The Union Cabinet’s clearance on March 10 for the setting up of the National Land Monetization Corporation was applauded in an editiorial in The Indian Express on March 15.

What has not been understood is that this could sound the death knell for livability in our cities. Or, if the new corporation perceives its mandate to be the proper management of public land rather than the extraction of its maximum monetary value, it could indicate better times ahead.

The point at issue is that governments are not equivalent to private developers in the land market. This is a basic fact that needs to be recognised and accepted by the new National Land Monetization Corporation.

Capitalism has worked well for the advancement of society and its future looks unchallengeable for most countries. But within itself, capitalism can have a variety of goals. A common one is the maximisation of the Gross Domestic Product, or GDP. Another could be maximising the living standards of the poorest in society, a goal that produces a more equal society.

Either goal is possible, or any other that is different. They all fall within the same framework of capitalism, where the fundamental common factor is a belief in markets and the power of self-interest in advancing society. Efficient markets, driven by competition, deliver efficient enterprises that provide enhanced product performance at lower product costs. This delivers consumer satisfaction.

Neglected against the yardstick of consumer satisfaction is damage to the environment and the consumption of irreplaceable resources. It is commonly accepted that capitalism works best when it is bridled. In other words, markets require regulation.

Land ownership for public good

Markets work well for commodities. Practically all over the free world, excluding dictatorships, land is treated like any other commodity. All markets in commodities require regulation, but the land market is different and calls for entirely different forms of regulation.

The difference between land and other commodities arises out of the peculiar nature of its ownership. Some of it is publicly owned and some of it is private. But owning land is different from owning a commodity.

Privately owned land can be bought and sold, like any other commodity. It can be inherited. But what you can do on the land is determined by a different authority: the government, representing the public. Whether the land can be used for agriculture only, or industry, or residential construction, and if so with what floor space index, is determined by the public authority. So while the land is “owned” by the private individual or corporation, the right to what you can do with it is “owned” by the public.

Publicly owned lands in a democracy are literally owned by the public. They are held in trust on behalf of the public by governments or government agencies. They must be put to the use that is in the highest public interest. This will not always be monetisation.

In cities, particularly, some parts of public land are taken off the market and not allowed to be tradeable. This is in the case of reservation for roads, surface rail, parks and other open spaces, schools, hospitals, police stations, fire stations, public toilets and so on. Once put to their particular uses, they provide some of the functionality that is essential to the working of the city.

Azad Maidan in Mumbai. Credit: David.Clay.Photography, CC BY-SA 4.0, via Wikimedia Commons

If we exclude roads and transit, the remaining facilities are what developers like to call amenities. The land taken up for roads and amenities is off the market. It cannot be traded like other parcels of privately-owned land.

The suggestion here is that low and lower-middle-income housing, or “affordable housing” as it is sometimes euphemistically called, be added to that list of off-the-market lands. Further, such land for affordable housing should be in small pockets that are well distributed throughout the city and never aggregated into what could become a ghetto.

This kind of distribution of low-income housing around the city, rather than flinging it to the outer edges, is important because the occupants are low-income people whose jobs are similarly well distributed across the city. Housing for nurses should be close to hospitals, for police constables close to their police stations. Many of these low-income employees work extraordinarily long hours, and being closer to their place of work would add great value to the quality of their lives.

Community land reserves

The important thing, of course, is to keep it that way, and not allow the low-income first occupants to become landowners claiming windfall earnings by putting that land back on the market. Affordable housing should remain affordable for future as well as first occupants. Just as there are forest reserves and wildlife reserves, there should similarly be community land reserves in cities to ensure housing for low-income occupants.

Like any other kind of land reserve, a community land reserve would have its land taken off the market. The community land reserves would be a non-profit entity bound by its terms of incorporation to keep the housing it offers affordable for all time, never burdening it with the current market value of the land on which the housing stands. That it is possible to manage such enterprises has been well established, particularly in the United States, where community land trusts have been successfully functioning for decades.

The National Land Monetization has the choice of using its powers to maximise benefits to the public or to maximise monetary returns. Unfortunately, the National Land Monetization is under the Ministry of Finance. That does not bode well for the future of our cities.

Shirish B Patel is one of the three authors of the idea of New Bombay, and was the first Director of Planning and Works for Navi Mumbai.