Aid to Housing for the Poor
Elizabeth Read Brown
[Reprinted from The Christian Century, 23
October, 1968]
CHURCH leaders and church members are to be commended for their
efforts to help break down racial prejudice and foster both, local and
national legislation, to the end that Negroes may have equal
opportunity to purchase housing that "will meet their needs.
However, other kinds of effort are called for. This was brought home
to me last spring when Columbia, Missouri, the city where I live, was
preparing to vote on an open housing ordinance. The local ministerial
alliance strongly supported the proposed ordinance; it adopted a
statement expressing its approval and urging church members to vote
Yes "as an eloquent expression of our belief in the Christian
concern for justice and equality for all people." (The proposed
ordinance did not pass.) Meanwhile George Brooks, highly respected
Negro leader in Columbia, pointed out that open housing legislation
can help only that small percentage of Negroes who are financially
able to buy homes in better surroundings. This means that poor
Negroes, and poor whites as well, must continue to live in slums.
The problem is especially disturbing because new slums are constantly
forming. It was nearly ten years ago that Robert C. Albrook of the
Washington Post & Times Herald wrote that "new slums
are growing faster than old sums are removed." And the process
continues undiminished. Still our mayors and other local officials
turn to Washington for help in solving the problem, urging ever
increasing sums for slum clearance, urban redevelopment, subsidization
of housing and rents. They do so without considering the basic
cause-and-effect relations which have sparked the evils they seek to
cure. And the demands they present necessitate ever higher federal
taxes, on poor as well as on rich.
Other than through federal taxation, the only way the problem can be
solved is by resort to free private enterprise. And free private
enterprise is hobbled by our traditional local tax policy. For
instance, when one remodels or improves his home or rental property
the assessor raises the tax assessment. The more rundown a building
becomes, the lower is the tax. It has been stated many times by
experts that the most profitable property is slum property. Why?
Because our tax system takes away incentive to improve buildings. Not
only is the man who builds a new home or improves an old one penalized
for something which is socially desirable, but the owner who lets his
buildings become more slumlike or who holds land out of use is
rewarded for following a policy that is socially undesirable. Our
local tax system is at fault: it penalizes the first owner and puts
temptation in the way of the second.
According to a May 1968 report there were at that time over 14
million vacant lots in American cities. If to that number is added
lots uneconomically used, the total economic waste is seen to be
staggering. Since these lots are mostly held off the market for
speculative purposes, their presence creates the artificially high
prices buyers must pay for lots on which they propose to erect
buildings. As a result we have urban sprawl, which increases the cost
of supplying electricity, gas and such public services as garbage
pickup.
Testimony from the Experts
The high prices city lots often command are primarily the result of
community- and geologically-produced values which the owners have not
created. When a city builds schools or a state builds a road, the lots
in the area increase in value - but not because of anything an
individual has done. A corner lot in the business section of a city is
more valuable than one of similar size in the center of the block. And
both are more valuable than lots on the outskirts or in the
residential sections of the same city. Lots in a seaport city may sell
for a great deal because of the geologically created value.
As quoted in a St. Louis newspaper last February, that city's
comptroller, John H. Poelker, declared that the need for slum
clearance and urban redevelopment exists because of the way we levy
taxes. He advocated taking "the profit out of slums" and
giving "new vigor to the city's redevelopment efforts." He
pointed out that since at present "most of the real estate tax is
on structures ... the more rundown a building is, the smaller the tax."
He referred to "many rotting buildings in premium locations in
the downtown area, where the tax on property in no way reflects the
value of the land." Those structures, he said, "should be
either demolished or substantially improved, but because they are
underassessed the owners can keep them rundown, waiting for a
prospective buyer with a lucrative offer. But if a property owner in
the downtown area or in a mid-city neighborhood improves his property,
he gets a tax increase."
In cooperation with the Milwaukee tax commissioner, Professor Mason
Gaffney of the University of Wisconsin at Milwaukee conducted a
tract-by-tract study for the Urban Land Institute. His research showed
that "it would be profitable for private enterprise,
without any subsidy, to tear down and replace practically all
the obsolete buildings downtown if the property tax were put on the
valuable land they cover" instead of on the buildings.
Robert Maynard Hutchins, former chancellor of the University of
Chicago, has commented: "Today's property tax promotes almost
every unsound public policy you can imagine. It encourages urban
blight, urban sprawl, and land speculation. It thwarts urban
rehabilitation, building investment, home improvement, and orderly
development. The remedy is absurdly simple." He urges removing
the tax on improvements and increasing the tax on land values.
