Introduction
Zoning plans are not merely
technical documents that determine the physical manner in which an immovable
property may be used. Which areas may be used for housing, commerce, industry,
social facilities or green space, as well as construction-related criteria such
as building conditions, the number of floors, building height and floor area
ratio, are determined through zoning plans. For this reason, there is a direct
relationship between the economic value of an immovable property and the zoning
rights granted to it. Indeed, the limited and non-reproducible nature of urban
land makes the effect of zoning decisions on property values even more
pronounced. [1]
This relationship has a particularly
significant consequence with respect to zoning plan amendments. Changing the
existing zoning function of an immovable property, expanding the building
conditions, or permitting construction at a higher density may increase the
market value of the property without any physical intervention taking place. In
other words, an economic value that does not stem from the property owner’s own
labor or investment may arise solely as a result of a planning decision taken
by a public authority. This is precisely what constitutes the basis of the
phenomenon referred to in the literature as “windfall gains.” [2]
The current approach to whether the
entirety of this increase in value generated through public power should be
left with the property owner is that, where certain conditions are met, a
“value increase share” (“VIS”) is collected on the increase in question.
I. Windfall Gains and the Value
Increase Share
Windfall gain is defined as “the
income that a commodity or money generates within a certain period without any
labor being expended.” Accordingly, windfall gains refer to increases in value
that arise without any effort or contribution on the part of the owner. The
concept of windfall gains is generally used in this context to denote the
acquisition of economic value by an immovable property as a result of zoning
decisions. Here, the concept of “windfall gains” must be addressed not merely
in the sense of an economic gain but in the context of the increase in value
that a planning decision taken by the public authority generates on an
immovable property subject to private ownership.
The procedures and principles
concerning the value increase share are set out under the Regulation on the
Value Increase Share Regarding Zoning Plan Amendments (the “Regulation”), which
entered into force by Law Nr. 7221 dated 14.02.2020.
The value increase share is
collected on the increase in the value of the immovable property resulting from
implementation zoning plan amendments that bring about an increase in building
density, population, building height or number of floors, or a change of
function. The base of the value increase share is the difference between the
value of the immovable property under the existing zoning conditions and the
value that will arise following the plan amendment; this difference is
determined by at least two real estate valuation firms. Since the entire
increase in value is intended to be transferred to the public, the VIS rate is
100 percent. The value increase share arises upon the finalization of the plan
amendment and of the amount of the share, and the persons liable are the owners
of the immovable property that is the subject of the plan amendment. Payment is
made before the sale of the immovable property or the issuance of a building
permit. [1]
The value increase share is accepted
to be a financial obligation “having the characteristics of a betterment levy”.
This characterization is important for establishing the legal nature of the
value increase share. Under the betterment levy approach, a person whose
immovable property has increased in value as a result of a public activity or
public decision is required to transfer a certain portion of that increase to
the public.
Accordingly, the value increase
share is based not merely on the aim of generating revenue but on the idea that
the economic value created by a public decision should be shared between the
public and private persons. In this respect, the regulation is an instrument
that makes it possible to reassess, from the standpoint of the public interest,
the economic consequences generated by zoning decisions. [3]
II. Calculation of the Value
Increase Share and the Problem of Valuation
One of the most important issues in
the implementation of the value increase share is determining how much of the
increase in value of the immovable property actually arises from the zoning
plan amendment. This is because the market value of immovable properties does
not change solely as a result of changes in the zoning plan. Transportation
investments in the area, population movements, economic conditions, surrounding
development, the balance of supply and demand, and changes in the real estate
market in general may also affect the value of the property.
Therefore, the essential issue in a
sound calculation of the value increase share is to determine the difference
between the value before the plan amendment and the value arising after the
plan amendment, and to establish the portion of that difference that genuinely
stems from the plan amendment. Valuation reports set out the difference between
the existing situation before the plan amendment and the situation envisaged
after the amendment.
The current system provides that the
values of the immovable property before and after the plan amendment are
determined on the basis of the work of authorized valuation firms and the
assessment of the valuation commission.
Pursuant to Article 8/1 of the
Regulation, at least two authorized real estate valuation reports must be
obtained for the valuation work. It should also be noted that, where there is
more than one report, pursuant to Article 9/4 of the Regulation, the valuation commission
determines the increase in value in an amount not less than the arithmetic mean
of the values stated in the valuation reports prepared by at least two
authorized firms.
Where there is a significant
difference among the reports obtained, pursuant to Article 9/5 of the
Regulation, if there is a difference of more than 20 percent among the reports
and the valuation commission, following its review, concludes that the
determined increase in value does not reflect reality, additional or new
reports may be requested from the valuation firms. Where the issue still cannot
be resolved, subject to the conditions, it is also possible to obtain a report
from another authorized valuation firm or to seek the opinions of universities/relevant
expert institutions.
