Socio-economic, political and fiscal drivers of unsustainable local land use decisions

For decades, various Austrian spatial planning strategies have emphasized the need to curb land consumption and land sealing. The growth paradigm in concrete land use planning is prevalent to this day: land consumption is still closely coupled to income (GDP) growth, while existing and newly introduced policy instruments were basically ineffective in curbing land consumption. Local decision-makers often expect to improve the fiscal position (municipal budgets) by a growth of residents as well as of businesses, as both increase revenues transferred to municipal budgets within the Austrian fiscal federalism framework (revenue sharing system/Finanzausgleich). This paper investigates the drivers and determinants of unsustainable land use (e.g., increased land take and land sealing for buildings and infrastructure that reduce soil ecosystem services) in Austria, and, in particular, the economic (fiscal) incentives for municipal decision-makers to adhere to the growth paradigm in Austrian spatial development. Based on a conceptual politico-economic model of land use decisions in Austria that takes into account various market and planning failures (e.g., externalities, fiscal illusion, behavioral anomalies, political determinants, moral hazard), the paper assesses the importance of the different drivers of land use decisions. Several key socio-economic and structural variables (e.g., population, income, demography) proved to be significant in explaining the continuous growth trend in land consumption. In addition, there is substantial spatial correlation in municipal land use decisions. The paper draws several conclusions on innovative policy approaches to escape the growth paradigm in spatial planning, in particular, new fiscal instruments to curb unsustainable land use patterns, which target both public (municipal) decisions makers as well as private land owners. • Politico-economic models can explain unsustainable land use decisions. • Local land use decisions are prone to market (e.g. external effects) and planning failures (e.g. behavioral imperfections). • Econometric estimations stress socio-economic and structural variables as main drivers of land consumption. • Land use decisions are spatially correlated. • A new tax instrument targeted both at public and private decision makers can significantly curb land consumption.