Wealth and Want
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Walt Rybeck

The Uncertain Future of the Metropolis
The single element that makes me apprehensive about the future of our cities is our land system. Tentacles of our misguided land policies are choking almost every vital aspect of metropolitan life. This is doubly worrisome, because the full dimensions of the land problem have barely surfaced in the public consciousness. To put it in the vernacular, most of us don't know what's eating us.

We have scarcely begun to identify the causes of today's city land problems. This is not to denigrate the legions of good folk -- officials and citizens alike -- who are trying desperately to cope with the daily disasters. But without a better notion of what is producing these disasters, we are unlikely to stem the flood.

A major problem, certainly, is our distorted land system that operates around the clock and around the calendar, and under the full sanction of the law. It rips off the poor, saps small business, and deprives municipalities of their rightful revenue.

The people as a whole create land values, not only by their presence, but also through participation in government, as taxpayers. Schools, firehouses, streets, police, water lines -- the whole gamut of public works and services that enhance a neighborhood are converted into higher land values. The taxpayers of the entire country, through federal aid for our multi-billion-dollar Metrorail project, have been boosting Washington, D.C. land values mightily.

Not all land values are manmade. Inherent qualities also give land special advantages: fertile soils in farming districts, scenic views in residential areas, subsurface riches of coal, oil, and minerals. None of us, as landlords, tenants, or governments, can lay claim to having created these values. The people who have been drawing up an international law of the Seas have characterized these natural endowments as "the common heritage of mankind", where no people, individually or collectively, produce these land values, it is difficult to argue with the conclusion that they belong to all people equally.

If the institution of private property has a sound foundation, and I believe it does, then it rests on the principle that people have a right to reap what they sow, to retain for themselves what they themselves produce or earn. Land values, produced by all of society, and by nature, do not conform to this prescription. ...

Decade after decade, billions of dollars in urban land values are being siphoned off by a narrowing class that has no ethical or economic claim to them. To be outraged when a few ghetto dwellers, in an occasional frenzy of despair, engage in looting on a relatively miniscule scale, but to remain indifferent to this massive, wholesale looting, is worse than hypocritical. It is to ignore a catastrophic social maladjustment, more severe, I believe, than anything the U.S. has experienced since slavery. ...

But I sense that we are drifting rapidly towards a landlord-dominated society. ...

Before that happens, the opportunity awaits to see whether a reasonably free economy can still be made to work. Unless we tackle the land question, and the looting of America, that game may be forfeited.

The future of the metropolis is uncertain. The choice is ours. We can intervene in the way society is now headed, to preserve the American dream. Or, we can continue along the present path and await the American nightmare.  Read the whole article

Have We Forgotten The Foundation?

What Affordable Housing Problem?
Let me say emphatically that America has NO AFFORDABLE HOUSING PROBLEM. By the time I finish my talk, I hope this startling remark (to help you wake up this early in the morning) will not appear as ridiculous as it may seem to you at first glance.

Like all creatures -- goldfinches, squirrels, butterflies, cicadas -- we humans are squatters on this planet. We all need a part of earth for shelter, nourishment, a work site and a place to raise the next generation. Otherwise we perish. ...

While a select few squat in luxury, those at the bottom of the heap haven't a square inch of space to call their own. Carrying bags of everything they possess, the homeless squat on sidewalks, under bridges, in condemned buildings, and in public parks (unless police chase them away), often sitting ducks for predators. ...

In the 1980s, Washington, D.C., was concerned about its growing army of homeless. At that time I found there were 8,000 boarded-up dwelling units in our Nation's Capital -- more than enough to accommodate some 5,000 street people. I also found there were 11,500 privately owned vacant lots in the District of Columbia, mostly zoned for and suitable for homes or apartments. Decent housing on these sites held in cold storage would have provided an alternative for the many low-income families squatting in places that were overcrowded, overpriced, overrun with vermin and overloaded with safety hazards.

