Thread by @ShaneDPhillips

The latest UCLA Housing Voice Podcast episode is out—give it a listen & subscribe! This time we interview @planning_mkim about different approaches to value capture, a really important topic with a lot of nuance to explore. This was a fun one. lewis.ucla.edu/2021/08/18/08-…

The paper we focus on is titled "Negotiation or Schedule-Based? Examining the Strengths and Weaknesses of the Public Benefit Exaction Strategies of Boston and Seattle," which can be found here: tandfonline.com/doi/full/10.10…

A while back, I summarized some interesting charts and passages from the paper in the thread linked below. We also always provide key takeaways and passages from the papers we discuss on our website, linked in the first tweet.

https://twitter.com/ShaneDPhillips/status/1400877224484503561

Value capture, as the term is often used now, is a strategy for redirecting value created by regulatory reforms (such as zone changes) from private benefit (i.e., higher land values) to public benefit (e.g., income-restricted units). There are different ways to do it though.

(More traditionally, value capture has referred to similar efforts to capture value from public investments, like rail lines or parks, and while we discuss that in the interview it's not our focus. An important distinction though!)

Dr. Kim compares schedule-based exactions, which are formulaic and can't be negotiated up or down, to negotiated exactions, which, as the name implies, are negotiable and can vary project to project. The findings are kind of surprising!

On the one hand, negotiated exactions in Boston yield more public benefits than schedule-based exactions in Seattle. We'd expect this, because negotiation should allow for the requirements to be more closely tailored to the project conditions.

On the other hand, we would expect negotiated exactions to cause more delay for projects—negotiations take time and create uncertainty. But in fact, projects in Boston were approved faster on average than those in Seattle (tho w/ more variability in Boston).

A few takeaways from this case study: 1) Competence matters. Boston seems to have a uniquely professionalized negotiation process, and it shows. 2) Details matter. Seattle's exactions are more straightforward, but it also has a design review process that creates a lot of delay.

(I imagine @STCActionFund could comment a lot more on the design review process. I would guess that the design review commission *could* work more efficiently, just like negotiations in Boston, but unfortunately that's not how things work today.)

A third point: Even though Seattle's process is actually somewhat slower on average, it is still less uncertain than Boston's and with less risk of outright denial. This probably helps explain why Seattle builds more housing overall, and in smaller projects. (That's good.)

In the rest of the conversation we look beyond Seattle and Boston and ask what cities could do instead. @MichaelManvill6 suggests a (but admittedly more politically difficult) land value tax, or at least a transfer tax to help capture value.

I wrote about transfer taxes here, for those interested: lewis.ucla.edu/research/trans…

Mike emphasizes that our current approach to value capture, at least in most places, penalizes people who build housing and rewards those who do not. We reward speculation on land and penalize the people who put their money at risk to help resolve the housing shortage.

Mike wrote more about value capture here, in this excellent paper, and you'll hear some of the same ideas in our interview: lewis.ucla.edu/research/value…

It was a really fun conversation, and if you've been curious about why we do value capture, how we do it, its flaws and strengths, and how we might do it differently, this episode is for you. Thanks again to @planning_mkim for joining us!