Raymond Moley on Urban Redevelopment
|January 9, 2007||Posted by Staff under Progress Report, The Progress Report|
Raymond Moley on Urban Redevelopment
One Reason We Have Slums — The Tax Structure Penalizes Upkeep of Property
by Raymond Moley
While the doctrines of Henry George and other tax reformers seem to have faded into the past and are largely forgotten in the calculations and teaching of economics, the new policies of urban renewal bring those ideas into sharp focus again. Henry George lived in a predominantly rural civilization, but his ideas have a permanent value and their reconsideration was never more necessary than today.
Embodied in that philosophy was the concept that since land on Fifth Avenue is physically no better than land fifty miles away in the wooded Hudson Valley, its greater sales worth must be due to the fact that many people are living in the city. Therefore, there attaches to prices a “social” value created by the community. And that value should be taxed to help support the public needs of the city.
Those who hold city real estate with little interest in its improvement are thus speculators who contribute little to the interests of the community. And if, as is necessary, there is to be urban renewal or redevelopment, the unearned increase in values should be squeezed from speculative profits. Thus it would be less necessary to tax not only those who have built improvements but the generality of taxpayers.
In a study just completed in New York City by a special committee on tax policies organized by the Citizens’ Housing and Planning Council, some very interesting facts are developed.
The committee started with the self-evident fact that New York, just like all modern American cities, needs more and better housing for its people and that such housing shouId supplant slum properties. There should be action to create that housing. But the committee found that since the assessments and hence the tax burden on unimproved slum property are far lower than on improved property, the speculative values of such unimproved property have risen. It is a curious fact, then, that those who make improvements are punished. Government thus puts pressure on landowners not to do what the government wants done.
But to provide better housing and to improve the face of the city, state and Federal governments break through the situation by pouring out vast sums of money, largely federal, to induce or to create improvements. So the government buys the land and sells it to the developer. The committee study found that the government paid $103,475,040 for twelve projects, but then sold the property to the developer for $22,721,305. The government pays 70 per cent above the values at which the same government has assessed the property. This low assessment on unimproved land means that to support the city, more must be raised on improved property. There is neither common sense nor justice in this.
For example, there are two pieces of real estate with a frontage of a block each on Fifth Avenue. They face each other and are of equal attractiveness. When, until recently, both had buildings dating back to the Nineteenth Century, the land under them was appraised at $5,000,000 each. But a private builder bought up one and built a tremendous office building. Nothing happened to the other. In the present appraisal, the man who built the office building has had his land assessed at $15,000,000, while the other side still pays on $5,000,000. Thus the man who built the big office building is penalized for doing something to improve the city, while the do-nothing owners pay the same as before.
A major remedy recommended by the committee is an overhauling of assessment policies. Also, to induce owners of undeveloped property to make improvements, it is suggested that such improvements should be exempt from taxation for a specified number of years.
A rational move of this kind would certainly lighten the immense burden on the Federal budget as well as promote the rebuilding of our cities.
Raymond Moley was a member of President Franklin D. Roosevelt’s “brain trust.”
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