# **3 Assembling Land for Urban Expansion**

## <mark>3.1 EMINENT DOMAIN/ LAND ACQUISITION</mark>

Expropriation, eminent domain, or compulsory purchase as it is called in some countries, is the primary method municipalities use to acquire land to accommodate urban expansion. This legal institution allowing governments to take land to achieve some objective of public interest has increasingly been criticized, as questions about corruption and private negotiations surrounding takings. The main issue becomes one of balancing the need for urban expansion with the costs associated with welfare of displaced individuals. In this context the definition of public interest may appear as a central element to land acquisition. However, as the definition of “public use” or “public purpose” constantly evolves, courts play a critical role in providing guidance on the legal scope of eminent domain while still allowing for a flexible definition of public use/purpose that adjusts as cities and countries grow.<sup>13</sup> In recent work, Azuela and Herrera-Martin (2009) provide a historic perspective of eminent domain. In their view, in the last two decades discontent with the use of this instrument has increased. While 30 years ago it was considered a crucial component of any development strategy, today, the social costs of eminent domain are widely recognized. According to Michael Cernea (2000) between 90 and 100 million people were displaced in the last decade of the 20th century. Finding the balance between efficiency for urban expansion and equity is not an easy task. There are high social costs associated with expropriation when it implies the displacement of individuals with little or no compensation.

However, society may also be forced to bear very high costs if governments are forced to pay exorbitant sums to landowners. In China for example, compensation for the acquisition of farmland includes land compensation (6–10 times its average production value in the past three years prior to acquisition), settlement subsidy payment (4–6 times the average production value of the land taken in the past three years prior to acquisition –payable to each person, and improvements and crop compensation (determined by sub national governments).<sup>14</sup> A study of select Chinese cities (Beijing, Chengdu, Fuzhou, Guangzhou, Hangzhou and Tianjin) in the late 1980s highlighted that the break-even price for reviewed 10 projects is 84 per cent greater than the average cost of construction and profit -- implying that the final consumers pay an average of 84 per cent over the average cost (including profit) of redevelopment projects. And in Indonesia – private sector developers of toll roads are pressing the government to fully assume the costs of land for infrastructure projects. They claim that if the cost of land acquisition is charged to the investors, these projects become unattractive.

The issues inherent to eminent domain may be exacerbated when the appropriate institutions are not in place. Lack of definition or weak enforcement of property rights increases the vulnerability of tenants and landowners. Cases in which land is taken from individuals without providing appropriate compensation is not necessarily suggesting a problem with the expropriation system but rather it points at deficiencies in the institutions that support the

> 13 Dowall (2011) and Azuela and Herrera-Martin (2009) 14 Chan (2003)

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