Tech billionaire wants to solve economic inequality, among other problems, by building a new city funded by land value tax. As described here, alternate source here.
Of course there are all kinds of issues involved in building a new, freestanding city, but it’s encouraging that he wants to start on a sound economic basis. Thanks to Bob Jene and Edward Miller for the tip.
Chicago needs a healthy and growing bus system. Fewer Chicagoans riding the bus means more people driving and more cars on our already congested streets, especially in and around downtown during peak periods. Our hub-and-spoke rail system continues to be a good option for people who live and work along the CTA train lines and in the Loop, but many neighborhoods lack access to it. Without more investment in bus service, Chicago risks more people abandoning transit for transportation options that are more expensive and less efficient, healthy, and green.
The report acknowledges that part of the problem has been CTA’s substantial service reductions, but seems mainly to look at “how do we move buses around faster” rather than “how do we provide service that lets people travel where they want, when they want, under civilized conditions and at a reasonable cost.” But, hey, moving buses faster is probably a good start.
Up in Vancouver BC, analyst Jens von Bergmann calculates that the increase in land value for single family houses over the past year exceeded the total income earned by the entire population of the City. Median increase was $262,000, average was $318,877. Von Bergmann estimates this to be equivalent to $126/hour, assuming people work a 40 hour week 62 weeks per year (allowing for multiple-worker households). By comparison, actual labor yields an average income of $26/hour (all figures in multicolored Canadian dollars, of course).
But the land price appreciates every hour of every day, so it might make more sense to calculate the median increase as $29.89 (mean $36.38) per hour.
Of course this cannot continue indefinitely, but something like it has been going on for a long time in Vancouver, as well as a few other cities. Wealthy international buyers from less stable places want a refuge, as well as perhaps an investment. But even this group, depending on developments overseas, must eventually be limited. Some analysts — Garth Turner comes to mind — have been warning of a crash for years and years.
What really impresses me about von Bergmann’s analysis is that BC assessment authorities appear to do a decent job of estimating land value, and making the data broadly available. It’d be worth something to live in a place like that.
In order to fund community needs from a tax on land value, assessors need to estimate what that land value is. Conceptually the task need not be difficult (Ted Gwartney outlines some options here, but a more complete and still-valid examination is in this book.) Basically, you look at sales prices for actual land transactions, and make adjustments for parcels which haven’t sold recently or where land comprises only a small part of the value. But what happens if the buyer pays something additional, “off the books,” for the land?
According to Peter Katz, that seems to be what often happens. This presentation at APA last March starts off slow (and self-promotional), but moves along thru some interesting territory. Regarding the price of vacant land, he asserts that, in many desirable areas, developers have to first buy (or option) the land, then negotiate with local authorities to get permission to build. Getting that permission might require agreeing to donate money (or land) for public use, or perhaps less savory expenditures, and to the developer this is part of the cost of land. If an area of any size is subject to such constraints, all the land sales are below market prices by the amount of such costs, and all sites, whether sold or not, receive assessed land values that are lower than what developers actually pay to get a buildable site. This results in less public revenue, implying a need for other taxes, as well as a tendency to develop at lower densities than might be appropriate, when developers choose to settle for existing zoning rather than what they might be able to negotiate. Katz suggests that a formal study of this effect should be done, and nominates Lincoln Institute to make it happen.
Katz’s remedy seems to be a combination of form-based zoning codes, plus a sophisticated (and presumably accurate) fiscal impact analysis that might show denser development to actually be more “profitable” to governments. But, responding to a question about 65 minutes into (and near the end of) his talk, he acknowledges that funding government from a land value tax would be a good way to obtain the desired development pattern, and that Henry George was a great guy. His observation that Georgists tend to be wacky has been made before, and I can’t say it’s wrong.