Global Compendium of Land Value Capture Policies

Slovak Republic

Land value capture in the Slovak Republic

Several land value capture instruments are used in the Slovak Republic (Table 2.48), including developer obligations, strategic land management and land readjustment, principally for urban development, renewal, and expansion, and to recover revenues relative to developments’ impacts on infrastructure. The national government provides a legal definition of land value capture and enables its use through national laws relating to land use and planning, though instruments are mostly deployed by subnational governments. Several obstacles limit the broader use of land value capture, including unclear development norms and land use regulations, inadequate administrative capacity and financing, the long-term absence of strategic planning, and an insufficient legal framework.

Table 2.48. Slovak Republic: Main instruments

Instrument (OECD-Lincoln taxonomy)	Local name	National legal provision	Implementation	Use
Developer obligations	Poplatok za rozvoj	Act 447/2015 Collections of Laws (amendment made 2019)/2016	National, local governments	Frequently
Land readjustment	Pozemkové úpravy	Act No. 330/1991 Collections of Laws (with latest amendment in 2020)/1991	District, department, local governments	Frequently
Strategic land management	Strategický pôdny manažment	Act no. 116/1990 Collections of Laws /1990 Act no. 330/1991 Collections of Laws /1991 Act no. 504/2003 Collections of Laws /2003	National government	Rarely

Enabling framework

The Slovak Republic is a unitary state with two subnational levels of government: 8 regional and 2 927 local governments (OECD, 2022[3]). The Slovak Republic has a hierarchical planning system with four levels of plans (OECD, 2017, p. 179[2]). The Slovak Republic’s national, regional, and municipal governments are responsible for the framework legislation that enables land value capture. The Slovak government values land using a market-based approach. However, there is no legal definition of land value capture in Slovakia. Public officials have little discretion in granting planning permits.

The principle of a social function of property is included in the Slovak Republic’s constitution.

Developer obligations

The legal basis for developer obligations is provided by national law, and frequently used. Local governments typically charge developers for the approval or support of new land development, or in exchange for the right to develop land at a higher density or height. The purpose of development fees is to provide cities with additional resources for building new infrastructure so that new construction brings immediate benefits for long-time residents. The legal basis for developer charges is provided by national law, and developers rarely appeal against requirements.

Developers are frequently charged cash or required to provide in-kind contributions to compensate for the impact of their developments on infrastructure. Charges are calculated using an established rule, based on the size and type of development, or the area or neighbourhood on which the development takes place. Charges must be paid before or at the time that the development receives approval. Developers can be exempted from such charges under certain conditions, including maintenance to an existing building that does not alter the total floor area, construction or extension of a floor area up to 25 square metres, or the provision of a public good or service. In the past, developers have made efforts to obtain one exemption in particular, worded as “significant investment according to a special regulation”. This has typically been done in order to have construction projects exempted from development fees, and because under this status developers could apply expropriation in the public interest--and for appropriate compensation.

Developer obligations raise an estimated 30 million EUR per year. In 2019, the city districts of Bratislava levied a development fee of over 9.3 million EUR; however, it is estimated that only 28% of money collected from development fees were used to build new infrastructure. The average amount that developers are charged to obtain development approvals is 30 EUR per square meter, factoring in a wide range: a maximum limit of 35 EUR per square meter is levied in all major cities, while smaller municipalities range from 5 to 35 EUR.

Public improvements or services provided by developers typically include public space, public transport, roads, parking, schools or elderly care, and public utilities. Developers who provide public improvements can receive discounts on charges. When developers provide in-kind contributions to obtain development approvals, an average of 70% of the public costs created by their developments is recovered through such provision. However, this is determined on an ad hoc basis.

Subnational governments can charge developers, issue development approvals, and spend resulting revenues without the need for approval from higher levels of government. Development charges are decided on and administered by municipalities, with revenues from development charges feeding the municipal budget. The redistribution of revenue from development charges between the city and the city districts is determined by the city's statute. In Bratislava and Košice, the two largest cities, city districts have considerably more discretion and capacity to charge developers, collect revenue, and decide on how revenue is spent, similar to most municipalities.

As the national capital and a self-governing region since 2002, Bratislava has particular administrative system where city districts are the collectors and administrators of fees. The revenue from the fee is divided between the city districts and the city at roughly a 2:1 ratio in favour of the former. According to the law, the city and city districts can only spend development fee revenues on capital investments for purposes specified by law. However, local governments have so far used only 3.6 million EUR, intended for the construction of transport, social and cultural infrastructure, and an increase in the share of greenery. This represents less than 28% of the total revenues collected through development charges.

