World Bank Good Practice Notes 1 Land Management July 2008

Land Management Provision of Land for Affected Population by the Wenchuan Earthquake

A. Introduction 1. The Wenchuan Earthquake has affected 20 cities,158 counties,3,655 towns and villages. Their geographical and demographic conditions vary significantly from small rural villages to county level cities, as well as the magnitude of their physical damages. Reconstruction strategy and plan including land management plan very much depend on these specific local conditions, from in-situ reconstruction for the cities or towns with limited damage in a relatively safe location to total reconstruction, including transfer from high risk location to low risk location. There is no blue print of land management strategy and plan which can fit to all different conditions of cities and towns. Previously submitted World Bank note on “URBAN DEVELOPMENT PLANNING- Planning for urban and township settlements after the earthquake covers a wide range of the issues to be considered in urban development planning in the process of reconstruction. Therefore, this note focuses on the land management issues, particularly on how to efficiently provide land for affected population, based on the World Bank study on “ The Spatial Growth of Metropolitan Cities in China, March 2008” as well as the experiences of ongoing Sichuan Urban Development Project which is developing new urban land in peri-urban areas through rational spatial development planning.1 To the extent possible, the note introduces the relevant experiences in other countries in Annex.

B. Land Provision for Affected Population

2. China is experiencing unprecedented scale of urbanization driving from rapid rural-urban migration. The difference in income between urban and rural population is a powerful factor of urbanization. For example, Sichuan is preparing for rapid urbanization, population growth of 8 to 10 percent and 40 percent urbanization by 2010 by putting an emphasis on furthering the development of medium-and small-sized cities such as Mianyang. 3. It is expected that the rural-urban migration will be accelerated as a result of the Wenchuan Earthquake. Thousands of rural people would move to the urban areas, as they have lost houses and production bases. The Government is providing temporary houses in the urban areas. The resettlement in the urban areas could be economical decision as the urban economies can provide more job opportunities than the rural economies.While not all of the transferred rural population will stay forever in the temporary houses, it is expected that they would stay there for a quite long period, say

1 Analysis of Mianyang Urban Land Development Component of SUDP is based on the Project Appraisal Document (PAD ) of SUDP as well as “Demand, Compensation for Land and Pricing issues in SUDP Working Note By Alain Bertaud, March 29, 2006

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probably five years2at least. During this period, they would find jobs in the urban areas and some of them would stay in the urban areas for economic reason and better social services. 4. This accelerated rural-urban migration will certainly give strong pressure on already very limited supply of urban land for the residences, public places and economic activities. As there is little room in Central Business District (CBD), most of the migrants will settle in peri-urban areas. The key question is how to efficiently provide the limited urban land to affected population. 5. The afore-mentioned Bank study on “ The Spatial Growth of Metropolitan Cities in China” found that the urban land use is not fully efficient in Chinese cities, while the population density is much higher than that of cities in the now developed countries. Land use policy can have a significant impact on urban spatial form and should therefore be used to promote land use efficiently. The study identifies a number of regulations, policies and management practices with unintended negative impacts on land use efficiency. Four factors contribute to dispersed spatial patterns and inefficient land use: (i) national regulations to limit land consumption by protecting farmland have the unintended consequence of fragmenting the urban periphery; (ii) the national policy to promote city-centered economic growth creates strong incentives for municipal authorities to convert agricultural land to non-agricultural uses in excess of need; (iii) the municipal practice of limiting building intensity within the city lowers land use efficiency and extends spatial spread; and (iv) the lack of coordination between land use and infrastructure development increases travel time and costs. These factors jointly contribute to consumption of more land than necessary and at lower efficiency than possible.

First, farmland protection: The unintended consequence of protecting basic farmland is fragmentation of the urban periphery. The spatial expansion of Chinese cities is marked by fragmented and non-contiguous development of relatively high-density clusters. This fragmentation is the unintended outcome of quotas to protect basic agricultural land because the policy does not discriminate sufficiently between agricultural lands within the city boundaries and those beyond. Thus agricultural land close to built-up areas cannot be developed while more distant villages classified as non-agricultural are incorporated into the urban space. This leapfrog development is inefficient and expensive because utility networks and transport lines have to bypass large pockets of empty land that lose productivity for lack of access to irrigation. Although the motivation of the Basic Agricultural Protection Law is valid, its inflexible implementation lowers both agricultural and urban productivity.

Second, incentives to convert agricultural land: Land is being over allocated for industrial and other uses in the suburbs adding to spatial expansion.

