The article examines Additional Article 8, which was added to Zoning Law No. 3194 on February 14, 2020 and regulates the transfer to the public of the increased value resulting from a zoning plan amendment, together with the related draft regulation.
The article proposes that zoning plan powers be transferred to boards attached to the Ministry of Environment and Urbanization and that the value increase arising from infrastructure investments also be transferred to the public.
The article argues that transferring the entire increased value to the public would hinder the development of private enterprise and excessively restrict the right to property, and that the draft leaves a gap for areas smaller than 1000 square meters and for land on which no zoning parcel has been formed.
The article also criticizes the fact that the valuation commission is composed solely of civil servants within the administration, and that areas within the scope of Law No. 6306 and amendments made ex officio by the administration are exempted.
Additional Article 8 was added to Zoning Law No. 3194 by the amendment made on February 14, 2020. This article regulates the transfer to the public of the value increase arising from zoning plan amendments. Following this, the Ministry of Environment and Urbanization opened for comments, on April 17, 2020, the “Draft Regulation on the Value Increase Share Arising from Zoning Plan Amendments”, which it had prepared in order to determine the procedures and principles for the work and transactions relating to Additional Article 8 added to Zoning Law No. 3194.
Zoning Law No. 3194, Additional Article 8 – (Added: 14/2/2020-7221/12 Art.)
“Plan amendments shall be made in accordance with the characteristics of the settlement, in a manner that does not disrupt the main decisions of the plan, its continuity, its integrity or the balance of social and technical infrastructure, and provided that technical justifications are met. For plan amendment proposals, a social and technical infrastructure impact assessment report including a needs analysis shall be prepared and submitted to the administration that will approve the plan.
Zoning plan amendments that increase the population, building density, number of floors or building height on a parcel basis may not be made.
In blocks formed with an area of not less than one thousand square meters, the cultural facility, social and technical infrastructure uses required by plan amendments that increase the population, building density, number of floors or building height on a block basis, or that introduce a change of function, must be met within an area with a radius of at most 500 meters from the center of the block.
The entire increased value of a plot whose value increases as a result of a zoning plan amendment made on a block basis at the request of all the owners of the immovable property shall be collected as the value increase share. In determining the amount of the value increase share, the principles for determining value set out in Article 11 of Law No. 2942 shall be taken into account.
The value increase that will arise in an immovable property as a result of a zoning plan amendment shall be determined by the valuation commission formed by the administration, provided that it is not less than the average new value established by at least two licensed real estate valuation firms authorized under Law No. 6362 through a determination of the value under the conditions of the plan in force, as stated in the explanatory report of the plan amendment, together with a determination of the value after the amendment. The value increase share shall be paid by the owners of the immovable property at the latest upon the first sale of the immovable property or at the permit stage. The value increase share determined by the valuation commission shall be applied on the payment date increased, for each calendar year, by the revaluation rate determined and announced for the preceding year pursuant to Article 298 bis of Law No. 213, effective from the beginning of the calendar year.
The fact that the immovable property is subject to the value increase shall be annotated in the land register. Except for permit modifications made without changing the floor area ratio, construction area, building height and intended use, no building permit may be issued unless the value increase share has been paid.
The value increase share amounts shall be deposited by the owners of the immovable property into the account of the Ministry’s accounting unit. Of the amounts deposited;
a) in provinces with a metropolitan municipality, 25% to the relevant account of the metropolitan municipality, 25% to the relevant account of the relevant district municipality and 25% to the Ministry’s Special Account for Transformation Projects,
b) in provinces without a metropolitan municipality, 40% to the relevant account to be opened at the administration approving the zoning plan amendment and 30% to the Ministry’s Special Account for Transformation Projects,
c) of the value increase arising from a zoning plan amendment approved by the Ministry, 75% to the Ministry’s Special Account for Transformation Projects and, of the remaining value increase share, in provinces with a metropolitan municipality, 15% to the relevant account of the metropolitan municipality and 10% to the relevant account of the relevant district municipality; in places without a metropolitan municipality, the entire remaining value increase share other than the Ministry’s share to the relevant account to be opened by the relevant administration of the place where the plan amendment is made,
shall be transferred within five business days, and the remaining 25% of the value increase share under subparagraph (a), the remaining 30% of the value increase share under subparagraph (b) and, where the zoning plan amendment is approved by other administrations with a general budget, the entire value increase share shall be recorded as revenue to the general budget.