These issues spurred my research described in a 1988 report, "Affordable Housing -- A Missing Link." Evidence from the Census Bureau, Bureau of Labor Statistics and other sources over a 30-year period revealed the following average cost increases of items that go into the building and maintenance of housing:
  • Wages of general building construction workers rose 14 percent a year.
  • Wages of special trade construction workers rose 11 percent a year.
  • Construction material costs rose 11.5 percent a year.
  • Combined wage-materials-managerial costs for residential building rose 12.5 percent a year.
  • Fuel and utility costs for housing rose 13.8 percent a year. All of these costs closely tracked the Consumer Price Index which, over these same 30 years, rose by 12 percent a year. According to those figures, housing prices and housing rents apparently were held in check
Why do those statistics not seem to jibe with what you have been told, seen with your own eyes, and felt in your own pocketbooks?
  • How to explain that, during the last decade of my research period, U.S. households with serious housing problems increased from 19 to 24 millions?
  • What caused the portion of renters paying more than 35 percent of their income for housing doubled from 21 to 41 percent during the last two decades of the study period?
  • Why were over 2.4 million renters paying 60 percent or more of their income for rent?
The answers would be obvious except that, so far, I have not mentioned what happened to the price of the land that housing sits on. Many of those who talk and write about housing conveniently overlook the fact that housing does not exist in mid air but is attached to the land, and that the price of this land has gone through the stratosphere.

In contrast to those 11- to 14-percent annual increases in housing-related costs, residential land values nationwide rose almost 80 percent a year, or almost 2000 percent over those three decades.

A close friend in Bethesda bought a house and lot there 40 years ago for $20,000. Two months ago he sold the property for a cool half million. That 2400 percent increase was entirely land value. The buyer immediately demolished the house to put up a larger one, so he clearly paid half a million for the location value -- the land value -- alone.

Officials, civic leaders and commentators who bemoan the lack of affordable housing nevertheless applaud each rise in real estate values as a sign of prosperity. Seeing their own assets multiply through no effort of their own apparently makes them forget the teachers, firemen, police and low-income people who are boxed out of a place to squat in their cities and neighborhoods.

... Many of our Founding Fathers, George Washington included, had amassed huge estates. But the property tax induced them to sell off excess lands they were not using. ...

One of the many virtues of a tax on land values is that it can be introduced gradually. Cities that take this incremental approach report that homeowners-voters-taxpayers hardly notice the change. What's important in modernizing your taxation is not the speed of change but the direction you choose. If you keep the present tax system with its disincentives for compact and wholesome growth, you will experience the treadmill effect that has been so familiar in so-called urban and housing "solutions." You will have to keep running faster and faster with patchwork remedies to keep from sliding backward.

Revising taxes as proposed here will not end the need for housing subsidies, at least not in the short run, but it will do three things that should greatly reduce subsidies.
  • One, by deflating land costs it will enable the private market to offer homes and sites at lower costs.
  • Two, this will shrink the number of families needing subsidies.
  • Three, it will stretch subsidy dollars farther because sites for publicly assisted housing can be acquired far more cheaply.
In Conclusion, I have tried to show that America has a housing land problem, not an affordable housing problem. This problem can be substantially alleviated by freeing the market of anti-enterprise taxes and by turning the property tax right side up -- that is, by dropping tax rates on housing and by raising them on publicly-created land values. Read the whole article

Wrong Diagnosis Underlies Post's Pessimism on Smart Growth
We would be amused if Martian observers, seeing people with crutches, concluded that crutches had crippled these folks. Analysts cited in the Washington Post’s recent series on sprawl are not from Mars, but many confused the crutches localities fall back upon as the cause of our region’s crippling growth pattern. ...

The Post paints a seemingly hopeless picture because it fails to recognize the real engines of sprawl — high land values, land speculation, and subsidies for development on greenfield sites. Wasteful scattershot development will outsmart Smart Growth until officials and voters confront these matters.

High Land Values. High land values stem from
1) regional population growth,
2) public works like roads and schools and
3) special natural features like waterfronts.
For example, a 1980 Congressional study found that Metro, still unfinished, had already generated $2 billion in new land values, “the biggest share of these new values…going to people lucky enough to own land within easy access of Metro stations.” Neither Metro nor the taxpayers who financed it recoup the values they generated.

Speculation. Sprawl starts at the center of the metropolis and radiates outward. Smith owns a vacant downtown site. If he builds offices or housing, he invites risks and sizeable property tax increases. He keeps his parcel in minimal use like a parking lot. Brown, seeing its potential, offers to buy it. Yet Smith who enjoys rising land values without effort asks a price so high that Brown’s venture can’t fly. Brown approaches owners of other first-class parcels, meets the same hurdle, and finally buys a cheaper second-class site. More “Browns” do the same.