2 In case of Kobe earthquake, it took five years to remove completely temporary houses. Kobe is large, commercial and industrial city with 1.5 million population. Given that the affected areas are economically underdeveloped areas in China, the duration of the temporary houses would be even longer.

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Industries located in central urban areas during the period of the planned economy are being relocated to new industrial estates in peri-urban areas where municipal authorities have incentives to over-release land below market value as a source of revenue. Land allocation to industry in Chinese cities is between two to three times that in comparable cities with well functioning land markets. Although reforms are underway to correct the allocation and pricing of industrial land, it will take time to redress the problem as most relocation of industry is fairly recent. In addition, anticipation of restrictions and price corrections has caused land-banking by cities and developers in the form of unused industrial estates.

Third, limits to building intensity: The spatial expansion of cities can be reduced by using existing land more intensively. Intensity of land use depends on the rate at which urban land is transformed into floor space. This intensity has increased in Chinese cities over time as measured by the gross Floor Area Ratio (FAR).3 However, there is considerable room to increase the intensity because gross FAR in major Chinese cities is lower than in urban centers like Tokyo, Seoul, and Manhattan. Overly strict limits on FAR values in central urban areas force cities to accommodate the demand for space by spatial expansion, increasing both land consumption and average commuting times.

Fourth, lack of coordination of land use with infrastructure: Urban land use is not characterized by the strategic location of high density nodes connected by rapid public transit. Although densities are high in Chinese cities, they do not vary sufficiently across the urban space because of uniformly regulated FAR values that suppress location premiums from being reflected in the price of land. This leads to the dearth of strategically located high density nodes. FAR values are not publicly available on citywide maps as guides to developers but are the subject of detailed planning at the block level, an approach that fails to signal the value of land based on location and leads to its suboptimal use. Higher intensities of land use, as measured by FAR values, can cause traffic congestion unless the strategically located high-density nodes are linked by appropriate rapid transit infrastructure. This aspect has not received adequate attention in China where land use and access policies are not sufficiently coordinated. This is a critical policy area as China is in the early stages of motorization whose worst excesses are potentially avoidable. Chinese cities have limited mass rail transit networks at present and the huge investment needed to increase coverage and make it sustainable necessitates a concern with ridership which depends on the densities of residence and employment nodes and their alignment with mass transit routes. As cities in China continue to grow, suburban housing uncoordinated with transport infrastructure will increase automobile use, energy consumption and travel time.

3 The Floor Area Ratio (FAR) is the ratio (or the limit imposed on such a ratio) of the total floor area of buildings on a certain location to the size of the land of that location. A limit on the FAR of 2.0 would mean that the total floor area constructed is not allowed to exceed two times the gross area of the plot. A FAR of 2.0 could be achieved in different ways: by constructing two floors on the entire plot; four floors on half the plot; or eight floors on a quarter of the plot.

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6. While the fundamental resolution of these policy, regulatory and practice constraints would take a long time, the Government could consider to remove the first (farmland protection) and the third (limits to building intensity) constraints on an exceptional basis for the earthquake affected areas as well as the urban areas which will host thousands of refuges.

C. Mianyang Urban Land Development Component of Sichuan Urban Development Project

7. Sichuan Provincial Government and the World Bank has been implementing the Sichuan Urban Development Project (SUDP) since 2006. SUDP includes urban land development in Mianyang and Suining in peri-urban areas which aims to promote rational spatial development and efficient land use, by overcoming some of above- mentioned constraints. In this note, the case of Miayang land development is presented as one of the best practices of the land development in China. Similar policy and practices could be adopted by the National Government and affected Provincial Governments to efficiently provide land for affected population.

8. Mianyang is typical of Chinese medium size cities developing rapidly by attracting high tech industries. These cities are attractive to high tech industries because of their benign environment and good city management. Typical of most Chinese cities, the population of the urban area of Mianyang and its immediate surroundings is divided into two socioeconomic groups with different legal rights. The urban population has typically access to all city services while the “farmer” population has to rely on lower quality services in health and education provided by villages or rural collective.

9. The “farmers’ areas” are partially developed at lower densities than the city’s urban areas but at higher densities than normal rural areas. The non agricultural uses in the farmers’ areas are fulfilling a useful function for the development of cities by providing a legally developed urban fringe of private rental housing, and space for workshops affordable to small entrepreneurs.