The provisions of this article shall not apply to plans or plan amendments to be made in areas within the scope of Law No. 6306 of May 16, 2012 on the Transformation of Areas under Disaster Risk, in areas of public investment and publicly owned areas, and in areas belonging to foundations administered by the state (mazbut) and annexed foundations (mülhak), or to plan amendments to be made, in accordance with the procedures set out in subparagraph (b) of the first paragraph of Article 8, concerning heights designated in zoning plans as maximum: free (yençok: serbest).
The procedures and principles for the implementation of this article shall be determined by the Ministry.”
TRANSFER OF THE POWERS TO DETERMINE AND AMEND ZONING PLANS TO BOARDS
First of all, we would like to state that it would be appropriate for the powers granted to local governments regarding the preparation, entry into force and amendment of zoning plans, as regulated in Article 8 of the Zoning Law, titled “Preparation and entry into force of plans”, and in the other related articles, to be taken away and transferred to a board to be established under the central government. In this regard, the High Council for the Conservation of Cultural Property and the regional councils for the conservation of cultural property, which operate under the Ministry of Culture and Tourism and are regulated by the “Law on the Conservation of Cultural and Natural Property” No. 2863, may be taken as a model. The formation of these councils and their working procedures and principles are regulated under the “Law on the Conservation of Cultural and Natural Property” No. 2863 and the “Regulation on the High Council for the Conservation of Cultural Property and the Regional Councils for the Conservation of Cultural Property”. Taking these councils as a model, “Zoning Determination and Amendment Boards” attached to the Ministry of Environment and Urbanization could be established.
Zoning planning and, more generally, the approach to urbanism are in essence directly linked to a society’s history, its culture, its outlook on life and the way it gives meaning to life. Beyond this, the primary impact of space on the mental/intellectual life of the people living in it is today also the subject of many scientific studies. Seen from this perspective, it will be better understood that the authority to determine and amend zoning is a matter that concerns not only the region to which it relates but the whole country, and that it is too important to be left to local municipalities. Transferring these powers to boards within the ministry composed of persons specialized in the fields of art history, law, real estate development, surveying engineering, architecture and urban planning will also eliminate the possible pressures concerning zoning plan amendments that may be exerted on local governments and the commission. In this way, uniformity in zoning plans will at the same time be achieved throughout the country and the city. Moreover, it should not be forgotten that the authority to determine and amend zoning is not solely at the discretion of the administration, and that, in addition, institutions such as the Ministry of Environment and Urbanization, the Ministry of Science, Industry and Technology, the Privatization High Council and the Housing Development Administration also have powers to determine and amend zoning plans deriving from various laws. The boards to be established will ensure uniformity in the determination and amendment of zoning plans.
PRACTICES AND VIEWS ON THE TRANSFER OF THE VALUE INCREASE SHARE TO THE PUBLIC
In fact, we have already seen a practice similar to the transfer to the public of the value increase arising in the context of a zoning plan amendment in Article 18 of the Zoning Law. From this perspective, it might have been appropriate to assess Article 18 and Additional Article 8 together. In this context, it would be appropriate to provide for a fair sharing of the value increase in a way that does not obstruct private enterprise either, and to apply it to all zoning plan amendments, apart from very limited exceptions. At the same time, it is known that this issue is widely debated on the world agenda, that some countries currently apply it, and that other countries, despite having applied it previously, later abandoned it.
In New Zealand, it has been reported that, with the amendment made to the Income Tax Act in 2016, all transactions converting an immovable property from land into a building plot or increasing the building density in an area would be subject to tax, regardless of whether the plan amendment was made privately or by a council decision. In addition, the immovable property not having changed hands for ten years or more was provided for as an exception to this tax.
