Iea Calls For A Land Value Tax

[LJAR]

IEA calls for land value tax

Unavoidable, could be substituted for council tax, would hit the biggest landowners hardest.

I doubt the blue team will be listening though...

[GinAndPlatonic]

As one of the posters said. "Who is to place value on the land"?

[Blue Peter]

As one of the posters said. "Who is to place value on the land"?

And as another of the commenters said, the Valuations Office Agency,

Peter.

[Chuffy Chuffnell]

And as another of the commenters said, the Valuations Office Agency,

Peter.

So 10s of thousands of faceless bureaucrats (on good salaries no doubt) would be needed to go round constantly valuing every bit of land in the country... right. "Not practicable" is an understatement. And how do they value the land? There would no doubt be an appeal procedure, court cases, etc...

It's more trouble than it's worth.

[Monkey]

Who values council tax?

and they get it wrong.

how can the valuation be based on prices for 1991, 21 years later?

http://www.newforest.gov.uk/index.cfm?articleid=532

my last place i lived in was built in 2001, was initially sold for £195k, the average for the street (whole street of identical houses build at the same time) averaged £201k. but the property was banded as band D? valuation £68-88k?!?!

Yes the amount i was paying IMO was fair, for the property and location. but i think the valuation/way its valued was wrong

http://www.newforest.gov.uk/index.cfm?articleid=10258

what happens if i bought a end of terrace 1 bed house. the coulcil tax would be based on that. then i built/extended it to a 5 bed house. the dependancy of the household on the council would be much more for that property (more rubbish to collect, etc) but the tax would not change.

using a land value tax makes much more sence, as the land was always there, should always be there. they could easily value each SQ km of land based on location, type of use and possible future use. then add 0.1% per year to the value of that land. and every 10 years revist the valuation bands to check they are realistic and relevant.

[Blue Peter]

So 10s of thousands of faceless bureaucrats (on good salaries no doubt) would be needed to go round constantly valuing every bit of land in the country... right. "Not practicable" is an understatement. And how do they value the land? There would no doubt be an appeal procedure, court cases, etc...

It's more trouble than it's worth.

The Valuation Office Agency would do the valuations, the same as for Business Rates or Council Tax. Im amazed anybody even asks the question. These would be based on the fourteen million sales and actual plot sizes, planning permission and selling prices recorded by HM Land Registry (with extra info from the council tax register which covers the stuff not actually registered at HMLR) over the last twelve years (about half of all homes have been bough and sold at least once in the last twelve years) suitably adjusted to arrive at relative rental values as at todays date. The whole thing can be computerised and requires some understanding of maths. Have you never wondered how Zoopla and all these other web sites do their instant valuations? I shall now sit back and wait for somebody to play the Poor Widows In Mansion bogey :-)

Peter.

[Gone baby gone]

As one of the posters said. "Who is to place value on the land"?

How does land get valued now when you wish to sell it... Is it impossible to carry out that same process on land that isn't being sold?

The valuations might not be precise, but there would be an appeals process (just like there is for council tax).

Valuation is no impediment to a LVT.

[EUBanana]

LVT does sound great in economic theory but the difficulty of administering it would seem enormous.

For it to work properly it has to be based on the value of land, not the value including anything built on it, so it's much harder to evaluate than council tax. How can you decide the value of a plot of land improved by a nearby amenity? Seems an impossibility to me.

Edited September 5, 2012 by EUBanana

[stormymonday_2011]

So 10s of thousands of faceless bureaucrats (on good salaries no doubt) would be needed to go round constantly valuing every bit of land in the country... right. "Not practicable" is an understatement. And how do they value the land? There would no doubt be an appeal procedure, court cases, etc...

It's more trouble than it's worth.

The Valuation Office has 3,990 employees according to wiki

It already carries out regular property valuations for business rates including things such as fishing rights, golf courses etc.

