Sustainable Urban Renewal: The Tel Aviv Dilemma
2014
Arch, Asaf Friedman
The city of Tel Aviv needs extensive urban renewal projects to answer the demand for housing. The area suitable for such a project is the older southern part of Tel Aviv, made up of small parcels of land with single units. This area has undergone an extreme gentrification process, which makes assembling small parcels into large ones a very difficult task. Owners holding out for higher prices may either prevent or significantly delay socially efficient redevelopment. The only current option for the Tel Aviv Municipality that will lead to efficient land assembly for private redevelopment currently is the option of private entrepreneurship. We wish to describe a mechanism that will solve the hold-out problem and lead to efficiency in land assembly without resorting to the intervention of the government to execute eminent domain. The mechanism requires the municipality to plan the development that will best suit the city, thus allowing the valuation of the parcel to reflect its true price for the owner. If the owners are still reluctant to sell, the municipality can then tax him according to the new value of the land.
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