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Taxing Land Speculation

Bill Hudnut at the Urban Land Institute wrote a post that attracted some attention at Austin Contrarian and Overhead Wire. Hudnut discusses a different approach to taxing land: How about restructuring the property tax across America to install a two-tiered system? 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 think such a system would induce more compact development and more infill work. It sure would induce more development. Higher taxes on the land, lower taxes on the building, discourages a land holder from leaving his land fallow and speculating on its increased value, and conversely, encourages improvements on the land and redevelopment. The monograph used Sydney Australia as a case study, but its general point, that a site value tax system puts “pressure on owners to sell their property for redevelopment if they cannot or will not redevelop it themselves.” Note that ULI is an organization primarily of real estate developers, investors, and related professions. (I am a member.) So, I can see why developers would favor a mechanism that would force more land into development. Overall, this type of scheme will help drive development in the short run, but be harmful in the long-run.  By encouraging development in the present by discouraging land speculation, we can expect a few consequences: Speculators play an important role in the land market, even if we don’t like the surface parking lots they often operate on their land.  Speculators essentially hold the land until development is optimal for the site, and all sites cannot be optimally built at once. Discouraging speculation drives the land into the hands of developers at cheaper prices than current market […]

The Story of I’On: Struggles of a New Urbanist Project

  I recently googled upon a post at a blog called “Rub-a-Dub” that mentioned a land development project in Mount Pleasant, SC called I’On. I imagine the developers of the I’On “Traditional Neighborhood Development” (TND) community are sympathetic with Market Urbanism, as they named streets after John Galt (of Ayn Rand’s Atlas Shrugged), free-market economists Ludwig Von Mises and Thomas Sowell, as well as urbanist writer Jane Jacobs. (ironically, Jane Jacobs Street doesn’t have sidewalks) Who says New Urbanists and free markets can’t mix?  (well, I’m sure we all can name at least one such person…) What I found interesting was the story of the development shared in the comments of the post by Vince Graham, Founder and President of the development company.  The story really conveyes the struggles developers go through to get projects through the approval process; especially when the standard 20th century, auto-centric layout is being challenged by innovative development solutions. The reason why there is only single family homes and a limited amount of commercial space in the neighborhood is due to unfortunate compromises necessary to get the neighborhood approved through the arduous political process. Here is a summary: A Summary of the Political Background and Permitting History for I’On. Background:The traditional walking neighborhood of I’On is located on a 243-acre infill site in Mt. Pleasant, SC located 5 miles from Charleston’s historic district and 3 miles from the Old Village of Mt. Pleasant. The site is surrounded by conventional subdivision development of the 1950’s, 60’s, 70’s, and 80’s. Approximately 60% of I’On’s acreage was originally comprised of former agricultural fields, 30% was 30-40 year old hard wood growth, and 10% took the form of three man made lakes. The design workshop for I’On took place in May of 1995. I’On received approval in March of […]

President Obama on Jane Jacobs and Cities

Without getting too political on inauguration day, I’d like to share a positive video featuring our new President that urbanists should appreciate, regardless of political persuasion: Let’s hope President Obama keeps Jane Jacobs’ lessons of spontaneous order from The Death and Life of Great American Cities in mind as he makes economic decisions. While on the subject of Jane Jacobs, Sandy Ikeda discusses Jane Jacobs’ thoughts on poverty from The Economy of Cities (1969). [hat tip for the video: Vince Graham]

