LVT and LID

[Chapter 7]

JOCK
THANKS FOR YOUR RESPONSES. MINE TO YOURS ARE IN THE TEXT IN BLOCK CAPITALS.
I HAVE TRIED TO EXPLAIN FURTHER WHY I FEEL LVT, IN THE CURRENT PLANNING
CONTEXT, IS MUDDLED, AND AT ODDS WITH LOW IMPACT DEVELOPMENT AND THE
INTERESTS THAT TLIO TRIES TO PUT FORWARD.


SIMON

>
> 
> 
> From: Jock Coats <jock.coats at oxfordshirecommunitylandtrusts.org.uk>
> Date: Thursday, December 9, 2004 12:04 PM
> To: diggers350 at yahoogroups.com
> Subject: Re: [diggers350] Re: Coats, Cahill and LVT
> 
> 
> On 9 Dec 2004, at 01:40, Chapter 7 wrote:
> 
>> What the 70 per cent own is, in terms of its value, about 2 per cent
>> land ,
>> about 48 percent bricks and mortar, and about 50 per cent planning
>> permission Ð and it is the planning permission they pay heavily for,
>> (until
>> they have paid off their mortgage when they can then proceed to make
>> somebody else pay through the nose for it).
> 
> Here's where we diverge already!  All land value is a human construct.
> A combination of various different elements depending on its
> use/useability.  The most fertile land on the planet, if it's too far
> away from human habitation to enable its yield to travel to market
> before it goes off is practically worthless, except as subsistance
> land.
> 
> But put in a road, or a railroad, generally something done by a
> community of people, and it suddenly becomes viable.

YES THIS IS CLASSIC GEORGIST THEORY, AND IT IS CORRECT AS FAR AS IT GOES,
BUT NOT SUFFICIENT TO EXPLAIN ALL PROPERTY VALUES. AN ACRE  IN THE COUNTRY
IN SOUTHERN ENGLAND, LOST UP A COUNTRY TRACK IS WORTH £3000 OR SO. WITH
PLANNING PERMISSION FOR A HOUSE IT BECOMES WORTH ABOUT £120,000. THIS IS
NOTHING TO DO WITH THE PROXIMITY OF RAILROADS  OR SCHOOLS OR ANYTHING LIKE
THAT (WELL THEY MAY AFFECT THE PRICE BY A FEW THOUSAND) BUT ALMOST ENTIRELY
TO DO WITH WHETHER THE PROPERTY HAS PLANNING PERMISSION. THE ADDED VALUE HAS
NOT BEEN GIVEN BY THE COMMUNITY PROVIDING IMPROVEMENTS IN INFRASTRUCTURE
ETC, BUT BY AN ARBITRARY DECISION TO ALLOW DEVELOPMENT ON THIS PLOT AND NOT
OTHERS. THIS COMPLETELY DISTORTS THE DYNAMIC OF GEORGE'S THEORY.
> 
> So it is with all types of land.  As that hideous television program
> says, "Location, location, location".  Under private ownership of land
> every "location" is a monopoly.  And so has a scarcity value, depending
> on how much other people would like to occupy that particular patch
> instead of the current owner.  And nearly all the desirability of
> location is produced by nature itself (views or perhaps mineral
> resource for example) or by human interaction.  But without the latter
> whatever nature has provided will not be exploited.
> 
>> The Land Tax arguments are confused by the fact that most of the
>> value of
>> most properties lies in the permitted and actual use, rather than in
>> the
>> land itself Ð if you want to capture that value and tax it, then  it
>> is a
>> development tax, not a land tax that you are looking at.
> 
> On the contrary, it's a "non-development" tax.  It's not "confused by"
> but "dependent on" the fact that most of the value of most properties
> lies in the combined efforts of previous owners and the community
> around them (for centuries perhaps), or, in your words, "permitted and
> actual use", and seeks to capture the value of that community's
> previous and current contribution to the property value.