In Ireland, a legislative amendment made in 2010 introduced a system in which zoning plan amendments are subject to tax. In this context, it was decided that 80% of the value increase arising from a zoning plan amendment would be transferred to the public. As a result of strong pressure from land developers, this legislative change was abandoned in 2015.
It would not be correct to say that a value increase share arises only in the form of a zoning plan amendment. Public administrations carry out infrastructure investments, and in this context various transportation services are brought to many areas. Even a rumor that a metro line will come to an area is enough for the market values of immovable property in that area to rise. In a sense, through the expenditure made by the public from the general budget, part of society both gains access to infrastructure facilities and sees the market value of its immovable property rise without any consideration. This, in turn, will mean that the state relinquishes, free of charge, to only one part of society the taxes it collects from every segment of society. Considering that they stem from the same rationale, it would be appropriate for even value increases of this kind to be assessed within the scope of this regulation, so that the value increase arising in immovable property as a result of the public’s infrastructure investments and social services is also transferred to the public, to be used in financing infrastructure projects.
Ensuring that the public does not burden all segments of society with the services it provides in a limited area can be achieved in various ways. One of these is infrastructure and superstructure investments made under the Build-Operate-Transfer model. In this way, an investment that the public would make from the general budget is carried out by the private sector, and the financing of the investment is placed, in the long term, on those who benefit from these services (assuming there is no need for a Treasury guarantee). The Eurasia Tunnel, Istanbul Airport and the Osmangazi Bridge can be given as examples of this. Similarly, it is also observed that joint investments are made by the public and the beneficiary. In cases such as a metro station passing through a private hospital or a shopping mall, the private hospital or shopping mall also contributes to part of the investment, since it benefits from the investment made by the public. The idea underlying these approaches is that “the one who benefits the most is the one who must contribute the most”. Even in all these cases, it would be appropriate for the value increase share arising in the area to be transferred to the public at certain rates. Moreover, it could also be said that immovable properties that benefit more from public services should pay more tax.
In some countries, on the other hand, instead of the value increase share being transferred to the public, the persons who will become right holders by reason of an increase in zoning rights are placed under an obligation to deliver the additional housing units created by reason of the increase in zoning rights to those in need at a reasonable price. In other words, instead of the value increase share being transferred to the public, the production of affordable housing on behalf of the public is imposed as an obligation.
GENERAL ASSESSMENT OF THE PROVISIONS OF THE REGULATION
Following these explanations, we will present for your consideration four different points concerning the Draft Regulation on the Value Increase Share Arising from Zoning Plan Amendments.
1) In Article 1, titled “Purpose”, of Part One, titled “General Provisions”, of the Draft Regulation on the Value Increase Share Arising from Zoning Plan Amendments;
“The purpose of this regulation is to determine the procedures and principles for the work and transactions relating to the acquisition for the public, as the value increase share, of the entire increased value of the immovable property whose market value increases as a result of a zoning plan amendment aimed at increasing the population, building density, number of floors or building height or at a change of function, made on the basis of a zoning block with an area of 1000 square meters or more at the request of all the owners of the immovable property pursuant to Article 12 of Law No. 7221 on Geographic Information Systems and on Amendments to Certain Laws and Additional Article 8 of Zoning Law No. 3194.”
In any case, whether or not to decide on a zoning plan amendment is a matter within the discretion of the administration. The regulation in question does not involve any intervention regarding the procedures and principles under which a zoning plan amendment is to be made. However, providing that the entire increased value of the immovable property will be transferred to the public will cause a decrease in the value of private enterprise and capital and an excessive benefit to the public. Instead, it would be appropriate for, for example, 30% to be transferred to the existing right holders, and thus to private enterprise, and the remainder to the public. Otherwise, requests for zoning plan amendments will have been blocked indirectly by way of law, and it is clear that this will hinder the development of private enterprise, excessively restrict the right to property and, for these reasons, be contrary to law.