I don't see that extending that to land including domestic property would be that hard since you would be using imputed rents not sale values as the basis of valuation

In fact this type of valuation for tax purposes dates all the way back to the Domesday book. It predates income and other measurements of wealth by hundreds of years. Unlike cash, shares, gold or other stores of value you also can not offshore it or hide it. It is also much cheaper to administer than income tax (nb the Valuation Office only accounts for about 6% of total HMRC staff) and the avoidance and default rate is tiny compared with other Heads of Duty such as VAT or Income Tax. Only North Sea Petroleum Revenue Tax comes near it in terms of sums collected compared with sums spent on running the systems

BTW the valuation is only the basis for property tax it does not set the actual rate charged which is done by central and local government

Edited September 5, 2012 by stormymonday_2011

[Gone baby gone]

LVT does sound great in economic theory but the difficulty of administering it would seem enormous.

For it to work properly it has to be based on the value of land, not the value including anything built on it, so it's much harder to evaluate than council tax. How can you decide the value of a plot of land improved by a nearby amenity? Seems an impossibility to me.

http://www.labourland.org/downloads/papers/chapters/4.pdf

It is often thought that valuing land accurately and separately from the buildings and developments on the land is more difficult than valuing properties as a whole, including the land element – especially since the incidence of bare land being sold, which could provide a benchmark for valuing other land, is rare. However, even now, property developers call upon professional valuers to value particular sites becoming available for re-development, and they do this without difficulty.

In fact, valuing land is less complicated than valuing buildings. That is because the only factors that need to be considered are location and potential use consistent with prevailing planning regulations, whereas for buildings, additional factors, such as the state of repair, what the buildings are being used for, how old they are, their architectural merits, their internal space, and so on, have to be taken into account. The valuation of land, therefore, can be more easily generalised. This allows the extensive use of modern information technology, including computer-aided mass assessment and geographical information systems (GIS).

One method for assessing the value of land separately from the value of buildings on the land is to start with the known market value of the property as a whole (the building plus the land), and then deduct the value of the buildings, which roughly corresponds to the estimated rebuilding costs for insurance purposes, adjusted for depreciation. The remainder will be the value of the land. This is known as the ‘residual value’ method of assessment. There are a number of other methods, which can act as a crosscheck on one another.

By collecting data on valuations and sales of similar properties in different locations, and on the valuations and sales of different properties in the same neighbourhood, including differences between property prices and their values for insurance purposes, and other data, it is possible to arrive at reasonably accurate estimates of land values over the whole country. This and other information can then be used to construct what Tony Vickers, at the School of Surveying, Kingston University, who is pioneering such techniques, has called a ‘land-value-scape’, with maps, instead of showing contour lines depicting topography, show lines marking off localities and zones with equal land values per hectare or square metre. Thus, simply knowing the area of a site, one can immediately calculate its value by referring to its position on the map, which would be available for public scrutiny.

Once such a system for valuing land is up and running, by recording and tracking property sales and other data throughout the country, it would be possible to update land values more or less continuously. Over time, it would be possible to incorporate new data – perhaps using a points system that would take into account proximity to amenities and services, which would increase land values, or congested roads or unsightly vistas, which would depress values – so that the system of land valuation would become ever more refined.

Next question.

[stormymonday_2011]

LVT does sound great in economic theory but the difficulty of administering it would seem enormous.

For it to work properly it has to be based on the value of land, not the value including anything built on it, so it's much harder to evaluate than council tax. How can you decide the value of a plot of land improved by a nearby amenity? Seems an impossibility to me.

Imputed rent ? Schedule A. etc

Apparently our primitive ancestors could handle all this stuff with their quill pens and bound ledgers but it is far too difficult for modern man with his markets full of futures, CDO, CDS, parallel sysplex computers etc

The real reason it is unpopular is not because it is difficult but because it would be a tax system that would be hard to evade and would hit those with the most accumulated wealth rather than just the most income at a given point in time..

For those who like a generational angle it would favour the young and productive over older rentiers

Edited September 5, 2012 by stormymonday_2011

[Gone baby gone]

The real reason it is unpopular is not because it is difficult but because it would be a tax system that would be hard to evade and would hit those with the most accumulated wealth rather than just the most income at a given point in time..