NO THE VALUE OF A HOUSE PLOT IN THE COUNTRY IS, AS I EXPLAINED ABOVE NOT
DEPENDENT UPON THE COMBINED EFFORTS OF PREVIOUS OWNERS AND THE COMMUNITY ‹
IN FACT, TO A LARGE EXTENT, IT IS THE DISTANCE FROM THE SHEER AWFULNESS OF
THESE COMBINED EFFORTS THAT MAKES THE SITE ATTRACTIVE ‹ BUT ON THE FACT THAT
FOR ARBITRARY, AND SOMETIMES QUITE DODGY REASONS, IT HAPPENS TO HAVE BEEN
GIVEN PLANNING PERMISSION. TAKE AWAY THE PLANNING PERMISSION, THE COMBINED
EFFORTS STILL REMAIN, BUT THE VALUE HAS EVAP[ORATED.
> 
> I think, perhaps, you are making the same mistake as I did until about
> a fortnight ago when Dave Wetzel corrected me, in that you are
> concentrating on a tangible, physical definition of the word "land".
> That's all well and good, but in the phrase "Land Value Tax" we're
> talking about "land" in the economic sense of being the third leg of
> production - labour, capital and land (where land means "raw material"
> of any kind, a natural resource we exploit for different ends - it
> could be half an acre of dirt and soil with or without planning
> permission or zoning restrictions, or it could be a bundle of
> electromagnetic frequencies as was the case in the infamous "3G" phone
> auction).

I AGREE WITH THIS, AND THAT IS WHY THEY SHOULD BE CALLED RESOURCE OR RAW
MATERIAL TAXES , NOT LAND VALUE TAXES;  THE TERM LAND VALUE, NOWADAYS, IS
AMBIGUOUS, BECAUSE PROPERTY VALUE MAY OR MAY NOT INCLUDE PLANNING
PERMISSION, AND THIS MAKES AN ENORMOUS DIFFERENCE, OVER AND ABOVE THE VALUE
CREATED BY "COMBINED EFFORTS" ‹ ESPECIALLY IN THE COUNTRYSIDE WHERE LAND IS
NOT ZONED OR ALLOCATED
> 
> 
>> Development taxes have their points, but when used in the past in the
>> UK
>> they were abandoned because they discouraged development Ð while,
>> ironically, one of the objects of Henry George's land tax was to
>> encourage
>> development.
> 
> LVT does encourage development.  The community, through its various
> "consensual" planning policy processes, puts an "optimum" use on a
> particular patch of land.  Perhaps you've got, as we have in Oxford, a
> builders' merchant's yard squeezed in between a primary retail frontage
> and the residential streets behind.  This type of
> commercial/semi-industrial use is deemed in inappropriate for the area
> (it needs big trucks blocking up main and side roads to get into it,
> draws in large vehicles to collect whatever people collect from a
> builders' yard and is generally just "out of place" in an otherwise
> residential area).  It is zoned for residential (note:  not planning
> permission per se, just an expression of what we would prefer this area
> to be used for if it came up for redevelopment).  The price per acre on
> residential land is higher than for a builders' merchant yard,
> reflecting a more appropriate fit with the community activities
> surrounding it, and so the taxable value of that land would also be
> higher.
> 
> So all the while that builders' merchant hangs onto it as a yard, he's
> going to be paying more tax than he would if he were to relocate to a
> site determined by the community again to be appropriate for his type
> of business.  That's a business cost - and moreover, one that a
> competitor business offering the same service but from a yard in a
> place the community determines is appropriate for such an activity is
> not going to be hit by.

> So the incentive is to do what the local plan wants and the tax regime
> indicates - change your existing yard to residential where the tax due
> per unit on that new estate will be substantially similar to
> neighbouring properties and so people will buy into them at no
> comparative disadvantage.

