PreScript: What follows is an entry in the MIT contest to solve human hastening of climate change. Last year, my entry was either a finalist or semi-finalist (MIT sent contradictory emails). This year, go to this entry and support it. Get others to. Help make it win. With MIT behind geonomics, global victory can't be far behind, eh?
Spur the Best in Building
Buildings aren’t better for lack of technology. Buildings are not all they could be due to politics. You want better buildings? don’t tax them.
Taxing makes buildings more costly than they need be. Inputs like design, materials, labor, hook-ups, and the stuff they sit on—dirt—don’t come cheap. Without those things, you won’t have a building. But without taxes on improvements, you’ll have structures of utmost quality.
Buildings can be better individually and collectively. When taller, it reaches wind for windmills. And when erected side by side within city blocks, they leak less heat.
One reform lets owners, investors, and architects put up high quality buildings and site them next to each other. Shift the property tax off buildings, onto land. Then owners incur no tax liability for improving structures yet do for leaving lots vacant.
Geonomics is a perfect opportunity for climate crusaders to make economic sense. Let’s perform our civic duty. Join a group, form one, or persuade one we belong to, and persuade neighbors to join in, to reform local taxes.
Technology, check. Psychology, uh …
The ways to improve buildings is pretty long: Better insulation. Better materials. Light tunnels. Capture the heat of lightbulbs, as did Thomas Edison. Air-to-air heat exchangers. Orient to the sun. Erect tall structures where the population demand for locations is itself high.
More passive cooling: draw in outside air through pipes that pass deeply through the Earth—an ancient Egyptian technique that in 120 degree heat made building interiors 80 degrees.
You can list more good ideas. Our imaginations can run wild. To employ them, however, our activism must run wild, too.
Pretty Up the Property Tax
The negative impact of taxing buildings is legend. When they were taxed, builders bricked up fireplaces, boarded over windows, and made houses skinny with less frontage. Owners left them unfinished and ugly to delay indefinitely tax liability.
The US Dept of HUD lays slums at the doorstep of the property tax. The extra cost discouraged owners from making improvements. Absentee owners especially did not make improvements that would not benefit them but only their tenants. In marginal areas, the profit was too slim to motivate extra investment.
The Lincoln Institute found the benefactor behind the lovely suburbs around Melbourne Australia. Those jurisdictions enjoyed 50% more built value per acre compared to the bordering jurisdictions imposing the conventional property tax. With zero tax on improvements, owners made all the improvements they wanted without adding to their costs.
Conversely, public recovery of location value—whether via tax, fee, lease, or dues—spurs owners who were leaving parcels idle to put up something beautiful. Better buildings typically are more efficient buildings.
In America, a few jurisdictions shifted their property tax off buildings, onto land, mostly in Pennsylvania. While Pittsburgh did, it was named by Rand-McNally America's Most Livable City back in the 1980s. It renewed itself without one penny of public subsidy.
Beautify a la Singapore
Shifting the property tax off buildings, onto land, not only aligns the bottom line with making improvements, it also provides extra wherewithal for making those improvements. One reason is, as a tax on land goes up, the price for land comes down. Buyers need not borrow so much nor make such big down payments. Instead, they can invest in the building itself.
Another reason is that the shift generates prosperity. To have income to pay their land dues (or tax or fee or lease), owners develop and redevelop. That attracts investment and creates jobs. It also infills cities and compact cities are efficient in many ways, including economic efficiency. With higher incomes, people have more to spend, including on good things.
A classic example. Singapore ranks at the top of several lists compiled by materialists—most prosperous society-wide, business-friendly, low-tax/high service, etc. That city-state also curbs car use and provides mass transit. Further, that world-class city taxes land and pays citizens a dividend.
Extra money helps make improvements affordable. Further, residents can increase their contribution to cutting emissions by using buildings less and the outdoors more. Then buildings could be heated or cooled only on demand, saving energy and reducing emissions.
A Citizen’s Dividend makes it possible for people to work less and enjoy leisure more. Some would spend less time in houses, offices, factories, and more time in parks and on bikes. That’d be great for their health and that of their environment.
A Sine Qua Non of Victory
What if advocates for climate stability could win efficient buildings without winning efficient taxation? What happens is the same thing that happens when artists and hipsters make a rundown part of town into a desirable place to live. More people move in. People with money move in. The place starts to look great, but rents and prices go up. The original inhabitants—those who created its character in the first place—can no longer afford to live in their neighborhood and move on to found the next cool place.
Gentrification makes many people resent and resist bettering buildings and neighborhoods, even improvements that’d mitigate climate change. Winning the debate to reduce urban emissions is made more difficult. It's a difficulty that can be avoided by sharing local land values.
Further, improving neighborhoods while not recovering the rise in location value would fatten mortgages. That further enriches the financial system now allowing and benefiting from an inefficient economy, one that emits too much byproduct into the atmosphere. Present financiers support this economy as is, defend it, and when mentioning any mitigation leave out any fundamental transformation that gets to the root of the problem.
