I've not heard any really good answers to this question yet. Which is not to say that I don't think there are answers; they just aren't being widely discussed yet.
The answer lies deeper than the analyses which are commonly discussed. We need to shift our incentive system at a deeper level than what is currently being discussed.
We spend a lot of money heating and cooling older homes many miles from where people actually work. People commute long distances -- most of them via private cars because there aren't viable alternatives. Why do they live so far from their work? Usually because they can't afford to live closer.
The selling price of most housing within a commutable distance of any vibrant city is mostly land value. And most people don't know it.
Let me say that again.
The selling price of most housing within a commutable distance of any vibrant city is mostly land value. And most people don't know it.
And they don't know why this is so, or realize that there is an alternative which would be desirable from virtually every point of view, or realize the far-ranging ramifications of this reality. And this is as true of people who hold graduate degrees in economics from our best universities as it is of people whose formal education ended with high school.
And the fact that the selling price of a home in a metropolitan area is mostly land value -- not value associated with the current structure -- seems to be invisible to most of us. As are the ramifications of the fact that houses -- like nearly everything else which is manmade -- depreciate! What appreciates is land value -- locational value -- and it appreciates for reasons which have nothing to do with the landholder himself.
The ramifications? I'll list a few here, but the list is very long.
- As population grows and more jobs are in cities, population density in the city itself and the closest surrounding suburban rings needs to increase. What might once have served as large-lot single-family housing ought to give way to multi-family housing -- townhouses, low-rises, mid-rises. Vacant lots ought not to remain vacant for long. Low-rise commercial ought to give way to mid-rise commercial, or high-rise mixed use, with retail on the street level and housing or offices above.
- More people living in walkable communities, with public transportation to move them to their work, reduces our reliance on cars.
- More people living in technologically modern housing reduces the per-person fuel to heat and cool their living spaces.
- Incentives which discourage redevelopment of underused sites are counterproductive
- Incentives with encourage the prompt redevelopment of well-located sites to their highest and best use will reduce our reliance on oil and other non-renewable natural resources as well as the pollution associated with those fuels.
- When we tax land value, we don't take from anyone value which they created.
- When we tax land value, we reduce our reliance on income taxes and sales taxes.
- When we tax land value, we can reduce our taxation of buildings and other improvements, which reduces the disincentives to redevelopment, to using modern techologies -- both of which create jobs.
- When we tax land value, we reduce the selling price of housing, making it more affordable to ordinary people, and requiring them to borrow less. This frees up credit for activity which creates jobs.
- When we tax land value, we stabilize our economy, reducing or eliminating the boom-bust cycles which afflict us roughly every 18 years.
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