Global Compendium of Land Value Capture Policies

Belgium

Land value capture in Belgium

Belgium uses several land value capture instruments (Table 2.5). However, those instruments seem to recover relatively little value. A strong culture of private property rights makes landowners resistant to these instruments, which hampers their political acceptance at the local level. The lack of culture in strategic spatial planning and the low levels of administrative capacities challenge strategic land management. Land readjustment has not been significantly used since the reconstruction efforts after World War II, except for agricultural development purposes and, on occasion, for natural resource development purposes.

Table 2.5. Belgium: Main instruments

Instrument (OECD-Lincoln taxonomy)	Local name	Legal provision	Implementation	Use
Developer obligations	Urban planning conditions (conditions d’urbanisme in French and stedenbouwkundige voorwaarden in Dutch) and urban planning charges (charges d’urbanisme in French and stedenbouwkundige lasten in Dutch).	Regional territorial development codes	Local governments	Frequent
Infrastructure levy	Reimbursement tax (taxe de remboursement in French and verhaalbelasting in Dutch)	Municipal tax laws	Local governments	Rare
Charges for development rights	Taxe sur les bénéfices résultant de la planification (French) and Planbatenheffing (Dutch)	Regional planning codes (Flanders and Wallonia)	Regional governments	Rare
Strategic land management		National Civil Code Regional planning codes (Brussels, Flanders and Wallonia)	Local governments and special purpose bodies	Rare

Enabling framework

Belgium is a federal state with three tiers of subnational governments: 6 federated entities at the regional level (3 regions and 3 communities), 10 provinces at the intermediate level and 581 municipalities at the local level (OECD/UCLG, 2019, p. 285[1]). The three regions are Flanders, Wallonia and Brussels-Capital, and the three communities, which cut across the regions, are Flemish, French and German-speaking (OECD/UCLG, 2019, p. 285[1]).

The national government and the regions create the legal framework for land value capture. There are regional variations in the design and use of land value capture tools. Regions delegate significant authority to municipalities in matters of land use and spatial planning (OECD, 2017[2]). Municipalities implement most land value capture tools, except for charges for development rights. Municipalities with higher land values have had more expertise in levying developer obligations than municipalities where land values are lower.

Developer obligations

Developers are subject to obligations to obtain approval for new development. They are designed to compensate the cost of stronger use of public infrastructure and services resulting from development. Regional legislations establish the guidelines and local governments implement the obligations and receive the revenues.

Although there are differences between the three regional legislations, the basic principles are the same. In Flanders and Brussels, the obligations consist of cash or in-kind payments. In Wallonia regulations, payment in cash is not admitted. In-kind obligations consist of providing land for local roads, public facilities or public space; providing public infrastructure directly; or building affordable housing.

In Flanders and in Wallonia, there are two types of developer obligations: planning conditions and planning charges. Planning conditions refer to obligations that are judged “necessary” for the feasibility of the project, such as public utilities and roads. By contrast, planning charges are negotiated with developers supposedly to compensate the wider impacts of the project upon the neighbouring area.

The obligation is paid at the time the new development receives approval. If this cannot be done, developers must provide financial guarantees beforehand. Exemptions to payment can be granted during the negotiation process. Small developments, for example adding a floor to an existing house, and projects that provide a social benefit that outweighs their impact on infrastructure usually receive a payment waiver. Social housing projects and brownfield redevelopment are illustrative of such projects.

Affordable housing requirements are more common in the regions of Flanders and Brussels, and less so in Wallonia. Some municipalities require between 15 and 25% of units in the project to be affordable units. The affordable units are built within the boundaries of the market-project, but not necessarily with the same building standards (size and quality). Households with an income of below the region’s median income level, households with one or more disabled individuals and single parents are eligible to affordable housing. Sometimes there is a ban on resale to prevent speculative reselling of units.

Developer obligations have faced resistance from developers and construction companies. They argue that the obligations would not be economically feasible, and that affordable housing requirements would particularly jeopardise the projects’ financial viability.