Exactly, whenever I see comments under newspaper or blog articles about LVT talking about valuation, I can't help thinking of powerful vested interests at work.

It's always worth stepping back to remember that we are a country where immense power for landowners is stitched into the very fabric of our society.

[RufflesTheGuineaPig]

So 10s of thousands of faceless bureaucrats (on good salaries no doubt) would be needed to go round constantly valuing every bit of land in the country... right. "Not practicable" is an understatement. And how do they value the land? There would no doubt be an appeal procedure, court cases, etc...

It's more trouble than it's worth.

Actually it' very easy. Anyone can decide the value of their own land.

And if a few people disagree with the valuation then the property goes to auction, with a reserve of 15% more that the owner valued their property at for tax purposes.

And thus the problem solves itself.

[Executive Sadman]

Just base it on individual previous sale prices +/-RPI. That way all those morons who bought in 2006/7 can have another nice reminder every year or month of their speculative greed. Id love to see the look on their faces when they find out their neighbours who bought before or after the boom only have to pay half the tax they do.

[Traktion]

Some great comments on that thread:

Submitted by Jim on Tue, 04/09/2012 - 17:46.

How exactly are you going to calculate the LVT liability then? If it were calculated purely on locational value, then as you say, a plot with a mansion on it has the same value as plot without a mansion (and indeed no planning for a mansion). Their locations are the same therefore there LVTs should be the same, no? If on the other hand you have to take into consideration planning status, then LVT is no longer a tax on pure locational value, its primarily a tax on planning permissions. Plot A has planning permission for a mansion, value £1m. Identical plot B next door has no planning permission, and is growing cabbages, value £25k. So unless you free planning up to such an extent that you can build pretty much whatever you like where you like, then LVT will always predominantly be a tax on planning permission, not the locational value.

I have other criticisms of a LVT, but this is an angle which I'd not thought of: The land value will totally depend on whether there is planning permission on it. It would also depend on what type of planning permission has been given (1 floor bungalow, 100 floor block, factory space etc).

Therefore, it isn't only a tax on location (which is in itself flawed*), but also a tax on usage. As said usage is defined by the council/state, they will inevitably have a big impact on the market value of the location.

Ofc, the flip side is that agricultural land without planning will remain largely unaffected by a LVT. However, I would assume some sort of 'windfall' LVT tax would have to be organised, to prevent land owners benefiting from gaining PP and then selling at a profit still (which is essentially, a private rent taken up front).

I'd be interested in hearing some discussion about the above, as I've never previously read/heard this (very good) point raised here.

* If your actions improve the value of the land, you will be lining yourself up for paying more tax. If you build a big office that attracts people to live near it, the LVT will increase for the factory, as the surrounding land gains a premium (by virtue of being close to the office). It isn't true that only public services increase the LVT potential at all (as was suggested in the linked article).

P.S. I'm all for people being compensated for the land monopolisation (through force), but others, but a LVT doesn't provide a direct solution for this. It also requires central planning, state theft and so forth to make it work, which leaves me pretty cold, tbh.

[bmf]

Imputed rent ? Schedule A. etc

Apparently our primitive ancestors could handle all this stuff with their quill pens and bound ledgers but it is far too difficult for modern man with his markets full of futures, CDO, CDS, parallel sysplex computers etc

The real reason it is unpopular is not because it is difficult but because it would be a tax system that would be hard to evade and would hit those with the most accumulated wealth rather than just the most income at a given point in time..

For those who like a generational angle it would favour the young and productive over older rentiers

And so it will never, *ever* happen.

[EUBanana]

http://www.labourland.org/downloads/papers/chapters/4.pdf

Next question.

OK, good answer.

[Gone baby gone]

Ofc, the flip side is that agricultural land without planning will remain largely unaffected by a LVT. However, I would assume some sort of 'windfall' LVT tax would have to be organised, to prevent land owners benefiting from gaining PP and then selling at a profit still (which is essentially, a private rent taken up front).

It's pretty obvious to anyone with a brain cell that in general, planning permission increases the value of land. So a Land VALUE Tax will be higher for land with PP vs land without it.

