Wealth and Want
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Sprawl: urban and otherwise

Henry George: Why The Landowner Cannot Shift The Tax on Land Values (1887)
A VERY common objection to the proposition to concentrate all taxes on Land Values is that the landowner would add the increased tax on the value of his land to the rent that must be paid by his tenants. It is this notion that increased Taxation of Land Values would fall upon the users, not upon the owners of land, that more perhaps than anything else prevents men from seeing the far-reaching and beneficent effects of doing away with the taxes that now fall upon labor or the products of labor, and taking for public use those values that attach to land by reason of the growth and progress of society.

That taxes levied upon Land Values, or, to use the politico-economic term, taxes levied upon rent, do not fall upon the user of land, and cannot be transferred by the landlord to the tenant is conceded by all economists of reputation. However much they may dispute as to other things, there is no dispute upon this point. Whatever flimsy reasons any of them may have deemed it expedient to give why the tax on rent should not be more resorted to, they all admit that the taxation of rent merely diminishes the profits of the landowner, cannot be shifted on the user of land, cannot add to prices, nor check production. ...

But while the Taxation of Land Values cannot raise rents, it would, especially in a country like this, where there is so much valuable land unused, tend strongly to lower them. In all our cities, and through all the country, there is much land which is not used, or not put to its best use, because it is held at high prices by men who do not want to, or who cannot, use it themselves, but who are holding it in expectation of profiting by the increased value which the growth of population will give to it in the future. Now the effect of the Taxation of Land Values would be to compel these men to seek tenants or purchasers. Land upon which there is no taxation even a poor man can easily hold for higher prices, for land eats nothing. But put heavy taxation upon it, and even a rich man will be driven to seek purchasers or tenants, and to get them he will have to put down the price he asks, instead of putting it up; for it is by asking less, not by asking more, that those who have anything they are forced to dispose of must seek customers. Rather than continue to pay heavy taxes upon land yielding him nothing, and from the future increase in value of which he could have no expectation of profit, since increase in value would mean increased taxes, he would be glad to give it away or let it revert to the State. Thus the dogs in the manger, who all over the country are withholding land that they cannot use themselves from men who would be glad to use it, would be forced to let go their grasp. To tax Land Values up to anything like their full amount would be to utterly destroy speculative values, and to diminish all rents into which this speculative element enters. And how groundless it is to think that landlords who have tenants could shift a tax on Land Values upon their tenants can be readily seen from the effect upon landlords who have no tenants. It is when tenants seek for land, not when landlords seek for tenants, that rent goes up.

To put the matter in a form in which it can be easily understood, let us take two cases.

  • The one, a country where the available land is all in use, and the competition of tenants has carried rents to a point at which the tenant pays the landlord all he can possibly earn save just enough to barely live.
  • The other, a country where all the available land is not in use and the rent that the landlord can get from the tenant is limited by the terms on which the tenant can get access to unused land.
How, in either case, if the tax were imposed upon Land Values (or rent), could the landlord compel the tenant to pay it?

It may be well to call attention to the fact that a tax on Land Values is not a tax on land. They are very different things, and the difference should be noted, because a confusion of thought as to them may lead to the assumption that a tax on Land Values would fall on the user. Barring such effect as it might have on speculation, a tax on land — that is to say, a tax of so much per acre or so much per foot on all land — would fall on the user. For such a tax, falling equally on all land — on the poorest and least advantageously situated as fully as on the richest and best situated land — would become a condition imposed on the use of any land, from which there could be no escape, and thus the owners of rentable land could add it to their rent. Its operation would be analogous to that of a tax on a producible commodity, and it would in effect reduce the supply of land sufficient to pay the tax. But a tax on economic rent or Land Values would not fall on all land. It would fall only on valuable land, and on that in proportion to its value. It would not have to be paid upon the poorest land in use (which always determines rent), and so would not become a condition of use, or restrict the amount of land that could be profitably used. Thus the landowners on whom it fell could not shift it on the users of land.  ... read the whole article

Henry George: The Crime of Poverty  (1885 speech)
  You may see the same thing all over this country. See how injuriously in the agricultural districts this thing of private property in land afflects the roads and the distances between the people. A man does not take what land he wants, what he can use, but he takes all he can get, and the consequence is that his next neighbour has to go further along, people are separated from each other further than they ought to be, to the increased difficulty of production, to the loss of neighbourhood and companionship. They have more roads to maintain than they can decently maintain; they must do more work to get the same result, and life is in every way harder and drearier. ... read the whole speech

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 4: Land Speculation Causes Reduced Wages

The immense area over which the population of the United States is scattered shows this. The man who sets out from the Eastern Seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam the river to get a drink, pass for long distances through half-tilled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent i.e., by homestead entry or pre-emption. He (and, with him, the margin of cultivation) is forced so much farther than he otherwise need have gone, by the speculation which is holding these unused lands in expectation of increased value in the future. And when he settles, he will, in his turn, take up, if he can, more land than he can use, in the belief that it will soon become valuable; and so those who follow him are again forced farther on than the necessities of production require, carrying the margin of cultivation to still less productive, because still more remote points.

If the land of superior quality as to location were always fully used before land of inferior quality were resorted to, no vacant lots would be left as a city extended, nor would we find miserable shanties in the midst of costly buildings. These lots, some of them extremely valuable, are withheld from use, or from the full use to which they might be put, because their owners, not being able or not wishing to improve them, prefer, in expectation of the advance of land values, to hold them for a higher rate than could now be obtained from those willing to improve them. And, in consequence of this land being withheld from use, or from the full use of which it is capable, the margin of the city is pushed away so much farther from the center.

But when we reach the limits of the growing city the actual margin of building, which corresponds to the margin of cultivation in agriculture — we shall not find the land purchasable at its value for agricultural purposes, as it would be were rent determined simply by present requirements; but we shall find that for a long distance beyond the city, land bears a speculative value, based upon the belief that it will be required in the future for urban purposes, and that to reach the point at which land can be purchased at a price not based upon urban rent, we must go very far beyond the actual margin of urban use. ... read the whole chapter

Bill Batt: Painless Taxation

Abstract Real tax reform could do away with those taxes that are resented by the large proportion of our population. We could replace all taxes on wages and on interest by instead taxing economic rent. Rent is windfall income; it is income that arises not from the efforts of any person or corporation; it comes about as a surplus gain from common social enterprise. There is ample moral warrant for society to lay claim to that which it has created, as well as to that which no individual or party has earned. Analysis increasingly makes clear that economic rent in all its forms is far larger than official government figures indicate; in fact it is likely sufficient to supplant all current taxes on labor and capital (wages and interest) which are acknowledged to have so many negative effects. Recovering economic rent in all its manifestations by taxing its various bases actually can foster economic performance and yield other benefits that make it the natural source of revenue for governments. Such a tax is essentially painless. ...

A New Tax Ethic Beyond the greater conformity to sound tax principles as noted earlier, the taxation of economic rent that accretes as a surplus upon land can offer two additional advantages. The first of these is the removal of the distortions wrought upon urban land use configurations and the negative environmental impacts which are presently apparent. The greatest of these effects is in the form of suburban sprawl, a phenomenon viewed with increasing alarm not only by its degradation of life quality but in the increased expenditures of time and resources (especially energy). Land use patterns, as intractable as they tend to be, will have to modify simply on account of the evolving limitations of future life. There are likely to be changes also in the way by which air, water, and other public goods are exploited. Treatment of these resources as "free goods" or as captive property of private parties will end if it is realized how generous the rental flow to public treasuries can be.... read the whole article

Bill Batt: The Merits of Site Value Taxation

Much of the environmental damage we have witnessed in the 20th century can be laid directly at the doorstep of faulty government policy, particularly fiscal policy. Suburban sprawl, to take the instance of greatest concern to us all now, results from two misapplications of fiscal policy applied under police powers.

The first is the pricing motor vehicle transportation service at only about a tenth of what it really costs to drive.

The second is the design of our conventional property tax which encourages the destructive practice of land speculation and the centrifugal forces of sprawl.

The argument needs to be developed in two parts. Pricing transportation services properly are equally as important as location pricing, as the two are, to a large extent, reciprocals. In this report only the matter of property taxation is addressed. ...

When one looks at the value of land in any broad way, its value will be highest at the center and falls as one looks out to the frontier. The highest value land, that with the greatest accrued rent, is at the very center of the city -- usually where the commercial parcels are located. In the spring of 1998, one land parcel (the building was to be razed) of less than an acre and split in two pieces in New York City's Times Square was sold by Prudential Life to Disney for an estimated $240 million,19 more than the value of all the land and buildings together in the lands north of the Mohawk River/Erie Canal in New York State. The highest value land is typically surrounded by a belt of residential areas, and with farmlands starting at the fringe. The more valuable parcels are taxed, the more their titleholders will find ways to recover their carrying costs. And it cannot affect the behavior of tenants as any change in burden is not passed through. In this sense, land value taxation fosters clustered development and reverses the egregious patterns of sprawl.  ... Read the whole piece

Bill Batt: Who Says Cities are Poor? They Just Don't Know How to Tax Their Wealth!

Taxing land value only is an incentive with the virtue of reversing the centrifugal forces of sprawl development and the tendency for builders to choose suboptimal locations.[14] Some titleholders find it advantageous to hold their valuable parcels off the market for speculative gain. But bringing the holding costs forward rather than allowing their exploitation for a capital gain upon sale increases the market efficiency of transactions and more optimal use of sites. The incentive to speculate on others' dime is removed. ... read the whole article

Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use

... The failure to collect site rent leads to a distortion in land use configurations. If patterns unfolded along the lines of both social preference and economic efficiency, high value landsites would tend to have high value buildings, and low value landsites would tend to be vacant or have very modest buildings. Consistent with this, urban centers sites would tend to have office and commercial use, surrounded by lower-value residential land uses, and still further out would be farms and forests. The ratio of building to land value, land to total value (or for that matter any other ratio between buildings, land, and total values) would be relatively constant throughout a region. Instead, the ratio of land value to total value consistently tends to reveal a patchwork of random development. This inefficient settlement of land sites is what we know as sprawl.

Land Rent is Capitalized Transportation Cost
There is another dimension to the distortion of land use in contemporary life. That is the heavy subsidy granted to motor vehicle transportation services. Estimates are that the typical driver pays only about a tenth of the true cost of his travel; society picks up the rest. This profuse subsidy paid to private automobile and truck transportation further encourages people to locate on sites at far greater distances from where they would choose than if they had to pay the full burden of that travel.