10. Urban households on the other hands are able to buy housing from large well capitalized formal developers who themselves purchase land use rights from the Municipal government – who has a monopoly on land development and in the transfer of land use rights. Urban dwellers can rent or buy a shop or workshop in a formal urban development with full infrastructure services, but at prices which are at least double from the ones practiced in farmers’ areas. The population densities in formal urban areas in medium size cities are typically between 120 and 250 people per hectare, while densities in farmers’ areas close to the urban fringe are between 10 to 40 people per hectare. 11. In Mianyang, as in most Chinese cities, the limits between formal urban areas and farmers, while clear-cut, follows idiosyncratic contours with enclaves of farmers areas surrounded by fully developed urban areas. The closest is a farmer area from formal urban areas, the densest it is, as farmer households get a great part of their income from urban activities.

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Figure 1: Map of formal urban areas and farmers area in Mianyang

12. When Chinese cities need to expand, they naturally do so at the expense of farmers’ areas which are the closest to the urban areas and therefore the densest. Leap-fogging these areas could be costly, as it would mean leaving low densities unserviced enclaves inside fully serviced areas (see below “alternative pattern of land development”). This would greatly expand the length and costs of urban networks while also increasing commuting time. However, Chinese cities do not usually expand in the most economical manner from a spatial point of view, not because they want to spare semi developed farmers areas but because the lack of construction finance pushes formal development in a linear direction along already existing trunk infrastructure. The pattern of formal urban development in Mianyang is typical of this less than optimum approach (see Figure 1) The development in both cities follows the main intercity roads, leaving large enclaves of undeveloped land at very close distance from the city center. The most economical way of developing urban land would be to develop land in a compact manner around the CBD as much as the topography permits. The most compact form for a city is a circle centered on its CBD. This compact form generates shorter trips, significantly save on energy4 and decrease the capital costs of utility networks. Of course topography often prevent cities from reaching the most efficient shape, this is the case in Mianyang

4 For a detailed discussion of city shape and efficiency see “The Spatial Organization of cities" Bertaud , 2004 at HTTP://alain-bertaud.com )

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where very wide rivers and hills constrain spatial development. However, the development of the SUDP Mianyang sites will significantly improve overall efficiency by decreasing average distance to the center as the population increases. 13. The current spatial policy implicit in the master plan of Mianyang could be summarized as follows: (i) redevelopment of older areas, and (ii) consolidation of under-used areas and agricultural enclaves within the existing urbanized radius. The location of the SUDP sites in Mianyang as shown on the maps of Figure1 illustrates this policy. The sites are part of a consolidation in-fill strategy rather than an extension of the build-up area farther away from the city center. In Mianyang the current built-up area expands up to 14 km from the city center while the SUDP sites are between 2.5 and 7 km for SEDZ and between 3 and 9km for Pioneer Park. 14. While it was not intended, a part of the land developed under the project in Mianyang (Pioneer Park) is currently used for the sites of thousands of temporary houses. The sites provide infrastructure services and access to the working places in town. It may not be by happening that Suining where another SUDP land development component is located is also providing urban land for many temporary houses. D. Recommendations 15．In order to provide efficiently urban land for affected population, the World Bank suggest that both the National and affected Provincial Governments consider the following measures for the affected areas or the urban areas hosting the affected population, on an exceptional basis, if the revision of the current regulation would take time. These recommendations have been selected from the whole lists of the recommendations made in the above mentioned “ The Spatial Growth of Metropolitan Cities in China, March 2008”, because of their large impact and relatively low costs for their implementation. • The application of land conversion quotas could be made more flexible by

allowing them to become transferable. The Bank suggests that flexibility in the application of land conversion quotas could improve land use efficiency by allowing fast-growing cities and counties/districts to fully realize their comparative advantages. There is need to explore the feasibility of a system for compensated transfers of land conversion quotas across counties/districts within the same municipality. This could be also be evaluated for broader application such that slow-growing cities could sell conversion quotas to faster-growing cities that could presumably afford them yielding overall efficiency gains. Such a system could also serve to introduce greater transparency in the conversion of land and provide a specific source of funding for slower growing cities.

