PROFITING  FROM  LAND
By Phil Day
The rich keep on getting richer, while public works and services and community facilities are perennially under-funded.   Rezoning land makes a gift of $400 million to private pockets and purses every year.   Public authorities give certain people windfall profits by the stroke of a pen, or by changing the colour on a zoning map.   This situation encourages investment in property rather than in manufacturing for export.   It makes a mockery of sustainable development by putting a premium on the mindless pursuit of further "development" -- nothwithstanding the implications of this for the resources of a finite planet.
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  What I'm on about is land, and using and profiting from land.  And the implications of this for "sustainable development," and how we raise public revenue to build our human settlements.  Ultimately, however, I guess what I'm really on about is the mystery of how an institutionally-preserved -- but fundamentally flawed -- national "mindset" has survived without being seriously questioned.

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  But let's come to that gradually.  Let's start with some familiar propositions.  For example, we all know that "lucky" landowners can reap a fortune when public works are undertaken in their vicinity--when roads and railways are extended and land is, as they say, "opened up."  And we all know--and either resent or secretly envy--how landowners can increase the value of their land by getting approval to use it for a more intensive use.  By getting approval, for example, to subdivide farm land for housing, or to carve up some coastal bushland for a "resort."  Or to convert a homesite to shops, or a block of flats.

  The approval is valuable.  It's valuable whether or not the actual development is ultimately profitable--or even if it is not carried out at all.  The land can be sold, with the approval, for a great deal more than it was previously worth.

  Yet the landowner has done nothing, except apply for approval to change the use.  It is the public authority's decision which has changed the value--literally by the stroke of a pen, or by changing the colour on a zoning map.

A talk recorded by Mr P.D.Day of Queensland, Australia, on 22 June 1993, and broadcast on "Ockham's Razor," Australian Broadcasting Corporation, 20 and 23 September 1994.

Profiting from Land; Phil Day  .."Ockham's Razor," ABC Radio, 20 & 23 Sep 1994

  Consider the consequences.  Well, for a start, they are quite literally inflationary--because there's been an increase in money but there's been no commensurate increase in goods and services.  So the windfall increase in land value is simply a built-in contribution to inflation, which is then passed on to all subsequent purchasers of the land, for homesites or whatever.

  Another consequence is that the prospect of a windfall increase in land value is a standing invitation to "develop" all land, regardless of whether the proposed development is genuinely needed.  Which means that all land is vulnerable to developmental pressures--irrespective of its environmental significance, and notwithstanding the need to maintain some clear demarcation between town and country, and to curb the environmentally destructive process of urban sprawl which has been going on ever since the advent of European settlement.

  Well, if these are the consequences, should not our proliferating town planning controls be doing something about it?  Yes, indeed.  The sad fact, however, is that our present town planning systems actually legitimise the process.  They provide a regular mechanism for approving changes in land use.  But, they allow the windfall profit to be appropriated by the "lucky" private landowners, or by developers acting on their behalf.


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"Near the window by which I write, a great bull is tethered by a ring in his nose.   Grazing round and round he has wound his rope about the stake until now he stands a close prisoner, tantalised by the rich grass he cannot reach, unable even to toss his head to rid him of the flies that cluster on his shoulders.

This bull, a very type of massive strength, who, because he has not wit enough to see how he might be free, suffers want in sight of plenty, and is helplessly preyed upon by weaker creatures, seems to me to be no unfit emblem of the working masses.

But until they trace effect to cause, until they see how they are fettered and how they may be freed, their struggles and outcries are as vain as those of the bull.   Nay they are vainer.   I shall go out and drive the bull in the way that will untwist the rope.   But who shall drive men to freedom?"--Introduction to Protection or Free Trade 1888 by Henry George [1839-97].

Picture and wording by courtesy of   Geonomics (USA and UK)

  Now in defence of town planning, let me hasten to say that town planning theory has always maintained that these land value inceases--which accrue from public planning decisions--should be recouped by the community whose public agencies have created them.  Town planning theory says that this so-called "betterment" should be recouped, and, at the same time, that any detriment, or "worsenment," which other town planning decisions may imnpose on landowners, should be compensated.

  So much for theory.  In practice we do neither of these things with any real commitment.  Back in 1976, Australia, along with other nations, endorsed the Vancouver Plan--the recommendations of the UN [United Nations] Habitat Conference on Human Settlements--which called for the unearned increment in land values resulting from changes in land use to be recouped by the community and applied to the building of our cities and towns.

  But, we continue to shy away from capturing this betterment.  And we're grudging about paying compensation (or else we avoid making town planning decisions--which ought to be made in the public interest--in case they give rise to claims for compensation).

 What obscures the siutation is that usually--but not always--we do in fact require some contribution as a condition of the granting of planning approval.  But, except in the A.C.T. [Australian Capital Territory]) the amount of contribution is not related in any way to the increase in land value.   Contributions are "negotiated" by local councils, artitrarily and haphazardly, and never in pursuance of any clear-cut philosophy or rationale.

  Thus we appear to be doing something about it.  Yet in reality, if one perseveres and looks behind the inter-disciplinary boundaries which compartmentalise town planning, land valuing, and public revenue-raising, it become apparent that, despite the diet of "financial discipline" and "economic rationalism" with which we've been fed in recent years, imprecisions and a sort of labyrinthine chaos prevail through the whole vast are of urban planning and development.  And those who know about it frankly admit it.

