An unexpected call for a land value tax

It was good to see a flurry of articles recently on Land Value Taxation, following a report from an unexpected source: the Tony Blair Institute for Global Change. I haven’t paid a great deal of attention to the Blair institute, which has mainly worked overseas on issues of governance and international cooperation. But this marks a foray into British politics again, hoping to highlight solutions that nobody else is talking about.

Hence Home Truths: A progressive vision of housing policy in the 21st century, by housing scholar David Adler, which is well worth browsing.

Adler describes land value taxation as part of a broader initiative that he calls the Community Reinvestment Programme, which “overhauls the system of property taxation to direct the gains from house price inflation toward the many, not the few.” Taxing land would encourage developers sitting on plots to get on and build on them. Britain has a housing shortage, which is driving up the price of land. Currently developers pay nothing to hold land, so it’s easy money to secure sites, and watch them go up in value even if you don’t build on them. Consequently, the nine biggest house builders in the country have an estimated 600,000 unused building plots between them. A land tax would sweep away that perverse incentive, turn that land hoarding into a cost and get more houses started.

A land tax would also capture the rewards of public investment. At the moment landowners can sit on urban brownfield sites while local councils add roads and streetlights and other infrastructure all around them. The public essentially pays to improve the land, and the owner gets all the benefits of that work without contributing anything.

The revenues from the LVT, under this particular formulation, would be shared between local and national government, making the proposal more politically palatable. It would also replace council tax, stamp duty and several other levies, making it clearer for home owners. The tax reform would sit alongside re-zoning proposals, and a ‘sovereign property fund’ that would buy land for new council housing. Adler also advocates rapid transit networks to make peripheral housing areas more attractive for development.

It’s great to see some fresh ideas directed at Britain’s housing crisis, as the government seems committed to subsidising home ownership at the expense of inequality and affordability. Whether the association with Tony Blair is helpful will depend on your politics, but taxing land is an idea that’s waited a long time for its moment. You can read the report online here.


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