• The land conversion quota could be made more flexible within a municipality by

allowing prioritized conversion within urban growth boundaries and growth corridors. The fragmentation of the urban fringe leaves patches of farmland served by expensive infrastructure networks while development leapfrogs beyond the built-

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up edge. This pattern is caused in part by the land protection system that does not differentiate between agricultural parcels located close to the city center and those located further away. This could be prevented by enabling infilling of agricultural enclaves, in particular those located within ring roads and along designated corridors. The Bank suggests a modification of the application of current quotas on conversion of agricultural land within urban growth boundaries and in designated growth corridors. Priority for conversion through transfers should be accorded within growth boundaries and in strategic corridors to allow contiguous development. Growth boundaries should be aimed at steering development away from both highly fertile and ecologically fragile areas, and along growth corridors. Outside the boundaries and corridors, the protective basic agricultural law would be strictly enforced. The policy could be reviewed at regular intervals.

• The FAR regulation could be used by municipalities to channel growth to

desired locations and enable the emergence of high density nodes. By using FAR regulations to discriminate between land with different location premiums, municipalities can create the variations in the value of land that would encourage efficient use. Thus locations in the proximity of mass transit stations can be allowed higher FAR vales to encourage densification. This could then lead to the coordination of land use and public transit investments.

• It is suggested that citywide zoning maps show the allowed FAR variations by

zone to provide accurate valuation guides to developers. In cities with functioning land markets, FAR values are closely linked to local demand for floor space, being higher where demand is higher. In turn, these manifest themselves in higher land prices which act as the signals that drive efficient land use. In China, urban master plans need to show FAR values, which at present are only specified at the individual block level rather than as part of the publicly available master plan documentation, to enable developers to compare the value of different locations. There seems to be no explicit spatial strategy to guide the FAR values used in the detailed plans.

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Annex Experiences of Other Countries.

1. The Great Fire of London in 1666 is estimated to have destroyed the homes of 70,000 of the cities 80,000 residents. Many radical schemes to rebuild the city were proposed. However, the city authorities attempted to determine the exact ownership of properties in order to acquire land for reconstruction. This proved impossible and finally the old street plan was recreated in the new city. Improvements consisted of wider streets, better hygiene and fire safety infrastructure, a sewage-drainage system, and brick and stone instead of wood housing. Thatched roofs were forbidden.

An important policy decision was to encourage the homeless to move away from London and settle elsewhere immediately. A proclamation was issued that "all Cities and Towns whatsoever shall without any contradiction receive the said distressed persons and permit them the free exercise of their manual trades."

2. The Lisbon Earthquake in 1755 was one of the most destructive earthquakes in history till that time with a death toll estimated between 60,000 and 100,000. The city underwent a radical rebuilding with big squares, rectilinear, large avenues and widened streets – these features were adopted as “mottos” by the city. The new buildings were among the first seismically protected buildings in the world.

3. The Paris Cholera Epidemic in 1832 provided the impetus to launch the long-debated reconstruction of the city. From 1852 to 1870, under Baron Haussmann, the old Paris of dense and irregular medieval alleyways was replaced by a rational city with wide avenues and open spaces. Haussmann's projects were decided and managed by the state, carried out by private entrepreneurs, and financed with loans backed by the state.

In a first step, the state expropriated those owners whose land stood in the way of the renovations. The main judicial tool was expropriation "for purposes of public interest" under which the city could acquire buildings placed along the avenues to be constructed, whereas earlier it could only acquire the buildings placed directly on the future construction site. It then demolished the buildings and built new avenues fully equipped with water, natural gas and sewers. The state reimbursed the reconstruction loans by selling the land, after dividing it in plots, to promoters who had to build according to a set of precise rules. This system allowed the city to devote each year a budget to the renovations twice that of the municipal budget.

An innovative new legal tool, the servitude d'alignement, was also brought into use in Paris during its reconstruction. This prevented real estate owners from renovating or rebuilding beyond a certain line drawn by the administration. In this sense, it could be considered a predecessor of the urban growth boundaries that are employed for the same purpose in a number of modern cities—Portland, Oregon, is among the better known examples.

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One of the most important innovations of the Paris case was the adoption of an overall objective to guide the reconstruction. This was to “let air and men circulate” based on the then-popular miasma theory of disease that associated epidemics with the circulation of foul air and odors. Even though the theory was incorrect, it enabled diverse agencies to coordinate their efforts with a single, clear objective in mind.

4. The San Francisco Earthquake in 1906 resulted in a relatively low loss of life (approximately 3,000 people) but the resultant fire destroyed about 500 city blocks of the downtown core. The Army built 5,610 wooden relief houses to accommodate 20,000 displaced people. The houses were grouped in eleven camps, packed close to each other and rented to people for two dollars per month until rebuilding was completed. This gave more time for the reconstruction. The cottages cost on average $100-740 to put up. The $2 monthly rents went towards the full purchase price of $50.

