Financing post-disaster recovery through land-based finance.

In the aftermath of the earthquake on September 19, 2017, in Mexico City, 137 apartment buildings with 2,991 homes collapsed or were demolished. Given the impossibility of public or private financing for its reconstruction, an innovative mechanism was developed based on granting density bonuses and land use change (DB&LUC) to those affected properties. This study aims to identify to what extent the use of DB&LUC enables the finance of postdisaster recovery of condominium dwelling buildings in Mexico City after the September 2017 earthquake. This research was designed from a qualitative approach using secondary data. It is developed through 6 steps: 1) sample selection, 2) data collection, 3) financial model construction, 4) running the model through the dataset, 5) selection of outstanding analysis cases, and 6) indepth case analysis. Maximizing the ability to generate revenue from selling additional units is critical to defining the share of the recovery costs covered. These are achieved through three main variables: a) location close to the areas of the city with the highest housing prices, b) extension of the application of the DB. and c) the combination with LUC. The results analyzed in this research provide solid evidence to state that the financing of the reconstruction of the condominium house affected by the September 19, 2017, earthquake in Mexico City through DB&LUC is a program with variable positive results, between 32% and 133% of the recovery costs, depending on specific conditions. The theoretical principles of land rent theory, urban land rent theory, and monocentric and polycentric urban models lay the foundations to propose this financing model based on LVC instruments, DB&LUC—the evidence from the sample analysis and in-depth case analysis support that the theoretical principles hold. This research and others referred to in the literature review represent the first steps in collecting and analyzing evidence on LVC for post-disaster recovery. Further research is required to analyze the program once completed and understand the accompanying mechanisms: a. technical, b. legal and institutional, c. governance and social participation. The results will be vital to transcend from a recovery mechanism to an extended prevention mechanism and to contribute to research on financing for adaptation to the climate crisis with an innovative financing alternative.