Ground Rent
The rent attributable to the land (location) itself, as distinct from the buildings on it — the specific quantity a land value tax targets.
Definition
Ground rent is the portion of a property's rental value attributable to the land and its location, as opposed to the buildings and improvements on it. When you rent a flat, part of what you pay reflects the structure (which someone built and maintains) and part reflects the site — its proximity to jobs, transit, and amenities. That second part is ground rent.
Why It Matters
Ground rent is the precise quantity a land value tax is designed to capture. Because the site's value is created by nature and the surrounding community rather than the owner, classical economists from Adam Smith (who called ground-rents an especially proper subject of taxation) through Ricardo and Mill treated it as the ideal tax base. Separating ground rent from building value is exactly the assessment task LVT requires.
See Also
Sources
- Adam Smith (1776), The Wealth of Nations, Book V (taxes on ground-rents). Full text