The Land Value Capture Mechanisms We Already Have

Sources: Lincoln Land Institute, Community Land Trusts Overview, County Health Rankings

When we talk about land value capture as a solution to the inevitable scarcity of land created by urbanization we are not talking about creating some far off utopian vision of the future like communism or libertarianism, but using tools we already have but under utilize to solve problems we’ve conceptually understood for the past few centuries, but have failed to act on. The law of rent has been understood at least since David Ricardo explained it over 2 centuries ago in regard to agricultural land and the virtue of land value capture as a means of generating public revenue even earlier when Adam Smith wrote the Wealth of Nations and described ‘ground rents and the ordinary rent of land as peculiarly fit subjects of taxation.’ It was a mainstay of classical liberal thought throughout the 19th century and only seemed to fall out of fashion with the advent of the automobile, at the turn of the century, and suburban sprawl during the New Deal era.

'Both ground rents, and the ordinary rent of land are a species of revenue, which the owner in many cases enjoys, without any care or attention of his own. Though a part of this revenue should be taken from him, in order to defray the expenses of the State, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground rents, and the ordinary rent of land are, therefore, perhaps, the species of revenue, which can best bear to have a peculiar tax imposed upon them.'
Adam Smith The Wealth of Nations, Book 5 Chapter 2, part 2

A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality.(i.e. The law of rent)' ……..Whether distinguished or not, there is a real difference between the nature of the compensations which the landlord receives for these different objects; and it is quite certain, that a tax on the real rent of land falls wholly on the landlord, but that a tax on that remuneration which the landlord receives for the use of his stock expended on the farm, falls, in a progressive country, on the consumer of raw produce. If a tax were laid on rent, and no means of separating the remuneration now paid by the tenant to the landlord under the name of rent were adopted, the tax, as far as it regarded the rent on the buildings and other fixtures, would never fall for any length of time on the landlord, but on the consumer.
David Ricardo On the Principles of Political Economy and Taxation, Chapter 10

'But the earth in its natural state, as before said, is capable of supporting but a small number of inhabitants compared with what it is capable of doing in a cultivated state. And as it is impossible to separate the improvement made by cultivation from the earth itself, upon which that improvement is made,the idea of landed property arose from that parable connection; but it is nevertheless true, that it is the value of the improvement, only, and not the earth itself, that is individual property.'
'Every proprietor, therefore, of cultivated lands, owes to the community a ground-rent (for I know of no better term to express the idea) for the land which he holds; and it is from this ground-rent that the fund proposed in this plan is to issue.'

Agrarian Justice by Thomas Paine

‘But to what does this doctrine, that men are equally entitled to the use of the earth, lead? Must we return to the times of unenclosed wilds, and subsist on roots, berries, and game? Or are we to be left to the management of Messrs. Fourrier, Owen, Louis Blanc, and Co.?” Neither. Such a doctrine is consistent with the highest state of civilization; may be carried out without involving a community of goods; and need cause no very serious revolution in existing arrangements. The change required would simply be a change of landlords. Separate ownerships would merge into the joint-stock ownership of the public. Instead of being in the possession of individuals, the country would be held by the great corporate body—Society. Instead of leasing his acres from an isolated proprietor, the farmer would lease them from the nation. Instead of paying his rent to the agent of Sir John or his Grace, he would pay it to an agent or deputy-agent of the community. Stewards would be public officials instead of private ones; and tenancy the only land tenure.’

Herbert Spencer, Social Statics, Chapter 9, Section 8

‘This is the phenomenon of earth hunger, the apparently insatiable desire to get more land; and the reason for it lies in the facts which have been mentioned. With more land, there are higher wages, because no one will work for wages which are convertible into less goods than the laborer could get out of the land when used in the most lavish and wasteful manner. With more land, the manual unskilled laborer is raised in comparison with the skilled and educated laborer, that is, the masses are raised in comparison with the classes. When there is plenty of land, the penalties of all social follies, vices, and ignorance are light. Each man has plenty of the "rights of man" because he need only be, in order to be a valuable member of society; he does not need high training and education, as he would in an old and crowded society with a strict organization, high discipline, intense competition, and weighty sanctions upon success or failure.’

William Graham Sumner, ‘The Earth Hunger or Philosophy of Land Grabbing

Community Land Trusts

In this arrangement, land is held in trust by a board of trustees consisting of one-third residents, one-third community representatives (who are not residents) and one-third public representatives who make decisions about the allocation of land for residential or commercial use. Residents retain ownership of their homes but only pay for the price of the house itself and upon resale profit only from the increased value of the house itself and not the value of its location. Renters pay rents that reflect the historical costs of the housing unit rather than the market price of the location. Residents have the privilege to vote for representatives on the CLT board and participate in any projects they may commence (e.g. parks, gardens, senior centers and food pantries) or neighborhood based groups that are subsidiaries of the CLT. To date, the US has 277 CLTs that have provided several thousand housing units to low income families, the biggest one being the Champlain Housing Trust in Burlington, VT which holds over $223 million in real estate assets that includes 2,200 apartments and land leases for 565 single family houses. There is even one within my own backyard called the Northshore Housing Initiative. CLT not only protects low income workers from the pressures of real estate speculation but also has a 90% lower foreclosure and delinquency rate than market rate mortgages. CLT is a smaller scale private version of the public land lease systems found in places like Hong Kong and Singapore.

Special Assessment Property Taxes

These are Surtaxes levied on property owners for specific improvements in infrastructure and public services, recognizing a basic premise of Geonomics that real property owners stand to profit the most from improvements in infrastructure and public services. However, unlike conventional property taxes the revenue is earmarked for specific projects over a specific number of years and the tax is levied only on property within the special assessment district.

Vacancy Tax

The city of Vancouver recently implemented a vacancy tax on all unoccupied residential properties that could curb foreign real estate speculation and generate $38 million in annual revenue for affordable housing and other public services. The city currently has 2,538 vacant homes and 2,181 homeless residents, 659 of whom are unsheltered; this marks a 2% increase from the previous year. The $38 million could go a long way to reducing and eventually eliminating homelessness. The vacancy tax could also be an incentive to rent or lease property, lowering the overall cost of housing and allowing more people to live in the city instead of commuting; however, the tax is only assessed on 1% of property values so its impact may be minimal. A much higher vacancy tax rate coupled with a reduction or elimination of the property tax assessed on buildings and improvements would go much further in making housing more affordable for everyone.

Paid Parking

Almost every big city has paid on street parking. Paid parking allocates a scarce public resource by charging a flat hourly rate for its exclusionary possession and use. This captures the value on street parking provides drivers while discouraging hoarding spaces that would otherwise be free making such spaces more readily available over time.

Fishing/Hunting Licenses

Just like paid parking, licensing for the use of wildlife and fisheries allocates a scarce public resource by charging a flat price and setting seasonal and often numerical limits for the exclusionary use of fish and game.

Government Land Leases

Federal and tribal land leases and permits for extraction industries such as oil and natural gas as well as for grazing and outdoor recreations are definitive forms of land value capture. 30% of the continental US is owned by Federal agencies with tribes owning about 2% of the country. There are currently 37,000 oil and gas leases on federal land of which more than half are non-producing and about 4,500 on tribal lands.