27 days, Speculation and Urban Sprawl

With 27 days to go to fund our project we are very impressed with our online community so far.  We are 8% towards our funding goal to get our project off the ground.  A HUGE thank you to all of you who have invested so far.  If you would like more information please follow the link to our crowd funding page


Meanwhile, here is a lovely film from ALTER and beneath, an explanation about how LVT would tackle Urban Sprawl and the benefits of doing so.

ALTER film

How to get rich without lifting a finger.

Above is a lovely video from ALTER which goes someway to explain Land Value Tax.  As the video shows, the increase in value of land comes from the community via tax funded projects and the individuals who move to, invest in or otherwise add value to an area.

In our current system without a land value tax, we allow land speculators to make money by holding onto vacant land in the same way as the video shows.  One of the many problems with this system is that of urban sprawl. 

Lets imagine that an area of land is being held onto by a speculator. 

Lets say that the land could have 100 homes built on it if it was sold to a developer.  Lets also say that 100 homes need to be built to house the ever growing community. 

In the present system, the speculator has no real incentive to sell the land to a developer.  If the speculator waits for another few years the land will probably be worth even more than it is worth now.  Instead, a plot of land far from the original community is chosen to develop the homes on.

This creates urban sprawl. 

Urban sprawl, as the name suggests, is when urban development sprawls out into the countryside, far away from the central hub of the community that caused the need for the development in the first place.  There are many problems caused by this, here are a few:

1.    Urban sprawl is bad for the environment.  Most of the community who live in urban sprawl travel to work in long queues of traffic that release petrol fumes and add stress to the individuals who have to drive through traffic to get to and from their jobs.

2.    Inefficiency of transport services, increasing their costs.  To accommodate the new urban sprawl a whole set of new bus routes might be created, instead of just upping the number of buses on the main route.  This creates an inefficient use of bus services, adds more traffic to the roads and is worse for the environment.

3.    Inefficiency of utility services, increasing their costs and the price of their services.  The bus example provided above also works similarly for building water pipes to connect the sprawled community to the main routes, electricity, communications and other utilities too.  This inefficient use of resources will hike up the prices to the customers of these services while costs are recouped.

4.    Increases our Carbon Footprint.  The more green land we build on the less of it there is.  In the center of towns there are lots of vacant plots held onto by speculators.  If we could bring these into use we would not need to sprawl out into the countryside.

So there are good reasons to care about and aim for limiting urban sprawl.  Whilst this may be true, a speculator is mainly interested in a return on their investment, and rightly so as they have invested their money into a project and has planned to see results.  That is one of the outcomes of the current system - To be able to invest in a plot of land then sit back and wait for it to gain in value.  You can also lobby/campaign for tax funded improvements to be built near your land – also improving its value. In this sense the speculator has no monetary incentive to sell and at the same time there is a demand for the land to be used more efficiently by the growing population of the town who are the very people who are adding value to the speculators land.

Lets instead say that we were to introduce a Land Value Tax, an annual tax on the increase in land value not due to improvements to the land but instead due to external factors such as the community who add value to an area or tax funded projects built nearby.

Lets say that we collect this annually at a certain rational rate which we can call Q.

The speculator now had more incentive to sell the land.  If they hold onto the land expecting the increase, they will lose Q of the increased land value each year.  Now there seems to be less value in holding onto land that does not in itself improve at all.  Still motivated by a greater return of investment, the speculator is likely to either sell the land to a developer or to develop the land themselves to improve its value in a way that will not be taxed at a rate of Q.

Protect our countryside, look after our environment, reduce our carbon footprint, keep our utility and services costs low and provide more efficient services and use of land.

Just one more set of benefits of the Land Value Tax.

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