Some land is kept out of use, or not used in the most profitable way, for environmental or cultural reasons. That is quite right. Unfortunately a lot of land which could be used for housing, for industry or for other useful purposes is also held out of use.
There are various reasons for this absurd state of affairs, not least of which is the fact that owners of undeveloped, or underdeveloped, urban land frequently expect land prices to rise, and hope to make a killing later on.
Our present taxation and rating system encourages this wastage of resources. Urban land without buildings, or with buildings which are unfit for use, is classified as “vacant land”. Vacant land is not liable for either Council Tax or Uniform Business Rates (UBR). Partially empty parts of buildings, such as unoccupied upper floors of shops, are also not liable to either Council Tax or UBR.
A Vacant Land Tax?
Some people have suggested that the problem could be met by imposing a Vacant Land Tax (VLT) on unused urban sites. This might well be an improvement on the present state of affairs, but there are serious difficulties. For example;-
1. It is difficult to define “vacant”, and any definition is likely to be arbitrary. To give but one example, it is hard to see how a VLT could deal with the owner of a big and otherwise empty site with a small business operating from one corner. Perhaps such difficulties could be met… but only with a lot more bureaucracy and fat fees for lawyers.
2, There are other technical problems, such as how soon after the vacancy the VLT bill would appear, and who would be responsible for inspecting. More bureaucracy, more lawyers!
3. A VLT will not make provision for bringing into better use land which is not technically vacant, but is occupied by run-down buildings which blight the value of nearby property.
Is there a better way?
Yes, there is a third way, which is better than either the present state of affairs or VLT. It may be used as a source of revenue for central government, in which case it is known as Land Value Taxation (LVT), or for local government , in which case it is known as Site Value Rating (SVR), or for both.
All land would first be valued. The valuation would ignore the value of any buildings or other developments on the land, but would consider the site alone. Professional valuers agree that the process of valuation would be simple and cheap.
A tax would then be levied on the basis of that valuation. If used for local government it would replace the present Council Tax on domestic property and UBR on commercial property. If used by central government it would replace existing taxes like VAT or Income tax.
The owner of vacant land, or land which is inadequately used, would pay the same as he would pay if the land were put to the best use. He would therefore have no incentive to hold it back, and would either develop it himself or sell it to somebody who was prepared to do so.
This would certainly discourage people from holding land out of its best use. Other Topic Papers in this series how it would have many other useful benefits as well.