Value capture refers to a type of public financing where increases in private land values generated by public investments are all or in part “captured” or recouped by the public sector. It provides a means for internalizing the positive externalities of public investments, allowing public agencies to tax the direct beneficiaries of their investments, and/or provide benefits to the taxpayers which fund the investments but do not necessarily enjoy them directly. The unearned increments, or increases in land value which otherwise profit private landowners without cost, may be captured directly by converting them into public revenue, e.g. using real estate taxes, impact fees, or other taxes levied upon landowners; or indirectly by converting them to land-related benefits, e.g. using exactions, public easements, or other nonpossessory interests granted to the public or a public agency.

Value capture refers to a type of public-private partnership

Public-private partnership

Public–private partnership describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies...

 in which the private sector compensates a public agency for the cost of an investment that generates economic value. It is in almost all cases led by the public agency responsible for the investment.

Transportation projects, for example, can increase adjacent land values, and thus generate an unearned profit for private landowners. Public agencies, with proper preparation and foresight, can capture a portion of that profit using a variety of methods: 1) local improvement districts; 2) public-private development of adjacent land; 3) traffic impact fees; 4) tax increment financing districts; or 5) buying privately held land near transportation hubs that is zoned for low-density use on the open market, increasing the designated use density, then selling the land back to private developers on the open market, capturing the capital gain resulting from both the increase in designated use density and the presence of the transportation hub.

Value capture can be thought of as a fully contained sub-set of land value tax

Land value tax

A land value tax is a levy on the unimproved value of land. It is an ad valorem tax on land that disregards the value of buildings, personal property and other improvements...

, however with a much more focused domain of application as indicated here. The Lincoln Institute of Land Policy http://www.lincolninst.edu/ offers this perspective on value capture:

"Value capture mechanisms are being implemented, with varying degrees of success, in several Latin American countries, while in other parts of the region the notion of value capture continues to meet with suspicion and resistance.

"In addition of the use of value capture mechanisms to control urban growth and territorial expansion and to reduce the perverse effects of land speculation, we are interested in their applicability to circumstances characterized by the large-scale and persistent informality in land markets so typical in Latin America. These include situations where land tenure relationships are poorly defined, where land occupations are mostly irregular or illegal, and where significant land value increments are self-generated by the community, rather than by state action. This network explores whether land value increments (resulting directly or indirectly from public interventions) can be mobilized to mitigate urban poverty in general and improve the access to serviced land by low-income families in particular. http://www.lincolninst.edu/topics/value_capture.asp

"Another broad meaning of capturing the value is the way by which a business retains value it has created in a prior step for its customers. Generally studied under operations and technology management, typical questions for a firm trying to capture value include:

• How should we design the business model?
• Where should we compete in the value chain?
• How should we compete if standards are important?"

See also

• Land Value Tax
  Land value tax
  A land value tax is a levy on the unimproved value of land. It is an ad valorem tax on land that disregards the value of buildings, personal property and other improvements...
  
  
• Property tax
  Property tax
  A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...
  
  
• Tax increment financing
  Tax increment financing
  Tax Increment Financing, or TIF, is a public financing method which has been used as a subsidy for redevelopment and community improvement projects in many countries including the United States for more than 50 years...
  
  (generally a kind of reverse value capture)

External links

• Earth Rights Institute's Land Rights and Land Value Capture Course
• Lincoln Institute of Land Policy (USA)
• Land Tenure Center
• Land Values Research Group (Australia)
• The Center for the Study of Economics
• The Land Value Tax
• Liberal Democrats Action for Land Tax and Economic Reform
• Centre for Land Policy Studies (UK)
• Labour Land Campaign
• Henry George Foundation
• Land Value Taxation Campaign Committee website
• Land tax in Philadelphia, what does it mean for you?
• Geonomy Society
• Land cafe home page and email group (international expert discussions, shared library, program)
• Land Theory (more international expert discussions)
• Just Economics LLC http://www.justeconomicsllc.com