YES, I KNOW ALL THIS, BUT THE POINT KATE BARKER MAKES AND THAT I KEEP HAVING
TO REPEAT  IS THAT ALTHOUGH THE LAND IS ALLOCATED FOR RESIDENCE, THE OWNER
CANNOT PUT RESIDENCES ON IT UNLESS HE GETS PLANNING PERMISSION, WHICH THE
LOCAL AUTHORITY CAN REFUSE. IT IS  UNJUST TO TAX SOMEBODY FOR NOT DOING
SOMETHING WHICH THEY HAVE BEEN FORBIDDEN TO DO. THEREFORE YOU CAN ONLY
JUSTLY APPLY THE TAX WHEN PLANNING PERMISSSION HAS BEEN GRANTED. THIS IS IN
EFFECT A DEVELOPMENT TAX, WHICH IN UK EXPERIENCE HAS BEEN FOUND TO DETER
PEOPLE FROM APPLYING FOR PERMISSION AND HENCE DEVELOPMENTS FROM COMING
FORWARD.

OF COURSE IF YOU TAX PEOPLE WHO HAVE GOT FULL PLANNING PERMISSION, BUT FAIL
TO CARRY IT OUT, THAT WOULD ENCOURAGE DEVELOPMENT.


> ALSO THERE IS  A FURTHER PROBLEM WITH TAXING LAND TO ITS MOST PROFITABLE
ALLOCATED USE ‹ THAT IT PUTS PRESSURE ON THE OWNER TO CARRY OUT THAT USE.
THIS MEANS IN EFFECT THAT NON-PROFITABLE USES IN AREAS ALLOCATED FOR
RESIDENTIAL, SUCH AS COMMUNITY CENTRES, ALLOTMENTS ETC, ARE LIKELY TO BE
TAXED OUT OF EXISTENCE ‹ AND THOSE ARE PRECISELY THE SORT OF USES THAT THE
LAND IS OURS IS DESIGNED TO DEFEND
> 
>> 
>> I haven't quite got my head round all this yet, but as far as I can
>> see,  a
>> main flaw in Land Value Taxation, is that it isn't really  a land tax
>> at
>> all, but an "improvement" or development tax, because that is where
>> the
>> value is. This might have been OK back in the days when there was no
>> such
>> thing as planning permission, and land could be assessed as being
>> worth a
>> given amount according to its productivity, proximity to town centres
>> and
>> railroads etc. Applying a tax on undeveloped land in George's day
>> would have
>> provided an incentive for it to be used to its full development
>> potential.
> 
> Still does.


> 
>> But nowadays most land derives most of its value from planning
>> permission,
> 
> No it doesn't.  As above.  The difference between a three bedroom home
> in Thamesmead and a three bedroom home in Holland Park is not planning
> permission on the land but the cumulative effect of community
> interactions with and around that land.

YES, IF YOU DEFINE WHAT IS MOSTLY SHEER SNOBBERY AS COMMUNITY INTERACTIONS
BUT I SAID "MOST" NOT "ALL". THE DIFFERENCE BETWEEN THE  PLOT JUST DOWN THE
ROAD FROM ME WHICH HAS PLANNING PERMISSION, AND THE FIELD NEXT DOOR TO IT,
WHICH HASN'T, IS £100,000, AND THAT IS SOLELY AND UNIQUELY DUE TO PLANNING
PERMISSION, ACCORDED BY THE STATE.
> 

> 
> On the second point in that sentence, exactly - the state gives out
> planning permission.  Again, in Oxford, we have this arguement at the
> moment about whether to build thousands of new homes on a few hundred
> acres outside the edge of the city in green belt owned by Magdalen and
> Brasenose Colleges and Thames Water (bad examples I know, as there's a
> real cogent argument in the case of these landowners to say that their
> land really is a part of the common wealth already - but they don't
> acknowledge that of course!).  It is currently low value agricultural
> use - perhaps £3,000 per acre.  The mere act of the state rezoning it
> to housing will give the current landowner a vast, unearned, potential
> profit - perhaps £3,000,000 per acre.
> 
> At the same time if they were to fulfill that planning permission and
> build housing, the state is going to have increased costs - new
> schools, roads and other infrastructure, together with, potentially,
> the hassle of "regenerating" areas that people move out of in order to
> move into the new estate.  Why should that not come out of the profit
> the state has created for the landowner?

I TOTALLY AGREE THAT THE £3,000,000 PROFIT SHOULD BE PERCEIVED BY THE
COMMUNITY.BUT ANY TAX DESIGNED TO MEET THE COSTS OF FULFILLING THE PLANNING
PERMISSION IS NOT A LAND TAX IT IS A DEVELOPMENT TAX, (WHICH CURRENTLY IS
PERCEIVED THROUGH PLANNING OBLIGATIONS). ONCE AGAIN, THE EXPERIENCE WITH
DEVELOPMENT TAXES IS THAT THEY DETER DEVELOPMENT, FOR OBVIOUS REASONS. THIS
IS DIFFERENT FROM A CLASSIC GEORGIST TAX ON UNDEVELOPED LAND, WHICH AS YOU
SAY PROVIDES AN INCENTIVE FOR DEVELOPMENT; BUT WHICH IS CONTENTIOUS WHILE
THE STATE HAS THE POWER TO REFUSE PLANNING PERMISSION.
> 
> 
>> If you tax planning permission,
>> then you discourage development, and you will get less homes, not
>> more.
>> That's why levies are currently obtained through negotiations about
>> 106
>> agreements, rather than a blanket tax.
>> 
>> If on the other hand you tax allocated land which hasn't got
>> permission,
>> then you tax people who have been refused planning permission, which
>> is
>> blatantly unfair because it is the state which grants pp and exacts
>> the tax,
>> thus giving the state an incentive for refusing planning permission.
> 
> Nope.  The state will get the tax on my builder's yard example whether
> Travis Perkins or whoever still occupy it as a builders yard or whether
> Berkeleys build some houses on it.  The difference is that compared
> with the revenue from the builders' yard business, the tax may be
> punitive, but divided out between the 200 households that land may
> accommodate as their only tax burden, it will be affordable and
> comparable to what others in the local market are also paying.

YES, BUT THE POINT IS THAT THE STATE CAN REFUSE PLANNING PERMISSION TO THE
BUILDER ‹ SOMETIMES THIS CAN GO ON FOR YEARS ‹ IN WHICH CASE IT IS NOT THE
BUILDERS' FAULT THAT THE SITE ISN'T BEING REDEVELOPED, SO WHY SHOULD HE BE
TAXED ON IT?

FURTHERMORE IT GIVES THE STATE THE POWER TO TAX LOW VALUE USES OUT OF
EXISTENCE: GOT A PROBLEM WITH UPPITY FOLK IN A COMMUNITY CENTRE, OR A GYPSY
SITE, OR A NICE LITTLE WILDLIFE HAVEN WHERE UNDESIRABLES HANG OUT? JUST
REALLOCATE IT AS HOUSING AND TAX THE BASTARDS SO THEY HAVE TO SELL IT TO A
HOUSING DEVELOPER.  IF THE TAX IS SET HIGH ENOUGH TO BE EFFECTIVE, IT WOULD
BE TOTALLY PUNITIVE FOR LOW VALUE USES.

INCIDENTALLY, THIS ALREADY HAPPENS WHEN A SITE  RENTED BY THE OCCUPIERS IS
REALLOCATED FOR, SAY HOUSING OR OFFICES, BECAUSE IT GIVES THE OWNERS AN
INCENTIVE TO REDEVELOP AND THEY EVICT THE OCCUPIERS; THE TAX YOU PROPOSE
WOULD ALLOW THE LOCAL AUTHORITY TO DO THIS WHEN THE SITE WAS OWNED BY THE
OCCUPIERS.

SIMILARLY, IF YOU WANTED TO FORCE ALL HIPPIES AND MISFITS OUT OF THE
COUNTRYSIDE AND BACK INTO THE TOWNS WITH THE PLEBS WHERE THEY BELONG, THEN
WHAT BETTER THAN TO SLAM ON A MASSIVE DEVELOPMENT TAX (SORRY "LAND TAX") ON
ANY HOME THAT ACQUIRED PLANNING PERMISSION TO ACCOUNT FOR THAT £100,000 HIKE
IN VALUE? 
> 
> 
>> Personally, I'm not wild about improvement taxes and development
>> taxes. I
>> tend to prefer resources taxes which tax people for using more than
>> their
>> fair of the earths resources Ð and that includes land, petrol etc but
>> not
>> "improvement", or planning permission. Resource taxes discourage
>> unsustainable development, but they don't discourage sustainable
>> development.
> 
> LVT is a resource use tax.  Don't be confused by the word "land".  Most
> LVT campaigners recognise this - and refer to things like the "3G
> auction" as a small one-time example of a "land tax".  Some even call
> the system simply "resource based taxation".

