|Wealth and Want|
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John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...
Owners paying higher land dues feel pressured to develop their land in order to pay their dues, and development is already blighting many suburbs and farmland. Won't the PTS force premature or excessive development, losing open space and ecologically sensitive areas? Environmentalists should understand that development is actually needed to spare land. Using some land more intensely means using other land not at all. The PTS stimulates construction in the most intensely-used locations; compact urban form leaves more surrounding countryside pristine. Since about one-fifth of urban areas are vacant or underused land, and half is devoted to cars, there's plenty of room in cities for growth. While suburban commercial centers compete with downtown for redevelopment, each new building, whether for business or residents, must find tenants.
Higher density is the expected result of the PTS, yet many people oppose higher density. However, the noxious component is not a higher density of population but of automobiles, creating congestion, noise, noxious smells, and danger. The PTS, by clearing out the infestation of vehicles, makes human habitats more livable and the added people unnoticeable.
Without coercion or remote planning, the PTS improves our settlement patterns. Regulations and zoning, some assume, might be vitiated or obviated, become obsolete. Instead, the PTS makes it easier for regulations and zoning to do their job. Since the land tax lowers land price, buying land for parks and reserves is more easily afforded. The loss in revenue from removing the newly public lands from the tax rolls would be offset somewhat by the corresponding rise in value of sites near the protected open space. Creating green spaces raises the density of already developed land, and thus its value. Furthermore, land dues reduce the profit from land development, making it a less attractive investment, and land use decisions of less economic consequence. After a while, people with deep pockets would turn to investments that, post-shift, would be untaxed. Reserving land for recreational or natural uses becomes less contentious; people could more easily determine an optimum proportion of green space to developed space.
Redirecting land rent from owner to government might merely pass the motive to exploit from owner to state, possibly the next implacable force against conservation. However, while an individual must use their own land most intensely to maximize profit, a government must optimize land use to maximize its land tax base. That is, land value thruout the jurisdiction is lower when there is border-to-border development; overall values are higher when some space is kept open. From the government's point of view, there's more rent to be collected when highest and best use includes nonuse. ...
What's won or lost is a value generated by society. That is, land rises in value
A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article
Jeff Smith: How Profit Shapes Urban Space
Like the rest of the universe, US cities keep expanding. Some time before the universe begins to contract, American metro regions may, too. What counterpart to gravity might suck suburbia back into the hole of our doughnut cities? One of the most fundamental forces in the world - money.Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use
It was the lure of cold cash that drove urbanites out of downtown. The usual suspect, the car, was merely a convenient ride. Despite our present dependency on cars, the drive to profit is powerful enough to bring people back. ...
Post-PTS, would these speculators turned developers find customers? Or would potential customers continue to set up shop and home out in the cheaper 'burbs? Many house-hunters are drawn to where all the amenities are in walking distance. Many shopkeepers locate where people walk about. Other businesses collect themselves close to their suppliers and customers. There are plenty of takers for new downtown development.
At least that's what land values tell us. Land values merely reflect the desirability of locations. The more people want on, the more they must pay. The lots that people are willing to pay the most for are the heart of the city. ...
As does nature, her defenders might also want to abhor a vacuum. "Letting one city block lie fallow means paving over many suburban acres," calculates Gaffney, consultant to Alaska on oil royalties. "Conversely, using one block intensely means many outlying acres need not be used at all." The biggest gain in saving suburban land comes from using urban land more efficiently. ...
This property tax shift (PTS) "helps cities recover from auto-dependency," notes Gihring, author of The Journal of the American Planning Association’s first article on revenue reform (1999 Winter). The PTS turns lots for cars into structures for people. By densifying a city, it provides more riders for mass transit, justifying more routes and times. As riding becomes convenient while remaining a bargain, and parking grows inconvenient while rising in cost, more people switch from driving to riding. Less traffic lets cities transform streets for bikes, pedestrians, sidewalk cafes, and street performers. ...
In New York, the city council keeps Manhattan’s Central Park unbuilt not because Greens rule the Big Apple but because property values overall are higher with the park than with luxury condos on the site. Land value is at its maximum when land use is at its optimum - mixed use including non-use. Batt adds, "the higher land value is, the more revenue there is for public benefit. Limiting a locality’s funding sources to land value puts government squarely on the side of the land’s health." ... Read the whole article
Site Rent and Transportation Costs Linked
Higher density development has all the economies of scale, savings in cost, reduction in externalities, dividends in community and political enhancement, and benefits to urban areas that we all say that we want. The greater the proximity to points of desirable accessibility, the lower are typically the transportation costs. Conversely, sites remote from the urban centers of greatest locational value will have higher transportation costs. When the fixed costs of transportation infrastructure and parcel site improvements are accounted for (which tend to be relatively the same regardless of location), one is left with the marginal costs of operations.(6) ...