Innovations Elsewhere
A system of taxation like that advocated by Dr. Hutchins has been in
force in the Australian state of Queensland for 78 years and for a
shorter time in New South Wales. In fact, Tasmania is the only
Australian state in which no city or district has taken taxes off
buildings and other improvements and increased them on land. Among the
Australian cities having a land-value tax system are Brisbane and
Greater Sydney. Most of the reports on the success these Australian
experiments have enjoyed have appeared only in British or Australian
publications; hence we in this country have had scant opportunity to
be aware of this challenging way out of our present urban housing
difficulties.
In November 1965 the Australian magazine
Progress reported on the building in South Melbourne prior to
and following the adoption, by vote of the property owners, of a
system of land-value taxation, with buildings and other improvements
tax-exempt. During the first six months after the new system was
adopted the money invested in new building and in expenditures for
alterations and additions to houses was more than twice that of the
average in the preceding six-month periods. Alterations and
improvements on commercial buildings were about 50 per cent greater.
The total value of new office building construction was
four-and-a-half times the previous figure. And the total value
represented in construction permits for industrial buildings more than
tripled.
In New Zealand more than 70 per cent of the cities have adopted this
system. Recently the state of Hawaii took the first step by reducing
taxes on buildings and increasing them on land. In Africa several
cities - among them Johannesburg, Nairobi and Livingstone - have
adopted similar systems.
In Canada the system operates, for instance, in Regina and New
Westminster; the latter city has taxed improvements one-fifth as high
as land for well over 50 years. A recent letter to my husband from a
member of the Canadian Parliament, a highly respected elder statesman,
contained some pertinent passages. I quote:
... From 1919 to 1923 Ontario was ruled by a farmers'
government headed by a knowledgeable premier. That government passed
a permissive act such as is in force in Pennsylvania, and one town,
Fort Erie, took advantage of it. That town witnessed the building of
more houses in {he short year or two in which an easing of house
taxes was in force than had taken place for many years previously.
Then the Tories won a provincial election and at once abolished the
permissive act.
Since then the municipal councils of all our major towns and cities
have been greatly concerned about the shortage of housing
accommodation, have been "fighting" the housing problem
and are oh so sorry for the poor people who live in slums, or
one-room apartments, but never a word about the exemption of
improvements or the taxation of land values.
In Toronto we
have seen building lots multiply in price until a house-of-his-own
is beyond the reach of all but the most favoured of earners, and the
victims of the system say never a word.
We in Canada read of the poor of your country "marching on
Washington" to insist that Congress do something, and not a
word about the only "something" that would bring any real
relief.
In our country, as well as in others which follow our tax system,
local real estate taxes are placed on land, buildings and other
improvements, with the smaller proportion on land. Thus construction
of buildings or improvement of existing ones is discouraged and
desirable land is held speculatively out of use. Result: higher cost
of land, lack of good low-income housing, more slums.
Incredible Oversight
Why have not the National Commission on Civil Disorders and other
groups looking into the causes of riots and the plight of our cities
pointed out the enormous potential in the kind of tax reform that has
for generations been tested in a large part of Australia and in
several other countries? When the effects on those towns and cities
which follow our tax system have been compared with the effects on
cities and towns which have changed to taxing land and exempting
improvements, it has been shown repeatedly that in the latter areas
(1) less land is held out of use, (2) industries are attracted, (3)
there is more building, (4) job opportunities are greater, (5) it is
easier to become a homeowner. All of these are results achieved
without subsidies.
What initial steps can be taken if we desire to enjoy such benefits
in the United States? Let me propose three: (i) If it is insisted that
there must be subsidies in order to achieve quick results and provide
adequate low-income housing, Congress could make the subsidies for any
city conditional on reform of its local tax policy. Then such
subsidization would not have to be continued endlessly. (2) Congress
could put this tax reform into effect in the District of Columbia as a
"pilot project" to demonstrate to a limited degree what
incentive taxation can do. (With Congress taking the lead, local
governments would have a stronger motive to reform their tax system in
this direction, and in cases where the state constitution would have
to be amended, it could be done more easily.) (3) If religious leaders
and church members come to realize that here is a way - termed by one
congressman "the most realistic approach to the revitalization of
our cities" - to one of the demands of the Poor People's
Campaign, they could urge their congressmen to take the action
necessary to implement the proposals. To this end, education and
discussion are vital.
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