In its decision dated 18.03.2024,
bearing the Basis number 2022/1428 and the Decision number 2024/1869, the 6th
Chamber of the Council of State also addressed the place of the valuation
report in the plan amendment process and the question of the date of
applications with respect to which the relevant regulation is to be applied.
The decision concluded that rejecting a plan amendment solely on the ground
that no value increase report existed, without taking into account the
transitional provisions to which the specific case was subject, was not in
conformity with the law. [4]
The important point established by
this decision is as follows: The regulation concerning the value increase share
cannot be considered a fiscal transaction independent of the zoning plan
itself. The regulation to which the plan amendment is subject, the date on
which the application was made, and the stage at which the valuation process
must be carried out must be assessed together.
III. The Legal Nature of the Value
Increase Share and the Right to Property
One of the most contentious aspects
of the implementation of the value increase share is the rate of the share
collected by the public. The initial regulation provided for the transfer to
the public of the entire increase in value arising from the zoning plan
amendment. However, in its decision dated 18.05.2023, bearing the Basis number
2020/42 and the Decision number 2023/99, the Constitutional Court assessed the
provision to the effect of “the entirety of the increased value” from the
standpoint of the right to property and annulled it. [5]
At the core of the Constitutional
Court’s approach lies the need to strike a reasonable balance between the
public interest and the holder of the right to property. The transfer of a
share to the public from the increase in value arising from a zoning plan
amendment was not considered contrary to the right to property in and of
itself; however, it was held that leaving the entirety of the increase in value
to the public must be separately assessed in terms of proportionality.
Following this decision,
Supplemented Article 8 of the Zoning Law Nr. 3194 was amended, and under the
current system it is provided that 90 percent of the increase in value arising
from zoning plan amendments falling within a certain scope is to be collected
as the value increase share. The new Regulation published in the Official Journal
dated 22.11.2025 and numbered 33085 also sets out the procedures and principles
for the implementation of this system.
The point to be noted here is that
the 90 percent rate should not be viewed merely as an economic choice of
“transferring a share of the windfall gains to the public.” The determination
of the rate also raises the question of the limits of the interference with the
right to property. In other words, the issue is not merely how much revenue the
state will obtain; it must also be assessed to what extent the transfer to the
public of the economic value created by the public would be compatible with the
guarantees of the Constitution concerning the right to property.
In assessing the value increase
share from the standpoint of the right to property, not only whether it is
possible to collect a charge but also the scope of the charge collected and the
economic consequences it produces for the property owner must be taken into
account. Although Article 35 of the Constitution guarantees the right to
property, it also allows this right to be restricted by law for the purpose of
public interest. However, such a restriction must not reach a level that would
impair the essence of the right to property or impose on the owner a burden
that s/he cannot bear. With respect to the value increase share as well, it is
necessary to maintain a reasonable balance between the public interest and the
economic interest held by the owner in the immovable property.
Indeed, the Constitutional Court did
not consider the transfer of a share to the public from the increase in value
arising from a zoning plan amendment contrary to the right to property in and
of itself; however, it found the leaving of the entire increase in value to the
public incompatible with the right to property on the ground that it imposed an
excessive burden on the owner of the immovable property. From this, it may be
said that what is decisive in the constitutional assessment of the value increase
share is not merely that a share is transferred to the public but on what value
and at what rate this share is calculated. For this reason, it is important for
the protection of the right to property that the valuation reveals the genuine
increase in value, stemming solely from the plan amendment, and that the
financial burden placed on the owner be proportionate.
IV. The Effect of the Value Increase
Share on Obtaining a Building Permit
The payment of the value increase
share is a condition expressly prescribed by law for obtaining a building
permit following a zoning plan amendment. Pursuant to Supplemented Article 8 of
the Zoning Law Nr. 3194, the value increase share is to be paid by the owner at
the latest at the time of the first sale of the immovable property or at the
permit stage; moreover, the provision that “no building permit may be issued
unless the value increase share is paid” is introduced. Accordingly, with
respect to a zoning plan amendment falling within the scope of the value
increase share, it is, as a rule, not possible to issue a new building permit
without payment of the said amount.
This requirement must be assessed
independently of the possibility of paying the value increase share in cash or
in installments. Although the law allows the value increase share to be paid in
installments, it expressly provides that a building permit cannot be issued
until the entire value increase share has been paid. Therefore, merely
arranging installments or paying the first installment is not, by itself,
sufficient to obtain a permit.
