Many cities are wondering just how they can spur development in their central zones without turning them into Xerox copies of the suburbs. Bill Hudnut, senior resident fellow and Joseph C. Canizaro Chair of Public Policy at the Urban Land Institute, suggests a two-tiered property-tax structure:
More tax on those horizontal pieces of empty land and asphalt, less on the buildings. That is, reduce the tax rate on homes and other improvements, and substantially increase the rate on the site value…
[I]f assessments are fair, the higher land tax would bring vacant or woefully under-used central sites into use, giving new life to inner cities and reducing sprawl. It would also stem land speculation, which is the big engine behind house price escalation, thus stabilizing neighborhoods and keeping sale prices and rents more affordable. The land tax returns to government — the values it creates with bridges, roads, and other infrastructure — helping to pay for maintenance and necessary improvements.
There are those who rank surface parking among the Great Evils of central-city development; were such a system as this in place, the temptation to put down a slab on a vacant lot, then sit back and collect rent, might well be reduced.
I noted earlier this year that our county assessor is now specifying land values on individual tracts as part of the records accessible to the public. Could this be an indication that they’re thinking about eventually moving to a two-tier system? Maybe not: the assessments are set by state law, not at the county level. Still, if this is the future of property valuation, better to be prepared for the transition.