Incentive, Vacant Lots and Your City

Harry Gunnison Brown

[A brief paper distributed by the Public Revenue Education Council, St. Louis, Missouri. Approximate date of publication: 1959]

To tax buildings and other improvements lessens the incentive for construction and improvement in your city. Such taxation is a hindrance to the growth and development of your city.

To tax just the value of the land does not lessen the incentive to construct and improve and is not a hindrance to your city's development. Instead, it removes one of the greatest hindrances to development, the speculative holding of vacant land at prices that keep it vacant, often for many years.

Moorabbin "is the largest of the municipalities which together comprise Greater Melbourne" (Australia). For years "its development lagged behind that of many smaller Melbourne Municipalities" that exempted buildings and taxed land values. "Much land was held vacant for speculation." In 1946, after a vote by taxpayers in its favor, Moorabbin adopted land value taxation. Twelve years later (Aug. 22, 1958) "the Moorabbin Standard-News published a special supplement featuring the growth of the city from obscurity to one of the most important municipalities in Victoria." The Moorabbin Standard-News further stated that it "has established its place as Victoria's fastest growing municipality . . . and the second fastest growing city in Australia." This growth had been in "all of its phases -- population, industry, commerce, housing, parklands and civic amenities."[1]

Does it make sense and is it fair to the majority of our people, for our lawmakers in the United States to pursue a policy as a result of which we have nearly thirteen million vacant lots (not counting parking lots)[2] in our cities, enough to provide housing space for a third or more of our entire population? Has there ever been a strike -- or a series of strikes -- by labor, of such magnitude as this more or less perpetual strike by our owners of vacant land? And while workers hold back their own labor, owners of vacant land hold back from the use of others, a considerable part of the earth! How many of our citizens have ever considered the economic waste involved?

Does it make sense and is it fair to the great majority of our citizens, that they should have to suffer such evils as retardation of saving and of investing in the construction of buildings and other capital, lessened productivity of our economic system, high cost of both rental housing and the acquisition of home ownership, widespread and perpetually recurring deterioration and slums, and perpetual heavy taxation to meet the perpetually recurring costs of government directed slum clearance?

Suppose the amount of land speculatively held out of use, waiting for a price that the holder considers "right," were enough to provide housing space for half of our people, -- or for two thirds of them, or three quarters of them! Would our people suffer that, too, and continue the tax policy that permits it, for the sake of encouraging -- by taxing them lightly -- our speculators in vacant land? For of course such speculative holding makes land costly for those who need it. How could the result be anything else?

To how great an extent should we, by our tax system, discourage capital accumulation, handicap industry, keep down the productivity of labor and, therefore, the wages of tabor, keep the cost of housing high, make home ownership unnecessarily expensive and bring into existence new slums faster than, at great expense to our taxpayers, old slums are cleared, -- to how great an extent should we do all this for the protection of the land speculator, whom the magazine HOUSE & HOME has termed[3] our "public enemy no. 1?"

But, some may ask, if tax policy in the United States is so bad, how can any of our cities and towns retain any industries? And how can they avoid depopulation?

The answer is that this tax policy is followed generally throughout the United States and neighboring countries. In other words, industry and people remain in your city and your area because conditions are equally bad in surrounding areas. To find any considerable area where these conditions can be avoided, they must migrate thousands of miles. If there were a few Moorabbins in the United States, it would soon become clear to serious observers that the rest of our cities and towns were hopelessly handicapped in seeking to attract -- and, often, even to hold -- both industries and people.

We have, indeed, many thousands (perhaps the number runs into six or seven digits?) of holders of -- speculators in -- vacant lots. Each hopes that the others will continue to ask more than they can get, so that buyers will have to come to him. Many vacant lot owners dream of fortunes they might make if a metropolis were to grow around or near to their vacant lots. Because of such hopes and dreams, they are all the more reluctant to let their lots go cheaply or for relatively moderate prices. Hence, though there are indeed millions of vacant lots in existence, relatively few are available except at comparatively high cost. The high price -- and similarly, of course, the high rent -- of vacant lots is obviously a barrier to new industries, a barrier to expansion of industries already present, a barrier to low-cost housing, a barrier to home ownership other than via heavy mortgage indebtedness, a barrier to high productivity of labor and, therefore, to high wages, -- and, along with all this, an encouragement to deterioration and slums.

Is it worth while for us to suffer such evils, lest the effective remedy of land value taxation make land speculation no longer profitable and even make it quite unprofitable? The 1959 legislation of the Pennsylvania General Assembly has given Pennsylvania third-class cities a possible -- and an easy -- way out. Your city council, if you live in such a city, can follow this way whenever they so choose. Why not urge them to do so and encourage them by your support if they do?

NOTES

1. Land & Liberty, London, England (July, 1959), p.121.
   
2. See Chapter entitled "Urban Expansion, Will it Ever Stop," by Dr. M. Mason Gaffney, in U.S. Department of Agriculture Yearbook for 1958, p.521.
   
3. Editorial, June, 1958.