Is the High Road the Only Road?
Rather than shift the property tax, some climate crusaders suggest merely exempting any improvements that raise the building stock’s efficiency. May that be a shortcut? Not really. Exemptions are a Pandora’s box.
Tax breaks go to insiders whose calls to politicians are answered immediately and on private lines. The property tax, as true with every tax, already exempts more than it collects. If your built value is not exempted, you’re paying for somebody else’s loophole.
Exemptions are not actually little loopholes but huge thoroughfares for the money of insiders. If ever you have enough clout to win an exemption, don’t waste it on that. Instead, go whole hog for fundamental tax reform and restructure the property tax.
Besides that political concern, there is the practical one of defining an improvement that is climate friendly. Nailing that is impossible, and complexity is the enemy of equity, since only those in the know can take advantage of the fine print. Better to exempt all improvements by exempting all buildings.
Further, exemptions don’t recover the socially generated value of land. That is crucial, too, for better buildings. It gets vacant lots developed and no longer useful buildings redeveloped; doing both cuts emissions.
Another strategy to get around shifting the property tax is to let the political storms continue to vitiate it but complement it with a property sales tax, imposed when the title is transferred from seller to buyer. Aspen Colorado, where a vacant lot goes for $10 million and more, does that and is the envy of many other towns with unaffordable locations.
Once again, however, that dodge fails to motivate efficient land use, nor does it exempt improvements. Neither the delayed tax nor the exempted tax is up to the task at hand. On behalf of the planet's atmosphere, proponents must shift the property tax.
A Winning Political Strategy
The above avoidance strategies are understandable. Most people love land and hate taxes. Owning land makes people feel secure. "Owing" taxes to an out-of-touch state makes people feel insecure. The hot buttons of owners must be respected.
Polls show the most hated tax is the property tax—a rational distaste since nobody wants to lose their home and governments can be overbearing and insensitive. To date, property tax "reforms" merely minimized the tax, starting with California's infamous Prop 13, later followed by many other states. Real reform has been rare.
Every place that did manage to tax land, not buildings, soon lost this reform. That's because it worked. It made the city or region more prosperous. People who prosper spend more money on locations. Real estate speculators see those higher values and want them for themselves. Enjoying closer ties to politicians, speculators soon get the reform repealed. All the reformers' activism went for naught.
One thing those short-lived reforms lacked and that Aspen’s title transfer tax had was a tangible benefit. Aspen earmarked its raised revenue for affordable housing. The proposal qualified almost all working families, even a doctor making six figures a year. That new tax cum benefit for the entire populace passed at the ballot box easily.
Just as the promise of more affordable housing made an extra property tax politically palatable in Aspen, and a future dividend made a tax on oil extraction passable in Alaska, and the reality of lower taxes on one's labor and capital made a land tax a winner in Singapore, so again could sharing of rents be won in other jurisdictions, too. The key is to guarantee money in the pocket.
Push the Left Buttons
Residents, voters, and legislators find the idea of handing over the annual rental value of their location to their community (long hand for land dues or land taxes) more enticing when other psychological factors are in alignment, too.
1, Regional land value must be presented as a hefty windfall, similar to how Alaskans view the value of oil under the tundra.
2, The value of land must be shown as a regional value, a region to which all residents belong—the old pride of place.
3, The fact that the value of every location is a product of the three most important things in real estate—location, location, location—must be stressed. That is, the value of one's land is not due to the owner but due to nature—things like a great view—and due to society—things like population density, and no lone owner can claim responsibility for density.
Promise people a share of the value of all the land and resources in their region. Rather than cling to the returns from their lone location, residents will be jumping on board. A groundswell would ensue.
Get Everyone to Pull on the Same End of the Rope
The way to win a tax shift proposal is to not propose it. Instead, propose a Resident's Dividend or a Share of Regional Value or a Universal Housing Voucher. Of course, proponents will have to explain how to fund it. That is when one mentions shifting the property tax off homes and improvements, onto locations. Or, replacing the property tax entirely with a tax on site value or with an annual deed fee or with land dues calibrated to the value of one's location. The actual mechanism for recovering the socially generated value of land is less important than disbursing the collected rents back to the populace.
As the body politic strives to expel fewer pollutants into the planet’s atmosphere, don’t force owners to improve their land or buildings. Instead, create a context in which quality development makes economic sense. That requires replacing the usual property tax with sharing land value. Winning local legislation requires advancing not a loss (a tax) but a gain, the resident's dividend.
Fortunately, a global benefit—incorporating appropriate technologies into building—can be won locally, where change can occur more quickly. Local residents could see and live in more beautiful and efficient buildings. And create a model for the rest of the world to follow.
Post-Script: The above is an entry in MIT’s contest to find and promote solutions to global climate change. If you like what you read, please go the contest and like this entry. Get others to do so. Even enter yourself. Last year I was a semi-finalist. This year, who knows? The climate could be the key to wining justice for all.
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