Balancing Short-Term Gains and Long-Term Sustainability: Managing Land Development Rights for Fiscal Balance in China’s Urban Redevelopment

Chinese local governments have long financed public services through land-sale revenues. The shift from selling undeveloped land to redeveloping existing urban areas has disrupted this traditional financing model, exposing a critical tension between the pursuit of immediate revenue and the assurance of long-term fiscal health. The continued dependence on land-based finance has led many local governments to overlook long-term public service obligations and the long-term operating deficits associated with intensive urban development. Thus, by examining the relationship between the development rights allocation and the sustainable fiscal capacity of the government, the study evaluates both short-term revenue generation and long-term expenditure commitments in urban redevelopment contexts. However, existing research has yet to provide actionable tools to reconcile this structural mismatch between short-term revenues and long-term liabilities. We employ a comprehensive analytical framework that integrates fiscal impact modeling with the optimization of development rights allocation. Based on this framework, we construct a quantitative, dual-period fiscal balance model using mathematical programming to analyze various combinations of land development rights supply strategies for achieving fiscal equilibrium. Our results identify multiple feasible supply combinations that can maintain fiscal balance while supporting sustainable urban development. The findings demonstrate that strategic development rights allocation functions as an effective tool for balancing short-term revenue needs with long-term obligations in local land finance systems. Our study contributes to establishing a sustainable land finance framework, particularly for jurisdictions lacking comprehensive land value capture mechanisms. The proposed approach offers an alternative to traditional land rights transfer models and provides guidance for avoiding long-term fiscal distress caused by excessive land transfer. The framework supports more sustainable urban redevelopment financing while maintaining fiscal responsibility across temporal horizons.