Land Value Tax Shifts

A land value tax (LVT) shift involves taxing the land value portion of properties at a higher rate than the building value.

The current property tax system taxes the total value of properties. This includes both the land and any structures on top of it. Because the average property has most of its value in the building, the conventional property tax is mostly a tax on building value.

This creates perverse incentives for speculators to buy up vacant and underused sites and to avoid building intensive uses. For the speculator, as long as annual holding costs are lower than the site’s annual appreciation in value, it pays to hold out. For those who want to make the most of the site, the more building value they create, the more they pay in property taxes.

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  Rent-sharing Land Trusts

In a rent-sharing land trust, home and/or farm owners have title to their buildings/improvements but pay the full current annual ground (i.e., land) rent to a trust for the underlying land. The trust – which could be either a public or non-profit entity — uses the collected land rent to pay any property taxes imposed on the homes/farms, with excess rental revenue used for common purposes approved by the trust.

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Value Capture for Infrastructure

Value capture is commonly conceived as a mechanism by which all or a portion of the financial benefits to property owners generated by a geographically targeted public capital investment are appropriated by a local public authority. The concept of value capture appeared many decades ago in the form of special assessments. The City of New York drew up a proposal for financing its 1930s subway extension through property assessments, demonstrating that enhanced land values along existing lines amounted to more than four times the cost of constructing the subway lines (Hagman and Misczynski 1978). Increasingly the term’s usage has been focused on transportation corridors, particularly rail transit.

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