The Land Value Tax as a Solution for Housing Affordability

Jerusalem Demsas writes to explain the potential of a land tax to potentially solve a number of fiscal problems while also creating an incentive for high value development.

Henry George first proposed a land tax in Progress and Poverty (1879), and the idea has hung around more esoteric economic discussions to this day—according to Demsas, the phrase "A land value tax would solve this" appears regularly on Twitter.

While proponents of a land value tax point to numerous fiscal challenges that could be solved with a land value tax, Demsas says one the idea offers a potentially straightforward solution for one of the country's biggest challenges: the cost of housing and the resulting lack of affordable options.

That crisis is caused, in part, by the failure to appropriately use valuable in-demand land for its best purpose. Millions of people want to live in New York City, Los Angeles, Washington, DC, or Seattle, but local tax regimes actually punish people for investing in their property. When people improve their property — either by adding a new room or building an entirely new structure like a multi-story apartment building, they’ll pay higher property taxes.

According to the article, the land tax isn't just an urban solution: small cities with vacant lots could also benefit from balancing the system of incentives. In both urban and more rural settings, according to the theory, under a land value tax, "property owners would be clamoring to be allowed to develop their land more intensely — leading to more homes being built."

The article includes a lot more explanation and links to the most prominent articles written on the subject in the past decade.