My one gripe with this overall excellent piece: Pro-housing cities tend to be those that embrace state oversight of local planning! We should reward cities meeting housing outcomes with large amounts of money, not “true local control” exemptions from state law
In practice, no city in California has built a lot of housing without a mix of density bonus, housing accountability act protections, permit streamlining, and other state laws. Those that meaningfully plan for new homes do so with the support of the state, not in its absence. Even the most pro-housing places benefit from sometimes being able to say “we can’t block this housing, the state requires it!” We shouldn’t abandon pro-housing elected officials in the places where they’re succeeding
Isn't land value tax a natural, outcome-based incentive to better utilize land? Landholders would stop getting lower taxes just because they underutilize their speculative investment. This would drive speculative investors away leaving only the investors that plan on profiting by actually improving the land and putting it to use. Land that is artificially restricted from being improved would drop in value. If states collected the land value tax and shared a portion with the cities, then the cities would be incentivized to increase the value of the land in their jurisdiction.
---
EDIT to unpack what I meant a bit.
By "underutilizing" land, I mean using a valuable parcel for something far below what its location can support.
- Surface parking lots in a dense downtown
- Single-story strip malls on major transit corridors
- Single-family homes on half-acre lots a block from thriving commercial districts
- Vacant lots held empty for years or decades
The land itself is highly valuable because of its location and the surrounding economy, but very little is being built on it.
By "improving" land, I mean adding structures or infrastructure that put that location to productive use.
- Houses
- Apartments
- Shops
- Offices
- Mixed-use buildings
- Factories
- Landscaping
- Amenities
The value of land comes from location (proximity to jobs, transit, amenities, neighbors), while the value of improvements comes from what someone has actually built on top of it.
When I say "speculative investors," I'm referring to people or firms who buy land primarily to profit from passive appreciation rather than to do anything useful with it. They're betting that the surrounding city and public infrastructure will make their parcel more valuable over time, while they themselves contribute nothing. They essentially free-ride on everyone else's investment and labor. Most speculative investors don't even live or work on or anywhere near the land that they hoard.
Under the current property tax system, your bill is roughly proportional to the combined value of your land plus improvements, whatever's built on it. That means a surface parking lot pays much less in tax than a five-story building next door, even though they sit on equally valuable land. It actively rewards keeping land empty or underbuilt, since adding a building raises your taxes. A land value tax flips that incentive - you pay based on what the location is worth regardless of whether you've built anything, so sitting on it and wasting its potential (speculative investing) won't profit you as much if at all. With a high enough land value tax speculative investing stops and land values settle to reflect only how they can be improved and used.
Cities artificially restrict land from being improved and used through a wide range of policies.
- Single-family-only (R1) zoning
- Low height limits
- Low floor-area-ratio caps
- Minimum lot sizes
- Large mandatory setbacks
- Parking minimums that force you to dedicate huge portions of a lot to cars
- Design review boards with discretionary veto power
- Slow and expensive permitting
- Lengthy environmental review
- Historic preservation overlays applied broadly
- Steep impact fees
Each of these makes it either illegal or financially infeasible to actually build more housing or commercial space, which suppresses what the land can be used for and therefore its value. Local governments have become plugs constipating housing supply through regressive, property-right-violating policies.
If cities got land value tax revenue they would have a real fiscal incentive to make their land more valuable. The levers they could use are well-known.
- Upzoning to allow more units and taller buildings
- Eliminating parking minimums
- Reducing setbacks and lot coverage requirements
- Switching to by-right approvals so you can build what's allowed without discretionary review
- Allowing mixed-use
- Narrowing historic overlays to genuinely historic structures
- Streamlining permitting timelines
- Investing in the public goods that make locations more desirable in the first place - transit, parks, schools, public safety, walkable streets, and reliable utilities
The cities would still have control over which levers they choose to pull and how much. But they won't get the reward unless they actually increase the value of their land. The value of the land won't increase merely through the boom-bust cycle of speculative investment since land value taxes disincentivize speculative investment. Cities will have to allow land to be used for things people want like places to live, work, and play.
That was unpacking more than a bit, but this is important, and I want people to understand.
