use Planning Obstacles to Property Rights in the Philippines
Arturo G. CorpuzSeptember 2008
Economic Freedom Network Annual Conference
Outline
• Establishing and Realizing the Value of Property Rights
• Obstacles internal to the Planning Process
• External Obstacles: Conflicting Development Policies
• Market Pressures Towards Higher Intensity and Higher Density Uses: Makati CBD
• Summary and Conclusions
Introduction
• Key message: Land use planning process is an integral component of property rights and obstacles to the process affect how property rights are exercised.
• Land is a foundation of economic activity and property rights to land.
• Property rights are meaningful only to the extent that land can be utilized and value extracted from it.
• Land use directly affects the value of land.
• Property rights reflect the value that the market places on land by virtue of its productive potential.
Introduction
1 Consensus on the value of land through a formal land use planning process.
Establishing and Realizing the Value of Property Rights
Establish the value of land
Two conditions:
Realize the value of land
Current focus: Unlocking capital
Removing obstacles, e.g. fake titles, outdated land laws, inefficient land transactions, etc.
2 Development of the land according to designated land use or disposition of this right.
Land ownership, administration and management
1 Consensus on the value of land through a formal land use planning process.
Establishing and Realizing the Value of Property Rights
Establish the value of land
Right to use land in a specific manner (land use)
Potential value to be derived from the land
2 Development of the land according to designated land use or disposition of this right.
Two conditions:
Land Use PlanZoning Ordinance
• Monopolistic land market
Establishing and Realizing the Value of Property Rights
Some Additional Points:
Location is unique.
No two parcels of land can occupy the same location.
• Land use plan > Land valueor
Land value > Land use plan
A land use plan determines the value of a parcel of land by designating what can take place in it.
But land uses with similar values typically take place near each other—existing land values determine the land use plan.
Establishing and Realizing the Value of Property Rights
Some Additional Points:
• Impact of Land Use Plan on Property Rights
1. Motivation to acquire land/property right influenced by current or potential land use.
2. Obstacles to land use planning can delay/ subvert exercise of property rights.
− Obstacles in identifying and designating land use
− Obstacles in land use plan implementation
• Lack of planning data/information
• Lack of planning resources and expertise
• Conflicts within the local planning-investment programming-budgeting- implementation process
Internal Obstacles
External Obstacles:
Conflicting Development Policies
Urban Expansion vs Food Security
Land Conversion: Drivers
• Existing high densities
• Rapid population growth
• High urban productivity and employment opportunities vs rural
• Lack of infra (to absorb growth in urban areas and to support rural productivity)
Pampanga
Bulacan
Rizal
LagunaCavite
Batangas
MetroManila
Pop Density 1980Pampanga
Bulacan
Rizal
LagunaCavite
Batangas
MetroManila
2007
PampangaBulacan
Rizal
LagunaCavite
Batangas
MetroManila
APGR 1990-2000
PampangaBulacan
Rizal
LagunaCavite
Batangas
MetroManila
2000-2007
External Obstacles: Conflicting Development Policies
Property Rights Impacts
Land conversion
• 2X-10X increase in value of converted properties
• Decrease in agri land• Urban land prices?
No land conversion
• Constrained urban land supply and dependent activities and services
• Maintain agri land inventory• Domestic food supply?• Urban land prices?
Rizal
LagunaCavite
MetroManila
0
1
2
3
4
5
6
7
0 20 40 60 80 100
Distance from Pop Center (km)L
n D
ensi
ty
Metro Manila Density Gradients
1980 20001990 2007
Market Pressure: Makati CBD and Deed Restrictions
• Market pressure to redevelop land towards higher intensity and higher density uses leads to conflicts that affect the exercise of property rights.
• Redevelopment: a logical response to (a) continuing demand for urban space and (b) diminishing supply of vacant or underutilized land.
– Potential gross value resulting from
redevelopment ~ P50k/sqm
• Strongest in and around Makati CBD
– Highest demand for high intensity and high density use
– Limited land supply– Deed restrictions
Fort Bonifacio
Rockwell
Alabang Stock Farm
Villamor Air Base
AranetaSan Lazaro
North Triangle
Old Bilibid
FTI
New Bilibid
Pandacan
Sta Ana
Makati CBD
New Bilibid400 ha
Welfareville72 ha
Old Bilibid8 ha
FTI120 ha
Pandacan30 ha
Market Pressure: Makati CBD and Deed Restrictions
Deed Restrictions
• Contractual agreement between land developer and lot buyer governing land use, density, building form, governance, etc.
• Ex. Along Ayala Avenue– Office use only– FAR 16 density– Build flush to front and side boundaries– Membership in estate association
• Ex. Residential villages– Single family residence– Two storey building – Building setbacks– Membership in village association
Areas rezoned to higher intensity/ density land uses
Areas subject to deed restrictions
Market Pressure: Makati CBD and Deed Restrictions
National level regulations
Local zoning ordinance
Deed restrictions
Hieararchy of Regulations• Principle: most stringent
provision prevails
Ideal for local enforcement: • local = deed restrictions
Inconsistent with hierarchy: • local < deed restrictions• deed restrictions not allowed
Market Pressure: Makati CBD and Deed Restrictions
National level regulations
Local zoning ordinance
Deed restrictions
Pre-2001Metro Manila zoning ordinance: • No height or density
restrictions
Post 2001• Ideal for enforcement: • local = deed restrictions
?
Proposed due to market pressure: • Increase density/intensity• Render deed restrictions
invalid• Force property owners to allow
increase in density
?
Market Pressure: Makati CBD and Deed Restrictions
National level regulations
Local zoning ordinance
Deed restrictions
Pre-2001Metro Manila zoning ordinance: • No height or density
restrictions
Post 2001• Ideal for enforcement: • local = deed restrictions
?
Proposed due to market pressure: • Increase density/intensity• Render deed restrictions
invalid• Force property owners to allow
increase in density
Deed restrictions do not violate stringency principle
Violates property rights
• Land use planning establishes the value embodied in property rights to land.
• Obstacles to land use planning and its implementation affects property rights.
• Obstacles can be internal or external—involving technical shortcomings or conflicting policies and regulations.
• In Makati CBD, obstacles can be:– Positive: lead to higher value redevelopments that lead to windfall gains and
additional local revenues.– Negative: prevent exercise of property rights as originally intended, compromise
environmental integrity.
• Implications: Need to build up local planning capability, reconcile conflicting development policies and regulations, integrate deed restrictions with land use plans and zoning ordinances, recognizing the principle that the most stringent provisions (from an environmental integrity point of view) prevail.
Summary and Conclusions
E N D