Land Value Capture and Social Benefits: Toronto and São Paulo Compared

Abstract

This paper describes and compares land value capture (LVC) tools in São Paulo and Toronto. LVC refers to the public sector’s recovery of part or all of the land value increments or “windfalls” accruing to new development through taxes, fees, exactions, or improvements that benefit the wider community. In São Paulo, a tool known as the onerous grant of the right to build (OODC) allows developers to pay for development rights in exchange for providing urban improvements of social interest to the community. In Toronto, a tool known as Section 37 allows developers certain development rights in exchange for cash or in-kind contributions. The paper has three goals: (1) to evaluate the effectiveness of, challenges to, and benefits derived from land value capture for generating urban financing; (2) to explore where such funds are allocated and how these allocation decisions are made; and (3) to identify who benefits from such decisions. The paper uses quantitative data to determine the benefits derived from the tools and expert interviews that explore the political and historical background associated with the use of both tools.