01 October 2006

Land Value Tax 1 - Where’s My Acre?

The first in a series about land value tax. I would like to see a shift of emphasis from property taxes to land taxes.

This question "where's my acre" is a little facetious but given that the population density of the UK is 244 per square km and there are about 247 acres in a square kilometre it is a reasonable rhetorical question. I am told the series Jon Snow did with his son on land ownership in the UK was great viewing. It demonstrated how land ownership in the UK is concentrated into a very small number of hands.
Not unconnected is that the average size of a new house in the UK is nearly a third (30%) smaller than a pre-1920s' dwelling, and has continued shrinking over the decades and is near the bottom of the EU league.
Retail analysts Verdict, has discovered that the average area for a modern medium semi detached house is currently 88m2, compared to an average 120 m2 for its pre 1920s' equivalent. Across all housing types, the current average is actually down to 83m2. Research shows overcrowded living conditions are independently correlated with poor educational achievement and other ills. Socialist ideas to solve this problem seem to be based around regulations and standards. In my opinion all that achieves is more red tape leading to less new housing which only compounds the problem. A root cause of the problem is that land is barely taxed (meaning speculators and indeed the public sector can sit on land and not use it productively at next to no cost to them) whereas residential properties are heavily taxed in the form of council tax, stamp duty etc causing a disincentive to build residential property. Your thoughts?

Quizzage - There is a successful and fast-growing economy where land tax is the major source of income. Can you name the place? Here's a clue, showing two fingers to the ordinary license fee payer the BBC is renting an island there?


Jock Coats said...

Blogging from Bournemouth eh! I haven't even launched my newsreader this weekend as I'm concentrating on working on some software thing I'm doing. But I looked you up to try to email you. I've just had sight of some email correspondence from Steve Norris. I don't want to post it here - was looking for an email address for you - but he's talking about a "piece of primary legislation called Land Value Enhancement Attachment Bill" as a mechanism for capturing uplifts in land values resulting from public spending on infrastructure projects such as but not limited to Crossrail. He goes on to say: "And why Gordon Brown hasn’t taken it up already I have no idea. I would have thought it was a particularly obvious no brainer." So he's obviously reasonably convinced.

(I'll come back and read this when my brain's got some free threads to concentrate on something else!)


Jock Coats said...

Interesting - I thought "why would the BBC be renting an island of Hong Kong or Singapore nowadays?" Second Life is certainly an interesting concept - especially the example is provides of the fexibility of money and currency in the new economy (see an old blog post of mine).

On LVT, however, it does strike me as a little odd, because presumably you can potentially not breach "Locke's Proviso" in a virtual world - the operators could just create more land in the program couldn't they? Maybe not, you would still have fixed mechanisms of getting to and from different parts of the virtual world where your markets might be and so on, so it's not more artifical perhaps than Von Thunen's model estate. Now if they invented a teleporter things would be different I suspect.

Praguetory said...

Hey Jock, If anyone was going to get the answer it would be you. N1. Yes, you're right Second Life is the place that is funded by LVT. As I am not familiar with Second Life, I don't know whether the "new land" is easily accessible, but I agree this is what is crucial to whether the success of LVT there can be replicated.

Jock Coats said...

I only found the place yesterday. It strikes me that it would be an interesting idea for all sorts of things - for example if we had any money in the bank perhaps Oxfordshire Community Land Trusts could use an island as a way of showing people how our affordable housing system works.

I guess the analogy is that land is akin to disk space on their server and that itself could become a scarce resource I suppose. I mean to have a better look into it all. As much for the monetary system as for the LVT!

Mark Wadsworth said...

In my report on tax simplification (www.bowgroup.org) I recommended that we replace all residential property-related taxes like Council Tax/Benefit, Stamp Duty Land Tax, Inheritance Tax, Capital Gains Tax and the TV licence fee with a simplified annual land value tax, being 1% of the value of your residential property, less a £70,000 exempt band per household.

It would not be difficult to extend this to undeveloped land.

Alternatively, Business Rates are currently around 4% of property values (and a larger percentage of underlying land value). If the exemptions for unoccupied properties were removed and business rates extended to undeveloped and agricultural land, this would also pretty much amount to a land value tax.

Praguetory said...

For me to support your proposal I think it would need to be extended otherwise it is a tax on property and we discourage developing property. Exemptions for unoccupied land etc are a boon for speculators, but not for the economy as a whole.

John Burns said...

Useful Land Article with links at:
For convenience.


John Burns said...

in the USA has a similar situation to the city of Liverpool. Lots of boarded up houses owned by speculative owners. Pittsburgh implemented a land tax and hey presto in no time at all these eyesores started to disappear. Properties now came on the market and were used for the greater good of the community.

Liverpool has tried to get this tax but failed. Many buildings are just abandoned and boparded up owned by outsiders - and many off-shore. The city is hosting European Capital of Culture in 2008, with most of the city centre and much of the historic docks designated World Heritage Zones by UNESCO. The city desperately wants to get many of these old historical abandoned buildings in order. LVT looks the best way to do it - a pragmatic approach which gains results. It looks like they will not, and much of the city in 2008 will be an embarrassment to the UK, never mind Liverpool.

Another point in tax collection, is that land can't be taken off-shore.


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