house prices mortgages affordable land value tax

A Big Idea Spreads, Echoed by More New Voices
gentrification henry george vacant lots

Four More Newspapers Cover Public Rent Recovery

Four papers recently cover a powerful solution to the problems caused by privatizing socially-generated site values. These 2013 excerpts are from: (1) The (London) Observer, Apr 27, by H. Stewart; (2) Oakland Local, Apr 29, by R. Lehmer-Chang; (3) Inside Housing, May 8, by Emily Twinch; and (4) Project Syndicate, May 13, by D. Baker.

by Heather Stewart, by Rana Lehmer-Chang, by Emily Twinch, and by Dean Baker

George Osborne has insisted that Help to Buy is not aimed at pushing up prices. But encouraging first-time buyers to take out mortgages with high loan-to-value ratios -– on properties whose value may be unsustainable even at current levels, let alone after another market bounce -– is hardly a recipe for a fairer or more stable economy.

But first-time buyers need cheaper homes, not bigger loans, and the chancellor's argument is reminiscent of those who used to claim vehemently in the mid-noughties that allowing low-paid workers to borrow six times their income was socially necessary, because otherwise young people wouldn't be able to afford a home.

And taxing housing more heavily -– whether through a more progressive council tax system, heftier inheritance levies or a land value tax, under which homeowners would pay a small percentage of the value of their property each year -– could help to prevent the next bubble inflating. Instead, the government appears intent on subsidising it.

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Rising land values are a measure of the progress of a community. Land Value Taxation, an idea championed by 19th century political economist, Henry George, keeps community generated wealth circulating to the benefit of the community.

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A left-wing think tank has launched a paper today calling for a land value tax to help deliver a ‘house-building revolution’.

The Centre for Labour and Social Studies suggests a land value tax could replace business rates and stamp duty, and should be levied on all land except where it lies under people’s homes.

It continues: ‘A land value tax, targeted at unproductive wealth and speculation, could help deliver the house building revolution –- and the economic revival –- our country desperately needs.’

The paper says the tax should end land speculation which now raises land prices and creates a lack of land for building.

Because there is currently no tax on empty land in the UK it can be lucrative to acquire it and hold onto it and then sell it at a higher value, the report says.

A land value tax, set at the right level, would encourage efficient use of land and heighten the prospect of the reuse of brownfield sites, the paper suggests. It says it could also moderate house price inflation and reduce the likelihood of future housing bubbles.

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Much of the story of the boom and the resulting imbalances created in the last cycle was an unprecedented run-up in house prices. Prices have fallen considerably from their bubble peaks.

Governments can help through the mechanism of a vacant property tax. The logic is simple, property that is vacant for a substantial period of time (e.g. 3-6 months) will face an additional tax (e.g. 1.0 percent of assessed value) in addition to whatever normal tax the property would face. The tax would give owners of vacant land, houses, and businesses a strong incentive to lower prices in order to have the property used.

This will have a hugely positive economic effect. Rent typically accounts for 30-40 percent of the consumption basket of ordinary workers and often more than 50 percent for low-income workers. If this tax could lower average rents by 10 percent it would effectively raise real wages by 3-4 percent.

While many of the people who will be hit by falling land prices are not wealthy, property owners as a whole are certainly much better off than those without property. And the people who will pay the most tax will be holders of highly valued vacant properties.

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JJS: If you’re going to let politicians tax you, you might as well let them tax you for the land you claim. You might love land and long for private security and find this imposition distasteful, but, those who own the really pricey sites -- downtown locations, oil fields, etc -- will find the land tax far more rigorous. Having to pay far more than you, they’ll enjoy far less political influence than now, and without them throwing their weight around a whole slew of other social problems could get straightened out by saner public policies. Plus, since all owners will feel motivated to put their land to best use (to afford the land tax or land dues), they’ll make both land use and the economy much more efficient. Yet as sound as this tax is, it is only part of the entire geonomic package, and not even a necessary part -- land dues would work just as well if not better than land taxes.

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Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Green MP Tells UK to Consider Land Tax -- It Works
http://www.progress.org/2012/sharing.htm

Writer Calls for Land Tax Loudly While ...
http://www.progress.org/2012/debtorsp.htm

To Never Pay Attention to Ohio & Florida Again
http://www.progress.org/2012/electorl.htm

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