Earmarked contributions from captured land value.

The Urban Development and Housing Act (UDHA) of the Philippines incorporates three land value capture instruments that may be earmarked by local governments for delivery of housing services. These are the idle lands tax, the socialized housing tax, and the balanced housing requirement for developers. More than 20 years after UDHA’s enactment in 1992, and with at least 18% of the country’s population needing new or upgraded housing, a wider use of the instruments might be expected. As of 2010, only eight of 121 cities and five of 80 provinces have imposed the idle lands tax. To date, Quezon City is the only local government with the socialized housing tax. Balanced housing is technically being implemented by national government for most local governments. The opportunities offered by the resource-mobilizing instruments could be lost in local governments’ unwillingness to impose new contributions, and unfamiliarity with their implementation. This thesis seeks to contribute to an understanding of these policies by documenting the implementation of the three instruments and their impact on social housing in Quezon City. The three land value capture instruments are examined in this study according to the concepts of equity, efficiency and effectiveness. Equity is taken up as the concept of assessment equity, which is the measure of how well the tax system is administered in terms of assessed values (Plimmer, McCluskey and Conellan, 2000). Assessment equity has horizontal and vertical dimensions where uniformity of manner of assessment within and among the different classes of properties and taxpayers is seen as a key indicator of the fairness of the tax system. The coefficient of dispersion (COD) is used as the indicator for horizontal equity in this study, while the price related differential (PRD) is used to indicate vertical equity. Sales data for vacant residential lands are used to derive COD and PRD. Efficiency is examined using the factors in the tax revenue identity (Walters, 2011), namely, Base, Rate, Coverage, Valuation, and Collection. Taken together, the components indicate how much land value that could be captured is actually being captured. In this study, Base and Rate are defined by the policies governing the implementation of the idle lands and socialized housing taxes, and the balanced housing policy in Quezon City. Coverage, Valuation and Collection are the administrative components quantified by the data found on the proportion of properties in the tax rolls, the proportion of identified taxable value, and the proportion of collections to total tax dues. Effectiveness is defined as the success of resources in achieving the objectives set for their utilization (Mandl et al, 2008). As contributions earmarked for housing the poor, the idle lands tax, socialized housing tax, and balanced housing are analyzed by the information gathered on the quantity and quality of housing delivered to the intended market. The findings of this study indicate that the land taxes in Quezon City are outside the acceptable standard for assessment equity, horizontally or vertically, with the taxes tending to be regressive. The balanced housing guidelines are inherently inequitable, being non-uniform in the calculation of values for compliance. The instruments are also at a low level of efficiency, with the factors of Rate, Valuation and Collection found to be the limiting factors. For balanced housing, the level of efficiency is not quantifiable in the period of study as Rate and Valuation are variable, and Collection is unknown. The idle lands and socialized housing taxes have so far not resulted in dramatic change in quantities of housing production. However, if the committed and pipeline projects funded by the earmarked taxes proceed as planned, the number of units produced will be higher per year. The city will also be utilizing more of its locally generated funds in land purchase and land development, rather than merely providing assistance for beneficiaries to access nationally operated financing programs. On the other hand, the responsibility for effectiveness of the balanced housing policy remains borne by national government agencies and cannot be accounted at the city government level. Over-all, the three land value capture instruments present deficiencies in the areas of equity, efficiency and effectiveness. However, the findings also present opportunities for how those areas can be improved, and the findings do not as yet detect negative effects on social housing delivery or its intended beneficiaries. When local governments can make the political decision to implement the land value capture instruments and at the same time address the identified areas for improvement, then the idle lands tax, socialized housing tax, and balanced housing policy may start to be seen as appropriately earmarked for social housing.