Challenges to Equitable and Effective Land Value Capture: Lessons from Mexico City

Land value capture is an underutilized and sometimes misunderstood component of urban policy. In this article, we develop a conceptual framework to compare four approaches to land value capture—land and property taxes, real estate transfer taxes, betterment levies, and development charges. Given that urban land values arise from collective action, local governments should tax this wealth to fund public infrastructure. However, local governments confront technical and political challenges in properly applying different land value capture mechanisms, which also vary substantially in equity and efficiency. Using Mexico City as a case study, we propose a conceptual framework to assess the technical and political challenges of the design components of land value capture mechanisms, as well as their impacts on equity and efficiency. We find that technical challenges to land value capture appraisals have substantially diminished and are surmountable, yet political challenges remain. The proposed conceptual framework facilitates a comparative approach to guide planners and policymakers toward more equitable and less distortionary land value capture strategies. We argue that land value capture mechanisms should not be dismissed as viable solutions due to the shortcomings of past implementations. Instead, scholars can use the proposed framework to identify a mechanism's limitations and propose better policy.