On the other hand, Additional Article 8 of the Zoning Law emphasizes that zoning amendments cannot be made on a parcel basis by stating “Zoning plan amendments that increase the population, building density, number of floors or building height on a parcel basis may not be made”, and immediately afterwards introduces the provision “The entire increased value of a plot whose value increases as a result of a zoning plan amendment made on a block basis at the request of all the owners of the immovable property shall be collected as the value increase share. In determining the amount of the value increase share, the principles for determining value set out in Article 11 of Law No. 2942 shall be taken into account.”; however, what is to be understood from the expression “on a block basis” has not been specified in detail. This detail was provided in the draft regulation by stating “made on the basis of a zoning block with an area of 1000 square meters or more”. The most important problem here will center on what is to become of areas larger than a parcel but smaller than 1000 m2. The meaning that seems to follow is that there will be no obligation to transfer to the public the value increases arising in these areas; this, in turn, will create a contradiction with the aim sought to be achieved by the additional article introduced. In this respect, this contradiction needs to be resolved.
2) In Article 4, titled “Definitions”, of Part One, titled “General Provisions”, of the Draft Regulation on the Value Increase Share Arising from Zoning Plan Amendments;
“Value Increase Share: In places with an approved zoning plan, the difference between the new value of the immovable property (plot) that will arise from the zoning plan amendment and the value of the immovable property (plot) calculated according to the zoning plan in force (the plan before the plan amendment)”
The draft regulation provides that only immovable properties with an approved zoning plan may be subject to the value increase share under this regulation. However, the value increase that will arise when immovable properties classified as “land”, on which no zoning parcel has been formed, are brought into zoning has not been treated as a share to be transferred to the public. At first glance, it may be thought that Article 18 of the Zoning Law, titled “Preparation of parceling plans”, fills this gap.
“During the distribution of land and plots subjected to readjustment by municipalities or governorships, a sufficient portion of their surface area, for the establishment of the public service areas necessary for the population in the readjustment area to carry on their urban activities and in return for the value increases arising from the readjustment, may be deducted as the "readjustment contribution share". However, the readjustment contribution shares to be taken under this article may not exceed forty-five percent of the surface area of the land and plots subjected to readjustment before the readjustment.”
It cannot be said that each of the plots or pieces of land that will gain value through the application of Article 18 of the Zoning Law (parceling) to be carried out in the area will gain value to the same extent or at the same rate. It is natural for each of them to see a greater or smaller value increase depending on its proximity to or distance from public service areas (a cemetery, municipal services, social and cultural facilities and many other areas). In addition, after the readjustment, the owner of the immovable property may not be able to acquire immovable property in the same location, or the owner’s separate parcel may have turned into a jointly owned parcel. When all these factors are considered together, it can also be said that proportional equality between the value increases cannot be achieved.
Nor is there any intention on the part of the legislator toward an equal or proportional distribution of values. Despite all this, the legislator, on the one hand, wishes to transfer to the public the value increase that will arise from a zoning plan amendment but, on the other hand, distributes the value increase in a manner far from equal through parceling arrangements, that is, through the implementation of zoning plans. It would have been appropriate for Additional Article 8 to contain a provision in this respect as well. Otherwise, the problem will arise that no value increase share is collected from zoning plan amendments made ex officio by the administration, while a share is collected from value increases arising as a result of the requests of right holders.
3) In Article 5, titled “Formation and Duties of the Commission”, of Part Two, titled “Formation of the Valuation Commission and Principles for Determining the Value Increase Share”, of the Draft Regulation on the Value Increase Share Arising from Zoning Plan Amendments;
“The valuation commission shall be composed of an odd number of persons, being at least 5 persons who are graduates of relevant undergraduate or graduate programs, on condition that they serve within the relevant Administration under Article 4 of Civil Servants Law No. 657. As a rule, the commissions shall include personnel who are graduates of the undergraduate, master’s and doctoral programs of the real estate development and management departments of universities, holders of a valuation expert license, urban planners, surveying engineers (geomatics engineers/geodesy and photogrammetry engineers), architects, civil engineers and graduates of other relevant engineering disciplines. Administrations that do not have sufficient personnel within the stated scope shall obtain them from personnel with the qualifications stated above within public institutions and organizations.”