Other relevant obstacles to implementation are inadequate legal frameworks, complicated formulas to calculate the charges and lack of administrative capacities at the local level, notably to estimate the costs and negotiate with developers.

Infrastructure levy

Landowners may have to pay a levy for local roads, sidewalks and sewer infrastructure built adjacent to their land by the government and from which they specifically benefit. Local governments are in charge of implementation and receive the revenues. They have high discretion in charging the levy and reinvesting the funds. This instrument is rarely used.

Local governments have two techniques at their disposal to charge the levy, the reimbursement tax and the urbanisation tax. The reimbursement tax is a mandatory levy for the remuneration of a public service, charged after the service is rendered. If municipalities do not charge the levy upon completion of the public works, they can impose the urbanisation tax, which is an annual flat rate tax. Although always annual, the period of the year in which the tax is due may vary from one municipality to one another.

Local governments use the levy to cover at least part of public works’ cost. Municipalities can choose how the tax is calculated, provided that there is an apparent and reasonable relationship between the tax and the public works. In practice, the tax collection falls largely below the actual costs.

Landowners whose plots are adjacent to public roads or utilities are charged. The levy is usually calculated according to a fixed formula, based on position and frontage length of private land. Landowners can pay through a lump sum or instalments. Exemptions to payment can be given to owners of non-buildable land along an equipped road; for taxes related to sewers, to owners of a plot which cannot be connected to the sanitation systems; and for state-owned land.

The main obstacle to implementation is resistance by property owners, in particular a cultural factor of strong belief in individual property rights that helps to foster a negative perception of the instrument. Therefore, local governments tend to avoid it. Local governments already have an important and stable income source deriving from land, which is the recurrent tax on immovable property. Another reason why municipalities refrain from implementing the levy, is also related to concerns around negative societal perceptions, due to the fact that is it not the municipality that finances most improvements or services, but other levels of government.

Charges for development rights

Landowners pay charges for development rights for zoning changes. The charge must be paid in cash when a non-buildable land becomes buildable land. The price of the charge is determined according to the estimated gains from rezoning and must not exceed them. The regions of Wallonia and Flanders have created such charges, but not Brussels-Capital. In all, regions rarely use the instrument and collect the associated revenues.

The main challenge to widespread adoption is how rarely zoning changes occur. Given the oversupply of buildable land in the country, zoning changes seldom take place, and, when they do, the rates tend to be low. Another obstacle is the lack of legal framework in Brussels Capital Region.

Strategic land management

The government does not hold a significant amount of land available to lease or to manage strategically. Even if at limited scale, local governments and special purpose bodies buy land to develop a project that they have not anticipated the need for before. The purposes of such projects can be urban renewal, affordable housing provision and industrial development. In all, strategic land management is weak, and a strategic approach to recover increasing land values is rare.

Local governments and special purpose bodies acquire vacant or unproductive lands through sales at market price or expropriations. Acquired land may be retained for some time. After retention, local governments and special purpose bodies sell the land at market prices to the highest bidder. Apart for industrial developments, local governments and special purpose bodies do not typically rezone or redevelop it before selling, what limits the potential of capturing land value gains.

Local governments and special purpose bodies can lease public land to facilitate developments with a public purpose. The national legal basis is in the Civil Code, which incorporated provisions from Dutch laws of 1824. There is a legal distinction between the owner of land and the owner of what is developed on land. Leases can occur through granting land use rights or surface rights (emphyteusis rights and surface rights, respectively). Both can be renewed indefinitely.

The rent of emphyteusis rights is symbolic, for instance in the case of the municipality of Louvain-la-Neuve. Therefore, revenues are symbolic. Concerning surface rights, the rent is the same of social housing. Due to the limited number of developments, revenues are also limited. One recent example of usage is in the city of Etterbeek.

Strategic land management is hampered by the small amount of land available to lease or sell, the absence of a legal framework, the lack of strategic planning culture or active land policies and the reduced levels of administrative capacities. The recent legislation on Community Land Trust may lead to further usage.

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.