The Essential Reform:
Land Value Taxation
In Theory and Practice
C. H. Chomley and R. L. Outhwaite
[Part 8 of 15]
A sufficiently high tax on land values, through the forcing into use
of land now held for higher prices, would in itself have an immediate
stimulating effect upon the building trade; coupled with the remission
of rates that now fall upon structures, its effect would be little
short of magical in transforming conditions. To see that this would be
so we have to take into consideration present circumstances. Building
is not retarded alone by the holding up of land around the cities, for
in the villages as well the people are to be found herding in hovels
surrounded by looked-up acres, and with regard to the small towns the
same conditions pr4wail. Wherever the people are gathered we find them
herded together whilst the land around is held idle, the owners
waiting for fresh increments of value to accrue as demand becomes ever
more insistent owing to the capacity of the population to increase
even under the most unfavourable conditions. When the land-owner is
approached, he will not sell his land at its present use value, but
requires a price which he knows it will fetch in the years to come
when the needs of the people for it shall have become even greater,
and State or municipal expenditure shall have still further enhanced
its value. He is content, in the words of John Stuart Mill, "to
grow rich, as it were, in his sleep." To this cause is primarily
duo the appalling state of affairs that is revealed by the statistics
of what is termed "the housing problem," but which is in
reality the land problem.
Let the reader, if he can, realise the significance of the following
figures: The total area of England and Wales is 37 million acres, and
in 1901 the population was 32-1/2 millions. Of the total population no
fewer than 25 millions are living on 200,000 acres, and of these 25
millions 13 are living in 2,600,000 tenements of four rooms or less.
Each of these tenements, including the air-space around it, occupies
on a liberal calculation 1000 square feet. Consequently the 13
millions together occupy about 60,000 acres, leaving 140,000 acres for
the other 12 millions, who live in country boroughs and urban
districts: --
"That is to say, two-fifths of the population of
England and Wales are crowded together on just over one
eight-hundredth part of the total land of the country, another
two-fifths occupy a little more than one two-hundred-and-fiftieth
part, and the remaining fifth is scattered over the rest of the
land."
These figures and the quotation are taken from an admirable book on "Practical
Housing," by Mr. J. S. Nettlefold, of Birmingham.
Now for this evil the taxation of land values will provide a swift
and potent remedy. If the landholder has to pay the same tax or rate
on his idle land as he would have to pay were it put to its highest
possible use, it is certain that he will put it to that use or part
with it as ruinous to hold. For no longer will it be profitable to
hold it for a rise, since the amount of the yearly levy will be more
than the yearly increase in land value, and with every increase in
land value the amount payable under a specific rate or tax will rise
also. The impossibility of the land-owners maintaining their present
demands can be realised by taking an illustration provided by the Duke
of Northumberland, who recently demanded and received from the county
council at the rate of £900 an acre for a piece of land for a
school site, part of an estate in extent about 4000 acres held for a
rise close to Newcastle. On the Duke's valuation this area, now let
for grazing, is worth £3,600,000. A tax of 2d. in the pound on
the capital value would cause the Duke to pay £30,000 a year in
respect of land from which he is probably drawing not more than £4000
a year in grazing rents; at the New Zealand rate of 2 per cent. he
would pay £72,000. It is safe to say he would not hold it long
under such conditions when the levy would be falling upon his 180,000
acres. There is a demand for this particular land, for it is locking
in the extension of Newcastle in one direction. On the property is a
colliery from which the Duke draws a huge revenue in royalties. When
the colliery company applied to him for land on which to erect
cottages for the miners, refused to sell, and land had to be purchased
on an estate about two miles away from the pit. So while to-day in
every district of the Kingdom land required for building is being held
up, as soon as the unimproved land values tax fell upon it the
land-owners would be tumbling over one another to get rid of it, or be
hastening to utilise it. Land-owners would be seeking buyers in every
direction, and there would be a slump in artificial land values.
Immediately that took place, the opportunity of the builder would come
to meet the existent demand.
With cheap land offering, with no rate to pay on any structure that
might be erected upon it, there would be no artificial curtailment in
the production buildings as at present when they are rated up to 10s.
in the pound on their rental value. The depression in the building
trade would then vanish, for it is an artificial one, seeing that the
need for buildings is greater than the supply, and that the need
cannot be met because an artificial enhancement of the cost of the
commodity places it out the reach of those who require it. That this
no mere theory, but a principle established by actual fact, can be
seen from the results of the shifting of rates on to unimproved land
values in Australasia, a detailed account of which appears in a
subsequent chapter. It is sufficient here to state that the theory now
being advanced has been fully borne out in practice.
