Public Investment, Private Gain: How Bogota Reclaims Land Value for Infrastructure

Bogota’s experience with land-value capture (LVC) through the valorization levy offers a nuanced and deeply instructive case study for cities worldwide seeking sustainable ways to finance urban infrastructure. The World Bank’s 2025 report, authored by Arturo Ardila-Gomez, draws heavily on the research and analysis of institutions such as the Lincoln Institute of Land Policy, Universidad de los Andes, and Universidad Nacional de Colombia. Through these lenses, the report unpacks Bogota’s century-long engagement with betterment taxes and explores the complex interplay between urban mobility projects, rising land values, and fiscal innovation. The valorization levy, which targets property owners who directly benefit from public works, is a tool grounded in economic logic yet dependent on careful legal design, accurate data systems, and public support.

The Economic Logic Behind Land Value Capture

At the heart of the valorization levy lies a powerful economic principle: public investment in transport infrastructure, such as roads, sidewalks, or transit systems, tends to increase nearby property values by improving accessibility. This generates a “windfall” for property owners, part of which the public sector can recoup to finance these improvements. Using classical supply-demand models, the report illustrates how such projects expand the supply of mobility, increase demand for nearby real estate, and drive up floor space prices. However, affordability becomes a central concern. While many property owners gain wealth on paper, they may not have the liquidity to pay lump-sum levies. Moreover, in areas with restrictive land-use regulations, rising prices can displace lower-income residents, compounding the risk of gentrification. The tension between equitable taxation and fiscal pragmatism runs through the history of Bogota’s valorization programs.

Legal Structures and Administrative Capacity

Bogota’s legal foundation for LVC dates back to national legislation from 1921, which was later reaffirmed in Colombia’s 1991 Constitution. Locally, Ordinance 7 of 1987 provided the framework for identifying beneficiary areas, allocating levies, and engaging residents through oversight boards. The Urban Development Institute (IDU) became the principal agency responsible for implementing these programs, drawing on cadaster data to determine who pays and how much. A well-maintained cadaster, updated through World Bank-supported projects, proved essential not just for property taxes but for the precision and fairness of the valorization levy. However, until recently, programs could be approved before final project designs were available, leading to unrealistic cost estimates, delays, and in many cases, public backlash. Administrative bottlenecks, citizen resistance, and evolving political priorities continually challenged the city’s ability to deliver on its promises of valorization.

Five Programs, One City, Mixed Results

Between 1995 and 2018, Bogota rolled out five major valorization programs, each offering unique insights. The 1995 program, approved under Mayor Antanas Mockus, aimed to upgrade arterial roads and build overpasses, but ultimately delivered less than planned due to underestimated costs and scope creep. The 2005 Mega Valorization Program under Mayor Luis Garzón was the most ambitious, targeting 137 projects citywide to promote equitable access. However, it received over 50,000 complaints, mainly from low-income residents, and was substantially downsized under later administrations. In 2013, Mayor Gustavo Petro amended the 2005 program, cancelling Phases 3 and 4 and shifting financing to tax revenue and debt. The 2010 program, centered on northern Bogota, was suspended and repealed before execution due to competing priorities and the emergence of other LVC tools such as density charges. The 2018 program, under Mayor Enrique Peñalosa, took a more targeted approach, focusing on high-income and industrial areas to reduce opposition. Emphasizing sidewalks, bike lanes, and a cultural center, it generated fewer complaints and stronger political backing, though delays persisted due to coordination challenges and legal claims.

Reforming for Accountability and Equity

Recognizing the limitations of the old framework, Mayor Claudia López introduced a transformative reform in 2023. Ordinance 915 replaced the outdated 1987 ordinance, introducing several critical innovations. Now, all projects must have final designs, safeguard studies, and approvals before the levy can be imposed. The new law requires IDU to conduct a capacity-to-pay analysis and prohibits the issuance of levies until construction begins on at least half of the proposed works. Citizen oversight is strengthened, but streamlined: instead of boards, participation begins from project conception. Annual updates to taxpayers ensure transparency. For incomplete projects, any unspent funds must be returned to the citizens. This approach aims to rebuild trust in the levy while tightening accountability mechanisms and accelerating implementation.

A Complementary Tool in a Broader Fiscal Arsenal

Although the valorization levy has raised meaningful revenue for Bogota, about 1.24% of total municipal income from 2000 to 2023, it is modest compared to recurring sources like property tax and sales tax, which together accounted for over 80% of total revenue. Bogota’s success in modernizing its cadaster has fueled substantial increases in property tax income, while the city has also expanded into new revenue streams such as congestion pricing. Introduced in 2019 and suspended during the COVID-19 pandemic, congestion charging is projected to generate more annual revenue than the valorization levy by 2031 and will be used to subsidize public transport. Bogota’s experience underscores that while the betterment levy is a valuable tool, it works best when paired with other fiscal measures, grounded in solid legal frameworks, and backed by administrative rigor. Ultimately, the city’s long journey with land-value capture reflects both the possibilities and the practical challenges of financing equitable urban growth in the 21st century.