THE INCIDENCE OF COMPENSATIVE COSTS FOR PUBLIC STANDARD SERVICES ON THE VALUE OF AREAS TO BE TRANSFORMED IN CONSOLIDATED OR CENTRAL URBAN LOCATIONS: THE CASE OF TURIN

Stefania Sabatino, Riccardo Roscelli and Luisa Ingaramo

ERES from European Real Estate Society (ERES)

Abstract: A key condition for the creation of balanced urban transformations is the introduction of appropriate public standard services beside the new Real Estate developments. The Turin Plan in force indicates that, in urban lots (developing more than 4,000 sq.m. of gross floor area) to be transformed in consolidated and central locations, the areas for public standard services should be given for free. Anyway, the City of Turin can refuse the disposal of an area whenever its shape, location or dimension might compromise the adequate standard allotment. As an alternative, according to the local regulations, the City requests a compensative fee to remunerate the necessary expenditure to fit other more suitable free areas with public services. In this case the private proposer offers to the City a ìcompensative feeî that has to be verified by the Public Body on the basis of the ìright of eminent domainî. The amount of the expropriating compensation had been considered, up to 2007, at the 50% of the area ìmarket valueî (see the Decree n. 327- 8th June 2001). As a consequence, a fair apportionment of the costs and advantages induced by the transformation process between Public and Private subjects had generally been granted. Anyway, during the last three years, some consistent changes took place: their impact on the estimation of the ìcompensative feesî has been so relevant to request a revision of their evaluation criteria. The first reason is related to the conjunctural economic and financial recession, perceived from 2007 in the Real Estate market as well as in the Land one. As the present low mortgage activity is demonstrating, the European Central Bank reduction of the official rate, up to 1,00% (Spring 2009), wasnít helpful. Furthermore, the 2008 national budget Law (Legge Finanziaria n. 244 ñ 24th December 2007) has introduced the ìmarket valueî approach as the new expropriation criterion. In the present economic recession the full 100% market value appreciation for public domain areas, or compensative fee, produces an overcharged variable not more easily sustainable by the Public Body. The paper aims to offer a contribution insight the economical-financial feasibility estimation of Real Estate urban re-developments (carried out through Discounted Cash- Flow dynamic analysis) to identify a market value able to represent a fair ìcompensative feeî for standard public services. Finally we present a compared analysis of some case studies concerning the re-development of former industrial areas in the city of Turin.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2010-01-01
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