But it is not only vacant land which is being held out of use that
the taxation or rating of land values would affect. Perhaps the most
striking result, so far as the cities are concerned, would be seen in
the demolition of buildings not representing the best use to which the
land on which they are erected could be put, and the substitution of
appropriate ones. Let us take, in the first instance, the case of
dwellings. It has been calculated that in London alone there are
50,000 empty houses. This is not because there is no demand for
houses, as the statistics of overcrowding clearly indicate. These
houses are obsolete, and have been deserted for this reason by the
class that formerly tenanted them. In the poorer quarters they have
been left because the workers, through the construction of the trams,
can find better provision for their needs further afield. In the
better districts the insanitary house with sunless basement rooms and
lack of modern conveniences is shunned. In almost every London suburb
hundreds of empty houses of ancient date are to be found, often
occupying the best sites, while close by modern houses are being
erected and are being let before completion. Now under the present
system these empty houses contribute nothing to the rates, the whole
burden of which is consequently thrown upon such as are in occupation.
Those who have built houses to meet demand have the commodity they
have produced subjected to an annual tax, from the fund thus provided
the municipality finances those services which maintain the value of
land on which the empty houses stand. Some receive services and pay
nothing for them, and consequently others who receive services have to
pay too much for them. The substitution of the land values rate or tax
for the present system would alter this state of affairs. The owners
of the 50,000 empty houses, when called upon to pay precisely as much
whether they were occupied or not, would quickly lower the rent
demanded for them, or pull them down and erect others, or part with
the land to those who would. The fact that the land values tax or rate
was driving vacant land into use in all directions giving people the
opportunity to obtain houses accordance with their requirements would
further compel the demolition of obsolete structures in favour of more
suitable ones. The slums that have resisted all palliatives would
vanish before the economic forces thus set up.
So too as regards business premises, the existence of the miserably
inadequate structures that disgrace almost every great thoroughfare of
every great city or town in the Kingdom would be cut short by the rate
or tax on land values, for such would fall with crushing effect upon
ground landlords holding some of the most valuable land in the world
out of full use.
On the occasion of a late visit to London, the Hon. Lawson Purdy, the
Chairman of the Department of Taxes and Assessments for New York,
expressed the opinion that were rates levied on actual capital value
in London as in New York, nearly all Regent Street would be pulled
down and a large part of the Strand. As the great ground landlords of
the cities would be compelled to put their land to the fullest
possible use, from this circumstance would result relief from the
tyranny now inflicted upon occupants under a building lease. At
present they erect premises which are subject to confiscation after a
term of years by the ground landlord and to a periodic readjustment of
rent. The man who has created a successful business in one particular
spot dare not risk its transfer to another, even were that possible,
which it is not, for all available sites may be in the hands of one
monopolist. Consequently he has to enter into a bargain with, as it
were, revolver at his head, and his one object must be to limit to
barest necessity the capital expenditure that will some day be subject
to confiscation. But when the ground landlord finds himself subject to
a tax on the capital value of his land, he will be willing to forego
the right of confiscation of capital at some future date in order that
the maximum of return may be obtainable from the at present. He too,
as other men holding land of use or full use, will then be driven to
seek users, and the latter will be in a far better position than at
present to bargain.
The ground landlord, paying for services now on the occupier, will
require his land put to its maximum use and be seeking the men who
want it. The land-user, finding the ground landlord him in a spirit of
enforced reasonableness, and the State taking burdens off capital
expenditure the shape of buildings, will be in a position to obtain a
security for his enterprise against confiscation that he lacks at
present. Inadequate buildings will then be demolished, and ones
representing the fullest use to which the site can be put will be
substituted. From the operation of these causes the city, no less than
the suburbs, will be transformed. Slum dwellings will vanish at the
centre, and cheap houses spring into existence on the outskirts.
Finally, it may be pointed out that the general effect of the land
values tax, in giving those desirous of being land-users the
opportunity to employ themselves, and consequently in raising wages;
would be to greatly stimulate the production of houses making
effective the potential demand. This would be particularly the case as
regards the rural districts. Nowhere is the necessity for the building
of cottages more urgent than in the villages, nowhere does worse
overcrowding exist. This is largely due to the fact that, owing to his
being access to the soil, the wage of the labourer has been driven
down to such a low point that he cannot afford to pay a rent that will
give a return upon capital expenditure. With a wage of from 12s. to
14s. a week the labourer cannot afford pay more than 2s. a week for a
cottage. With a higher wage, with land made available for him to
labour upon and for the erection of cottages, building would proceed
apace upon the countryside. So it may be claimed that by a simple
readjustment of taxation the housing problem can be solved, and
incidentally an industry, which at present is contributing the
greatest quota to the ranks of the unemployed, can be stimulated to an
extraordinary degree.
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