As a Texan, Texas is also notable for having a state government that isnt shy about intervening in local affairs by US standards. They usually abuse this power by doing dumb stuff like blocking transit and fussing over rainbow sidewalks in gayborhoods, but the upside is that NIMBYism is utterly dead on arrival as a political philosophy for our urban cores. Our usage of property tax as our main tax levy instead of income tax even acts as a pseudo-LVT - if you live in a single family home in a neighborhood with rising property values, you have to really want to live in that house to not cash out and sell to a developer.
In my cash-strapped California city the Council usually approves in-fill housing when the staff tells them disapproval will cost them a million dollar lawsuit. The NIMBYs are mad but the threat of state enforcement of housing laws has more power.
As a New Englander, and former Bostonian, the suburban BS just really gets to you, especially since these towns have the most sanctimonious politics.
The issue though is that these towns have zero incentive individually to fix a regional problem. They get state subsidized transit, like a commuter rail stop, and can keep down the property tax burden for schools by blocking housing
I think the points on the cost of NIMBY nonsense and the difficulty of overcoming it somewhat cancel each other out.
Every public official who puts on the record that they are abusing the law to waste city time and money not building is making another argument to tell state govt to hold their feet to the fire.
Blocking this kind of legislation just benefits larger development companies who don't want competition from smaller scale infill projects. Part of the "status quo" suburban model that leads to financial dependence on continual growth and development.
Reminder of that time a Cupertino Councilmember openly said from the dais that he wanted to stuff his city's Housing Element inventory with sites they could get HCD to sign off on, but where no housing would get built.
This is a New England style annual town meeting and the person responding is most like a selectperson. It's direct democracy - townspeople are the legislature. This is actually the discussion before the vote on the third yearly attempt in a row of attempting at passing a multi-family zoning ordinance that complies with state law.
I like the outcomes approach but benefits for achieving outcomes should not go to cities but to neighborhoods where the housing is built. Yes we will take those two new apartments in exchange for rebuilding the community center or undeegrounding the utility lines.
My one gripe with this overall excellent piece: Pro-housing cities tend to be those that embrace state oversight of local planning! We should reward cities meeting housing outcomes with large amounts of money, not “true local control” exemptions from state law
In practice, no city in California has built a lot of housing without a mix of density bonus, housing accountability act protections, permit streamlining, and other state laws. Those that meaningfully plan for new homes do so with the support of the state, not in its absence. Even the most pro-housing places benefit from sometimes being able to say “we can’t block this housing, the state requires it!” We shouldn’t abandon pro-housing elected officials in the places where they’re succeeding
Isn't land value tax a natural, outcome-based incentive to better utilize land? Landholders would stop getting lower taxes just because they underutilize their speculative investment. This would drive speculative investors away leaving only the investors that plan on profiting by actually improving the land and putting it to use. Land that is artificially restricted from being improved would drop in value. If states collected the land value tax and shared a portion with the cities, then the cities would be incentivized to increase the value of the land in their jurisdiction.
---
EDIT to unpack what I meant a bit.
By "underutilizing" land, I mean using a valuable parcel for something far below what its location can support.
- Surface parking lots in a dense downtown
- Single-story strip malls on major transit corridors
- Single-family homes on half-acre lots a block from thriving commercial districts
- Vacant lots held empty for years or decades
The land itself is highly valuable because of its location and the surrounding economy, but very little is being built on it.
By "improving" land, I mean adding structures or infrastructure that put that location to productive use.
- Houses
- Apartments
- Shops
- Offices
- Mixed-use buildings
- Factories
- Landscaping
- Amenities
The value of land comes from location (proximity to jobs, transit, amenities, neighbors), while the value of improvements comes from what someone has actually built on top of it.
When I say "speculative investors," I'm referring to people or firms who buy land primarily to profit from passive appreciation rather than to do anything useful with it. They're betting that the surrounding city and public infrastructure will make their parcel more valuable over time, while they themselves contribute nothing. They essentially free-ride on everyone else's investment and labor. Most speculative investors don't even live or work on or anywhere near the land that they hoard.
