Value Capture Reconsidered: What if L.A. was Actually Building Too Little?

Should cities only allow new housing on the condition that the developers of that housing deliver public benefits in return? This idea is often called “value capture”, and is used to justify — among other things — various forms of inclusionary zoning. The author argues in this essay that value capture is conceptually and logically flawed. It rests on the idea that new housing is not by itself a public benefit, and on the assumption that not building housing is socially harmless. Most of all, it inverts one of the most important insights in urban economics and urban public finance: that value rests primarily in land, and that development is an important way to share and redistribute land value.

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