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Slums
and gentrification
Mason Gaffney: How to Revive a Dying City "Slum
clearance" in the 1950s had a negative caste, with a name
catered solely for middle class consumption. Reuse of cleared land
was often at lower density, inevitably throwing unhoused people on
the private market. Federal "urban re-newal" in the 1960s, while
better named, emphasized clearing, not rebuilding. The inventory of
cleared, unrebuilt land under the program grew each year. Cynics'
cracks of "bombing out" and "Negro re-moval" were on the mark, though
blacks were not the only evictees. Any talk of demolition and renewal
evokes the specters of those cruel, wasteful programs.
But George's program begins with fostering renewal and intensive use. Clearance is involved only to serve renewal, never as a goal in itself. The first land taken would generally be vacant or with boarded-up buildings. New buildings would draw renters and buyers from old ones, releasing more space. The idea and impact are to increase rentable, salable floor space. There would also be more firms to compete in selling and hiring. How do we know there would be an aggregate increase in supply?
There are three kinds of slums.
The poor also must fear gentrification, in which new gentry
displace the poor in the same old buildings. This is one result of
not renewing; renewal as such is innocent. It seems carping, too, to
criticize people for restoring old buildings. The alternative may be
seen in ungentrified neighborhoods, where buildings simply go out of
use, sheltering no one. But the ultimate end of Georgist policy is
viewed in terms of the nation, pitting cities against each other to
attract people.
Nothing is better for people than to be competed for. It
raises
their bargaining power as tenants, buyers, and workers. Read the
whole article
Mason Gaffney: The Property Tax is a Progressive Tax Definition of the property tax base is also a source of serious error in a number of studies based on cash rents. Netzer for example assumes that property taxes are proportional to rents. They aren't. The base is not rent but capital value. The poor live in declining neighborhoods and buildings nearing abandonment, where capital value is a very low multiple of rent. Rents include high costs for collection, turnover, damage, loss of status, maintenance and repairs, and general unpleasantness. In Milwaukee's "Inner Core" or slum area the rule of thumb is you pay 30 months' rent to buy a dwelling unit. Tenant incomes are low, but higher than such capital values. The rich live in new buildings of long future life in appreciating neighborhoods. Incomes are high, but normally less than half of lot or acreage plus house values. It is true that slums are often overassessed, but again, maladministration is the fault of administrators. The property tax in concept is progressive precisely because it is based on capital value. Owners of appreciating property often complain that capital value as a base hits them harder than would current income or service flow as a base, and they are right. That is precisely what makes the property tax, correctly administered, so progressive. Read the whole article Nic Tideman: The Case for Taxing Land I. Taxing Land as Ethics
and Efficiency
II. What is Land? III. The simple efficiency argument for taxing land IV. Taxing Land is Better Than Neutral V. Measuring the Economic Gains from Shifting Taxes to Land VI. The Ethical Case for Taxing Land VII. Answer to Arguments against Taxing Land There is a case for taxing land based on ethical principles and a case for taxing land based on efficiency principles. As a matter of logic, these two cases are separate. Ethical conclusions follow from ethical premises and efficiency conclusions from efficiency principles. However, it is natural for human minds to conflate the two cases. It is easier to believe that something is good if one knows that it is efficient, and it is easier to see that something is efficient if one believes that it is good. Therefore it is important for a discussion of land taxation to address both question of efficiency and questions of ethics. This monograph will first address the efficiency case for taxing land, because that is the less controversial case. The efficiency case for taxing land has two main parts. ... To estimate the magnitudes of the impacts that additional taxes on land would have on an economy, one must have a model of the economy. I report on estimates of the magnitudes of impacts on the U.S. economy of shifting taxes to land, based on a mathematical model that is outlined in the Appendix. The ethical case for taxing land is based on two ethical premises: ... The ethical case for taxing land ends with a discussion of the reasons why recognition of the equal rights of all to land may be essential for world peace. After developing the efficiency argument and the ethical argument for taxing land, I consider a variety of counter-arguments that have been offered against taxing land. For a given level of other taxes, a rise in the rate at which land is taxed causes a fall in the selling price of land. It is sometimes argued that only modest taxes on land are therefore feasible, because as the rate of taxation on land increases and the selling price of land falls, market transactions become increasingly less reliable as indicators of the value of land. ... Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse. ... Apart from questions of feasibility, it is sometimes argued that erosion of land values from taxing land would harm economic efficiency, because it would reduce opportunities for entrepreneurs to use land as collateral for loans to finance their ideas. ... . Another ethical argument that is made against taxing land is that the return to unusual ability is “rent” just as the return to land is rent. ... But before developing any of these arguments, I must discuss what land is. ... A similar phenomenon occurs with respect to the personal value that people attach to locations, what might be called ‘location-specific human capital’. If all persons had equal demands for all locations, there would be no location-specific human capital. But incomes, tastes and personal histories differ, leading to differing personal values for locations. Familiarity with a location tends to lead people to attach a special value to it, a value that tends to be lost if the characteristics of the location change. Thus a change in land use that raises surrounding land values will generally reduce the location-specific human capital of the residents of that area. One example of this phenomenon occurs when a neighborhood is ‘gentrified’, and the prior residents of modest means can no longer afford to live there and must seek other housing options that are less attractive to them than the opportunities they lost. This represents a reduction in their location-specific human capital. ... Read the whole article Walter 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 Mason Gaffney: The Taxable Capacity of Land The question I am assigned is whether the taxable capacity of land without buildings is up to the job of financing cities, counties, and schools. Will the revenue be enough? The answer is "yes." The universal state and local revenue problem today is whether we must cap tax rates to avoid driving business away. It is exemplified by Governor Pete Wilson of the suffering State of California. He keeps repeating we must make a hard choice: cut taxes and public services, or drive out business and jobs. (When a public figure gives you two choices you know they're both bad, and he wants one of them.) The unique, remarkable quality of a property tax based on land ex buildings is that you may raise the rate with no fear of driving away business, construction, people, jobs, or capital! You certainly will not drive away the land. However high the tax rate, not one square foot of it will put on a track shoe and hop out of town. The only bad thing to say about this tax's incentive effects is that it stimulates revitalization, and makes jobs. If some people think that is bad, maybe this attitude is the problem. There is the answer to Governor Wilson' dilemma. I hope here in The Empire State you will supply a practical demonstration of the answer, one we may then use to inspire The Golden State. California now, following Proposition 13, has become a morality play, a gruesome object lesson in what happens when the property tax is pushed down toward zero. It forces higher taxes on production and exchange. Non-property taxes, you know, mostly have the character that they "shoot anything that moves," penalizing and discouraging economic activity. New buildings gain by having a lower property tax burden, it is true; but they bear the brunt of these new taxes and impost fees up front, at the time they are built. These offset the benefits of their lower property tax rate. ... When you observe cities much, the positive neighborhood effects of replacing old buildings with new are irresistible and contagious, raising land prices all around. The converse is also true: the negative neighborhood effects of letting old junkers stand without replacement are depressive. Thus, when you take the tax off new buildings, and put it on the land under old tumbledowns, you kick off a general process of revitalization that turns gloom into hope into optimism: optimism that boosts land prices and the land tax base. There are three kinds of slums.
That's the bad news. How do you turn it around? When you drop buildings from the property tax base, you change the arithmetic of incentives, as we have discussed. Parachuting into the middle of a slum is still hopeless, as before. Change will come first to the fringes of the Type II slum, where it merges into healthy neighborhoods. New development likes to anchor onto healthy neighborhoods. Richard Hurd, father of urban studies in America, taught us in 1902 that land values are marked by continuity in space. It's still so. Fashions and technology change, but principles last. Hope survives at the edge of the slum; land there retains some renewal value. There is where you'll first see change, because there is where the forces are evenly balanced. Tip the forces for renewal, and there is where it begins. Once it begins, it proceeds incrementally through the Type II slum. When it's through, your oldest neighborhood has become your newest, the cutting edge of progress, the showplace of the town. That is how it has got to work; that is how it will work when you exempt buildings and tax only land. When it is through, you have a high tax base where now you have nothing but fire and police calls. I once wrote a long chapter on this subject, "The Adequacy of Land as a Tax Base" (Gaffney, 1970). It came out of two years of research, and is too long even to summarize now. I am delivering it to Pat Salkin, however, and hope she may add it to the record of this conference. I also attach a short bibliography of articles that expand on topics covered above, for whoever is moved to study more on this fascinating subject. I hope you think it as important as I do. Please pick up this ball and run with it. Nobody said it was going to be easy. There are some bone-crushing line-backers out there, like Greed, Ignorance, Myopia, and Inertia. So much the more credit to you when you cross the line: your fans will love you for a touchdown. They really need a lift; they've waited so long! Read the whole article |
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