Key takeaways

• A broad consensus of economists throughout history have supported land value capture – collecting the increase in land value that results from public spending on infrastructure and other services – as the optimal method of financing public infrastructure.

• Land value capture should both increase economic productivity and generate enough revenue to significantly contribute to Ukraine’s reconstruction costs, making financing reconstruction considerably easier.

• The need for reconstruction funding, ongoing land reform efforts, and an openness to new policy solutions make Ukraine an ideal place to implement land value capture, especially in areas prioritized for major reconstruction.

• Ukraine could use the following tools for land value capture:
  • Ground Leases: Issuing leases for land already owned or newly acquired by the state at rates periodically adjusted to the full market rental value of the land.
  • Covenants: Acquiring land currently in private hands, re-developing the surrounding area, and then selling the land with a covenant attached that obligates all future owners to pay an annual land value charge.
  • Land Value Tax: Imposing a property tax only on the rental value of the land, not counting the value of buildings or other improvements on the land, adjusted annually.

• Without land value capture, reconstruction investment will likely yield only a temporary increase in productivity and exacerbate the concentration of power among the nation’s elite.

The full analysis can be found in the attachment below: