Loading Glossary… Rick Rybeck Jan 24 2024 at 10:39PM on page 1
Suggestion
The county, sector and individual TOD visions make a lot of sense. The goals are laudable and compelling. However, some aspects of the status quo will make it difficult or impossible to achieve these goals and visions.
In particular, the county has certain tools for realizing these visions. First, is the provision of public infrastructure to facilitate desired development. The high-quality transit in this area is just one example. But, if infrastructure is well-designed and well-implemented, land prices nearby (such as around the Metro stations) will increase. This makes development (particularly affordable development) difficult. Sometimes, high land prices will chase development to cheaper, but more remote sites. People move into these remote developments only to discover that they lack the infrastructure they desire. If infrastructure is extended to these remote areas, land prices rise and the cycle begins again. The sprawl that results is bad for the environment. It's also bad for taxpayers who must fund the wasteful duplication of expensive infrastructure systems at the urban fringe.
A second tool is zoning. Thus, land near a Metrorail station might be zoned for greater density. If more residents/businesses can share this expensive land, then the per capita or per business costs go down and it becomes more affordable. Unfortunately, when zoning density is increased, land values/prices go up even more, defeating the objective of creating more affordability.
We know the cause for this conundrum. As mentioned, public actions (like investment in infrastructure or increases in zoning density) cause nearby land values to rise. The ability of private landowners to appropriate the lion's share of this publicly-created land value is the fuel for land speculation. Land speculation is buying land not to develop it, but simply to hold it for future appreciation. Thus speculation is a parasitic activity. It creates nothing of value and attempts to siphon off value created by others. It creates artificial scarcities of developable land, particularly at prime locations -- driving up land prices even more.
Fortunately, some communities are employing an effective remedy to this conundrum. They are returning publicly-created land values to the communities that created them. This reduces the profit from land speculation and leads to lower land prices. Simultaneously, land value return provides justifiable and sustainable funding for public goods and services.
Land value return can be accomplished in several ways. One way involves reducing the property tax rate applied to privately-created building values while increasing the tax rate applied to publicly-created land values. The lower rate applied to buildings makes them cheaper to construct, improve and maintain over their useful lives. Surprisingly, the higher rate applied to land values helps keep land prices lower by reducing the profits from land speculation. Thus, without new spending or revenue loss, this Tax Shift can make both buildings and land more affordable. As a bonus, it compells development of high-value sites. High value sites are typically infill sites near urban infrastructure amenities like Metro stations.
In conclusion, great infrastructure investments and up-zoning for TOD often increase land prices to the point where TOD (and particularly affordable TOD) becomes impossible. However, if infrastructure investments and upzoning are accompanied by a land value return Tax Shift, development is drawn towards the Metro station areas and that development becomes more affordable. Also, by locating more development at existing transit stations, remote locations can be preserved for agriculture, recreation and conservation. And, reducing sprawl benefits both the environment and taxpayers.
Please contact me if you desire more information.
In particular, the county has certain tools for realizing these visions. First, is the provision of public infrastructure to facilitate desired development. The high-quality transit in this area is just one example. But, if infrastructure is well-designed and well-implemented, land prices nearby (such as around the Metro stations) will increase. This makes development (particularly affordable development) difficult. Sometimes, high land prices will chase development to cheaper, but more remote sites. People move into these remote developments only to discover that they lack the infrastructure they desire. If infrastructure is extended to these remote areas, land prices rise and the cycle begins again. The sprawl that results is bad for the environment. It's also bad for taxpayers who must fund the wasteful duplication of expensive infrastructure systems at the urban fringe.
A second tool is zoning. Thus, land near a Metrorail station might be zoned for greater density. If more residents/businesses can share this expensive land, then the per capita or per business costs go down and it becomes more affordable. Unfortunately, when zoning density is increased, land values/prices go up even more, defeating the objective of creating more affordability.
We know the cause for this conundrum. As mentioned, public actions (like investment in infrastructure or increases in zoning density) cause nearby land values to rise. The ability of private landowners to appropriate the lion's share of this publicly-created land value is the fuel for land speculation. Land speculation is buying land not to develop it, but simply to hold it for future appreciation. Thus speculation is a parasitic activity. It creates nothing of value and attempts to siphon off value created by others. It creates artificial scarcities of developable land, particularly at prime locations -- driving up land prices even more.
Fortunately, some communities are employing an effective remedy to this conundrum. They are returning publicly-created land values to the communities that created them. This reduces the profit from land speculation and leads to lower land prices. Simultaneously, land value return provides justifiable and sustainable funding for public goods and services.
Land value return can be accomplished in several ways. One way involves reducing the property tax rate applied to privately-created building values while increasing the tax rate applied to publicly-created land values. The lower rate applied to buildings makes them cheaper to construct, improve and maintain over their useful lives. Surprisingly, the higher rate applied to land values helps keep land prices lower by reducing the profits from land speculation. Thus, without new spending or revenue loss, this Tax Shift can make both buildings and land more affordable. As a bonus, it compells development of high-value sites. High value sites are typically infill sites near urban infrastructure amenities like Metro stations.
In conclusion, great infrastructure investments and up-zoning for TOD often increase land prices to the point where TOD (and particularly affordable TOD) becomes impossible. However, if infrastructure investments and upzoning are accompanied by a land value return Tax Shift, development is drawn towards the Metro station areas and that development becomes more affordable. Also, by locating more development at existing transit stations, remote locations can be preserved for agriculture, recreation and conservation. And, reducing sprawl benefits both the environment and taxpayers.
Please contact me if you desire more information.
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