WHAT DO YOU MEAN BY DON'T BE CONFUSED BY THE WORD LAND? THE MAIN POINT OF
WHAT I'M SAYING IS THAT THE USE OF THE WORD LAND IS INHERENTLY CONFUSING
BECAUSE IT MUDDLES TWO DIFFERENT THINGS: A RESOURCE TAX ON IMPROVEMENTS TO
THE POTENTIAL VALUE OF LAND, AND A DEVELOPMENT TAX CONTINGENT ON GETTING
PLANNING PERMISSION. THIS IS PARTICULARLY CONFUSING IN THE COUNTRYSIDE,
WHERE THE TWO THINGS ARE COMPLETELY DIFFERENT.

IF YOU WANT TO TACKLE THE PROBLEM OF THE £3,000,000 WINDFALL PROFITS FROM
OBTAINING PERMISSION, THEN YOU NEED TO START LOOKING AT WHY SUCH EXCESSIVE
PROFITS ARISE. THEY ARE NOT SIMPLY A REFLECTION OF INHERENT VALUES CREATED
BY COMMUNITY EFFORT. THEY ARE A RESULT OF SCARCITY IMPOSED BY THE PLANNING
SYSTEM, AND HENCE REFLECT  POLITICAL CHOICES.

MY OWN VIEW AND THE VIEW FOR WHICH CHAPTER 7 CAMPAIGNS IS AS FOLLOWS:

RATHER THAN TAXING THESE PROFITS, IT WOULD BE BETTER TO DO AWAY WITH THEM BY
ELIMINATING THE ARTIFICIAL SCARCITY. SCARCITY CAN BE REDUCED BY INTRODUCING
A PLANNING SYSTEM WHICH GIVES PERMISSION, NOT ON THE BASIS OF LOCATION, BUT
ACCORDING TO THE SUSTAINABILITY AND IMPACT OF THE PROPOSED DEVELOPMENT. IE
YOU CAN BUILD ANYWHERE YOU LIKE AS LONG AS WHAT YOU BUILD DOESN'T CAUSE HARM
(AS DEFINED BY THE COMMUNITY THROUGH THE PLANNING SYSTEM).

UNDER THIS SORT OF REGIME  THE VALUE OF LAND  REFLECTS THE ABILITY OF THE
LOCATION, (A) TO BENEFIT FROM COMMUNITY PROVISION AND (B) TO PROVIDE A SITE
WHERE A DEVELOPMENT COULD BE CONSTRUCTED WITHOUT CAUSING ":HARM".

THIS MEANS THAT LAND BECOMES AFFORDABLE FOR HIGHLY LOW IMPACT DEVELOPMENTS;
AND ALSO THAT THE MONETARY VALUE OF LAND IS AN ACCURATE REFLECTION OF ITS
REAL VALUE AND   IS NOT  STILTED BY THE CURRENT ABILITY OF THE STATE TO
CONFER OR REFUSE PLANNING PERMISSION ACCORDING TO LOCATION, WHIM AND VESTED
INTEREST.

THIS IS THE CRUX OF THE THEORY OF LOW IMPACT DEVELOPMENT
> 
> --
> Jock Coats, Oxfordshire Community Land Trusts
> c/o Wardens' Lodgings, J1e Morrell Hall, OXFORD OX3 0TU
> h: +44 1865 485019 w: +44 1865 483353 m: +44 7769 695767
> e: jock.coats at oxfordshirecommunitylandtrusts.org.uk
> w: http://www.oxfordshirecommunitylandtrusts.org.uk/
> 
>