Why municipalities grow: The influence of fiscal incentives on municipal land policies in Germany and the Netherlands

It is generally assumed that municipalities attract residents and businesses as a result of intermunicipal competition for tax revenues. This growth-oriented behaviour poses a serious problem considering internationally acknowledged goals to limit land take. Nonetheless, research on how fiscal incentives affect municipal land policies is scarce. Adapting a neoinstitutionalist approach, we compare the two contrasting fiscal systems of Germany and the Netherlands. While clear incentives can be deducted from the different sources of municipal income, complex balancing measurements and consequential infrastructure investments make it difficult to predict a project’s profitability. According to the perspective of planning practitioners in municipalities around the growth centres of Utrecht and Berlin interviewed for this study, local pressures force them to keep allocating new building sites. In order to create effective policies to limit land take, it is important to understand not only
the influence of fiscal incentives but also of place-specific pressures on municipal land policies.