Soon Jones and other enterprisers find owners of second- and third-class sites boosting their asking prices. Owners get away with this because land hoarding in the core creates an artificial scarcity of affordable sites. “Joneses” are driven farther into the hinterland. Developers, denied entry by inflated land prices to close-in sites best suited for their ventures, invade open space. This race to beat speculators to cheap land fosters leapfrog growth. ...

Subsidized Sprawl. Federal and state spending on misplaced highways, utilities, schools and the like subsidize premature urbanization of outlying areas. Tax abatements for malls lay waste to cornfields and forests and sap the vitality of older communities. ...

Reality Pursues Sprawl. As inflated land costs drive middle income families far from choice central neighborhoods, their new localities duplicate the police, water systems and schools left behind, plus roads to get them back to work. High taxes to construct over-extended public facilities spur new home seekers to go even farther a field.

The real culprits — upside-down property tax incentives and inappropriate infrastructure investments — make it profitable for land speculators to keep their prime locations in cold storage, to board up rental housing, and to block the path of normal growth in appropriate city and town centers.

Sprawl Can Be Halted. The challenge is to take the profit out of sprawl so the massive inventory of skipped-over prime locations can be put to optimal use. Jurisdictions can deflate high land and housing costs by altering current taxes that favor land holding rather than land using. Then the counties’ crutches, short-term palliatives at best, can be discarded. Only then can Smart Growth rather than sprawl become the dominant pattern in our region. Read the whole article

Walter Rybeck and Ronald Pasquariello:  Combating Modern-day Feudalism: Land as God’s Gift
Calling for "a modern equivalent of Jubilee," signers of a proposal fundamentally to revise the property tax structure petitioned the endorsement of the 1984 General Conference of the United Methodist Church. The proposal, which the conference did endorse, sought to shift taxes from labor to land values. Combining good biblical theology with public policy insight, the plan offers a simple but critical tax change as a way of dealing with "poverty, joblessness, slums, urban decay, farmland destruction, the erosion of public services and facilities and social justice."

The current property tax combines land and building taxes; recently, it has become a tax mostly on buildings. As a result, owner-made building improvements are overtaxed, while land is under-taxed. And undertaxing land encourages its disuse. The Methodist petitioners’ simple proposal was to tax land, not buildings. The possibilities are great for achieving social justice through this easily implemented change in the property tax. ...

Biblical justice in this instance, as Walter Brueggemann asserts, "is to sort out what belongs to whom, and return it to them." ...

The generally held belief that ours is a nation of small landholders is a myth. According to Gene Wunderlich, quoted in a 1979 Harper’s article, "about 3 percent of the population owns 55 percent of all American land." And that same 3 per cent holds "95 percent of the private land." Furthermore, while 64 per cent of families own or are in the process of buying their residences, the residential sector occupies only 2 per cent of the 1.3 billion acres of privately held land.

Feudalism, it seems, is still with us; its new face is the landlordism that lets a few benefit from what belongs to society. This lopsided arrangement denies the Bible’s insistence that an equitable share of the Lord’s resources is the birthright of all humans. While the U.S. is infinitely better off than the countries of Latin America, Asia and Africa, our situation is worsening. Consider these facts:

• Poor people pay inordinate rents. While in 1970, 25 per cent of income generally went for rent, today, according to National Low-Income Housing Coalition reports, that percentage for many renters, especially the poor, has doubled.

Early in the century, poor immigrants in New York City could buy or lease a shop with a fair chance of prospering. Now many minorities face site costs that almost doom new businesses from the start. A front foot costs more than the whole lot would have 70 years ago, a startling change even when considering inflation.

•Large firms are deserting the cities for cheaper suburban sites, taking with them employment and badly needed tax revenues.

•Large agribusinesses represent only 13 per cent of U.S. farms but take in 72 per cent of agricultural sales, according to the U.S. Department of Agriculture’s Economic Research Service. At the other end of the scale, 50 per cent of the farms account for only 3 per cent of sales.

• Land-holding is gaining ascendancy over land-using. Land speculation -- holding land for its future worth rather than putting it into current production -- has become standard practice for the affluent.

What gives value to land. Any real estate textbook will explain that the three factors for determining land value are "location, location and location." And any property owner will affirm this truth. But what generates locational value? Three phenomena: God, people and public activities.