From the standpoint of an economic geographer, and for some land economists, land rent is simply capitalized transportation cost. Land rent is the surplus generated by social activity on or in the vicinity of locational sites which accrues to titleholders of those parcels. Whether or not it is recaptured by public policy, rent is a natural factor deriving from the intensive use of natural capital. More intensive use of high value landsites leads to site configurations that are less dependent upon transportation services. People can access them easily even by walking. One must remember that transportation is not an end in itself but rather a means. This is something often forgotten even by urban planners, the distinction between accessibility and mobility.  ...

Public opinion polls are practically unanimous in their demonstration of the kind of environment most Americans say they would like to live in.(16) Sociological studies have documented graphically how alienating the car-dependent environment really is. There is an inverse correlation between the ability of a street to move and to park cars and trucks, and the amount of social interaction between neighbors on that street. One study two decades ago compared three similar residential streets in San Francisco, with different levels of traffic volumes. Residents on the different streets were asked to indicate on the base maps of their streets where friends and acquaintances lived. Those living on streets with the least traffic volume had three times as many friends and twice as many acquaintances as those living on the streets with heavy traffic volumes.(17)(18) More recently Harvard Professor Robert Putnam has made similar findings in his book Bowling Alone, and concluded that every ten minutes of additional commuting time means ten percent less time devoted to communal activity. Driving is no longer regarded as fun, not on today's typically congested highways. There was a time when most people drove cars for pleasure; today people resent their having to drive so much and often see driving as a burden.(19) It is also no accident also that on measures of livability, those locations regarded as most attractive are also the ones that are most bicycle-friendly.(20) A number of recent books and their popularity reflect resentment over our forced dependency on motor vehicle transportation Jane Holtz Kay's Asphalt Nation, Clay McShane's Down the Asphalt Path, Wolfgang Zuckerman's End of the Road, and Katie Alford's Divorce Your Car are only a few such examples.(21) But despite their vague discomfort people typically lack the perspicacity to incorporate these non-pecuniary costs into their decisions about locational choice.

Correcting Distortions by Pricing: Increasing the Collection of Land Rent

Recovering the economic rent from urban parcels helps people to appreciate the true costs of the transportation versus location trade-off. It brings the carrying costs of site choices back to the present time and makes them comparable with travel choices. The payment of site rent becomes an operating cost. The other corrective policy needed is to raise transportation costs to a level commensurate with their full value as private goods. Transportation user fees, in the form of motor fuel taxes, green taxes, congestion fees, and administrative costs (for the administration of drivers' licenses and registration fees) could easily provide the needed price corrections to bring into balance marginal transportation costs and land rent collection. Doing so would equilibrate choices between people living and working in high rent urban centers and those in peripheral low rent (but higher travel cost) locales. ...

The conventional property tax, one taxing both land values and improvement values, is analogous to a train with an engine at each end. The tax on land value fosters improvement on the parcels with the highest market and social value, while the tax on structures discourages that very same thing. No wonder it is that economic activities is stymied most in the urban centers and manifests itself in areas where the least imposition of all has taken hold. As scholar Jessica Matthews once put it,
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.(35) ... read the whole article

Bill Batt: How Our Towns Got That Way   (1996 speech)

There were many arguments to be made for the classical tradition, the result of which would be to rely upon payment of rent of land according to its value to society. George recognized that land value is largely a function of how society has elected to invest in any general neighborhood; there is no argument for any one titleholder to reap the reward of what others have invested. Gaffney points out that, from the standpoint of economic theory, the framework had the following virtues:

  • It reconciled common land rights with private tenure, free markets and modern capitalism, a growing and persistent problem as the industrial society took hold.
  • It enabled the lowering of taxes on labor without raising taxes on capital.
  • It reconciled equity and efficiency. It constituted a progressive tax because land is concentrated so much among the wealthy and because the tax cannot be shifted. It was efficient because it is neutral among different land-use options.
  • It constituted no disincentive to business location or population settlement. In this way it encouraged the most efficient land use and discouraged sprawl.
  • It created jobs without inflation, and raised government revenue without any penalty upon its base.
  • It strengthened public revenues and at the same time promotes economy in government.

Those economists who today still persistently hold to the view that there is something special about land that make it unwise to treat as a form of capital are known as Georgists. They represent a small minority of the economics profession, but, little known as they are, they are among its most esteemed members. ...

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."... read the whole article

Karl Williams:  Land Value Taxation: The Overlooked But Vital Eco-Tax
I. Historical overview
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation
Land value taxation (LVT) has often been omitted from the lists of natural resources for which eco-taxes are being advocated. LVT provides strong financial encouragement for land to be put to its optimal use and will eliminate speculation on land, as occupants must pay the full LVT whether the land is being fully utilised or not. This leads to better land management, a reduction in urban sprawl, less urban smothering of agricultural land, and less farmland being pushed into hinterland.

LVT makes the investment in resource-efficient infrastructure affordable because the resulting enhanced land values are "recycled" back into public coffers. One particular application of LVT to agricultural land provides much-needed financial incentives for organic farming. Unlike other ecotaxes which "sow the seeds of their own revenue demise," LVT actuallyincreases over time as our environment is enhanced and is thus a stable revenue base.

This paper argues that the LVT assessment process shifts and refines our focus from monitoring human activity onto our use and abuse of natural resources, as any responsible form of stewardship should. It suggests that only if land users are prepared to pay the full cost of utilising resources should private resource holding be permitted.
"The depletion of natural resources and the despoliation of nature is due to a single reason: the failure properly to measure the rental value of all of nature's resources, and to make the users pay the community for the benefits they receive." F. Harrison, "The Corruption of Economics" ...

II. The problem of sprawl
While taxes on labour and capital act as a deterrent to production and employment, the unique qualities of land are such that a tax on land values encourages land to be put to its optimal use. Simply put, land holders cannot afford to hold land unused or underused, for they are compelled to pay the full LVT whether they use this scarce resource or not. The resulting compact cityscape would consume far less resources (in terms of land, infrastructure and ongoing energy costs) and would be more amenable to the provision of public transport, walking and riding.

Note that advocates of LVT, often nowadays called Geoists, call for the full collection of the LVT and not the partial and misapplied (with all manner of exemptions and thresholds) forms collected by some local, state and federal governments in Australia and elsewhere. When the land occupier is repaying his/her full dues (which is only just, as they represent the value of the amenities of the land), then land will have no market price. The improvements on the land (buildings etc.) retain their market value as they are not being taxed, so production is not penalised or discouraged. The social justice implications of having land with no market price (i.e. all humanity having their very birthright) are profound, but are again outside the domain of this paper. ...

While, at first sight, the prospect of sprawling cities with lots of open space and possible greenery might be appealing from an environmental perspective, a closer examination should lead to a different conclusion. The inducement to collect windfall profits (resulting from the failure of society to apply LVT) encourages some landholders to withhold vacant land from the market and forces new development to "leapfrog" this land and move further out. Hence there is an unnecessary outlay in roads, pipelines, power supplies and other infrastructure which must service a greater area. Commuting journeys, similarly, must now consume greater resources. Financially inducing land to be put to its optimal use is not "flogging" the land, but is rather ensuring land is carefully used and that we only exploit as much as we properly need.  read the entire article

Fred Foldvary:  The Rent, the Whole Rent, and Nothing but the Rent
The public and community collection of rent puts land at its most productive use, maximizing the wages of workers while minimizing sprawl as well as boom/bust cycles. We need to understand rent to fully understand the market process and the cause and remedy of many of today's social problems. ... Read the whole article

Fred Foldvary: Geo-Rent: A Plea to Public Economists

OTHER ADVANTAGES OF TAPPING GEO-RENT  While this article will not necessarily serve as a manifesto for the idea of tapping geo-rent to fund community goods, there are a number of further advantages that merit passing mention.
  • Geo-rent taxation would reduce sprawl. Current tax policies tend to discourage the development of urban land, because the fruits of those developments are directly taxed. To the extent that those policies are replaced by policies that tap geo-rent, the landowner is incented to develop his land. Recall, an underused site pays the same geo-rent tax as a developed site. The untaxing of production combined with the tapping of geo-rent will induce infilling of the city center, making for a more compact city, agreeable to mixed use and pedestrian activity. Hence, the demand-side push for sprawl is diminished. Moreover, the supply-side pull toward sprawl would also be diminished: Today, sprawl landowners are subsidized by extraneous taxpayers who pay for the roads, sewers, schools, fire-fighting, and security in the sprawl neighborhoods. If those services depended on the community’s geo-rent, the pull toward sprawl would be reduced. Read the entire article

Lindy Davies:   The Top Ten Reasons Why Land is More Important than Ever

The Georgist economic proposal insists on the primary importance of land as a factor in the economy. Many people dismiss that as a quaint, agrarian notion. "Perhaps," they scoff, "land was that significant back when most people had to work the soil for a living, but modern agriculture has moved far past that! Nowadays we deal with modern issues of technology, global markets, information -- land is no longer a big deal."
10. There's no place to dump your trash for free. ...
9. Scratch a financial crisis, find a real estate bubble. ...
8. Information (like railroads) needs routes. ...
7. Cities can no longer afford to be inefficient. ...
6. Global climate change is too likely to ignore. ...
5. The loss of biological diversity cannot be reversed. ...
4. Two out of every five people lack a safe and dependable source of drinking water. ...
3. The myth of overpopulation causes cultural sickness. ...
2. We have forgotten what nations are. ...
1. "The land shall not be sold forever, for ye are strangers and sojourners with Me." ...

Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems

The Special Challenge to Economic Thinking
The Search for Surrogates
Sources of Nonpoint Pollution
What Problems are Created?
What Problems are Unsolved by Excise Taxes on Surrogates?
The Case of Forestry
The Case of Urban Settlement
The Case of Agriculture
The Common Theme from Forest, City and Farm

The central problem here is urban sprawl; the solution is compactness.  More land urbanized means more urban runoff.  But more people on given land may even mean less runoff per acre, e.g. at the threshold where sewering can economically replace a collection of septic tanks and leach lines.  It certainly means less runoff per capita.  It means better control of any given runoff.   

A compact, synergistic city is resource-saving; sprawl is resource-wasting, using up more land, capital, materials, fuels, and air/water quality to substitute for direct human contacts and cooperation.  Here are some items that sprawl maximizes or worsens:
  • the number of car-miles for any given level of urban linkage, with smog generated in proportion.  (The unforgettable demonstration of the last came in 1967 when Mayor Henry Maier closed all Milwaukee gas stations for a week, because of arson and riot threats.  As a by-product Milwaukeeans saw, for the first and last times, what clean air really looks like — glorious!)  
  • paved areas, with salt and roadside litter both spread in proportion.   
  • "and sudden death."  Auto accidents, the ultimate "negative externality," kill some 40,000 Americans per year, maim many times more, and intimidate everyone.   
  • grading and denuding new lands, generally upstream and more sloping.  Three-quarters of the pollutant loadings in the Menominee River come from urban non-point sources.  Developing urban areas cover only 2.6% of the watershed, but contribute 37% of the suspended solids and 48% of the phosphorous.  (Bauman et al. 1980, cited in Falk, 1985, p. P-II-B-2)
  • number of homes on septic tanks.  
  • diversion of sewer funds from treating sewage to collecting it.   
  • larger lots and lawns, longer driveways.  
  • inhabited areas without good fire protection, with more grass and brush exposed to humans.  
  • private wells puncturing aquifer caps.  
  • settlement and industry beyond gutters and storm drains.  
  • withering of mass transit.   
  • longer, wider utility rights‑of‑way, with higher voltage and pressure and hazard.  
  • filling wetlands
  • occupying floodplains, so more flood control reservoirs are needed.   
  • automobile dependency creates its own treadmill effect.  The car itself is the major consumer of urban space, space which must in turn be traversed, using still more car‑miles.  Pedestrians and cyclers are maimed and intimidated into becoming motorists.  Mass transit withers away.  The market does not lead us to optimal outcomes in such a world — this world.   
Suburbs abate their own problems by pick‑pocketing central cities, e.g. by getting sewers they could not pay for themselves.  Milwaukee Metropolitan is as good an example as any.  Systemwide that is a dubious gain, when the central infrastructure goes to ruins.  The titles of some seminal works on this subject tell the story quite well: America in Ruins (Choate and Walters, 1981); The Costs of Sprawl (Downs); "Cost‑push of Urban Sprawl" (Schechter); "The City as a Distorted Price System" (Thompson).   

Solutions to urban sprawl will involve at least these three courses:
a) Marginal-cost pricing of city services, with a spatial or locational component.  Example: a water‑rate surcharge rising with pressure zones.  Cheap city services in the center, encouraging infill and centralization.   
b) Renewal‑oriented tax policy, especially in central cities.  (Milwaukee needs this the worst way, having lost population and capital for many years now.)  Renewal-oriented property taxation means to impose higher tax rates on land than buildings (Breckenfeld).  Former Mayor Dan Hoan favored this policy (Hoan, pp. 26-27), and what Hoan favored, Hoan did. 
Renewal-oriented property assessment accomplishes the same end by apportioning a higher share of assessed value to land, and less to buildings.  During Hoan's tenure the City Assessor accomplished it by using the "building-residual" method of apportionment.  He drew up, reproduced, and publicly distributed land value maps, on which every parcel was valued at its highest and best use, as determined by comparable sales in the neighborhood.  This approach approximately triples the assessed value of land, as compared to current Milwaukee practise.  
c) Renewal-oriented spending and service policy.  One guide to this is "tiered" zoning and planning, firm and consistent.  Attorney Robert Freilich, the "father of growth control," has shown how to make this work in Ramapo, San Diego, and we hope soon in Riverside.  When Dan Hoan was Mayor of Milwaukee, 1916-36, he oriented spending this way reflexively (Hoan, Chaps. 2,8), to serve the existing city rather than to expand it.  Milwaukee was a city that worked — then.  

One may prefer other measures.  More should be said about constraining the space demands of cars and trucks.  But the point is that whatever measures one wants, they will have to cut much deeper than taxing pesticides and fertilizers.  We are talking about major, radical readjustments of urban, tax and utility policies.   ...   Read the whole article

Al Hartheimer: Affordable Housing and the Land Value Tax Perspective: a letter to Asheville, North Carolina

Mason Gaffney: Land as a Distinctive Factor of Production
A city that grows in capital and people generally enjoys a long stage of increasing returns to the composite urban economy, even though each atomistic site is improved in the stage of decreasing returns to capital and people.  This antinomy is due to synergy.  Cities exist to bring people and capital together in space.  People attract more people; capital attracts more capital; people and capital attract each other.

Adding land to a city, on the other hand, often results in diminishing and even negative returns to the composite city.  Cities are already full of holes.  Adding more land, especially in the sprawled manner of modern American cities, adds to the cost of tying the pieces together.  There is an enormous literature on the wastes of sprawl.  It may be summarized in two points. 
  • First, it foils the very purpose of cities, by keeping people and capital apart, and aborting synergies among them. 
  • Second, it raises the cost of preserving such synergies as survive. ... 
In finding the optimal resultant of these opposing forces we are faced with more than a standard example of diminishing returns.  One could perceive land division as simply a matter of applying more people and capital to a given area of land.  The more intensive application to each acre justifies itself up to a point by added yields from each acre; beyond that the added yields do not compensate for the added costs.

But there is more here than a simple matter of quantities and proportions of inputs.  There is also a distance factor.  The more parcels we add the closer are their nuclei, and the less is the cost of linking them along the common lines.  The cost per acre is, to be sure, higher: that is inherent in adding more labor and capital to a given amount of land.  But the linkage cost per parcel drops as we add nuclei by dividing land into more parcels.

There is an asymmetry here that has been obscured in the evolution of marginal productivity theory, with its effort to show that the relationships among all the classical factors of production are "symmetrical," so that diminishing returns is simply variable proportions.  Land is not symmetrical with labor/capital.  When you add nuclei of labor/capital to land, they get packed closer together.  But when you add land to fixed labor and capital, the units all get farther apart -- the land units as well as the nuclei of labor/capital.

Such distancing of the active nuclei of economic life requires more capital and land devoted to the linkages among them - "urban sprawl" is the familiar term.  Sclerosis is the corresponding medical condition: an overgrowth and hardening of connective tissues at the expense of the active tissues they link.  It is pathological for societies, as it is for organisms.   ...

Las Vegas, not a typical city, is the largest I know of that indeed grows in worthless desert.  Here another factor stands out clearly: new lands are peripheral and only imperfect, partial substitutes for central land.  The city must range farther for water, power, waste disposal, raw materials and markets.

The high marginal cost of adding to spreading cities, and the low true net value of the additions, are concealed, in our culture, by an elaborate and pervasive system of subsidies and cross-subsidies built into our institutions and political power structures.  These drain the old centers to feed the fringes.  In a systemwide accounting we find the true social cost of urban sprawl as we know it today to exceed the gains at the margins.  We are not so much adding land to cities as wasting capital, dissipating central rents to do it.  Thus the private rent gradient and resulting land-value gradient that we observe in the marketplace is much flatter than the true gradient that is hidden under the subsidies.  Even so, the visible gradient remains impressive: values rise to $2,000/psf in San Francisco, Chicago and Manhattan, and $25,000/psf in Tokyo.

Land of rare and limited qualities is often the basis of market control: retail sites, rights-of-way, rare ores, water rights, are familiar examples.  Even land of less rare qualities is often used for market control.  American farm output is controlled by means of acreage limitations; Texas and now OPEC oil production by oil well protates; and so on. Read the whole article

Mason Gaffney:  Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth

Underuse of better lands forces labor and capital (which is mobile, like labor) to resort to worse or “marginal” lands, thus scattering and spreading out settlement, raising aggregate demands on land, and wasting capital (George, 1879). This lowering of the “margin of production” lowers the marginal productivity of labor and capital, and hence their economic rewards, tilting the distribution of income in favor of landowners, creating an illusion of overpopulation (Malthus), and lack of investment outlets (Marx, Keynes, Hobson et al.).

That pattern was first recognized in farming, but it is universal. The underuse of central city lands (large parts of which are derelict) drives demand outwards to less accessible urban sites. From there, the same force drives demand outwards to the inner suburbs; from there, to further suburbs, and so on. “Urban sprawl” is the generic name, but “scatter” and “disintegration” express the point better. Farm and wilderness defenders perceive the problem mainly at the edge of cities, noting the loss of open land, but that is a lesser social and economic loss than the destruction of urban values inside the edge.

One way of denying the basic problem is to call it “unbalanced growth,” as in Orange County, where people recognize it as too many jobs relative to the housing supply. It is not the “unbalance” that is the problem, though: how can there be too many jobs? It is too little housing that is the problem, driving demand eastwards up through Sta. Ana Canyon, with its awful traffic bottleneck, to central Riverside County, where it meets demand fleeing north from San Diego.

Now weave this pattern of scattered settlement into the whole system. It forces auto-dependency and truck-dependency, multiplying the need for fuels, pushing up their prices, and lowering the real wages of those who have to consume them in larger quantities at higher prices. Much of what looks like self-indulgent consumption of U.S. motorists is not joy-riding, but the forced consumption of commutation, forced by scattered urban sprawl, the product of land speculation. Auto-apologists get this backwards, of course, making joy-riding the cause and sprawl the effect.

In forestry, the places to grow commercial timber are lands that are “flat, wet, and warm,” as John Baden summarizes it. (He might have added, “accessible.”) Failure to restock such lands economically pushes demand onto lands that are steep, dry and cold, creating the “forestry sprawl” from which we suffer.

Failure to put indigenous waters of southern California to full economical use creates the appearance of scarcity where there is actually enough water. It drives demand northwards to the Owens Valley and the Feather River, and eastward to the Colorado River, at enormous social cost, much of it for energy. Those who issue doomsday dessication scenarios, and deplore the loss of water to farming, also seem to have no idea of how a handful of giant landowners waste most of our water on low-valued uses like pasture, hay, small grains and rice, using primitive wasteful methods like flooding, or furrow irrigation. Only 2-3% of our irrigated lands use basic conservation techniques like drip emitters. Those who waste water in this way are basically substituting water, a limited natural resource, for the labor and capital others use to conserve water while growing higher-valued crops (Gaffney, 1997; Kahrl).

One could go on through a long list of natural resources, but once one gets the idea, those with understanding and imagination can fill in hundreds of details.

Lemma: the same phenomenon forces mobile factors to invade wilderness areas, wetlands, etc., when their demands go unmet on the lands more suitable for human use. Writing in 1879, George did not stress this point, but the relationship should be obvious to us today. ...

Cities, if compact and with good circulation, are resource-conserving (Gaffney, 1978, 1980). Free land markets, absent institutional biases and land speculation, would work to make cities compact. Land speculation is the worm in the apple of land markets, however, resulting in urban sprawl. Taxing land on the basis of its market value overcomes such speculation and lets the market make cities compact (Gaffney, 2001). Read the whole article

Mason Gaffney: Red-Light Taxes and Green-Light Taxes
I. Shared postulates
II. What is waste, and what should we do about it?
A. What is waste?
B. Two kinds of green taxes
C. Two kinds of containment policy
III. Raising wage rates
IV. The need for user charges 

Likewise, there are at least two kinds of containment policies for urban sprawl.

  • One says Stop! Thou shalt not settle outside the designated growth boundary, neither shalt thou build, nor manufacture, nor trade, nor store goods, nor park vehicles, nor disport thyself in other than traditional country-squire-like amusements. I shall call this a "negative containment policy."
  • The other policy says Go!, or rather Come! Come into my city and rebuild it. This is not "development" in the modern pejorative sense of territorial expansion. Rather it is REdevelopment in the manner of the phoenix - the mythical bird, that is, not the city misnamed Phoenix, which is an awful example of mindless lateral expansion without renewal.

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

Mason Gaffney: Economics in Support of Environmentalism

Gifford Pinchot, the father of Conservation, was not against developing land. In his own words:

"The first principle of conservation is development, the use of the natural resources now existing ... for the benefit of the people who live here now. There may be just as much waste in neglecting the development and use of certain natural resources as there is in their destruction by waste. ... Conservation, then, stands emphatically for the use of substitutes for all the exhaustible natural resources, ... (water power and water transportation are his examples). ... The development of our natural resources and the fullest use of them for the present generation is the first duty of this generation. ...

In the second place conservation stands for the prevention of waste. ... "

So Pinchot was against waste, so what? Who isn't? This could be just a banality, but he gives it a new turn. To him, waste means failing to use renewable resources. His example was hydropower, which he would substitute for coal and oil. That is not such a good example today, when we cherish our few remaining wild rivers, but today urban land makes an even better example.

"Urban land?", you may ask. "What has urban land in common with falling water?" Economists (who are not all bad) classify urban land as a "flow resource." They liken it to flowing water because its services perish with time, whether used or not, and we are trapped in the one-way flow of time. Likewise, urban land is not depleted by use. It is an even better example of a "flow resource" than flowing water itself, because, as we are so conscious today, "unharnessed" flowing water may have other downstream uses. Even in wasting out through the Golden Gate, it may repel salinity. The unreaped harvests of idle land, however, flow down the river and out the gates of time like lost loves dimming, and golden moments we let slip away beyond recall.

What is this "service" of urban land, that we should be mindful of it?

  • For one thing, using central urban land conserves all the hydrocarbons and other resources otherwise needed to traverse it. Compact urban settlement is a direct substitute for oil, with all that implies - and it implies a great deal, which I will leave you to fill in.
  • Second, using good central land saves all the costs of settling on other land - including the cost of taking more of the shrinking habitat from endangered species.  Therefore, habitat-savers should emulate Pinchot and favor development in the right places, the better to oppose it in the wrong places. This is the great lost secret of conservation our times have forgot. You cannot beat development by opposing it everywhere it pops up. People need land for all kinds of legitimate things, and they will have it. To stop urban sprawl, you must support compact, efficient urban development, including healthy, timely renewal of older cities, inner suburbs, and neighborhoods.
We have met the enemy, and it is US (Urban Sprawl). Let's analyze this beast, US. ...

Urban sprawl, which creates a psychological effect of great crowding, is not the product of development as such, but of leapfrogging. Leapfrogging means chaos, with development in the wrong places and times. Infilling, on the other hand, is anti-sprawl. It is the cure for sprawl.

A common belief is that the search of open space is the main force behind sprawl. You may test that by observing high density, cookie-cutter subdivisions scattered throughout the land. Within each such development, you are living at urban densities. It is when you get onto the freeway to commute, or shop, or take the kids to school or the dentist, or worship, that you experience open space. You experience it as a negative resource, an obstacle between where you are and where you want to go.

A favorite fallacy is that sprawl results from free individual choice. In fact, sprawl results mainly from subsidies to sprawl, enforced through taxation and/or utility rate regulation. Thus it is imposed, not freely chosen. The classic case, which exemplifies the whole genus, is postal service. It costs you 29¢ to send a letter across the street downtown, or from rural Idaho to rural Florida. The generic name for such subsidies to sprawl is "postage-stamp pricing" (a species of spatial cross-subsidy), which gives you the idea. ...

Those are the carrots. A good stick is also needed. We have seen how leapfrogging results from the scattered locations of motivated sellers. We can motivate sellers near-in, and in compact increments as we expand spatially, by raising land taxes there. ... read the whole article

Mason Gaffney:  George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies

a. Taxing land sharpens market incentives via the leverage effect noted earlier. Thus it makes the land market work better, and follow its natural infilling, centralizing tendency. Curbing urban sprawl does not overrule the land market; it is a byproduct of making the market work better. Richard Hurd, as cited above, noted that land values are marked by continuity in space. That means the market is telling owners to develop land contiguously; to anchor new building to established strength. Sprawl, then, is not market driven, but market-defying. It is the product of market failure. Georgist taxation makes the market work better.

b. Fosters resident ownership, civic participation Riverside, CA built itself a lovely downtown pedestrian mall, back when that was in vogue, and has been sorry ever since. Nothing worked out, retailers deserted, and half the stores are empty. Recently I asked the developer of Tyler Galleria, a success, why he thought downtown failed, and got the answer in two words: "absentee ownership". I should have known, I've preached it for years.

An agricultural adviser in Fresno once told an impressionable boy "The best dressing for soil is the owner's shadow, applied daily". In town they say "Who's keeping the store?" Absentees aren't the only negligent owners, nor are they all bad. Torpid owners are the problem and they come in many forms. Basically, to make a city go you want to be rid of owners who see real estate mainly as a cash cow for their retirement, and replace them with owners who see it as a vehicle for their enterprise, who "apply their shadows" daily. Those shadows will also follow them into local civic clubs, and enterprising downtown and neighborhood associations for making joint improvements. Read the whole article

Mason Gaffney:  Neo-classical Economics as a Stratagem Against Henry George (in The Corruption of Economics, London: Shepheard-Walwyn, 1994)
The Imperative to Put Down Henry George
The crabbed spirit of neo-classical economics
Popular responsiveness to problem-solvers
Henry George as reconciler and problem-solver
  • George reconciled common land rights with private tenure, free markets, and modern capitalism.
    a. Those who got the upper hand by securing land tenures would support public services, so wages and commerce and capital formation could go untaxed.  
    b. To pay the taxes, landowners would have to use the land by hiring workers (or selling to owner-operators and owner-residents). This would raise demand for labor; labor spending would raise demand for final products.
    c. To pay the workers, landowners would have to produce and sell goods, raising supply and precluding inflation. Needed capital would come to their aid by virtue of its being untaxed.
  • George's proposal lets us lower taxes on labor without raising taxes on capital.
  • Georgist tax policy reconciles equity and efficiency.
  • A state, provincial, or local government can finance generous public services without driving away business or population.
  • Georgist tax policy contains urban sprawl, and its heavy associated costs, without overriding market decisions or consumer preferences, simply by making the market work better.
  • Georgist tax policy makes jobs without inflation, and without deficits.
  • George's land tax lets a polity attract people and capital en masse, without diluting its resource base.
  • Georgist policies let us conserve ecology and environment while also making jobs, by abating sprawl.
  • Georgist policies let us strengthen public revenues while in the same process promoting economy in government. 
Georgist tax policy contains urban sprawl, and its heavy associated costs, without overriding market decisions or consumer preferences, simply by making the market work better. Land values are the product of demand for location; they are marked by continuity in space. That shows quite simply that people demand compact settlement and centrality. A well-oiled land market will give it to them. ...

Georgist policies encourage the conservation of ecology and environment while also making jobs, by abating sprawl. It is a matter of focusing human activity on the good lands, thus meeting demands there and relieving pressure to invade lands now wild that are marginal for human needs. Urban sprawl is the kind of sprawl most publicized, but there is analogous sprawl in agriculture, forestry, mining, recreation, and other land uses and industries.   ...
Read the whole article
Hanno Beck: The Three Keys to Containing Sprawl
The successful solution to sprawl is not some formula. Rather, succeeding against sprawl means having a variety of tools at your disposal, so that you can shape the best solution for your particular situation.

I baked a birthday cake for my wife a few weeks ago. White cake, with pink icing. To serve it, I used a knife to cut the cake, then a sort of spatula to lift the slice of cake, then a fork to eat the cake. It was just a simple piece of cake, for crying out loud, but we used three tools to serve it. Three tools, just to control a piece of cake!

Do you think that sprawl is less complex than a piece of cake? Do you think that all sprawl is caused by one simple factor, has one set of characteristics, and always has the same solution? Of course not. There are lots of causes of sprawl, and lots of types of sprawl. Sprawl is more complicated than a piece of cake.

So how many anti-sprawl tools do we need? We need as many as possible. Right now I am going to put three tools in your anti-sprawl toolkit. They are three general tools, you can use them in many ways and in many combinations. Read the whole article

Walt Rybeck: Have We Forgotten The Foundation?
... misconstrued land policies led to a sharp decline in the character and quality of life in our cities and towns. Sprawl ruined the landscape surrounding our communities. Sprawl promoters and apologists say this is merely an expansion of the American dream. To me, sprawl is more appropriately recognized as an American nightmare. ...

However, too few have a clue about how to deal with land issues, or any notion that archeological digs into our history might provide useful answers. Instead, consider what's happening:
  • Habitat volunteers build houses for the poor, making recipients and its volunteers feel real good. This is a fine example of charity combined with self-help, and it spreads awareness of a great social ill. But more housing is being abandoned and demolished than Habitat is able to build.
  • This same treadmill effect undermines federal efforts. HUD has spent billions on public housing, urban renewal and enterprise zones. Some of these programs have retarded urban decline but their strongest advocates would not claim they have come close to stopping or reversing it.
  • Cities offer tax abatements to revive decaying business districts. Yet after new buildings are established, the cities hit owners with the same tax burden that helped cause decay in the first place.
  • Some builders turn to what I call "designer sprawl." They mimic old towns and are clearly less wasteful of land than unplanned sprawl. Yet they often invade wheat fields and wood lots far from the job centers, transit lines and cultural institutions that comprise real communities -- while large quantities of usable sites that are well served by infrastructure lie fallow in those real cities and towns. These stumbling efforts recall an architectural parallel -- when people first tried rather pathetically to restore old neighborhoods with false storefronts, tarpaper bricks and Permastone.
Urbanologists and the public need to be awakened to the central role played by taxation. They need to see that loss of our historic land tax has made speculation our top national sport -- a treacherous one at that. As Hans Blumenthal wrote in Metropolis...and Beyond (edited by fellow panelist on this program, architect Paul Spreiregen):
There is no doubt that the present real property tax...contributes more to depressing the standard of housing than all government housing policies combined do to raise it. The current property tax may fairly be called the upside-down tax. It taxes land values too lightly, buildings much too heavily. It rewards bad land use, penalizes good land use. Consider three identical homes and lots:
  • Owner No. 1 adds a rec room, new roof, great landscaping. The assessor comes by and says, in effect: "As punishment for making a showplace, and for generating jobs and profits for local businesses, we're raising your assessment by the amount of your investments. Your tax bill will go up, not just for a year, but for as long as you keep the house in good condition."
  • Owner No. 2 lets his house of the same size run down -- loose banisters, torn screens, broken gutters, junk-filled yard. The assessor tells him, in effect: "Because you created an eyesore for your neighbors and an unsafe dwelling for your tenants, we're reducing your assessment and your taxes. If your place is more dilapidated next year, we'll reduce them even more."
  • Owner No. 3 tears his building down; the idle lot neither houses nor employs anybody. The friendly assessor tells him, in effect: "For completely wasting your property, and for making no use of the infrastructure provided for this area, we'll give you the lowest assessment and tax bill of the three."
These all-too-familiar examples condemn not the assessor but our present tax system. And the same perverse property tax incentives apply to commercial properties. Is it any wonder cities are torn apart? The wretched tax on buildings is only the half of it. The low land tax is the other half. A speculator sees that the annual increase in his or her land value is greater than the tax bill. This signals the owner to do nothing, to sit back and collect the values generated by productive neighbors and the community.

Speculation feeds on itself. The more land held out of use, the tighter the supply of available sites. This raises land prices further, seducing more speculators into the land game, hastening the flight of residents and businesses from central cities and even small towns. This is far from the only cause of sprawl, but one of the most potent. It cannot be stressed too much because it is one of the least recognized causes.

If we continue on our present course, overtaxing production and undertaxing land, the outlook is dismal. It is heading us toward the very conditions seen in extreme forms in Latin America and other continents.  Read the entire article

Walter Rybeck: Wrong Diagnosis Underlies Post's Pessimism on Smart Growth

We would be amused if Martian observers, seeing people with crutches, concluded that crutches had crippled these folks. Analysts cited in the Washington Post’s recent series on sprawl are not from Mars, but many confused the crutches localities fall back upon as the cause of our region’s crippling growth pattern. ...

The Post paints a seemingly hopeless picture because it fails to recognize the real engines of sprawl — high land values, land speculation, and subsidies for development on greenfield sites. Wasteful scattershot development will outsmart Smart Growth until officials and voters confront these matters.

High Land Values. High land values stem from
1) regional population growth,
2) public works like roads and schools and
3) special natural features like waterfronts.
For example, a 1980 Congressional study found that Metro, still unfinished, had already generated $2 billion in new land values, “the biggest share of these new values…going to people lucky enough to own land within easy access of Metro stations.” Neither Metro nor the taxpayers who financed it recoup the values they generated.

Speculation. Sprawl starts at the center of the metropolis and radiates outward. Smith owns a vacant downtown site. If he builds offices or housing, he invites risks and sizeable property tax increases. He keeps his parcel in minimal use like a parking lot. Brown, seeing its potential, offers to buy it. Yet Smith who enjoys rising land values without effort asks a price so high that Brown’s venture can’t fly. Brown approaches owners of other first-class parcels, meets the same hurdle, and finally buys a cheaper second-class site. More “Browns” do the same.

Soon Jones and other enterprisers find owners of second- and third-class sites boosting their asking prices. Owners get away with this because land hoarding in the core creates an artificial scarcity of affordable sites. “Joneses” are driven farther into the hinterland. Developers, denied entry by inflated land prices to close-in sites best suited for their ventures, invade open space. This race to beat speculators to cheap land fosters leapfrog growth. ...

Subsidized Sprawl. Federal and state spending on misplaced highways, utilities, schools and the like subsidize premature urbanization of outlying areas. Tax abatements for malls lay waste to cornfields and forests and sap the vitality of older communities. ...

Reality Pursues Sprawl. As inflated land costs drive middle income families far from choice central neighborhoods, their new localities duplicate the police, water systems and schools left behind, plus roads to get them back to work. High taxes to construct over-extended public facilities spur new home seekers to go even farther a field.

The real culprits — upside-down property tax incentives and inappropriate infrastructure investments — make it profitable for land speculators to keep their prime locations in cold storage, to board up rental housing, and to block the path of normal growth in appropriate city and town centers.

Sprawl Can Be Halted. The challenge is to take the profit out of sprawl so the massive inventory of skipped-over prime locations can be put to optimal use. Jurisdictions can deflate high land and housing costs by altering current taxes that favor land holding rather than land using. Then the counties’ crutches, short-term palliatives at best, can be discarded. Only then can Smart Growth rather than sprawl become the dominant pattern in our region.  Read the whole article
Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
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. ...

Good for the economy, the PTS is also good for the eco-system. Were land levied, the owners of the most valuable sites would feel most pressure to develop; their sites tend to be closer to the city center. Hence those owners draw any needed development, infilling cities, sparing suburbs further encroachment. Other highly valued sites are those rich in natural resources. Again, using them more intensely frees up sites of lesser natural endowment. Thus, besides conserving sites, the PTS also conserves resources. ...

The segment of the economy wasting the most resources is probably transportation. Sprawl exacerbates the need for mobility while infilling reduces it. Presently, cars claim 50% of urban surface. Land dues would motivate owners to put their asphalt devoted to cars to higher and better uses, ones that serve humans. A higher human density provides mass transit with more riders so that the system could expand and automobile dependency contract, letting both city and suburb blossom. ...

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. ...

The failed policy that the PTS would replace is the present property tax. This is actually two taxes in one, one on land and another on improvements. The tax on improvements penalizes owners for improving. This negative incentive does its greatest damage at the margin, where profit is slim. There, rather than pay a higher tax, owners let buildings dilapidate into slums. The lack of much tax on land keeps overhead on speculators affordable. This negative incentive lets owners under-utilize prime sites, even withhold them from use entirely. Kept from prime sites, development sprawls outward.

Sprawl inflates the values of suburban and rural land. Leap-frog development raises a few spikes in a land value map that soon pull up values everywhere, increasing the property tax burden of owners of previously developed sites, unless the tax is capped. The resultant sprawl also raises enormously the cost of extending infrastructure and makes auto-dependency a given.

The PTS reverses all these negative consequences.
  • Rather than burden construction, taxing only land spares it.
  • Rather than spread development (hooking us on cars), taxing land concentrates it (providing a market for mass transit).
  • Rather than inflate land price, a land tax squashes it.
  • Rather than enrich the owners of prime sites or itself, a land-taxing government could rebate some collected site rent as a dividend, perhaps in the form of a Housing Voucher, making home ownership inflation-proof.
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. 

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.  ...

Without spending a penny of subsidy, cities can make urban renewal more profitable than suburban development. How is about as commonsensical as Einsteinian physics, but like "e=mc2", it works. The trick is to forget subsidies and lower one tax while raising another. That is, levy a tax or charge a fee to collect land value while eliminating any tax on buildings or improvements.
The present property tax works backwards, like an intruder from the anti-universe. It increases as owners improve their property; it decreases when owners let buildings dilapidate. "Save money, create slums," cities tell owners.  ...

If the property tax is a centrifugal force that flings structures outward, its opposite is a land levy, a centripetal force that pulls development inward. ...

"They'll put their land to uses that generate much more revenue than does an empty building or car-covered lot," adds Gaffney. "They'll get busy building apartments, stores, offices, schools, theaters, mixing all uses together to maximize their return."
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.  ...   Read the whole article
Jeff Smith: Sharing Natural Rents to Sustain Human Society
To get rich, or more likely to stay rich, some of us can develop land, especially sprawling shopping centers, and extract resources, especially oil. While sprawl and oil depletion are not necessary, they are more profitable than a car-free functionally integrated city. Under the current rules of doing business, waste returns more than efficiency. We let a few privatize rent -- ground rent and resource rent -- although rent is a social surplus. As if rent were not profit enough, winners of rent have also won further state favors -- tax breaks, liability limits, subsidies, and a host of others designed to impel growth (20 major ones follow herein).

If we are to sustain our selves, our civilization, and our eco-system, we must make some hard choices about property. What we decide to do with rent, whether we let it reward our exploiting or our attaining eco-librium, matters. Imagine society waking up to the public nature of rent. Then it would collect and share its surplus that manifests as the market value of sites, resources, the spectrum, and government-granted privileges. Then we could forego taxing labor and capital. On such a level playing field, this freed market would favor efficiency - the compact city - not waste - the mall and automobile. ...

Drawing their cue from the public, governments tolerate "rentention", the private retention of publicly-generated land values. Lacking this Rent, states turn to taxes. But to grow the economy, all governments -- left, right, or undecided -- hustle to stimulate development; they cut taxes and slop subsidies. Going beyond the call of duty, the state excuses producers' their routine pollution and limit liability, thereby cutting the cost of insurance. Companies that don't impose on nature, worker, or customer are not benefited at all but lose a competitive advantage. On this tilted playing field, one with the lumps of subsidies and the tilts of taxes, technologies lean and clean have a hard time competing as suppliers of materials, homes, food, rides, and energy.

Construction - Sprawl vs. Eco-City
  • Rent. This social surplus is why developers build sprawl, not car-free villages. Rent, so-called "equity", is what homeowners borrow against for a bout of consumeritis.
  • Taxes. The property tax assessment is skewed toward the building, away from the land, benefiting speculators and developers, not owners. Localities often abate the tax for years for developers and major corporations who sprawl on new campuses.
  • License: The price of new homes too close to streams or on freshly cleared hillsides does not include the cost of washing out the homebuyers or their neighbors.
  • Subsidy: Where new homes go in, localities pick up the tab for new schools and infrastructure, saving developers $25,000 per home (Better Not Bigger, Eben Fodor, 1999). When people build on floodplains and get flooded out, the federal government bails them out (National Wetlands Newsletter, 1993, Scott Faber).
To sustain that which we love, we must transform our relationships to nature, to government, and to each other. We need to become geonomists in worldview, theory, discipline, and policy. Geonomics creates an economy that's not at war with but aligned with the natural world....  Read the whole article

Herbert J. G. Bab:  Property Tax -- Cause of Unemployment  (circa 1964)
Property taxes shape the pattern of our cities.
  • If taxes on improvements are low or non-existing and taxes on land are high, the cities are bound to grow vertically and at a fast rate.
  • If taxes on improvements are high and taxes on land are low, our cities will spread over larger and larger areas. They will become metropolitan areas and they will grow at a much slower rate.
Relatively low taxes on land and high taxes on improvements will discourage the owners of vacant lots or underdeveloped land, such as that used for parking lots, gas stations, hamburger stands, etc., from improving their land. It will encourage them to keep the land out of use and to sell later at a profit. This will create an artificial shortage of land, which in turn will lead to urban blight and irregular, leapfrog city growth.

This urban sprawl makes our cities look ugly, but it has many disadvantages besides:
  • It gobbles up a tremendous amount of farm land;
  • the farmers have to give up their land before it is really needed;
  • the building developer has to go far out to find available land;
  • the prospective home-owner has to travel farther;
  • traffic on congested roads will increase and
  • new roads and schools will have to be built.
It is generally believed that zoning laws are a very effective tool to control the growth of our cities. Zoning laws determine the best possible use of urban land. Yet nobody can be forced to improve his land and to build unless there is an incentive. This can be achieved by taxing land at a rate that will make it unprofitable to hold it without improving it.

The city planner needs land taxation just as he needs zoning laws. With both these tools the orderly growth of our cities will be assured, but -- as experience has shown -- without land taxation rational and efficient land usage becomes impossible. ...

Professor Galbraith and others have expressed concern about the poverty of the public sector of our economy as compared to the affluence of the private sector. The appearance of our cities, the inadequate financial support we give our schools and poor public services seem to support this view. Yet, I can not agree with Professor Galbraith's conclusion that we need more public revenues to meet these needs. It seems to me that the spreading out of our cities over wider and wider metropolitan areas has immeasurably increased the financial burden of local governments. In other words, wasteful use of land caused by our property tax system is the real reason of the poverty of the public sector.

It stands to reason that the spreading out of our cities into wider and wider metropolitan areas is a very costly venture. For instance it was found that in the New York region suburbs have to make capital outlays of $68 per capita for new housing, while only $44 was required for new housing in the central cities and only $38 in the non-metropolitan area. Another survey found that it costs $80 per household to provide water in the outlying suburbs against $30 in the city. ...  Read the whole article

a synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World
Land's value goes up when population increases and technological and economic development make labor more productive. Those who "own" land often withhold it from use, expecting to capture its increased value in the future -- thus, the possession of land enables people to take an income that they did nothing to produce.

Speculative withholding of land has disastrous consequences. Peasants who seek land on which to survive are pushed out to poorer and poorer lands. These "sub-marginal" lands become their alternative place for self-employment. With such a poor alternative, they have no choice but to accept very low wages. Rent -- the payment to landowners -- absorbs more of the wealth produced on all sites.

Land speculation also prevents development near the center of cities, pushing it to the outskirts while the center decays from neglect and slums increase. The "sprawl" engulfs farms and forests, even as it raises the price of land, making use and development more costly.

Rapid destruction of the Amazon rain forest in Brazil dramatizes how the unnatural phenomenon of sprawl has an ominous worldwide impact on the environment. In Brazil, ten per cent of the landowners own 80 percent of the land, while one million peasants are forced off the land each year. And a mere one per cent controls 48 percent of the cultivable land. The only place in Brazil where there is land for the taking is in the Amazon rain forest. The destruction of the rain forest is caused by a system that perpetuates artificial land shortages. Nearly four-fifths of Brazil's arable land is covered by sprawling latifundios, most of which are held by speculators who produce nothing.

Here is the root cause of poverty. When laborers are faced with the choice of either bare subsistence wages or land that can barely maintain life, labor itself is marginalized and cannot effectively bargain on its own behalf. Wages, generally, on all land, are driven down toward the point of bare subsistence. Returns to capital are also depressed for the same reason, deterring investment. When this is carried to an extreme -- when people can no longer afford the goods being produced and when there is little profit in applying capital -- the economy collapses. The inflated land market, on which the speculative frenzy has fed, collapses too.  Read the whole synopsis

Ted Gwartney:  Estimating Land Values
What are the factors that cause land to have market value and to whom does this market revenue advantage properly belong? Land has market value for three reasons:
  • the limited supply and "natural" productivity of the soil and natural resources,
  • the publicly provided services, including planning, improvements that increase the market value of land and
  • the growth of communities and peoples' competitive demand for the exclusive use of prime locations.

Land rent is the price that people and businesses are willing to pay for the exclusive right to possess and use a good land site for a period of time. For example, people prefer to use sites of good location because it gives them an advantage of spending less time in travel by being near what they choose to do and where they work. A businessman can sell more goods at a site where many people pass each day, compared to a site where only a few people would pass.

The collection of land rent should be used as revenue, by the community for supplying public needs. This returns the advantage an individual land possessor receives from the exclusive use of a land site, to the balance of the people who live within the community and have allowed the land possessor the exclusive use of the land site for the period of time.

It is the responsibility of the local communities to insure that the market rent of land is collected for public purposes. When a major part of land rent is not collected, which is the case in most of the world today, land title holders obtain rights to sell the value of the public improvements which were made by the whole community. The community added to the market value to land by making improvements which increases demand and rent for the land. The longer the possessors hold the land out of use the greater will be the bonus they obtain.

By prohibiting people from using good land, the possessors force the premature use of other less desirable land, which is more distant from the city. This raises the cost of community improvements and the rental value of the unused, but better located, land. This precipitates the degradation of the rural environment by using city land inefficiently -- and creates huge unnecessary pressures on the natural environment.

A problem that we face is that cities throughout the world are spreading out and using land prematurely which is not needed and should not be used. That is because failure to collect land rent subsidizes the waste of natural resources and clutters the environment. Cities that collect the full rental value of land are more compact and provide greater and less costly amenities for their citizens.

Any moves to enact good government principles without collecting the full market rent of the land may result in a failure. People are guided by the profit motive. When people can make a larger profit by doing nothing, but keeping the land they possess out of use for a long period of time, they will do so. When the community collects the full market rent of land, they eliminate the motive for keeping land out of efficient use, because the unearned profit has been collected as public revenue.

Efficient land use appeals to all people because it surpasses the political constraints of most people. Everybody understands that the earth belongs equally to all people. They want a clean environment on earth and to leave a healthy inheritance to the future generations, regardless of their political viewpoints.

The major function of a competent city government is to provide good community services by collecting the land rent created within the community to ensure the efficient use of land and equal opportunities for all of its citizens. Transportation is an important function of government which would facilitate the creation of a compact city, where people can easily find the facilities they desire for education, commerce, religion and recreation. Good land use, with the freedom of individuals to achieve the highest and best use of land, would ensure a desirable community. A compact city would reduce the need to invade the wilderness and devastate the environment. ... Read the whole article

Ted Gwartney:  A Free Market Strategy to Reduce Sprawl

  • Unused land is far more abundant than we realize.
  • End the Public Subsidy of Land Speculation and Sprawl
  • Counterproductive growth limitations and regulations should be abolished.
  • A Strategy for Urban Renewal
  • A Strategy for Economic Development
  • Public Finance by Self-Financing
Unused land is far more abundant than we realize.
We utilize less than 5% of the total land area in the United States for urban purposes, including housing, commerce, and manufacturing. As you fly across the country all you see is farm, timber, desert and an occasional small community. While less than 5% of our nation's land area is needed for urban purposes, much vacant land within existing cities is bypassed because it is cheaper to build further out than pay the high prices demanded for the more efficient, better located, land. The result is urban sprawl.
  • Why do we choose to utilize land distant from employment, social, and civic needs while bypassing superior land?
  • Why do many of us choose to spend two hours each day commuting to work?
  • Why do our older cities fail to renew or rebuild obsolete buildings?
Sprawl is not just about the density of land use. In many cities only one half of the land is devoted to housing and commercial uses while the other half is vacant or under-improved. Could it be that there are inefficient requirements built into some public policies? Smart growth should not be constrained by archaic patterns that impede or misappropriate free and open urban land usage. Local ordinances and practices within cities that force accelerated suburban sprawl should be abolished. We don't need more regulation, we need greater freedom to act responsibly. Individuals should have the opportunity to decide whether they want to live in the suburbs or in the city. This should not be a coerced decision because of a public policy that impedes growth within the city. Simple tax reform can help to achieve some of the goals and objectives of smart growth without government intervention and wasteful subsidies.

If land holders can produce a higher return on investment by not using land for productive purposes but rather hold it for a higher price from those willing and able to pay the higher price in the future, there is a flaw in public policy. Public policy thereby gives speculative, nonproductive investment a higher return than productive investment. Sprawl is subsidized by taxes on production and distribution and the failure to recapture the benefits resulting from public improvements. If we choose to end this subsidy, we would reduce sprawl.

One example that I know is that of a friend who bought land within the city but did nothing with it. I asked him why he put good money into an investment that had no visible return? He replied that, by holding the land for future sale or development, his long term return, in capital gains would exceed 18% annually. If he built a building on the site now, his long term return would only be 12% annually, including both net income plus capital gains. Why should he use his land now when it would be more profitable for him to not use it, but to hold it for a larger future gain?

Most major cities have a substantial amount of fully serviced but unused or underused land sites. ...

Counterproductive growth limitations and regulations should be abolished.
Property taxes should not be levied on new construction or existing improvements, when the revenue needed could be obtained from the land values created and maintained by the community.

The property tax could be shifted to reduce the incentives for sprawl. If the property tax were taken off urban buildings and focused on the land itself, this would penalize land speculation and would reward people who build on their land. Thus land speculation, which promotes a "leap frog" development out of the city and into the surrounding countryside, would decrease. The proposed shift from traditional property tax to a "land value tax" would penalize land speculation and encourage urban redevelopment. Removing the tax on buildings makes them cheaper to construct, renovate and operate, and more affordable to buy or rent. Urban construction creates urban jobs. Capital and labor both benefit. ....
One means that has long been available but not brought into general use is to exempt buildings from the real estate tax and begin to impose an annual tax on land sites that makes holding land off the market for speculation a costly proposition. An annual fee on land should be set near what the land site alone would yield if rented by the owner to the highest bidder. Think of how this would change the behavior of land owners. If I owned a parcel of land with a rental value of $6,000 a year and that was near what the city charged me as my annual fee, my return on investment as a land speculator would be greatly reduced. In order to generate positive cash flow I would either develop the land myself or put it on the market so that someone else would develop it. At the same time, if my tax rate on the building I constructed on the land was zero, my incentive is to construct a building that maximizes my cash flow (i.e., to develop the parcel to its highest and best use in the market). At minimum, land prices would stabilize and the increase in land brought onto the market would be somewhat offset by increased demand. Land prices to builders would tend to begin to fall over time.

This is where the anti-sprawl component appears. As the city begins to renew itself -- as property owners are no longer penalized when they renovate or build new structures -- businesses and people will increasingly see the city as a more desirable place and not just in a few neighborhoods that now benefit by abatement programs and public subsidies.  ...

By utilizing land within cities efficiently and in response to the demand for its use, open space and natural habitats outside the city will be conserved. If urban land is used to its highest and best use, farm land and environmentally sensitive land will not be required for inappropriate uses. Builders and developers would not have to bypass serviced but vacant land to construct housing at a further distance from where it is needed or wanted. ... Read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
Any failure to pay back that increment to society, or of government to recapture it in the form of taxes, constituted not only an injustice to the poor but a distortion of economic equilibrium. He witnessed first hand the perverted configurations of land use that today we know as sprawl development— even in his time it was apparent that urban, high value land parcels were being held off the market for speculative gain by meretricious interests. He witnessed also the boom and bust cycles of the land markets on account of such speculation, effects which spread far wider than just land prices. These inevitable cycles would dislocate labor and capital supply, giving impetus to the impoverishment and suffering which he himself had experienced. He understood that holding the most strategically valuable landsites out of circulation constituted a burden on the economy. He understood that financial resources spent to pay exorbitant land prices had a depressing effect on capital and labor. And because government was taxing labor and capital instead of recovering land rent, it was further restricting the job market and the growth of capital. He realized that people who captured monopoly control of strategically valuable landsites could do so because they were privy to information prior to its public release. It was not by any means his insight alone; it was captured also by George Washington Plunkett writing at the same time:
There’s an honest graft, and I’m an example of how it works. I might sum up the whole thing by sayin’: “I seen my opportunities and I took ‘em.”

Just let me explain by examples. My party’s in power in the city, and it’s goin’ to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re going to lay out a new park in a certain place.

I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particularly for before.

Ain’t it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course, it is. Well, that’s honest graft. 32

32William L. Riordan, Plunkett of Tammany Hall. New York: Dutton, 1963, p. 3.
All society needed to do was to collect the economic rent from landholders as its rightful due, a solution that became part of the subtitle of his book, “the remedy.” Taxing the land (or, alternatively, collecting the economic rent) was something common citizens could understand. ...

The most compelling arguments to many supporters stem from its environmental consequences. A tax on land sites is the most powerful instrument available to neutralize and reverse the centrifugal forces of urban sprawl. This is because incentives are present — the higher the tax the more power it has — to improve the high-value sites to the full extent that their market value warrants. Titleholders are induced to build on their parcels in order to recover the carrying costs of their increased taxes. The inelastic supply of land sites means that taxes are shouldered fully by owners, without being passed on to tenants. (Of course a tenant’s charges can be raised anytime.) Hence urban areas tend to be improved and peripheral areas become less attractive to sprawl development. George saw a strong moral argument for shifting from the conventional property tax levied on both land and improvements to one based on land alone. The argument was quite simple: the tax as it stood penalized people who improved their property and rewarded people who held vacant parcels for speculative gain. It rewarded those owners who let their holdings go to wrack and ruin, often those who bought up parcels to use as rental property without investing in the maintenance to ensure that they would continue to be attractive and livable — slumlords. ...

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.)

The more cohesive the development of communities is, the greater the synergy exists among its members. Sprawl development not only increases the cost of transportation and other infrastructure needed to service these sites, it also reduces the extent to which people are accessible to one another. There is considerable indication that American society is losing this elusive quality of community. When Harvard professor Robert Putnam published his celebrated article Bowling Alone in January, 1995, it was remarkable as much for the resonance that it generated throughout the nation as for the message itself. David Broder of the Washington Post pronounced Bowling Alone the most important academic article that year. Putnam argued that our communal relationships are declining, and that an ever smaller proportion of the population is involved in social activities of a cooperative and communal nature.54 We used to be a nation of joiners; increasingly now we’re a nation of loners. As Tocqueville noted 150 years ago, affiliative groups used to be the unique strength of American society.55 Several hypotheses were offered in this and subsequent studies to explain the decline in the civic engagement of Americans — various demographic changes, technological innovations such as television, the changing role of government, the cultural revolution, and so on. The land-use and transportation patterns that have evolved in the post-war period are a factor as well. The concepts of neighborhood and community today no longer mean the same thing as they did in the past. ...

Recent days have witnessed a profound and growing awareness of the problems due to sprawl development. In fact one opinion poll marked sprawl as the highest current concern among American voters.6061 Solutions such as these reflect the penchant of policy makers to rely upon so-called “command-and-control” (CAC) approaches to government rather than “pricing” approaches. The extension of government reach and weight to impose policies deemed appropriate is burdensome, expensive, and inefficient. ...

And yet, for pricing to work at all, there must be both supply and demand; the lack of either results in there being no market price at all. Is it possible, perhaps, that policies might be developed where demand for certain resources are reduced to zero — and hence no price? To some extent this is how the Georgist economics approach works. It leaves certain realms of the commons unthreatened by exploitation for the reason that the attention of the market is focused elsewhere. By the collection of economic rent the prices of resources are effectively shifted, so much so that the market arena is profoundly altered. Resource prices are shifted in such a way that their use is curtailed and their consumption concentrated. It was noted earlier, for example, that collection of land rent tends to reverse the centrifugal forces of sprawl, actualizing demand at the core of urban areas and leaving remote regions uninhabited and intact. Economic rent accrues to sites that have high demand and frequent use; collecting that economic rent tends to concentrate their use in ways that discourages speculative practices, allocate their use to those who can best maximize their utility, and leave other sites and commodities in remote areas less affected by human activity. So also with charges for other public resources such as radio frequencies and airport landing slots. Pricing incentives are established in such a way that economic activity is intensified, concentrated, and integrated without the need of artificial CAC instruments such as zoning, urban growth boundaries, community land trusts, and other devices which are expensive to implement and have notable records of failure. ...

Recent years have witnessed a growing awareness of how urban sprawl has sapped community cohesion and creativity. In part it is the land use configurations themselves that have been responsible, fostered by the decisions of realtors and developers to capitalize on the promise of speculative gain to be had by people who settle at the periphery of urban areas and then see their land values rise. But current reversals in public sentiment about suburban lifestyles suggest that community cohesion is once more appreciated. This reversal of preferences may favor measures that will foster development of landsites with the highest value, reducing motor vehicle dependency and infrastructure costs. It is no accident, perhaps, that rankings of the most livable cities in the country correlate most strongly with those that are most bicycle friendly.

Greater proximity in development can lead to greater guarantees for the preservation of unsettled areas, leaving tracts of nature undisturbed by the inroads of human presence. This too may have the ironic effect of fostering greater community with nature. Certainly millions of backyards with gas grills and lawns to mow are a poor substitute for pastoral lifestyles. Ecological economics makes clear to people the interdependency between urban and rural, past and future, life and lore, far better than the conspicuous consumption fostered by conventional economic pursuits. Daly himself writes approvingly of land value taxation, even though he has little to say about Henry George or about collecting economic rent.131 Ecological economics hunts for a continuum between economic value and non-pecuniary value, without finding a clear boundary for either. Georgism, in contrast, encourages a precipitous fall-off in economic prices at the periphery of human presence, simply on account of the fact that rent recovery reverses the centrifugal impetus of conventional market forces. The continuum asserts itself.... read the whole article The answers being offered, however, don’t address the root causes of the problem. The most talked about panacea is the institution of urban growth boundaries, but these have failed to be demonstrably successful even in the two communities most often cited (Portland and Boulder) where they were instituted over twenty years ago.

Bill Batt: Stemming Sprawl: The Fiscal Approach

SPRAWL DEVELOPMENT CONFIGURATIONS are not natural. Were it not for incentives to the contrary, people would choose to live and work in close proximity. This has been well documented in studies of every era and place.[1] Only when incentives are put in place that induce people to live in other circumstances do they choose settlement patterns that are remote, less accessible, and alienating. Only in the industrial era and after have outlying areas become more attractive. Tracing the history of such developments makes it clear that they are a response to less livable conditions of urban life as they have evolved -- the pollution of air and water, loss of nature, loss of privacy, housing deficiencies, and so on. In more recent years, differentials in taxation and the quality of services (such as schools) have also played a role in making the suburbs more attractive. ...

Stemming Sprawl: Pricing Measures for Transportation

From the foregoing, it is clear that insofar as the causes of sprawl development are economic, the solution needs to be economic as well. The equilibrium of forces can be restored in two ways:

1) by charging the true marginal costs of motor vehicle transportation to users and
2) by recovering the economic rent from urban site owners that is really the socially created value.

It is easy to distinguish five elements of transportation service cost: capital investment, maintenance costs, regulation costs, environmental externalities, and congestion costs. Each of these calls for a different treatment with respect to revenue design. Capital costs are best recovered by recapturing the land rent proximate to the highway corridors. This is socially created value, which is better used to honor debt service of infrastructure investment than allowing it to be retained as windfall gains by titleholders to property dose by. User fees, most aptly linked to the purchase of motor fuel and tire wear, serve as a proxy for the use of the roads and can be designed to be commensurate with use. As the wear and tear of roads as well as police patrol, snow and ice control, and signaling all involve operating and maintenance costs, such charges are easily linked with benefits received. In the future, still more accurate systems of service charges are likely to appear: Singapore, Hong Kong, and New Zealand are already reliant on electronic devices that record road use by time, place, and vehicle weight.

Ensuring the safety of drivers and vehicles through licenses, registrations, and inspections is most appropriately financed by fees commensurate with the costs of their administration. This way, if a vehicle is used but seldom, it is charged on the basis of its identification rather than assuming any projected level of use. Environmental externalities such as pollution costs can be linked to the polluting source, such as diesel fuel and gasoline consumption, to the full extent necessary to equilibrate air quality and other environmental ambiences. Congestion costs, the last of the major components of a pricing design for highway use, are partially paid for by the time loss of those caught in traffic. The costs of time lost due to highway congestion are enormous: In 2000, the average driver spent 62 hours sitting in traffic at a nationwide cost of $68 billion in gas and time lost In Los Angeles, the average driver spent 136 hours stalled in traffic at an average cost of $2,510.[33] Commuting times were also 20 percent longer than they were a decade ago, about 22 minutes one way nationally on average but as high as 32 minutes on average in New York.[34] But not all people's time is valued equally, and people themselves value their time differently at different times, and it is unfair to require people to impose their congestion on others. Therefore, congestion pricing, being explored in several urban regions, provides a rationing of limited highway space. In a sense, that payment for space usage, in time or money, is a form of land rent. ...

Just as recovering the costs of transportation service equilibrates costs and benefits on one side of the equation, recovering the economic rent accruing to land value facilitates efficient space configurations on the other side. Figure 10.2, again conceptually, portrays how the collection of various transportation user fees as well as the recovery of land rent corrects the economic distortions that today result in sprawl development. The shaded area indicates the pricing correctives necessary to ensure that neither urban nor rural land sites are disadvantaged in travel or location choices that individuals make for either residential or commercial purposes.

As it happens, collecting land rent is a relatively simple operation: It involves a small computer adjustment in the assessment base of what is now the local real property tax. The real property tax to an economist is really two separate taxes: that put on land value and that put on improvement values. A gradual phaseout of the tax on the improvement component, shifting totally to a tax on the land, recovers economic rent in a way that satisfies all the principles of sound tax theory.[35] It is efficient, neutral, equitable, administrate, stable, and simple. It is also absolutely foolproof: One cannot hide land or take it to a remote tax haven. It relieves poor households (who typically own no land) of any tax burden and rewards those titleholders who use their sites efficiently. High-value sites are induced to construct high-value improvements, and low-value sites are left alone. In this way, central locations, where commercial enterprises typically locate, pay according to their intensity; home owners, who typically locate at the periphery of a neighborhood community, pay moderately; and agricultural land and forestlands pay little if anything. By an automatic and natural process, the centrifugal forces of sprawl development are reversed, and investment is encouraged in core locales. The higher density resulting affords the necessary ten to twelve households per acre (or the commercial equivalent) that makes public transportation service economically viable, lessening the prospect of automobile dependency.[36] ... read the whole article

Frank Stilwell and Kirrily Jordan: The Political Economy of Land: Putting Henry George in His Place

Concerns about urban policies also raise questions about the current relevance of Georgist ideas. For example, it is pertinent to ask whether a more uniform land tax would encourage the more efficient utilisation of urban space. George argued that, in order to cover the costs of a higher rate of land tax, landowners would be forced to put their land to its most productive use, and could not afford to hold it idle. Here is a clear link with the modern concerns to discourage ‘urban sprawl’ and to promote ‘urban consolidation.’ To the extent that a higher land tax would encourage the development of more housing in existing urban areas, the pressures for housing development in outlying areas would be significantly reduced. This, in turn, could reduce the burgeoning demand for transport that is currently characteristic of large cities.

Land tax also impacts on the politics of peripheral urban expansion. Currently, the prospect of huge capital gains resulting from decisions by local governments to rezone land from rural to urban acts as an incentive for landowners on the fringes of built-up areas to lobby for changes that will allow increased development. Hence, landowners push for rights to subdivision, irrespective of whether or not there is actual demand (Day, 1995: 3). By creaming off the gains from windfall increases in land values, land tax obviates this bias towards relentless urban expansion.

However, the question remains: would a uniform land tax be sufficient to produce more efficient patterns of urban development? Or would there still be a need for direct land use controls? Land tax can certainly be a tool for discouraging the wasteful use of land. It tends to discourage people from purchasing excessive amounts of land or leaving it idle. However, it may also encourage the overdevelopment of land in order to produce the income stream necessary to pay the higher rate of tax.

Critics of urban consolidation such as Patrick Troy (1996) have examined the potential problems of such overdevelopment, including a range of environmental impacts such as altered hydrological processes. It seems to be an overly bold claim that a Georgist land tax alone would be sufficient to achieve optimal urban development patterns. Land use controls a necessary adjunct to land tax - in setting minimum requirements for green space, for example.

Local government planning controls are also important to prevent incompatibility of land uses, such the development of hazardous or unhealthy industrial activities adjacent to residential areas. Targeted decentralisation policies are a means of encouraging the further development of regional centres. Such policies can work in conjunction with land taxes to ease growth pressures in the larger cities, while addressing long-standing spatial, social and economic inequalities (Stilwell, 2000: 254-260). The desirability of promoting more decentralised regional development is consistent with a Georgist perspective, but not altogether compatible with the claim that land tax would facilitate urban consolidation. It seems clear that it ‘overburdens’ land tax to expect it alone to produce the best spatial outcomes, taking account of all the economic, social and environmental issues involved in urban and regional policy. The various other policy instruments – including regulations relating to green space, zoning, and the provision of public infrastructure to pave the way for decentralisation – are important complements to land taxation. In other words, land tax is best regarded as a necessary but not sufficient condition for more effective spatial policy. ... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 10: What You Can Do (pages 155-166)

What’s also nice about the new operating system is that, once installed, it can’t be easily removed. That’s because it relies on property rights rather than government programs that are subject to political ebb and flow. If you have any doubt about this, consider the staying power of Social Security and the Alaska Permanent Fund, both of which distribute periodic payments that have attained the status of property rights. Social Security is over seventy years old and has never been cut once; in 2005, it survived a privatization campaign led by President Bush. Similarly, the Alaska Permanent Fund, now more than twenty-five years old, repelled an attempt in 1999 to divert part of its income to the state treasury.

This third version of capitalism is a logical successor to the first two. In Capitalism 1.0 we had a shortage of goods, in Capitalism 2.0 a surplus. In Capitalism 3.0 we’ll have plenty, but not too much. We’ll have more things we truly need — healthier ecosystems, communities, culture — and fewer thneeds. We’ll have a proper balance between our “me” and our “we” sides. We’ll be more connected and less isolated, more secure and less stressed. Overall, I’d venture, we’ll be happier.

We’ll have some new traffic rules on this road. Rights now enjoyed exclusively by private capital will be matched, or even trumped, by rights held in trust for future generations. Similarly, the ability of private wealth owners to receive income and inheritances will be matched by the ability of everyone to receive them. And risks we now face individually, such as illness, will be tempered by shared risk pools that exclude no one.

The biggest change will be in the third algorithm I described in chapter 4: the price of nature will no longer be zero. Instead, the price of nature — or at least, of the scarcest and most endangered parts of nature — will gradually rise. This will compel corporations (and consumers) to internalize many of the costs they now externalize.

This, in turn, will drive them to invest and consume in ways that, over time, do less harm to nature. Businesses will invest in clean and renewable energy technologies. Farmers will use fewer chemicals, and local food will outcompete food grown far away. Consumers will shift from driving alone in gas-guzzlers to more convivial forms of transport and less dashing about. Housing will move from sprawling suburbs to small towns and tall cities. ... read the whole chapter

Bill Batt: Fallacies of the Slippery Slope Argument

Some explanations reflect downright corruption. The earliest cars manufactured in this country and in Europe were electric; streetcars also were largely electric powered until a conspiracy of the automobile and petroleum industry exerted its force to ensure that fossil fuel powered motor vehicles would dominate our transportation and land use patterns.15 Our motor-vehicle-dependent and urban sprawl configurations can be explained by powerful interests continually pressing for policies to make us so. One might even conclude that the decision to drive on the right side of the road was equally as much a defining moment.
15 This is an untold story. A trial was held in a Chicago federal court in 1949, resulting in an indictment of GM, Firestone, Standard Oil, Phillips Petroleum, and Mack Trucks among others. Their crime was in forming a holding company called National City Lines which proceeded in the preceding decade to buy up the public transportation services in dozens of US cities, and then scrapping them so that people would then become more automobile dependent. The corporations were fined $5,000 each, and the CEOs of each one $1. See United States Senate, Committee on the Judiciary, 93rd Congress, 2nd Session, “American Ground Transport: A Proposal for Restructuring the Automobile, Truck, Bus, and Rail Industries,” by Bradford C. Snell, February 26, 1974 (Washington: US Government Printing Office, 1974); and Jonathan Kwitney, “The Great Transportation Conspiracy,” Harper’s Magazine, February, 1981.

And I hope that you will forgive me for mentioning another great conspiracy in American history, the subject of my Torch presentation about four years ago. That story recounted how the American railroad industry, in collusion with the banks, induced the founders of the American economics profession to change definitions and formulas so that they would be relieved of taxation on their land holdings and speculation would be rewarded.16 This dividing line between classical and neoclassical economics is responsible I believe for many of our economic problems today — economic cycles, an inequitable tax structure, poverty and unemployment, urban sprawl and the gutting of urban centers. Only now is this economic ideology, almost sacrosanct for a century, falling apart and seen for what it is. ... read the whole article


Further reading:

Rick Rybeck: Using Value Capture to Finance Infrastructure and Encourage Compact Development, at http://www.edrgroup.com/ted2006/T3_Rybeck_Rick.pdf.
Fred Harrison: Wheels of Fortune: Self-funding Infrastructure and the Free Market Case for a Land Tax at http://www.iea.org.uk/files/upld-publication307pdf?.pdf.

see also: http://www.kunstler.com/

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Wealth and Want
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