Date: July 15-19, 2018
The rapid housing development that accompanied the high economic growth starting in 1960s Japan forced local governments to incur significant expenses for investment in public infrastructure. Therefore, many local governments established guidance on impact fees in relation to housing developments, which significantly relieved some of the financial burden on local governments in connection with these developments. However, the lack of binding force behind these guidelines also caused tension between local governments’ demands and non-compliant developers. Accordingly, most local governments refrained from implementing such guidelines, perceiving them negatively as stopgap measures to an issue that required the enactment of alternative laws and regulations.
However, since both laws and regulations (hard law) and guidance (soft law) prescribe social norms, irrespective of its binding force, hard laws are unnecessary if soft law successfully elicits voluntary cooperation between parties. Moreover, soft law is somewhat superior to hard law in terms of its ability to build solid consensus without binding force. One of the lessons from the Yokohama’s experience of using soft law for urban development management is how to achieve such a solid consensus without the availability of legal coercion.
From the viewpoint of law and economics, the economic interests of developers of complying with the guidance, that local governments are able to have an impact on, can include: (1) direct and subjective benefits from compliance shared only between the local government and the developers, (2) long-term benefits (if prioritised by the developer), and (3) indirect benefits that may be accrued by demonstrating their compliance with the guidance. In the case of Yokohama, the guidance worked effectively mainly because the administration enhanced (1) intentionally in a favourable environment for (2) although it did not take measures for (3). The developers would therefore recognise the value of such compliance to gain greater profit from higher sales of their residential land.
Rapidly growing cities in developing countries face the same dilemma as Japanese local governments did in the past, and they also have similar difficulties in collecting impact fees for public infrastructure investment. Soft law may be a more appropriate solution than legislation, especially in developing countries where the rule of law is weak, since they have greater difficulty developing and enforcing laws when compared to Japanese local governments that have experienced high economic growth. Therefore lessons learned from Japanese local governments, especially the Japanese experience of using soft law for urban development management, including how to achieve such a solid consensus without the availability of legal coercion, could contribute to more effective practice of using impact fees to solve this dilemma in developing countries.
Date: July 15-19, 2018