That said, the fact that the value
increase share is mandatory for obtaining a permit does not mean that the
amount determined by the administration is undisputed and final in every case.
The existence of legal remedies against the act concerning the calculation of
the value increase share must be considered separately from the obligation to
pay. In other words, while the regulations make the building permit conditional
on payment of the value increase share, this does not remove the requirement
that the amount of the value increase share be determined in accordance with
the law.
In conclusion, where a zoning plan
amendment falling within the scope of the value increase share is concerned, it
is, as a rule, not possible to obtain a building permit without paying the
value increase share. As an exception, the requirement to pay the value
increase share does not apply to permit amendments carried out provided that
the floor area ratio, construction area, building height and intended use are
not changed.
V. The Approach of the Council of
State
When the decisions of the Council of
State concerning the value increase share are examined, it is seen that the
time of application of the regulation, the valuation process, and the
relationship between the zoning plan amendment and the increase in value are of
particular importance.
Under the Council of State’s settled
approach to zoning plans, it is accepted that plan amendments must be reviewed
in terms of the public interest, urban planning principles and planning
fundamentals. Therefore, the mere fact that a plan amendment generates an
economic increase in value in the immovable property, or that a share is
transferred to the public from that increase in value, is not, by itself,
sufficient for the lawfulness of the plan amendment.
Preserving this distinction is
particularly important. Otherwise, the value increase share may turn into a
“payment of consideration” mechanism that replaces the legal review of the
planning decision. Yet what must be done in law is to assess separately, first,
whether the plan amendment is in conformity with the public interest and
planning principles, and then whether an increase in value has genuinely arisen
as a result of this amendment and by what method this increase is to be
calculated.
Conclusion
The relationship between a zoning
plan amendment and the increase in the value of an immovable property has today
become an issue of importance not only for urban planning or the real estate
market but also for the right to property and public finance. Changing the
zoning function of an immovable property or increasing building conditions may,
as a result of a decision taken by a public authority, significantly increase
the economic value of property subject to private ownership.
On the other hand, the most
important legal problem of the system is how the increase in value is to be
calculated and what kind of balance the share to be transferred to the public
will establish between the right to property and the public interest. The
Constitutional Court’s decision, dated 18.05.2023, bearing the Basis number
2020/42 and the Decision number 2023/99, has clearly demonstrated that this
balance cannot be disregarded. The provision under the current regulation for
the collection of 90 percent of the increase in value, rather than putting an
end to the debate, opens up new areas of discussion regarding the rate of the
value increase share, the principle of proportionality and the legal review of
valuation methods.
In conclusion, the essential issue
in the implementation of the value increase share is not the transfer to the
public of every kind of market value increase arising from a zoning plan
amendment. What must be emphasized in law is the objective determination of the
economic increase in value generated in the immovable property by the new
zoning right granted by the public, and the transfer of this value to the
public with a reasonable balance maintained between the public interest and the
right to property. Therefore, in future implementations of the value increase
share, not only the amount collected but also the justification for the plan
amendment, the valuation method, the bases of the calculation, and the
proportionality of the interference with the property owner’s right to property
must be assessed together.
Fatma
Şengün, Legal Intern
References:
1. ERCAN, Erdem / ALPTEKİN, Esra, “İmar Rantı
Vergisi Türü Olarak Değer Artış Payı: Güncel Veriler Işığında Tespit ve
Öneriler” (“Value Increase Share as a Type of Windfall Gains Tax: Findings
and Recommendations in Light of Current Data”), Journal of Public Finance,
Issue: 183, July–December 2022
2. BAŞDOĞAN, S., “İmar Planı Değişikliğine Dair
Değer Artış Payı Yönetmeliği ve Kamu Yararı İlişkisi” (“The Regulation on
the Value Increase Share Regarding Zoning Plan Amendments and Its Relationship
with the Public Interest”), Journal of Architecture, Vol. 58
3. Ezer, A. / Bülbül, D., “İmar Rantlarının
Kamuya Kazandırılması: Uluslararası Örnekler Çerçevesinde Değer Artış Payı
Düzenlemesinin Analizi” (“Capturing Windfall Gains for the Public: An
Analysis of the Value Increase Share Regulation in Light of International
Examples”), Journal of the Court of Accounts, Vol. 33, Issue: 127, 2023.
4. Decision, bearing the Basis number 2022/1428
and the Decision number 2024/1869 and dated 18.03.2024, of the 6th Chamber
of the Council of State
5. Decision, bearing the Basis number 2020/42
and the Decision number 2023/99 and dated 18.05.2023, of the Constitutional
Court
