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Leasing public land - Review

by Luca Gaeta

It is not easy to grasp immediately the variety of issues covered by a title as leasing public land. One should take into account each word occurring in such title, and ask: what kind of leasehold conditions? On behalf of what public bodies, and to what purposes, should be the land leased? What kind of land has to be leased, and how much land? The mix of possible answers to such questions hints the complexity of a land policy that the editors analyze carefully, setting prejudicial apart.
The case study approach, with a low comparative ambition, is chosen as a suitable way to assessing pros and cons of the public leasehold. Ten cases are collected which refer to different national contexts, with a few in-depth investigations at the urban level. The cases are partitioned between experiences from developed leasehold systems (Australia, Netherlands, Sweden, Finland, Israel, Hong Kong), and experiences from under development systems (Ukraine, Louisiana, China, Poland).
Long-term lease of the land held by public institutions is more commonly adopted one might suppose, facing today's ownership-oriented individualism. As a policy, it was introduced through different times in many European countries, mostly of the North, and it is well known by planners as a tool to minimize the impact of land speculation over the costs of affordable housing. Public leasehold, however, is above all a flexible policy, suitable to different and sometimes contradictory purposes as shown by some of the cases.
Since the nineteenth century, Hong Kong's government, which is the sole landowner of the (former) colony, seeks to raise financial revenues by selling at auction land development rights. On the one hand, the government's commitment is to shorten land supply, in order to avoid a downturn in land values. On the other, it is compelled to provide enough land to satisfy the needs for affordable housing construction.
Major municipalities in the Netherlands, well known as large landowners, make use of leasehold agreements as an additional planning tool. By setting suitable clauses in a contract, land use conditions may be enforced that would never be achieved through ordinary planning.
During the nineteenth century, Sweden set up a system of site leasehold (tomträtt) aimed at improving social housing conditions. After World War II, however, the site leasehold has been used as well for capturing land value increases. The subsequent litigations about the fixing of rent levels, together with the liberal upturn in recent years, are leading Sweden municipalities to sell public land.
Together with the selection of purposes, another key issue is related to the leasehold system, as a land policy: that is the shaping of a wise institutional framework. Security of tenure for individuals as well as public goals' achievement depends to a great extent on the cohesion of such framework. Many of the cases argue that multilevel governance, though necessary, is indeed a source of conflicts when the land is at stake. Overlapping powers, disagreements between state and local agencies, competition between different public sectors, are all likely to undermine the effectiveness of a policy with such a deep social impact.
The public landowner bears a complex identity. Moreover, in a democratic context it is strongly influenced by the expectations of the lessees, which are voters at the same time (see the experience of Canberra, Australia's capital). Repossession of the land when the contracts expire, as well as rent increasing as a condition for renewal, are both viable options in theory. However, the cases clearly show that no government has been able to undertake such extreme measures.
The authors also consider a critical one the relationship between land management, urban planning, and land taxation. They suggest keeping independent the respective authorities (as is the case in Israel). In so doing, planning statements are less affected by the pursuit of land revenues, and vice versa. Moreover, rent payments due for the right to use the land are less likely to be confused with taxes due for public services and facilities.
It is not so easy to get benefits from landownership in the long run. The commonplace of the idle landlord, pocketing the outcome of other people's work, does not match the amount of strategic choices and responsibilities required by public land management. To get an idea of the difficult task to which the public landowner is committed, let's look at the list of the main variables to be considered in a leasehold agreement (see p. 18): lease term; right of renewal; ownership of leasehold improvements; lease payments; land use conditions; additional requirements for redevelopment; transferability of land rights; right to repossess land.
The implementation of public leasehold requires a widespread political consent. But supporting organizations are also required, such as a land registry to secure property rights, a bank system mortgaging land held on a lease basis, a judicial system to mediate controversies between the lessor and the lessee, and advisory services provided by surveyors and appraisers. In short, a developed land market is needed, although countries like Poland or Ukraine are experiencing public leasehold as a path towards a private land market.
The value of the book lies in the editors' ability to escape from easy remedies, including the simplistic solution of selling public land. International experiences of public leasehold appear to be successful for countries possessing strong planning systems. Even those countries that are moving from a centralized towards a market economy can benefit from public leasehold as a flexible way to improve land use patterns, and to transfer property rights without traumatic ruptures. Public land policies are extremely sensible to contexts. That's why the design of the leasing system is crucial, and should be accomplished by setting ideological biases apart. That's why this challenging research, promoted by the Lincoln Institute of Land Policy, deserves further attention.

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