Uncomfortable truths about the progressive legacy

by Stephen Smith Yesterday I was listening to the pre-inaugural concert at the Lincoln Memorial on the radio, and one of the speakers said something that struck me as emblematic of the challenges that Barack Obama faces, though I doubt she realized the ironic significance. She was praising Theodore Roosevelt’s conservationist legacy as a model for Obama, with some quotes from him at the Grand Canyon or Yosemite or some other celebrated national park, though she only touched on a small sliver of Roosevelt’s environmental legacy. He definitely did cherish the environment; a timeline of his life shows that in early April 1903 he “commune[d] with deer while writing letters in Yellowstone, WY.” He was indeed a conservationist, as were many progressives at the time. But the progressives were also something else – something that today’s progressives would do well to remember: ardent planners whose plans often had grave unforeseen consequences. Just after his time communing with the deer at Yellowstone, Roosevelt traveled to St. Louis to address the 1903 Good Roads Convention. The “good roads” movement dated back to before the automobile rose to prominence, and was formed to agitate for improved roads for bicyclists and farmers. But around the time of Roosevelt’s speech, the movement was hijacked by the budding auto-industrial complex. Unwilling or unable to compete on their own against mass transit, the automakers, highway engineers, and road contractors sought for the state to both acquire the rights of way necessary for the roads, and to pay for them to be paved – an advantage the streetcars and railroads did not generally have. Not wanting to appear to be too blatant in their rent seeking, these interests lobbied the government indirectly, giving organizations like the AAA money in exchange for influence and seats on their boards. The […]

Urban[ism] Legend: Positive NPV Infrastructure

As Washington debates how many hundreds-of-billions of the nearly trillion-dollar stimulus will go towards infrastructure or to other spending/tax cut schemes, pundits claim that spending billions on “shovel ready” public works projects can effectively create jobs that will lead to recovery. As readers probably know, I am skeptical that the anticipated spending could be activated so quickly. As Bruce Bartlett put it: Despite claims by the Conference of Mayors and the transportation lobby that there is as much as $96 billion in construction “ready to go,” the fact is that it takes a long time before meaningful numbers of workers can be hired for such projects. As a recent Congressional Budget Office study explains, “Practically speaking … public works involve long start-up lags. … Even those that are ‘on the shelf’ generally cannot be undertaken quickly enough to provide timely stimulus to the economy.” The prospects for unconventional projects such as alternative energy sources are even worse. The CBO calls them “totally impractical for counter-cyclical policy” because they take even longer to come online… Finally, the impact of increased public works spending on state and local governments cannot be ignored. Most federal transportation spending goes for projects initiated by them. When they think there is a chance that the federal government will increase its funding, they tend to cut back on their own spending in hopes that the feds will foot the bill. A study by economist Edward Gramlich found that the $2 billion appropriated by the Local Public Works Act of 1976 postponed $22 billion in total spending as state and local governments competed for federal funds and actually reduced GDP by $30 billion ($225 billion today). Meanwhile, proponents of infrastructure spending claim that Congress should sift through the shelved projects to identify those projects that will be economically […]

Private Roads Work

Bart Frazier wrote a brief article for the Future of Freedom Foundation on private roads. He begins by discussing how most Americans remain strongly opposed to privately owned roads, while at the same time many have warmed to private education, medicine, and social security. This first part of the article is somewhat similar to many articles advocating private roads. In the second part of the article, Bart goes on to discuss some examples of private roads in America, including a homeowners association, The Dulles Greenway in the suburbs of DC, and the city of North Oaks, Michigan, which doesn’t even own any property. Frazier concludes: Everyone, particularly libertarians, should favor private roads. They have much going for them — they rely on mutual consent for their construction and use, and the market decides what is the appropriate level of their use. People who don’t want to use them are free to spend their dollars on other things that they consider more worthy. And as far-fetched as they seem to some, we have examples of working private roads. I cannot think of a better way for cash-strapped state governments to reduce their budgets than to stop paving the roads.

