Economic Instruments for Controlling Urban Area and its Urban Land Prices

C. Fiscal Area

Fiscal area in question is a form of government intervention towards the development of the area are exempt from various taxes for the purpose to pull economic activity. Although this will be very contrary to the spirit of increased State revenue from taxes, but in some cases of some regions the application of this policy is very possible thing to do.

D. Area Incentives

In this context, the developer is possible to develop a region exceeds a predetermined limit on condition that the developer must build facilities and spaces for public. This is done to stimulus the construction of public facilities in order to be an interesting thing to be built not only for Government, but for the developer. This means that if a developer wants to have the right to build larger area, then the developer should be willing to build facilities and public spaces. Thus indeed has happened a mutually beneficial transaction for the Government and developers.

E. Betterment Tax

The tax is charged by the Government on the basis of the increase in land prices. The rationalization is due to an increase in land prices is the impact of the development by the Government. For example, when there is an infrastructure of roads, sidewalks, hospitals, and universities, the price of land surrounding the site became higher. On the matter of this then the Government should get a piece of the price mark-up. In addition to adding to the revenue from the tax, it can also be used to prevent activities about land speculation and hoarding wealth by the form of land.

The discussion above shows that the effort to control the city with economic instruments contain a fairly complex dimensions that include control of the city, the economic development of the city, and increasing city’s income. At this very current conditions, seems that the focus of the Government is how to improve the income, but overlook about the role of Government in its management functions. Though some of the above policies that can be applied in order to increase city’s revenue, it can also be used to improve the controlling function by the government against spatial planning, land use planning, and land prices of the cities.

On the other hand, economic instruments are only being effective when the market moving towards perfect conditions. Even if it does, the market of land and/or property is not possible as perfect as the other goods and services market due to the limited supply and unlimited demand that will not reach the point of perfect balance. And yet, the location advantages that play an important role has a monopolistic characteristic in nature where location is a significant factor in determining the price of the land.

But at least, with the land price control efforts such as information disclosure to reduce asymmetrical information for consumers and other market participants can assist land and property markets becoming healthier. Therefore, economic instruments in the context of controlling the city in this case that affects spatial control, land use, and land prices do not same as the government make a market intervention as an operational, but rather as the efforts of political will by the Government as an organization that has the authority in terms of regulating and controlling an area.