Global Compendium of Land Value Capture Policies

France

Land value capture in France

France uses systematically developer obligations and strategic land management (Table 2.20). Local governments always use developer obligations to recover the public costs private development generates. Many local governments manage land strategically for urban development purposes, such as affordable housing construction. However, the impact and revenues of these instruments vary widely across local governments. Larger cities with high land prices can have higher land value capture charges without reducing incentives for development compared to smaller cities with low land prices. Smaller local governments also lack administrative capacity.

Table 2.20. France: Main instruments

Instrument (OECD-Lincoln taxonomy)	Local name	National legal provisions	Implementation	Use
Developer obligations	Contributions d’urbanisme: taxe d’aménagement et participations aux équipements publics	Loi 1253 d’orientation foncière/1967; Articles L331-1 to L332-30 of the Code de l’urbanisme/1975; Article 7 of the Loi 1208 relative à la solidarité et au renouvellement urbains (SRU)/2000; and Loi 1658 de finances rectificative pour 2010/2010	Local governments and the départements (the intermediate level of government)	Always
Strategic land management	Politique foncière	Article 4 of the Loi 1253 d’orientation foncière/1967; Articles L221-1 to L221-3 and Article L300-1 of the Code de l’urbanisme/1975; Loi 13 d’amélioration de la décentralisation/1988; Ordonnance 460 relative à la partie législative du code général de la propriété des personnes publiques/2006; and Loi 366 pour l’accès au logement et un urbanisme rénové (ALUR)/2014	Local governments and public land agencies	Frequent
Land readjustment	Remembrement foncier	Loi 1253 d’orientation foncière/1967; Articles L322-1 to L322-11 of the Code de l’urbanisme/1975; and Loi 366 pour l’accès au logement et un urbanisme rénové (ALUR)/2014	Private consulting firms	Rare

Enabling framework

France is a unitary state with three subnational levels of government: 18 regions, 101 departments (départements) and 34,965 municipalities (OECD, 2022[3]). The national government creates the legal framework for land value capture. Moreover, together with regions the national government plans and finances large scale infrastructure projects, such as highways, railways and universities. Municipalities create local land-use plans and issue planning permits. Inter-municipal associations in larger urban areas also play an important role in the planning system. They create strategic plans that provide a coherent strategy for the entire urban agglomeration. These plans are legally binding for local land-use plans. Inter-municipal associations are to replace municipalities for local land-use plans’ creation in larger urban areas. The intermediate level of government between regions and municipalities (the départements) does not have formal land-use planning responsibilities (OECD, 2017, p. 99[2]).

Article 17 of the Declaration of the Rights of Man and of the Citizen and Article 545 of the Civil Code allow to restrict private property for a public purpose through a fair and pre-established compensation.

Developer obligations

Developers are subject to obligations (contributions d’urbanisme) to obtain approval for new development, densification or exceptions from urban planning regulations. The obligations consist of cash or in-kind payments or a combination of both. They are designed to compensate the cost of stronger public infrastructure and services use resulting from private development. The legislation dates back to 1967. Local governments and sometimes the départements (the intermediate level of government) implement the obligations and receive the revenues. Local governments always use the obligations but the revenues vary strongly across them.

In 2019, local governments and the départements recovered EUR 1,784 million from the obligations, which corresponds to 4% of the total public costs private development generated. The obligations are higher in large cities with high land prices and thus cover a larger share of the public costs private development generates compared to smaller cities.

There are two types of developer obligations:

1. The taxe d’aménagement (development tax), a cash charge per square metre built. Local governments mainly take into account the public costs private development generates to set the charge.

2. The participations aux équipements publics (development contributions), which local governments and developers negotiate in designated urban development zones (zones d’aménagement concerté or projets urbains partenariaux). Developers must pay in cash; provide land for public roads, utilities, parks, schools, libraries, gymnasiums or other public facilities; or provide this infrastructure directly. Local governments may also use inclusionary zoning policies in local land-use plans: the requirement on developers to provide a share of housing units in new developments as social housing units. The participations’ negotiation procedure is similar for each development approval.

Before 2010, local governments usually preferred the participations aux équipements publics in the zones d’aménagement concerté. However, the zones d’aménagement concerté have special procedures that are long and rigid. Thus, local governments increasingly use the taxe d’aménagement or participations aux équipements publics in projets urbains partenariaux, which have shorter and more flexible procedures than the zones d’aménagement concerté. Social housing construction and buildings for crafts activities can be exempt from the taxe d’aménagement.

