01 Dec

La Paz city of Skyscrapers

La Paz city of Skyscrapers

Many times it is in the statement of reasons, and in the technical reports that support a bill, where we can assess the quality of a regulation. Municipal Ordinance 046/2022, which promotes unrestricted construction in 10 areas of the city of La Paz, presented by the President of the Planning and Territorial Management Commission of the Municipal Council and approved in the first instance by the Plenary of the Municipal Council of La Paz is an example of an exercise that has not been reflected on; and supported with equivocal arguments.

Those of us who take the time to read and interpret the consequences of the draft rule know that the commitment from the Council was to turn La Paz into a panopticon (in the prison sense) in the name of freedom and private investment. Entire apple trees with walls 40, 60 or 80 meters high along avenues and around apple trees; buildings with little ventilation, little sun, without retreats or green areas.

After the rejection decision of the College of Architects of La Paz and the Association of Engineers of La Paz, to which many citizens joined, far from promoting a process of reflection within the Council, there have been entrenchment positions in order to not having to go back with the aforementioned norm. Councilor Pierre Chain has assumed the rule as his own and has threatened the citizens to expand the 10 laisser faire zones, laisser passer to the entire city if the executive does not approve it or if the Council must revisit it.

In the end, this councilor who is part of the bench of the Movement for Socialism, defends the norm based on arguments typical of an ultra-liberal free market capitalism. He went on to point out some of his premises:

1. There is a pool of businessmen who get rich selling apartments at prices much higher than in other Bolivian cities. Enabling greater buildability (read without sunlight, or parking, or retreats) would reduce costs for builders and would allow lower prices for access to housing.

2. Higher levels of buildability and therefore business possibilities will encourage higher levels of private investment in La Paz and return of capital that currently migrates to other Bolivian cities.

3. A greater supply of apartments, at lower prices, will allow many young people from La Paz to find solutions without having to go looking for them in neighboring municipalities that are far from their sources of employment. In short, the risk of being in the hands of those who are very lost.

Those who know the economy of the land, the way real estate markets work, know the fallacies of these arguments. The fact that higher buildable levels are allowed does not have to reduce the cost of the apartments, since the holders of land (or houses as land), knowing that the constructive potential is greater, what they do is update their expectations and therefore increase the sale value. The surplus value is appropriated by the owner of the land. At one extreme, it may even further reduce the real supply of land given these generated expectations and a real reduction in supply. In La Paz, a thousand 40-story buildings will not be built. The market does not require it.

I agree, however, with councilor Chain, that the price of land in La Paz is very high, both for the land and for the square meter built.

But the solution cannot be to make the land even more expensive, providing greater surplus value to owners, property owners and real estate rentiers. The solution comes from the side of making real estate ownership more expensive and therefore discouraging saving on unproductive or unproductive urban land.

I explain. In commercial areas and areas undergoing densification processes, plots of land or single-family homes have ceased to fulfill a relevant social function since their vocation is commercial and high-rise densification. So, holding these lands and not offering them to the market should be penalized through important progressive taxes, which allow the mobilization of these resources, discouraging their possession.

A significant increase in the supply of land and costs of unproductive maintenance will allow the price of land to drop and that with buildings between 7 and 15 floors it will be possible to have access to apartments at reasonable prices within the centralities that also have sunlight. , parking lots, common areas and green areas.

A second immediate action to reactivate construction, much more interesting, innovative and without collateral costs, is to reduce the entry barriers that in the construction sector are linked to the lack of clarity in the approval processes for construction plans and the eternal times on the part of the GAMLP, costs that end up driving the businessmen away, increasing the real costs of construction and finally discouraging new businessmen to venture into the sector.

I wonder, what will be the reflection of those who promote the productive community social economic model in relation to this norm? Could it be that in urban planning and management and in reference to the urban land market, the Bolivian model includes the principles promoted by Hayek and the Austrian School?

Or could it be that within the Movement for Socialism there is more than one economic current and councilor Chain belongs to the same group as the “mining cooperatives”, businessmen, who promote, by force of dynamite, the shrinking of the State and unlimited freedom.

Suddenly Councilman Chain, without knowing it, is an organic intellectual of a new current emerging in the ranks of the Movement Toward Socialism: popular neoliberalism.



Eduardo Pando is an economist, specialist in real estate markets, Gerenssa executive director