A land value tax is all very well, but it must be coupled with planning reform to be fair
September 22, 2010
I don’t normally defend property speculators, but there’s an important concern that Vince’s endorsement of a land value tax in his speech fails to address. It’s the corollary of the little old lady argument; that LVT is unfair because it could potentially force out a little old lady who lives in a house that’s been rising in price over her lifetime owing to factors outside her control. That can be mitigated if the tax is implemented in a progressive (in the technical, non-wanky sense) way, but there’s another objection which is less endearing but still important.
Say you own a plot of land on the outskirts of the city. As the city expands, and development around your plot of land increases, the value of your land – and the tax you pay on it – will also rise. Say you decide to cash in by building houses on that land. You apply for planning permission, only to be refused on the grounds of residential amenity for the people already living there. Your tax will continue to rise, but you won’t be able to profit from your land, and you certainly won’t be able to sell a piece of land that can only ever represent a financial drain.
I’m sure many won’t weep for property speculators, but it doesn’t stop that from being unfair. LVT should work hand in hand with planning reform, otherwise it’ll be illiberal.