Another Angle on Planning in Houston

Brian Phillips at Live Oaks contacted me regarding the recent post by Stephen Smith on planning in Houston. Brian is a long time opponent of land use restrictions and defender of property rights in Houston. Brian has a different point of view on the subject, and has written a post on his blog, which I hope will spark some lively conversation. Brian invited me to publish a copy of his post at Market Urbanism. Tomorrow, I hope my schedule gives me the opportunity to share some of my thoughts on the topic, because I sympathize with both authors’ points of view. In the meantime, I want to share Brian’s post right away to get readers reactions to it: Urban Legends: Myths About Houston by Brian Phillips In a recent posting titled “Is Houston really Unplanned?” on Market Urbanism, Stephen Smith attempts to debunk alleged myths about Houston and planning. In the process, he actually engages in a much more widespread error–the failure to essentialize. (Here is a good explanation of essentializing.) Smith cites several examples of land use regulations in Houston, such as minimum lot size mandates and regulations dictating parking requirements for new development. He argues that these regulations, along with the city’s enforcement of deed restrictions, refute claims that Houston has developed primarily on the basis of free market principles. Smith’s position is common. Zoning advocates actually used similar arguments in the early 1990’s. Zoning advocates were wrong then, and Smith is now. Admittedly, Houston is not devoid of land use regulations. But the nature, number, and scope of those regulations is significantly different from other cities. There is an essential difference between the regulations in Houston and those in other cities. The permitting process in Houston is relatively fast compared to other cities, and the expenses incurred […]

Yes, Virginia, government roads really are government subsidized, and no, they don’t approximate freed-market outcomes

Recently, I came accross an article by Charles Johnson, who blogs at Rad Geek.  The article had linked to a Market Urbanism post about how user fees and gas taxes fall well short of funding road use in the US. Charles’ article further debunks the Urbanism Legend asserted by free-market imposters that a free-market highway system would be similar to the system we see today. I like the post so much that I asked Charles about posting it at Market Urbanism.  Charles requested that I, “indicate that the post is freely available for reprinting and derivative use under the terms of the Creative Commons Attribution-ShareAlike 1.0 license.” I am happy to comply, and must admit that I haven’t taken the time to acquaint myself with Creative Commons.  So, here it is, in it’s original form, and feel free to read the comments in the link: Yes, Virginia, government roads really are government subsidized, and no, they don’t approximate freed-market outcomes by Charles Johnson, RadGeek.com When left-libertarians argue with more conventionally pro-capitalist libertarians about economics, one of the issues that often comes up is government control over roads, and the ways in which state and federal government’s control over roads has acted as a large subsidy for economic centralization and national-scale production and distribution networks (and thus, to large-scale “big box” retailers, like Wal-Mart or Best Buy, dependent on the crafty arrangement of large-scale cross-country shipping as a basic part of their business model). People who have a problem with this analysis sometimes try to dispute it by arguing that government roads aren’t actually subsidized — that heavy users of government roads are actually getting something that roughly approximates a freed-market outcome, because users of government roads pay for the roads they get, in proportion to how heavily they use them, because government […]

Urban[ism] Legend: Is Houston really unplanned?

by Stephen Smith It seems to be an article of faith among many land use commentators – both coming from the pro- and anti-planning positions – that Houston is a fundamentally unplanned city, and that whatever is built there is the manifest destiny of the free market in action. But is this true? Did Houston really escape the planning spree that resulted from Progressive Era obsessions with local planning and the subsequent grander plans of the post-WWII age of the automobile? Michael Lewyn, in a paper published in 2005, argues that commentators often overlook Houston’s subtler land use strictures, and recent developments in the city’s urban core reaffirm this. It is definitely true that Houston lacks one of the oldest and most well-known planning tools: Euclidean single-use zoning. This means that residential, commercial, and industrial zones are not legally separated, though as I will explain later, Houston remains as segregated in its land uses as any other American city. But single-use zoning is not the only type of planning law that Houston’s government can use to hamper development. As Lewyn lays out in his paper, minimum lot sizes and minimum parking regulations abound in this supposedly unplanned City upon a Floodplain. He discusses a recently-amended law that all but precludes the building of row houses, a stalwart of dense urban areas (the paper is heavily cited and poorly formatted, so I’ve removed the citations): Until 1998, Houston’s city code provided that the minimum lot size for detached single-family dwellings was 5000 square feet. And until 1998, Houston’s government made it virtually impossible for developers to build large numbers of non-detached single-family homes such as townhouses, by requiring townhouses to sit on at least 2250 square feet of land. As Siegan admits, this law “tend[ed] to preclude the erection of lower […]

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