C. Lowell Harriss, et al.
[A pamphlet published by the Robert Schalkenbach Foundation, 1978]
by Dr. C. Lowell Harriss, Professor of Economics, Columbia University
1. Land Supply Constraints in the United States
Excerpt from the Final Report of the Task Force on Housing Costs, William J. White, Chairman
2. The High Price of Land
by P. I. Prentice, Chairman, National Council for Property Tax Reform
3. Modernize, Don't Abolish, the Property Tax
From a report by the Subcommittee on the City of the House Committee on Banking, Finance, and Urban Affairs of the U. S. House of Representatives, Rep. Henry S. Reuss, Wisconsin, Chairman
by Dr. C. Lowell Harriss
The number of Americans who lack adequate housing is much too high. While both opportunity and promise life in the long-established principle of providing satisfactory shelter for everyone, many are still not well housed. Population grows, and the existing stock of housing grows older. For years to come, much new construction, expansion, and modernization will be needed.
Rapidly rising costs, however, present formidable obstacles. One of the heaviest costs is one which also rises most rapidly. And it is the cost of something created not by sweat and thrift, but by nature.
It is land.
The rising prices paid for land itself must be distinguished from the portion of the price of a building site which represents cost of preparation for use. The land elements alone go up and up in price. But land price increases do not change the quantity of land in existence. Here is a rising price which does not add to supply.
Land is different.
In these three articles on land value taxation, the first, "Land Supply Constraints in the United States," points out that the sharp rises in land prices result in part from man-made factors. Arbitrary, artificial, and unconstructive restrictions on land supply boost prices and threaten our housing future. New building will therefore be kept below levels which unfettered economic conditions would otherwise achieve. But tax policy which would encourage use, rather than underuse and withholding of land can increase the effective supply. Need more be said?
Yes. And in the second selection, "The High Price of Land," Mr. Prentice says more. He points to many avenues by which the harmful effects of restricted land supply spread through the economy. Developers and builders, laborers, supplier, subcontractors, and others all suffer. They have less work, operate under conditions of disadvantage, and receive poorer rewards because of essentially needless obstructions to the optimum use of land. The full and true price of land includes burdens above and beyond the dollar prices of building lots. We shoulder burdens of lost opportunity of many kinds. They are largely hidden but indeed real. The quality of too much new construction deteriorates instead of improving as an advancing society should expect. And, to repeat, the tragedy is that the rising prices for land do not create an more surface on the earth.
What to do? The third article, "Modernize, Don't Abolish, The Property Tax," points to the reform outlined generations ago but here presented in modern form: reduce the property tax burdens on structures and make up the revenue by higher tax rates on land value.
The benefits from relying more fully on taxation of land values, rather than taxation of buildings, would include greater pressure on landowners to put land to better use. Withholding land -- which reduces the current effective supply -- would become more costly if land value taxes were higher. Thus some land formerly held for speculation would be sold, and new building would be encouraged on the increased supply of land.
A careful study of probable results in Washington, D. C., showed, among other things, that taxes on present homeowners would generally fall. But this result is not the one which most justifies support for reform. More significant and constructive would be a combination of forces producing incentives for better land use. Upgrading of housing in older urban centers would be expected. Positive incentives at many points would contribute to improving America's housing.
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