The proposals for reconstruction included Paris-style avenues, boulevards, arterial thoroughfares that radiated across the city, a massive civic center complex with classical structures, and what would have been the largest urban park in the world. But this plan was dismissed at the time as impractical and unrealistic. Real estate investors and other land owners were against the idea due to the large amount of land the city would have to appropriate to realize such proposals.

In the end the original street grid was restored but with many improvements like wider streets, arterial thoroughfares and modern buildings. However, the most negative aspect of the San Francisco case was the decision to rebuild quickly and in this rush building standards were in fact lowered rather than strengthened. It is estimated that building standards did not reach 1906 standards till about 1950 and the older buildings pose a hazard even today.

5. The Kashmir Earthquake in 2005 is the most similar to the earthquake in Sichuan. The magnitude and death toll were very similar as was the mountainous rural terrain with only a few secondary cities affected. In many ways, the context was very different as the Pakistani effort was led largely by domestic and international NGOs and international relief agencies coordinated by the UN. However, some policy lessons are relevant. These were learnt the hard way as the initial choices were not the best in most cases.

The first lesson was that the rural and urban contexts were entirely different and needed to be addressed differently. In small self-contained villages, the revival of the village economy was more important than household based relief measures. In the absence of the former, households remained dependant on relief and also suffered from emotional trauma from continued loss of livelihoods. Thus, it was found that the replacement of draft animals and seed stocks was the most critical intervention in rural areas in the reconstruction phase.

In the urban context, the decision on the choice of incremental versus radical renewal needed to be made very quickly in order to prepare the residents to cooperate with future plans. Ambivalence in this regard was the cause of much discontent.

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6. Kobe Use of the Land Readjustment for Urban Reconstruction. Kobe city used the land readjustment scheme for the reconstruction of the urban areas destroyed by Great Hanshin-Awaji Earthquake in 1995. The land adjustment scheme is often used for the urban renewal in Japanese cities. The destruction of large city areas allows the city to accelerate the implementation of the land adjustment plan which had been programmed. The mechanism of the land readjustment is explained as following.

Mechanism of Land Readjustment

Source: JICA 7. Key Lessons Based on these case studies a number of key lessons can be identified and options listed for consideration. The first step is the obvious one of determining the seismic suitability

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of the affected land for reconstruction and the minimum building standards needed for each type of land category.

In rural areas, a village-by-village determination needs to be made if a specific village economy can be revived as a whole. If not, arrangements need to be made for the relocation of the affected village population.

In urban areas, a rapid assessment of the extent of property damage is needed to decide whether buildings are going to be repaired or demolished. If the number of repairable buildings in a given area is below a pre-determined threshold (say 30 percent of total buildings), it might be better to acquire them for demolishment so that a radically improved city can be constructed.

An early decision on the mechanism for compensation is important for the nature of reconstruction. Property-by-property compensation mechanisms, while more fair in one way, slow down the acquisition of land for reconstruction. A quick decision, one way or the other, is required to design the appropriate reconstruction strategy.

The nature of the temporary housing for the displaced population is an important policy decision that determines the time available for reconstruction. One of the important lessons from the case studies is not to make very fast reconstruction a measure of ultimate success.

The policy to allow displaced families (both rural and urban) to resettle in neighboring locations with permission to work is another important policy decision that allows more time for planned reconstruction.

A peculiarity in China is the existence of villages within urban jurisdictions. These presently serve the purpose of providing affordable rental housing for migrants and a source of income for farmers whose land has lost productivity. The reconstruction would provide an opportunity to rationalize the status of such villages. If it is determined that seismic protection of new housing would make it unaffordable to migrants, it might be better to compensate the farmers, incorporate the land in the urban jurisdiction, and relocate the housing elsewhere.

The mechanism adopted to finance the reconstruction would have a bearing on the speed of reconstruction and the nature of the built form. This is a policy decision that should not be taken independently of the rest of the reconstruction plan.

One of the most important lessons from the case studies is the adoption of an overriding objective for the reconstruction. This is critical because many different agencies are involved in land management and reconstruction and without a common objective they are likely to maximize their own limited objectives which would lead to a suboptimal global solution.

The choice of a global objective is up to the policy makers. In the current context of very high energy prices it seems reasonable to focus the urban efforts on the construction of ecologically efficient cities. This would require consideration of urban growth boundaries

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and integrated land management to optimize the location of housing and employment and the type of transport links between them. The World Bank is pleased to provide the technical assistance for this effort.