Sharing the unearned increment:: Divergent Outcomes in Toronto and São Paulo

Abstract

Land value capture (LVC) refers to the public sector’s recovery of part or all of the land value increments (‘unearned’ income) generated by actions other than the landowner’s direct investment, including public investments in infrastructure or administrative changes in land use norms and regulations. LVC is increasingly used around the world as a tool to raise funds for urban development. This paper analyzes two LVC tools, one used in Toronto and the other in São Paulo, to show how different approaches produce divergent outcomes in practice. Expert interviews and an analysis of secondary quantitative data show that São Paulo’s formula-led approach is bureaucratized, compared with Toronto’s politicized process and that benefits from Toronto’s Section 37 are primarily located in the central wealthier neighbourhoods, while in São Paulo benefits are more dispersed. The comparison between the two cases highlights different approaches that reflect divergent values, rationales, socio-economic realities and political cultures which ultimately produce varied outcomes. The contrasting tools’ distributional and equity outcomes in Toronto and São Paulo raise questions about how cities can best share the benefits of urbanization to ensure equity and justice for all city residents.