Developer obligations face several challenges:

• Until 2000, local governments sometimes required obligations that were higher than public costs from developers. The legislation became stricter: the obligations are now linked to the cost of stronger public infrastructure and services use resulting from development. Nevertheless, the cost of the obligations can remain high for developers, especially in smaller cities with low land prices. Developers frequently challenge the obligations in court.

• Often, the revenues raised or public infrastructure developers provide are low compared to the public costs private development generates.

• Smaller local governments lack administrative capacity, for example to estimate the public costs private development generates.

• During economic downturns, there is political pressure to lower the obligations to kick start the construction sector.

Strategic land management

Some local governments own a lot of land thanks to strategic purchase, donations or transfers after the revolution, while others own none. After 1960 and until 2000, the government restricted public land purchase to reduce spending as well as intervention into private property rights. Things are changing quickly. The national and local governments increasingly create national and local public land agencies to buy and manage land for the following:

• Affordable housing and industrial projects;

• To create green space around cities;

• To support urban growth, for example through the redevelopment of middle town centres.

Local governments and the public land agencies implement strategic land management (politique foncière) and receive the revenues.

Land is bought at market price or expropriated. Local governments and land agencies can buy or expropriate land at the price before the announcement of a public investment or zoning change. This allows recovering the increase in land values public investments or zoning changes generate. Expropriations in relation to the Grand Paris Express, a set of metro lines under construction in the Paris metropolitan area, were carried out in such a way. Usually, local governments and land agencies buy or expropriate unused land as well as land in designated ‘strategic’ zones. They can buy (though not expropriate) land outside their administrative jurisdiction.

Land is typically retained for five to ten years although there is no limit to the length of retention. It is usually rezoned, which raises land prices. Local governments then sell the land:

• At a predetermined price to the preferred buyer, for example community land trusts (organismes de foncier solidaires) for affordable housing construction;

• Or through public tender with criteria beyond the sales price, such as developments’ share of green space.

The national government and local governments also lease their land to encourage development with a public purpose, for example affordable housing construction. The government recovers investments in land purchase through the sale or lease of rezoned plots.

The amount of land accumulated and revenues raised through land sales and lease vary widely across local governments. The Paris region’s land agency, the Établissement Public Foncier d’Île-de-France (EPFIF), owns EUR 2.2 billion worth of land and recovered EUR 266 million in 2020 through strategic land management, for example. In 2014, it created together with local authorities the land company Foncière Commune, which buys land when owners are ready to sell, retains, consolidates and then sells or leases it to support SMEs, crafts activities and housing construction in Paris.

The main challenges for smaller local governments are the lack of resources for land purchases and their lack of administrative capacity.

Land readjustment

Land readjustment (remembrement foncier) is used for urban development, redevelopment and the conversion of rural to urban land. Private consulting firms, such as the Bureau d’Aménagement Foncier et d’Urbanisme (BAFU), implement it. The legislation dates back to 1967 and has been reformed in 2014 to overcome landowners’ resistance. Consent is now required from fewer landowners. However, land readjustment is still rare.

Typically, private landowners’ associations (associations foncières urbaines) initiate a readjustment project, though public entities also have the authority. Landowners and local governments participate in consultations. The share of consenting landowners required depends on the type of project. For example, for public projects at least 75% of landowners as well as landowners who own at least 75% of the readjustment area need to consent. Readjustment projects that significantly reduce the floor area ratio of plots require the consent of at least 50% of landowners. For private redevelopment projects, all landowners need to consent. Once these requirements are met, landowners who do not consent can require the other landowners to buy their land. Landowners are compelled to participate in readjustment projects with a public purpose.

Landowners must provide a share of their plots for public infrastructure and services. After readjustment, they receive a plot with an area proportional to their original holdings. They can exchange reallocated plots for cash. The distribution of costs and benefits should be fair. Nevertheless, owners of readjusted plots that are more valuable than original plots are not required to pay any compensation.

References

[3] OECD (2022), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 13 January 2022).

[8] OECD (2021), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 25 November 2021).

[2] OECD (2017), Land-use Planning Systems in the OECD: Country Fact Sheets, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264268579-en.

[1] OECD/UCLG (2019), 2019 Report of the World Observatory on Subnational Government Finance and Investment - Country Profiles, OECD/UCLG.