But what makes you think that land without planning permission will remain largely unaffected by a LVT? This land has market (and more importantly, intrinsic) value. A large % of land in the UK is owned by very few people, who effectively hoard the land, not using it. In the worst cases, they actually receive money from the EU and various UK agricultural schemes - we pay them to hoard land!

The average homeowner in the UK probably owns about 0.1 hectare of land, but there are people and organisations who own thousands of hectares of land...

This is land that could be used to grow food, or grow trees, build houses, or turned into parkland with free access.

[libspero]

Valuation is no impediment to a LVT.

Agreed, it would just be the last sale price of the property adjusted for HPI each year until next sold.

It would effectively just be the same as council tax, but instead of bands, it would be percentage of value.

That is the only way I see a LVT working effectively.

[Gone baby gone]

Agreed, it would just be the last sale price of the property adjusted for HPI each year until next sold.

It would effectively just be the same as council tax, but instead of bands, it would be percentage of value.

That is the only way I see a LVT working effectively.

LVT is just the land. Not the buildings.

The thing is, the value would be going down in many areas right now, not rising like council tax.

But those chaps with land banks, especially the ones with planning permission, would probably be quite keen to use it, or sell it....

[LJAR]

It's pretty obvious to anyone with a brain cell that in general, planning permission increases the value of land. So a Land VALUE Tax will be higher for land with PP vs land without it.

But what makes you think that land without planning permission will remain largely unaffected by a LVT? This land has market (and more importantly, intrinsic) value. A large % of land in the UK is owned by very few people, who effectively hoard the land, not using it. In the worst cases, they actually receive money from the EU and various UK agricultural schemes - we pay them to hoard land!

The average homeowner in the UK probably owns about 0.1 hectare of land, but there are people and organisations who own thousands of hectares of land...

This is land that could be used to grow food, or grow trees, build houses, or turned into parkland with free access.

This is what I would want to see,

the land should be freed up so that the population as a whole gets the most out of it. A LVT allows for that possibility.

(albeit with some hefty planning reform - but we got close recently)

[sossij]

So 10s of thousands of faceless bureaucrats (on good salaries no doubt) would be needed to go round constantly valuing every bit of land in the country... right. "Not practicable" is an understatement. And how do they value the land? There would no doubt be an appeal procedure, court cases, etc...

It's more trouble than it's worth.

Er... I'd imagine a small team using Google Earth to do it fairly quickly.

[GinAndPlatonic]

Who values council tax?

and they get it wrong.

how can the valuation be based on prices for 1991, 21 years later?

Its based on prices surely but then placed in bands, which can be appealed against if a house is extended/improved (not likely unless a neighbour complains maybe?) or even if its thought a house should be in a lower band.

I`m not defending the system just pointing out its not just based on the valuation from donkys years ago....its actually based on what band a house is in and compared to all other houses.

Not ideal I know!

Edited September 5, 2012 by GinAndPlatonic

[Monkey]

I`m not defending the system just pointing out its not just based on the valuation from donkys years ago....its actually based on what band a house is in and compared to all other houses.

Not ideal I know!

no, and i agree, but the banding is totally out of kilter with the price of houses today.

the average house price in 1991 was £53k with the average now 3 x that, the bands need re-valuing, as the highest band is H which is £320k and over. surly with todays prices (lets forget HPC for a moment) the highest band should be £1m +?

the bands should be

A = >£100k

B= £100k-£150k

C= £150K - £250K

D = £250k to £300k

E = £300k to £500k

F= £500k to £750k

G = £750k to £1m

H = £1m plus

[Gone baby gone]

no, and i agree, but the banding is totally out of kilter with the price of houses today.

the average house price in 1991 was £53k with the average now 3 x that, the bands need re-valuing, as the highest band is H which is £320k and over. surly with todays prices (lets forget HPC for a moment) the highest band should be £1m +?

You don't seem to understand the concept. The bands are relative, not absolute. The actual price bands don't matter, as long as the banding is applied consistently.