Although developers pay developer charges to municipalities, which in most cases is set at the upper limit of the rate decided on ad hoc between cities and developers, especially in larger cities, they often also face charges for building public infrastructure. Although the city uses development charges to reimburse capital expenditures related to construction costs of public infrastructure, this can create a double financial burden for developers. As a consequence, these costs are often passed down to end-users, e.g. tenants, and is one cause of large increases in real estate prices in and around Bratislava. Meanwhile in small municipalities located in poorer regions with few job opportunities, local government development fees are almost never applied. They do not want to introduce additional barriers in locations that are not experiencing growth.

The main obstacles to developer obligations include unclear development norms and land use regulations, an inadequate legal framework, and that the benefits and provisions provided do not justify the cost of the charges.

Land readjustment

Land readjustment in Slovakia is used for urban expansion, development, and renewal, with the legal basis provided by national law. Land readjustment projects are typically executed by public entities. There are 120 land readjustment projects carried out yearly in Slovakia. The required consent level among landowners is frequently reached, and projects frequently executed.

Readjustment projects can take place when all original plots in the readjustment area are registered in the land registry, and private landowners hold at least two thirds of the area. To execute land readjustment, consent must be achieved among at least two-thirds of the land that forms the perimeter of the project. If consent is reached but some landowners resist providing their plots, compulsory participation is employed. After the pooling and readjustment of plots, landowners receive a plot proportional to their original holdings based on either value, surface area, or both. Landowners can exchange reallocated plots for cash. Landowners can be reallocated plots on or close to their original land, different plots within the area, or receive jointly owned plots. If the readjusted plots are less valuable than the original ones, the affected landowners are not entitled to receive compensation; however, if the readjusted plots are more valuable, landowners are not required to pay a cash compensation. Land readjustments typically involve leaseholders and tenants, and landowners are typically involved in the consultation process. Landowners sometimes resist decisions to pool and readjust their plots.

A share of readjusted plots is typically reserved for public infrastructure or services, with no limit to the amount. However, limits have been placed on certain subnational land readjustment projects involving greenfield development. The cadastral area of Brezovica reserves 13% of the potential readjusted plot, while a project in the Lamač region has reserved 15%.

For brownfield development, land designated for public infrastructure owned by the state is used first, then the land of the municipality. If there is not enough land for public infrastructure from the state and the municipality, then the need for sufficient land is borne by all participants according to the proportion of their claims for compensation.

Across all land readjustment projects, 3 000 hectares are reserved for public infrastructure per year, and typically includes public space, roads, parking, public utilities, sports facilities, environmental protection measures, and water management measures. Collectively or publicly owned plots created through land readjustment can be sold or leased.

Subnational governments that pool and readjust plots need approval from national level government. The list of cadastral areas is prepared on the basis of proven urgency, according to the Ministry of Agriculture and Rural Development of the Slovak Republic.

Obstacles to land readjustment include a lack of funding for faster submission of land readjustment projects by the state, which are currently in demand by both municipalities and landowners.

Strategic land management

Strategic land management is used for urban renewal, redevelopment and land consolidation, but there is no legal basis provided by national law. However, major legislative reforms are being prepared. The forthcoming Development Act would establish a new norm regulating the issue of strategic management of the development of territorial entities. The country has chosen the structure of inter-municipal cooperation. Under the current legislative environment, municipalities can ensure the strategic management of development in their administrative territories, use joint spatial plans among municipalities and pool the financial resources needed. However, strategic land management is mostly implemented informally within broader spatial planning, and is not widely conceptualised or defined as an instrument specifically for land value capture, which undermines its effectiveness.

Acquisitions for strategic land management are not limited to specific types of land. They can be both greenfield and brownfield sites. Land acquired for such purposes is typically located within the administrative jurisdiction of the acquiring government, and is acquired either via purchase at market price or via transfer from the government. It is not possible for the government to freeze land prices before purchasing, and there is no limit to the length of retention of land acquired for strategic land management.

Land acquired for strategic land management is typically rezoned by the government or an authorised public entity, and is developed before it is sold. Developments include roads or parking, and is carried out entirely by the government. Land acquired for strategic land management can be leased, e.g. fixed-length operational and maintenance concessions of a motorway network via public-private partnership. Though the government does not hold a significant amount of public land to lease, public land can be leased to generate public revenue, facilitate development with a public purpose, or facilitate planned urban growth and development. Land can also be transferred to other public entities, e.g. from the Slovak Land Fund to a municipality.

The Slovak Republic’s national, regional, and municipal governments, as well as the Slovak Land Fund, can each strategically acquire and retain land, dispose of the acquired land, and receive the revenues generated. Subnational governments can do so without approval from a higher level of government.

Obstacles that hinder the practice include a lack of an adequate legal framework, a lack of administrative capacity of public entities, a lack of coordination between the relevant public entities, and a lack of financing for the acquisition of land. Other obstacles include the existence of uncoordinated approaches across sectors, lengthy administrative processes, the long-term absence of strategic planning, the lack of capacity in most municipalities and self-governing regions to create or manage the process of creating strategic documents.

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.