Land pooling

Another technique for promoting efficient, sustainable and equitable land development in the urban fringes is land pooling/readjustment. The concept of land readjustment has been used in various countries of the world for at least two hundred years. It has been most successfully used in Japan and Republic of Korea in recent years.

Land readjustment works best when implemented in small to medium-size areas.

How It Works

The concept of land readjustment is to assemble small rural land parcels into a large land parcel, provide it with infrastructure in a planned manner and return the reconstituted land to the owners, after deducting the cost of the provision of infrastructure and public spaces by the sale of some of serviced land.

A land readjustment scheme is typically initiated by the municipal or the national Government designating an area which is about to be converted from agricultural to urban land use. A subdivision plan is developed for a unified planning of the area. Provision of infrastructure and services is financed by the sale of some of the plots within the area, often for commercial activities. The original landowners are provided plots within the reshaped area which, although smaller in size, now have access to infrastructure and services.

When to Use This Method

The method is especially useful when:

1. scattered and unsuitable subdivisions hinders private sector land development;
2. older urban structures should be reorganized; and
3. there is a need for extensive provision of infrastructure and services.

Prerequisites

There are several important prerequisites for the successful implementation of land readjustment:

1. It must be supported by the national, regional and municipal governments. It is important that the national Government provides regulations and guidelines to ensure fairness in the system;
2. The land readjustment agency must be given powers to coordinate and to get access to assistance from various government departments;
3. The land registration and cadastral system needs to be efficient;
4. There has to be a sufficient number of skilled and highly dedicated negotiators at the local level as well as objective and well-trained land valuers;
5. As the method is based on public/private cooperation, the majority of the landowners should support the use of the technique. Forceful acquisition of land should be avoided

Advantages

There are many advantages of using land readjustment:

1. It provides an opportunity for a planned development of the land and infrastructure network and it avoids the problem of the so-called "leap-frog" development where different types of land uses and densities are mixed. Developers in many Asian countries often have a problem because plots in the urban fringe are small, irregularly shaped and lack access to public roads. Furthermore, as many of these plots are not for sale, it is often difficult to find a sufficient number of plots next to each other and, thus, building development becomes scattered.
2. Land readjustment is an attractive method to influence the location and timing of new urban development since it is becoming increasingly difficult to obtain public support for the use of expropriation for land development and infrastructure provision. The method is typically supported and sometimes even initiated by the landowners since they would make considerable profit on the project. Contrary to the obvious alternative methods for city development, land banking and expropriation, it also avoids the costly and unpopular government procedure of acquiring land. Unlike expropriation, land readjustment will return a major part of the land to the landowner. Ideally, a partnership for development should be formed between the public sector and the landowners. It is therefore very important that close links are established during the project.
3. It provides an opportunity for the provider of infrastructure and services to recover the incurred costs as well as to get access to land for this purpose. As cost recovery is a major obstacle for municipal governments in most Asian countries, this would probably be the most important component.
4. A welcomed side effect is that land readjustment requires that the land ownership situation is clarified and an accurate land registration system provided. This should also lead to increased public revenues from property taxation.
5. If administered properly it could provide increased equity in land distribution. Not only among the landowners within the area, but it could also be a means of providing access to land for low-income housing.

Problems

There are a number of problems with the land readjustment technique.

1. While they provide an opportunity for landowners to develop their land, the present systems do not force the development of land. In many countries with very high demand for land, such as Japan and the Republic of Korea, it has become increasingly common that landowners use their land as a savings and investment instrument and this has contributed to increases in land values and land speculation. Furthermore, another major incentive for landowners to encourage high land values is that the provision of infrastructure and services if financed by the sale of land. In fact, the use of the land readjustment technique in Japan and the Republic of Korea has virtually stopped when rapid land value increases took place in the 1980s.
2. As there are no incentives to maintain low prices on land and no other built-in mechanism for inexpensive housing, the method has been criticized for not being effective in reducing the huge shortage of low-income housing in most Asian cities. While it is important to maintain the incentive for landowner participation, it can be argued that the profit margin is unreasonably high and that the role of the public sector as partner should be recognized in sharing the profit. The public sector should therefore aim for more than cost-recovery.
3. As the concept of the land readjustment technique is based on private-public cooperation and negotiation, it requires large human resources both in terms of numbers and qualifications. In particular, skilled negotiators and valuers must be available. In most Asian countries, there is a shortage of skilled staff in the Government, especially at the municipal government level.