Pursuing municipal land use interests in densifying cities: How municipalities strategically apply land value capture contracting to trade-off economic value of density for other gains

Abstract

Municipalities both create and capture the economic value of density through planning and other land market interventions. In theory, this position allows them to trade-off economic advantages of densification for other gains that serve public interest, such as social housing production and resource efficiency. However, despite broad scholarship on land value capture, there is limited understanding of how municipalities strategically apply value capture instruments to pursue particular land use interests in densifying cities. We investigate, in a qualitative study of 14 large and mid-sized Finnish municipalities, what the land use interests are that municipalities motivate densification with, and how they tailor the use of one type of flexible value capture instrument – a contract negotiated between the municipality and the landowner prior to the approval of a plan that allows densification – to trade-off land value increase for certain interests. Our analysis shows that municipalities’ densification-related land use interests are heterogeneous and marked by the political realities of urban sustainability. We document that the value capture contracting practices reflect the interest plurality, as municipalities trade-off land value increase both to specific social and environmental objectives and to less clearly expressed, often financial, interests. The article deepens understanding of municipalities as strategic actors of densification and sheds light on the explicit and implicit trade-offing practices embedded in the governance processes of densification.