Under the current property tax system, your bill is roughly proportional to the combined value of your land plus improvements, whatever's built on it. That means a surface parking lot pays much less in tax than a five-story building next door, even though they sit on equally valuable land. It actively rewards keeping land empty or underbuilt, since adding a building raises your taxes. A land value tax flips that incentive - you pay based on what the location is worth regardless of whether you've built anything, so sitting on it and wasting its potential (speculative investing) won't profit you as much if at all. With a high enough land value tax speculative investing stops and land values settle to reflect only how they can be improved and used.
Cities artificially restrict land from being improved and used through a wide range of policies.
- Single-family-only (R1) zoning
- Low height limits
- Low floor-area-ratio caps
- Minimum lot sizes
- Large mandatory setbacks
- Parking minimums that force you to dedicate huge portions of a lot to cars
- Design review boards with discretionary veto power
- Slow and expensive permitting
- Lengthy environmental review
- Historic preservation overlays applied broadly
- Steep impact fees
Each of these makes it either illegal or financially infeasible to actually build more housing or commercial space, which suppresses what the land can be used for and therefore its value. Local governments have become plugs constipating housing supply through regressive, property-right-violating policies.
If cities got land value tax revenue they would have a real fiscal incentive to make their land more valuable. The levers they could use are well-known.
- Upzoning to allow more units and taller buildings
- Eliminating parking minimums
- Reducing setbacks and lot coverage requirements
- Switching to by-right approvals so you can build what's allowed without discretionary review
- Allowing mixed-use
- Narrowing historic overlays to genuinely historic structures
- Streamlining permitting timelines
- Investing in the public goods that make locations more desirable in the first place - transit, parks, schools, public safety, walkable streets, and reliable utilities
The cities would still have control over which levers they choose to pull and how much. But they won't get the reward unless they actually increase the value of their land. The value of the land won't increase merely through the boom-bust cycle of speculative investment since land value taxes disincentivize speculative investment. Cities will have to allow land to be used for things people want like places to live, work, and play.
That was unpacking more than a bit, but this is important, and I want people to understand.
As a Texan, Texas is also notable for having a state government that isnt shy about intervening in local affairs by US standards. They usually abuse this power by doing dumb stuff like blocking transit and fussing over rainbow sidewalks in gayborhoods, but the upside is that NIMBYism is utterly dead on arrival as a political philosophy for our urban cores. Our usage of property tax as our main tax levy instead of income tax even acts as a pseudo-LVT - if you live in a single family home in a neighborhood with rising property values, you have to really want to live in that house to not cash out and sell to a developer.
In my cash-strapped California city the Council usually approves in-fill housing when the staff tells them disapproval will cost them a million dollar lawsuit. The NIMBYs are mad but the threat of state enforcement of housing laws has more power.
As a New Englander, and former Bostonian, the suburban BS just really gets to you, especially since these towns have the most sanctimonious politics.
The issue though is that these towns have zero incentive individually to fix a regional problem. They get state subsidized transit, like a commuter rail stop, and can keep down the property tax burden for schools by blocking housing
I think the points on the cost of NIMBY nonsense and the difficulty of overcoming it somewhat cancel each other out.
Every public official who puts on the record that they are abusing the law to waste city time and money not building is making another argument to tell state govt to hold their feet to the fire.
Also begs the question "Pricks for whom?"
Blocking this kind of legislation just benefits larger development companies who don't want competition from smaller scale infill projects. Part of the "status quo" suburban model that leads to financial dependence on continual growth and development.
Seeing the same thing happen here unfortunately.
Good article, thanks for sharing.
Reminder of that time a Cupertino Councilmember openly said from the dais that he wanted to stuff his city's Housing Element inventory with sites they could get HCD to sign off on, but where no housing would get built.
https://www.youtube.com/watch?v=VCJJ2f9JQJI
This is a New England style annual town meeting and the person responding is most like a selectperson. It's direct democracy - townspeople are the legislature. This is actually the discussion before the vote on the third yearly attempt in a row of attempting at passing a multi-family zoning ordinance that complies with state law.
Modica for president.
I like the outcomes approach but benefits for achieving outcomes should not go to cities but to neighborhoods where the housing is built. Yes we will take those two new apartments in exchange for rebuilding the community center or undeegrounding the utility lines.
Great insight thank you.
I think this is how the Pushcart Wars started.