It is emphasized that all members of the commission must be persons serving within the administration under Article 4 of Civil Servants Law No. 657. However, we think it would be appropriate for 3 members to be selected from among persons who are not civil servants and who are specialized in their fields, and for 2 members to be selected from among civil servants specialized in their fields. In this way, persons with technical expertise will also take part in the processes of determining and amending zoning plans. We also do not think it right that the public body to which the resource will be transferred and the authority that will carry out the valuation of the value increase share should be the same. This is because, in theory, it is clear that a civil servant will act in line with the request and wishes of his or her superior.
4) In Article 17, titled “Exceptions to the Value Increase Share”, of Part Five, titled “Exceptions”, of the Draft Regulation on the Value Increase Share Arising from Zoning Plan Amendments;
“Zoning plans or zoning plan amendments to be made in areas within the scope of Law No. 6306 of May 16, 2012 on the Transformation of Areas under Disaster Risk, in areas of public investment and publicly owned areas, and in areas belonging to foundations administered by the state (mazbut) and annexed foundations (mülhak), and, concerning heights designated in zoning plans as maximum: free (yençok: serbest), zoning plan amendments to be made in accordance with the procedures set out in subparagraph (b) of the first paragraph of Article 8 of the Zoning Law, and zoning plan amendments to be made ex officio by the administrations are not subject to the value increase share.”
Ensuring uniformity in zoning plans throughout the country and the city forms the basis of zoning planning. For this reason, the heading of exceptions should be kept limited unless it is strictly necessary. To explain:
It is a fact that most buildings in our country fall within the scope of urban transformation. It was not right for areas within the scope of Law No. 6306 on the Transformation of Areas under Disaster Risk to be included among the exceptions in the draft regulation.
When an increase in zoning rights (number of floors, building density, etc.) is achieved through zoning plans, providing for the transfer of the value increase to the public for some of the places with adjoining parcels, while leaving the value increase with the parcel owners and the contractor for others on the grounds that they fall within the scope of urban transformation, will be contrary to the principles of the Right to Property (Article 35) and Equality before the Law (Article 10), which are among the fundamental norms of Universal Law and of our Constitution.
We can say that construction costs are more or less the same everywhere in Türkiye. However, it is a fact that there is a huge gap between land costs or sale prices to the end customer. On the other hand, the need for urban transformation does not arise only in places in large cities where land is expensive and the sale price to the end customer is high; it presents itself as a need that is widespread across the country as a whole. In this situation, while the reconstruction/redevelopment of some buildings within the scope of urban transformation is possible because it will be profitable for the contractor and the landowners, the reconstruction/redevelopment of other buildings is not possible because, owing to factors such as their location and the rate of urbanization, it will not be profitable for the contractor.
All projects within the scope of urban transformation to be carried out throughout Türkiye need to be assessed, as it were, within the logic of an equalization market. The logic of the equalization market consists in using part of the value increase share arising from profitable projects to finance projects that are not profitable. We think that in this way, action will be taken more in line with the main purpose of transferring the increase share to the public.
Finally, when all the explanations we have made above are considered together, all the provisions introduced under this regulation must comply with the principles of the Protection of the Right to Property and Equality before the Law. This is because master and implementation zoning plan amendments are also likely to confer gains on the owners of immovable property without consideration. In addition, as regards the value increase arising in an immovable property due to a zoning plan amendment, there is no difference between an action taken upon application and an action taken ex officio by the administration. We think it would be appropriate for the public to collect a value increase share also from the value increases (gains conferred without consideration) arising from actions taken ex officio by the administration under subparagraph (b) of the first paragraph of Article 8 of the Zoning Law.
Att. Taha Hüseyin Çebi
This article is a general assessment prepared in accordance with the legislation in force on its date of publication; it does not constitute a legal opinion. This English text is a translation of the Turkish original; in case of any discrepancy, the Turkish version prevails.