This relationship has been demonstrated more empirically in a recent study by the Urban Land Institute. The author concluded that, for Portland Oregon,
each additional mile [traveled] translated into slightly more than $5,000 in housing costs; closer-in locations command a premium, those farther out save money. A ten-mile difference, all other things being equal, would amount to about $56,000 in new home value.
For a household in which one worker drives downtown (or at least to a more central location) to work, that ten-mile difference may amount to 4,600 miles annually, assuming 230 days of commuting and a round-trip of 20 miles each day. Moreover, if non-work trips to the central area and elsewhere doubled that amount, the tradeoff would be about 9,000 miles annually, which could mean a higher/lower driving cost of $3,000 annually, not counting the time saved/spent.(7)
Bill Batt: How Our Towns Got That Way (1996 speech)
That's the savings for living closer to the urban center by ten miles. If the urban resident has to rely upon a car nonetheless, subtracting some $3,000 annual travel expenses will still leave him paying again that much, and likely more, to own a car. Seven years ago James Kunstler put the true costs along with other experts at about $6,100 annually.(8) The American Automobile Association calculated that a car driven 15,000 miles in 2001 cost 51¢ per mile or $7,650.(9) Even that figure reflects only direct costs to the driver, not those passed on to society. One study calculated that the total costs of motor vehicle transportation to our society equal approximately one-fourth of our Gross Domestic Product (GDP).(10) In 1991 road user fees totaled only about $33 billion whereas the true costs to society were ten times that;(11) put another way, drivers paid only 10% of the true costs of their motor vehicle use.(12) ...
... Developing land use and transportation patterns that assume walkability or transit service rather than individual and private motor vehicles is the very definition of livability. Experts agree that the minimum density necessary to make public transit services economically viable is 10 to 12 households per acre, although cities developed in the post-automobile era, lamentably, one sees very little prospect of altering automobile dependency.(36) One study found that "the range of costs induced by spread-out development, . . [i.e.] houses built in sprawling developments, may cost 40 to 400 percent more to serve than if they were located close to major facilities, were clustered in continuous areas, and in corporate a variety of housing types."(37) But by bringing prices into line with costs, both on the transportation services side and on the site-rent side, it is possible both to foster those personal choice calculations that are consistent with sustainable urban environments. ... read the whole article
Failure to recapture publicly-created land rents through the tax mechanism provided the incentive to speculators to buy land, not to use it in production but to hold it for the rise. In this way, choice parcels remain undeveloped or underdeveloped relative to the full extent that their values warrant and development occurs instead in remote areas where opportunity for profit is more immediate. The result was low density development what we know as sprawl.
To some people this may be counter-intuitive. It may not be obvious that increasing taxes on a parcel of land will foster its improvement. Consider, however, the possibility that there are two parcels of land in roughly the same location and of equal size. You own a vacant parcel and another next to it has a twenty-story building. If only the land-value is taxed you will be paying the same tax revenue as your neighbor. What are you likely to do with your parcel? If you are rational, you will either build a twenty-story building or else sell the land to someone who will. In this way improvements tend to be clustered in high-land-value areas except where it is prohibited, perhaps for a park. ...
Jessica Matthews, now with the Council on Foreign Relations, recently wrote a syndicated piece observing that:
In a now familiar sequence, developers reach for the cheapest land, out in the cow pastures. Government is left to fill in behind with brand new infrastructure roads, sewerage systems and schools paid for in part by those whose existing roads and schools are left to decline. Property values rise in a ring that marches steadily outward from the city and fall in older suburbs inside the moving edge.
Because residential development can't meet the public bills, local governments compete for commercial investment with tax discounts that deplete their revenues still further. Property taxes then rise, providing an incentive for new development.
Years of such leap-frogging construction devours land at an astonishing pace. Now if the full social opportunity cost of land occupancy were charged to landholders, the reward of (and incentive for) speculation would be obliterated, and land now locked up by speculators would be transferred to users. Users would employ more labor and engender more capital development instead of seeing it locked up in wasted space.
Absent adequate taxation the regions at the periphery are the first developed, just as Ms. Matthews observes.
The economics profession is only now coming to recognize its responsibility for what it has wrought. Economists are coming to recognize the costs of sprawl, and studies show how astonishingly inefficient the suburban lifestyle is. One review of the literature on the subject of comparative development costs published by the Urban Land Institute revealed that "houses built in sprawling developments may cost 40 to 400 percent more to serve than if they were located close to major facilities, were clustered in contiguous areas, and incorporated a variety of housing types."
