The City of Greater Geelong has sent in an interesting submission to the Commonwealth Senate Housing Affordability inquiry. We could hardly have said it any better ourselves:
In the submission, the council says the capital being acquired by the private market when land is rezoned could be captured by the Government.
“Across Australia, communities are creating billions of dollars of value through their rationing of development rights,” the submission says.
“This value, or betterment, is currently flowing into the hands of a lucky few, rather than being effectively captured by the communities who created it. Sound public policy dictates that this inequity be addressed as a matter of urgency.”
The submission goes on to say the public acquisition of land would provide a substantial public funding source that could be used “to meet important housing and urban development objectives”.
Another similar adaption of the principal of capturing economic rent can be see in Community Land Trusts
3 Comments on “Land Value Capture in Geelong?”
This idea is good as far as it goes. Why not extend the idea to capturing the entire value of land. The logic and justice of this is evident when one understands that the entire value of land, 100%, is created by the community as whole. The increase of land values by the act of local agencies giving developers the right to build (called upzoning in the US) is only one tiny part of how the community creates land values. Increasing population and provision of all government services at every level of government result in the increase of land values. Only land values are increased by the community and not the value of improvements on the land. All economists agree; they just don’t talk about it because of the implications.
The implications are that since the community needs a just, stable and sustainable source of income to pay for the services it provides, what more appropriate source of revenue than the value the community creates. That value is land value and only land value in all its forms (land, natural resources, water, the electromagnetic spectrum etc.). The community only creates land value and does not create the value of anything made by people.
The mechanism to do this is already in place. It is called the property tax in the US. All that we have to do is gradually remove property taxes on buildings and increase the tax on land values so that in the end the property tax is a tax on land values only. This will begin to require landowners to pay back to the community the value that the community confers on their land and will remove the disincentive property taxes on improvements impose on human effort and rel capital investment. The result of this will be to end real estate speculation, curb urban sprawl, encourage the rebuilding if cities, increase the supply of housing and thereby decrease its cost. Much more could be said but enough for now.
For those who are already informed this is part of the fundamental idea promulgated by the American, Henry George, over a century ago.
Yes Henry George and Ghandi knew a thng or two..that land is not a commodity to be traded for profit. Land belongs to the community and in the USA and in UK and more recently in Australia, a movement to buid CLTs– Community Land Trusts is progressing nicely. With 240 in the US, a few in UK and none as yet–some in the pipeline-in Australia.
A non profit development group, incorporated and with a board of knowledgible locals, acquires land by purchase, longterm lease or donation. The CLT builds on the land, modest, beautiful, 6/7 star energy rated, close to facilities. The CKT sells the houses, but not the land–this means affordable housing. There is more!
The new home owner must earn under a certain income level,and must sign an agreement to sell the home BACK to the CLT, at a predetermoned price, including a % (possibly 10-15%, as decoded by the CLT Board) of capital gain. This same house can be sold to another low to middle income earner at an affordable price.
See http://www.burlingtonassociates.com for details.
well said Grace!
check this webpage for earthsharing’s CLT links….we recently had an article in Ethical INvestor on CLT’s that I must post and have an upcoming report focusing on the financial modelling behind it. Lets get one happening in Victoria!
K2