Public land leases, reforms and (in)stability of municipal revenues in Poland – The case of Poznan city.

The stability of municipal revenues is crucial for long-term socio-economic planning at the city level. This paper presents the impact of changes in legal regulations mandating the transformation of perpetual usufruct into ownership on preferential terms. Using micro-level information on transactions and plots handed over in perpetual usufruct for single-family housing, we determined potential losses in the City of Poznan caused by the new regulations. The research uses mass appraisal models to assess the fees related to the land value of properties affected by the legal transformation, scenario analysis, and Monte-Carlo simulation to evaluate the consequences of the change in the regulation in the long run. The simulation results indicate that the municipalities are deprived of relatively stable revenues after the reform. In Poznan, we assess that the net present value of revenue losses ranged from −327.3 mln PLN to −419.6 mln PLN (74.6 % to 92.9 % reduction of the baseline revenues, respectively). Incorporating provisions allowing the perpetual usufruct of developed land to be converted to housing is less financially beneficial for municipalities than for perpetual usufruct holders. Additionally, it significantly manages municipal strategic control of local development within the city and reduces municipal land resources. The research attempts to narrow the gap in knowledge about the role of land leases in municipal revenues. • The regulations introduced by the Law on Perpetual Usufruct Transformation of 2018 are financially disadvantageous for municipalities. • In the long run, the decrease in revenues will most likely cause a sub-optimal expenditure reduction and, to some extent, will lower the quality of local public utility services. • Reducing municipal land resources significantly limits local development and the scope of public utility services. [ABSTRACT FROM AUTHOR]