Twin Issues: Housing and Taxes

James L. Busey

[Reprinted from GroundSwell, September-October 1991]

ED.NOTE: This editorial, written nearly two decades ago, is here reprinted because it is as timely and germane today as when first published in Equal Rights in the Autumn, 1972, issue. Dr. Busey was then an Associate Editor of ER, and Professor and Chairman of the Faculty of Political Science at the University of Colorado.

Not much has changed in the past 19 years, except that millions more in federal funds have been spent on low-cost housing, while the unaffordability and unavailability crisis in decent housing continues to escalate. However, two rays of sunshine now penetrate this bleak outlook: 1) the National Association of Home Builders, along with others, now cite land costs as being largely responsible for the rising costs of building. And 2) the recent HUD report on Regulatory Barriers to Affordable-Housing recommends local adoption of LVT (fully reported elsewhere in this issue). We proponents of land tax reform have undoubtedly played a role in helping to generate this belated recognition and landmark federal recommendation. Perseverance is paying off.

Almost everyone knows about the notorious Pruitt-Igoe housing project in St. Louis, which after expenditure of some $36 million in taxpayers' money had to be dynamited because it was infested by rats, thieves, rapists and vandals. In many parts of the country, federally sponsored housing projects have not been demolished, but should be. In addition to becoming publicly supported instant slums, they are ridden by corruption and scandal, and have done little or nothing to improve the housing situation of the general population.

A new housing bill, calling for additional expenditures of billions of dollars on new housing projects, is now making its way (more or less) through the labyrinthian channels of Congress. With some variations, the bill is a new verse set to old music - tear up existing low-income housing, pour in federal money, match it with state or local funds, and build low-income housing either in the old location or elsewhere. Old patterns of property taxation continue to prevail; new "owners" are given little if any incentive to improve their properties and no reason to remain after their economic conditions improve or after their "improved" housing so deteriorates that they can no longer endure it.

The solution offered by Barron's, in an editorial of September 11, is to abolish the whole housing program from top to bottom. One can readily sympathize with the frustration of Barron's and of other observers who witness the persistent debacle of public housing.

However, the housing problem persists and intensifies. Martin F. Nolan, columnist for the Scripps Howard newspapers, calls the housing issue "more inflammatory than the war in Vietnam," and a headline says that "Congress sits in housing volcano." News items point out that despite grandiose federal housing programs, there is as much of a housing shortage as ever, and it is getting worse.

Thomas Jefferson is reported to have said that "were we directed from Washington when to sow, and when to reap, we would all soon I want for bread." And Joseph H. Blatford points out in a recent column, "when we tried to federalize every problem, our growing urban centers declined into seething inner cities."

By now we should know that we will not solve the housing problem by undertaking more projects of federally supported urban dislocation, known as "urban renewal." Nor will the housing problem simply go away because we turn the other way and act as though it were non-existent.

Last year, an excellent report by a Subcommittee on Intergovernmental Relations of the United States Senate pointed to our property tax system as a chief cause for many urban development problems, all of which are related to the availability and distribution of housing. Because of heavy taxation of improvements and light taxation of unearned land values which discourage improvements and encourage land speculation, 1) much needed land is held out of use, 2) housing must leapfrog over large areas and be built far from city centers, 3) increased public costs for utilities and transportation add to tax bills, thus further exacerbating the problem of distorted taxation, 4) high land prices encourage construction of high-cost luxury apartments and discourage construction of housing for low-income families, 5) public transportation must cover great distances and is a shambles, and further increases the expenditures of low-income families, and 6) owners are discouraged from rehabilitating existing structures.

It could be added that under present systems of property taxation, which reward speculation and punish improvement, the "urban improvement" of downtown districts at taxpayer expense so enhances speculative land values as to further encourage parasitic landholding arid intensify the vicious cycle we have described.

The solution is not to abandon consideration of the problem, but to try a new approach. That approach is to untax improvements and place heavier tax impositions on unearned increment from land values.

At this moment, a national debate rages over the twin issues of housing and property taxation. As any Georgist knows, the two questions are linked together inextricably. An awakened citizenry may be coming around to the idea that governmental bureaucracy accompanied by massive expenditures cannot solve everything. If aided by a sufficiently loud and persistent voice proposals for radical revision of the property tax may find unexpected public support.

These are times when issues of the day are peculiarly suited to the proposals first advanced by Henry George.