  • God the creator, Genesis tells us, "looked at everything he had made, and he found it very good." We recognize this goodness in the fertility of the soil, natural harbors, scenic beauty, the availability of water, and the subsurface riches of coal, oil, gold, iron and other substances. The land has a God-given goodness and is one of the gifts through which God sustains us.
  • People create land values simply because they are social beings, consumers and producers. The more people concentrated on a piece of land, the higher its value. The press of population intensifies the demand for homes, jobs and services; this is what makes Manhattan far more valuable than downtown Richmond, Virginia, and Richmond more valuable than Anderson, Indiana, and Anderson more valuable than an uninhabited Utah crossroad.
  • Finally, the public or government generates land values by providing streets, schools, police protection and other infrastructures. Opening a subway system for the District of Columbia in 1976 gave Washington’s blighted downtown a new lease on life. The subway and its riders are stimulating the economy along all of its corridors. According to a 1981 congressional study, "a minimum of $2 billion in land values has already been added to the existing land value base." However, it concluded that "only a trickle" of these new values finds its way back to local government through the property tax. The biggest share goes to people "lucky enough to own land within easy access of Metro stations."
Private vs. common property. ... "The earth is the Lord’s and the fullness thereof" (Ps. 24:1). ...

This idea of the land belonging to all humanity, to the community as a whole, is not entirely inoperative today. National parks, school grounds, public building sites, many wilderness areas, lakes and ocean fronts are recognized as the common property of all.

The immorality of landlordism. An increasingly small elite is taking possession of the nation’s land, enabling them to squeeze more and more from the landless. This is runaway landlordism, and current public policy fuels its progress.

On the federal level, while the wages of ordinary workers find no shelter from the Internal Revenue Service, exemptions and special preferences for landowners whittle down their taxes or turn real estate losses into profits. The 1986 Tax Reform Act aims to reduce these privileges, but landowners’ past ingenuity in avoiding taxation warrants continued vigilance over tax structures. At the local level, the property tax rises for owners who build or improve their homes, rental apartments or commercial buildings, while it is reduced for those who let their land go fallow. Compare the following situation of the Joneses, the Smiths and the Greens.
  • The Joneses have a well-maintained home. The local tax office, seeing that they have has added air conditioning, a recreation room and a new roof, raises their assessment. Never mind that the Joneses improved their neighborhood and generated jobs and business. The result will be higher taxes not only this year, but as long as they keep the house in good condition.
  • The Smiths’ home of the same size and age is an eyesore. The yard is full of junk, gutters are rusted, screens are torn, paint is peeling. The tax office says it is worth less than last year. The Smiths’ taxes are reduced, a "reward" for blighting the community.
  • The Greens do not use their lot at all. They offer no production or housing on it. For wasting the site’s potential, they enjoy the lowest tax bill of the three.

Overtaxing good land use while under-taxing blight and empty lots invites slumlords and encourages land speculators. This type of landlordism -- or modern feudalism -- is an injustice. It allows individual landowners to siphon off the lion’s share of land values.

The ethical foundations of land value taxation. The biblical Jubilee prescription -- redividing the land every half century -- may have been feasible for a people practicing crude agriculture. However, a modern civilization cannot reshuffle the land without confiscating unmovable property or discouraging economic progress. The land value plan suggested here -- increasing land taxes, while decreasing taxes on labor, production and buildings -- achieves the same Jubilee goal without negative effects. It lets everyone share the economic value of the land rather than the land itself, just as a corporation, instead of carving up physical portions of itself each year, lets shareholders enjoy portions of the profit. ...

Poverty, joblessness and homelessness have been central concerns of religious social-action groups. There is a growing awareness that neither private nor public charity is sufficient in dealing with these problems. Shifting property taxes offers an effective way to encourage public policy to be responsive to blighted cities, farm dislocation, declining industries, chronic unemployment and growing poverty. The need to infuse biblical principles into solutions for these problems seems imperative. Acknowledgment of this necessity is already evident in the Catholic bishops’ pastoral letter on the economy and parallel works by the Presbyterians, United Methodists and the United Church of Christ. The need to address poverty’s basic causes, including the unhealthy concentration of America’s land and resources in the hands of so few owners -- who have tended to misappropriate land values -- ought to be high on our religious and public policy agendas.



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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper