Explanation, Part 3


  1.   The Causes of Land Value.
  2.   Resource Rents.
  3.   Industrial Land Values.
  4.   Agricultural Land Values.
  5.   Unimproved Land Values.
  6.   Winners and Losers.
  7.   Getting on the Property Ladder.
  8.   Affordable Housing.
  9.   Economic Rent Collected in Advance.
  10.   Typical Objections.
  11.   The Single Tax Issue.
  12.   Definitions.
  13.   Quotations.

1. Causes of Land Value

In part 2 of the explanation the relationship between land values and location was shown to be fundamental, but within that context it is worth noting how land in general or sites in particular may acquire value.  The primary causes affecting land value are:

  1.  Natural advantages.     2. Infrastructure.    3. Population Intensity.   4. The Planning System    5. Security.

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2. Resource Rents


“No-one can own the fish of the sea” — Mr Justice Cranston, in a High Court ruling on fish quotas, 10.7.13 (1)



Amongst economists it is generally understood that the term ‘land’ includes all natural resources, all gifts of nature, natural forests, wildlife, minerals in the ground, fish in the sea etc.   This definition raises the question of ownership, exploitation rights and also the concept of  Resource Rents.  Justice Cranston’s ruling could apply equally to all natural resources.

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3. Industrial Land Values

In the explanations of part 2, it may be queried why there is no mention of industrial land.

This is because there is a big distinction to be made between ‘heavy’ and ‘light’ industry.  For the purpose of the part 2 explanation, light industrial land comes under the heading of ‘commercial’.

Heavy industrial land is somewhat anomalous in that, where land values are concerned, it does not follow the same pattern of development as for other forms of economic activity.

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4. Agricultural Land Values

In Explanation part 2 it was pointed out that LVT was predominantly an urban rather than a rural tax, in the sense that by far the greater revenue would be derived from the former.

The primary difference between urban and rural land values is that urban land values are determined by location within a close knit agglomeration of sites, each contributing to the ‘economic pressure’ that gives rise to the increase of value.

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5. Unimproved Land Values

The term ‘unimproved land value’ is widely employed in much writing on LVT, but can be misleading. What is intended is to make the distinction between a site that has been developed or built upon (improved) and a vacant site where no apparent development has taken place (unimproved).

The problem with this term is that it leaves unresolved various anomalies that might arise when trying to establish the actual meaning of ‘unimproved’ for the purposes of taxation.

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6. Winners and Losers

Politicians are always averse to any change in taxation that will create ‘losers’ who will cost them votes, so they tend to resort to indirect taxes where no obviously disadvantaged group can be identified. Where homeownership is concerned the introduction of a land value tax would clearly create winners and losers.

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7. Getting on the Property Ladder

This expression arose from the time when ordinary homeowners realised that their home did not have value simply as somewhere to live, but also as an investment. It became evident that constantly increasing property values, reflected in house prices, provided, over the long term, a better return on capital than savings accounts, and at the same time a place to live. Paying rent when you could be paying off a mortgage did not make sense to most people.

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8. Affordable Housing

As with any commodity, it is the combination of the price demanded and the financial means of the prospective buyer, that renders it affordable or not.

Housing is no different. House prices have been rising inexorably at least since the 1960s and continue to do so, especially in the most sought after areas, such as London and the South East.

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9. The Economic Rent Collected in Advance

As explained in the basic principles of part 1 the economic rent of land arises inexorably and is collected by whoever is in control of the land, whether an individual or a government. One interpretation of Ricardo’s law of rent states:

‘The rent of land is determined by the excess of its product over that which the same application can secure from the least productive land in use’ (1).

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