Taxing land and properties allows city authorities to capture the enormous wealth generated by the urbanisation, and use it for the public good.

For cities to become engines of growth, they require massive public investments. Yet too many developing cities lack the finances to make such investments, and consequently cities are becoming locked into sprawling, unplanned growth patterns.

In this context, annual taxes on land and physical properties represent the largest source of untapped municipal revenue for developing cities. As cities grow, the wealth they create becomes capitalised in the rising land values of the city. Parts of peri-urban land in Kigali, for example, have increased in value over 1000-fold in the last 10 years1. Taxing these assets allows governments to capture these rising values to fund much-needed public investments. Alongside their potential to raise significant public revenues, these land and property taxes are also fairer and more efficient than other forms of tax.

Poorly designed and administered systems of taxations, alongside significant political resistance from owners of these assets, have meant these taxes have gained limited traction in developing cities. But at each stage of the design of a land and property tax system, policymakers can make decisions to harness the benefits of annual land and/or property taxation whilst addressing these associated challenges. Even modest investments in reform to land and property tax systems can help dramatically expand municipal revenues to enhance public service and infrastructure provision.

Key messages

  1. Land and property taxes offer a fair and efficient form of taxation for cities that can fuel a virtuous cycle of public investment.
    These taxes have limited effects on urban investment, and allow governments to capture increases in land and property prices that are the direct result of public investment.
  2. Complexity comes at a cost.
    Policymakers will need to weigh up whether greater accuracy in valuation, and targeted rates and exemptions, justify the added complexity these bring to the tax system. In cities in Sierra Leone, implementing simpler valuation systems to match capacity have yielded higher revenues and greater public acceptance.
  3. Registration and taxation are complementary.
    Formal land and property ownership creates a legal basis for taxation and allows easy identification of those liable for taxes. Large scale titling through local parasurveyors using low cost technology can significantly expand the tax base.
  4. Linking land and property taxation to public investment is key to increasing compliance. 
    In the long run, public support for land and property tax is linked to the tangible benefits such taxation provides. If closely linked to public investments, these taxes become legitimate price paid for services and infrastructure.

A PDF version of this section of this policy content is available here. An extended Cities that Work synthesis paper on land and property taxes is available here.


  • 1 M. Smolka, ‘Implementing Value Capture in Latin America: Policies and Tools for Urban Development’, Policy Focus Report Series (Lincoln Institute for Land Policy, 2013).