Value capture and vertical allocations of public amenities

Abstract

This paper describes and critically reviews an important but under-theorized value capture mechanism that we have termed “vertical allocations” (or vertical exactions). This mechanism enables cities to capture value vertically by allocating floor space for public utilities in privately owned, mixed-use, vertical development. As a value capture tool, vertical allocations allow the government to tap value uplift to supply the nearby neighborhood, and the city as a whole, with much needed public services. The owner or developer is required to make in-kind contributions in the form of spaces provided for a range of public facilities such as schools, preschools, community centers, and public medical clinics. While focusing on vertical exactions in Israel we explore how a certain share of land/floorspace can be allocated for public amenities in a given project. There are several legal pathways for securing public floorspace including negotiated agreements, land readjustment and expropriation. The findings show that unclear policies and regulations could create frictions between developers and municipalities, and these raise the nexus question as well as debates about construction costs and financial contributions developers have to make. Specifically, the paper finds that while developers often argue that cities should cover the costs of constructing public floorspace, city officials assert that the costs should be borne by the owners and developers.