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$400 MILLION GIFT TO PRIVATE POCKETS--EVERY YEAR

  To put it in some perspective, there are a thousand-odd local councils in Australia [written 1993] and, while not much development takes place in some of them, the councils in urban areas handle huge numbers of development applications every year, creating millions of dollars of increased land value and bestowing it as a gift on private individuals and corporations.  The National Capital Planning Authority in Canberra has put the figure at around $3-400 million per year.

 Thus we come to the curious national mindset which seems to accept this situation.  A situation in which urban works and services and community facilities are perennially under-funded, while the landed rich keep on getting richer as the population grows and the community develops.  A situation which--as a recent Economic Planning Advisiory Council report points out--encourages investment in property rather than in manufacturing for export.  A situation which makes a mockery of sustainable development by putting a premium on the mindless pursuit of further "development"--nothwithstanding the implications of this for the resources of a finite planet.

  And a situation reinforced--very plausibly in time of economic stringency--by the assumption -- notwithstanding all the evidence that the benefits did not "trickle down" from the "resources boom" of the early 1980s, or from the "property boom" of the late 1980s--that the roller-coaster pursuit of more development will somehow solve the problems of unemployment.

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  Which of course conveniently absolves us from confronting the uncomfortable fact that unemployment will never by solved while the lifestyle we pursue depends upon increasingly sophisticated capital-intensive technology, and an economic system whose efficiency we actually measure by the number of people it can dispense with.

  This, let's fact it, is the picture of a "free market economy" which we're presenting to the people of Eastern Europe and expecting them to enthusiastically endorse.  Is it really the only alternative to a Marxist-type regulated economy?  Is it all somehow pre-ordained and inevitable?

  Not really.  Much of the answer lies back in the Middle Ages with the decline of feudalism which, as you may recall, required all occupiers of land to contribute services to the Crown, as the representative of the community.

  When feudal dues were abolished and "common" land was enclosed, and when extravagant characters like Henry VIII sold the lands of the realm outright, and closed the monasteries, land ownership became absolute.  With two dramatic consequences.  For the common people, political bondage to the feudal kings was replaced by economic bondage to the wealthy landowners, who established the pattern of private appropriation of land value increases which has prevailed ever since.  As for the costs of government, from then on the cost of defence and education and so on had to be met, instead, by taxation.

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  Thus, while tribal societies have never had a problem in recognising it, over the centuries we've forgotten--or are strangely reluctant to acknowledge--that land is a finite community resource for the use or occupation of which we should all be paying a rent to the community.

  Instead, we raise community revenue by taxing the things one might think we ought to be encouraging, things like hard work and skill and, incredibly, even employment itself.  And we've been facing the iminent prospect of a tax--not on the consumers of the community's natural resources -- but on the consumers of socially worthwhile goods and services which we want people to produce and add to in value.

  An American economist, Henry George, exposed the craziness of it all a centry ago. So have others from all sides of the political spectrum, extending back to old Adam Smith, who can conveniently mean all things to all people, but who in fact asserted that taxing the benefits accruing to the owners of land was the most logical and least distorting means of raising public revenue.

  Alas, to little avail.  One would like to conclude on a cheerful note.  Yet, incredibly, our national mindset seems indelibly enshrined in the 5,250 pages of the Income Tax Assessment Act, and institutionalised in the massive (and enormously expensive) bureaucracies--both public and private -- required to administer it.  Or to escape from it.

 The alternative of letting us all keep the rewards of our skill and labour while paying rent to the community for the land we use, offers the prospect of a less exploitative, more efficient, and far less unequal society.  But, the chances of such a lateral shift of emphasis enlightening political and economic debate in the foreseeable future seems, well, the chances seem depressingly remote.

P.D.Day
3 / 24 Croydon St
TOOWONG Q 4066

(THE END)


The author, Philip D. Day, LL.B., Dip. T.C.P., L.F.R.A.P.I., is a town planner who lives in a suburb of Brisbane, Queensland, Australia.   Among his writings is the book Land, 1995, Brisbane, Australian Academic Press, 120pp, ISBN 1 875378 16 2, Dewey 333.730994, subtitled "The elusive quest for social justice, taxation reform & a sustainable planetary environment."

Would you like to hear his voice, or get a transcript of this clear explanation and/or a 1997 radio talk by Phillip Day?   Contact the Australian Broadcasting Corporation to buy a tape on:   http://www.abc.net.au/rn/tapesale.htm   or order a transcript from the ABC.   If you are on the Internet, download his 26 October 1997 Radio National talk transcript by clicking Widening the Tax Reform Agenda , on:   http://www.abc.net.au/rn/science/ockham/or261097.htm     And for more of his writing, see a joint paper he helped write at http://www.multiline.com.au/~georgist/day-phil.htm

Copyright © 1993, 1994 and 1997 of original material reserved, but may be reproduced if the author is advised beforehand, agrees to the request, and the sources (the author, Ockham's Razor on ABC, and the Association) are clearly acknowledged in any reproduction.   No legal responsibility taken.   For legal and copyright details see Disclaimer, Copyright and Trade Mark Statements _Copyright © 1993, 1994 and 1997

OBJECTIVES:   Social Justice, Land Rights for All, Collection of Site Revenue and Resource Rentals, Environmental Protection, Sustainable Development, Decentralisation, Opposition to Anti-Enterprise Taxes and Monopolies, Proportional Representation, Responsible Government Expenditure, Exclusive Land Occupation, Collection of Misappropriated "Economic Rent," Natural Public Revenue, Abolition of Involuntary Unemployment, Wealth Producers to keep Full Value of their Production and Enterprise, Reducing Speculation, Freedom from Sex and other Biases, Civil Liberties, Human Rights.

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