Capturing land value in urban redevelopment

When the government in Addis Ababa orchestrated redeveloping Casa Inchis in 2002, it envisioned the dual motive of slum eradication and bringing land into profitable uses by accommodating commercial and mixed investments. To this end, an authoritative document called LDP was prepared, based on which the slum was cleared, inhabitants were relocated and plots were transferred to developers. Consequently, noticeable change came in the physical and socio-economic make-up of the site. Casa Inchis once was a dilapidated neighbourhood is now a show-case for high-rise commercial and business centres in Addis. Arguably, such change entails substantial increase in land value which local government has to capture to generate revenue and finance redevelopment. Regarding Casa Inchis redevelopment, however, apparently, there is lack of documented study about the generation and mobilization of land value. The aim of this study was therefore to assess the extent to which the government managed to capture land value increment by redeveloping Casa Inchis. It also examines whether or not the value captured is recycled to recover intervention cost and benefit displaced households. Having reviewed relevant literature on value capture and redevelopment, data was collected during a field visit to the project site in Addis. Data sources include the Casa Inchis LDP, land transactions, compensation and relocation reports, satellite and ground images, urban land policy documents, and interview with officials and experts. The themes and contents of the data collected were then interpreted through descriptive analysis to produce the following findings. First, redevelopment in Casa Inchis not only created potential land for development but also allowed for concentration of demand for land in the area. As a result, there has been up to five fold increase in land value after redevelopment. Though modifying density regulation was the driving forces for the land value increment, the land use change from slum to high-order business and mixed uses has also contributed. The investment in preparing plan, site clearance, compensation, households relocation and infrastructures means not only the public contributed for the land value increment but also substantial costs for the government. Nevertheless, comparing the monetary costs incurred and the benefits accrued to the government entails the benefit was about twice that of the cost. Hence the city government was successful in capturing part of the land value increment in Casa Inchis. The prevailing public land leasing arrangements have allowed the governments to do so. Nevertheless, the value capture endeavour had gloomy aspects and seems it was at the expanses of displaced households. Due to out-dated compensation policy, only 32% of households were eligible for compensation. The majority of households had to move away for nothing despite they lived in Casa Inchis for over 25 years. The transfer of land that amounts at about USD 20 million free of lease payment means a loss of revenue which could have been used to build 1300 houses for 1102 displacees on-site. It is paradoxical that the LDP stipulated land sharing and mobilizing land value to relocate households on-site. But the government opted for off-site relocation. Lack of political accountability and commitment may explain the discrepancy. But, the emphasis on revenue generation and city beautification over improving the living condition of slum dwellers seems the underlying factor. The process was also found to be marred with lack of transparency in plot transfer, preferential treatment of some households over others, and absence of any meaningful obligations on developers despite the government had the legal leverage for doing so. Based on the above findings, therefore, one of the challenges that policy makers should face is how to design a 'pro-poor redevelopment' and value capture strategy that not only brings efficiency in land use and eradicates slum but also improve the living conditions of slum-dwellers.