Transportation planners know that
public transit typically takes a
density of at least 8-10 households per acre in order for it to be
economically viable. Because tax policies have been instituted that
have the effect of deliberately fostering low density suburban
sprawl, society has become dependent upon motor vehicle
transportation rather than transit service. Had taxes been imposed
heavily or solely upon land value, just the opposite would have
occurred: development would have been most intense on the high
land-value parcels, right by the transit services, making our society
less dependent upon motor vehicles.... read
the whole article
Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
The collection of land rent has other consequences for the smooth and effective functioning of the economy as well. With respect to the configurations of land use in urban areas, the collect of land rent neutralizes, and even reverses, the centrifugal forces which the current real property tax (i.e. that on both land and improvements) exerts on the values of locational sites. In fact one eminent economist argues that a tax on land sites is “better than neutral,” because it fosters activity in the highest value areas and removes the factor of adverse timing that often stalls economic investment.51 This all leads to the economic vitality of high-land-value cities, simply by virtue of concentrating activity in central areas instead of peripheral and remote regions. It discourages the extravagant and careless development of land sites, thereby also fostering development densities conducive to community welfare and to the success of public transit services.52 Experts agree that the minimum density necessary to make public transit services economically viable is 10 to 12 households per acre; without this, there is little prospect of altering private automobile dependency.53 And given the widespread environmentally and socially destructive consequences of motor vehicle dependency, collecting rent is half the answer toward the goal of engendering livable urban areas. (The other half — see below — is pricing motor vehicle use at its true marginal cost to society.)... read the whole article
William F. Buckley, Jr.: Home Dear Home
Likewise, there are at least two kinds of containment policies for urban sprawl.
Consider Philadelphia, once the City of Brotherly Love founded by an idealistic English Quaker. Today, after 3 centuries of development, Philadelphia has 15,800 vacant lots, but that only begins the story. It has 27,000 empty houses (i.e. junkers on usable lots that might as well be vacant); 1500 acres of vacant land and brownfields; and 700 vacant commercial bldgs. A local journalist names it BlightTown, U.S.A. If he travelled a bit he'd find it is only one of many.
The result of decay without renewal is to threaten the countryside; settlers spill out, "like ghosts from an enchanter fleeing." Yet, these are not ghosts, nor autumn leaves in the west wind; these are live people. Destroy man's habitat here and he moves it there, and takes habitat from other life forms. The solutions to urban decay and disintegration are infilling and renewal. Here is where the Green Light Tax is such a good management tool. It lets cities rebuild themselves without tax penalties on new building, and rise like the phoenix from their own ashes.
There is a reflex against growth and development we must learn to overcome. "Growth" should not be an issue to divide us: it depends on the kind of growth. Resentment of growth and development stems in large part from associating them with territorial expansion. Infilling and renewal and rehab, however, UNCOUPLE growth from sprawl: they let cities grow (or at least stop shrinking) without sprawling. Ascending to a satellite view, let's look at the whole system of settlement: focusing people where they should be keeps them away from where they shouldn't be.
Here is an aerial view of Albuquerque, New Mexico, a state dominated by owners of million-acre ranches, and therefore with about the lowest property tax rate in the U.S. Albuquerque sprawls out about 30 miles east-west, and another 30 miles north-south, giving a density of about 300-400 people per square mile for its 330,000 residents. Many of its homes are slums.
Contrast that with the aerial view of Sydney, Australia, a city that raises a lot of its budget from "Green Light" taxes on site value. Sydney and suburbs have nearly 3 million people, on less land than Albuquerque, and with no slums.
There is plenty of land to go around. The pleasant green villages of Shorewood and Whitefish Bay, Wisconsin are upper-income Milwaukee suburbs that feature detached homes on tree-lined streets, with detached garages, laws against overnight curb parking, a number of lakeshore mansions with parklike grounds, ample public parks, good shopping, and a little industry. Their densities are 10,000 persons per square mile. At this density, 250 million Americans would fit nicely into less than half of Wisconsin, an average-sized one of 50 states. (They would occupy 0.7% of the United States.)
At the 10,000 density, Greater
Milwaukee would fit inside
Milwaukee County, yet it now sprawls out over several counties. It
sprawls farther yet if one counts the rural residents who float in
and out of town for seasonal work. Shorewood and Whitefish Bay have
high density because they are the only Milwaukee suburbs with no
vacant land; the others, and the central city itself, are full of
holes. Result: sprawl, invasion of wildlands, loss of farmland,
forced automobilization of former pedestrians, water pollution from
new grading - the whole litany of green laments. High density is not
their cause, but their cure. ... read
the whole article
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper