5 November 2020

Using development rights to acquire land for infrastructure projects in Deep Dives dense urban areas

5 November 2020

III Perimetral Ave, Porto Alegre

Context

  • The municipality of Porto Alegre, the capital and largest city in the southern Brazilian state of Rio Grande do Sul, was planning to build a new transit artery connecting 20 neighborhoods across the city, including dedicated lanes for the Bus Rapid Transit (BRT) service

Problem

  • The required land was largely privately owned
  • Public funding available for land acquisition was limited
  • The Inter-American Development Bank (IDB), a financing partner, insisted that it would only finance the project once all land had been acquired

Innovation

  • The municipality acquired 13.2 ha by compensating owners with development rights elsewhere in the city
  • Offering additional land to property owners who agreed to terms within 60 days served as an incentive to hasten the process
  • Depending on the estimate, transferring development rights reduced land acquisition costs by between 50% and 65% overall compared to traditional acquisition methods

Stakeholders Involved

  • Federal Government — Provided initial funding
  • Municipality of Porto Alegre — Responsible for planning, executing and financing the project
  • Ca. 6000 property owners — Agreed to development rights transfer
  • Inter-American Development Bank (IDB) — Financing partner

Results/Impact

  • Porto Alegre was able to complete the III Perimetral Ave project, including the envisioned Bus Rapid Transit system (BRT), at a reduced cost compared to benchmarks and forecasts due to innovative use of development rights
  • Reaching mutual agreements with residents on transferable development rights, rather than expropriating property outright, reduced subsequent number of lawsuits and other obstacles to construction
  • In 2012, Porto Alegre once again adopted transferable development rights as a method to lower land acquisition costs, thereby facilitating development of urban infrastructure projects

Key lessons learnt

  • Authorities can seek, analyze, and potentially implement less traditional methods of project financing to develop infrastructure needs more cost- effectively
  • Porto Alegre successfully realized the value of transferable development rights to citizens affected by urban infrastructure development, and sought to use them rather than traditional forms of payment
  • In order to succeed, similar schemes must be focused on developing the relationship between all stakeholders involved, with goals clearly set and aligned
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