AFAIK, it has generally been assumed that land rent is proportional to
land value. But in looking at some sample statistics from realtor.com
and other real estate websites, I find this assumption straining my
credulity. Even allowing for a generally higher improvement value
fraction with commercial and industrial properties, their rents seem
to be a significantly higher fraction of value than residential rents.
This could mean that the residential fraction of total land rent,
generally assumed to be about 60% on the basis of assessed values,
could be quite a bit lower.
If it is real, this phenomenon might easily be explained by the
typically much greater tax subsidies to speculation in residential
real estate, especially single-family detached homes, than other forms
of landed property. Speculative land value is extremely sensitive to
the expected relationship between after-tax returns and the discount
(mortgage) rate. The multiple tax breaks for speculation in
residential real estate, especially principal residences, could easily
make the ratio between rent and value twice as large for
non-residential as for residential land. This implies that the
residential land rent fraction, assumed to be about 60%, could easily
be less than 50% and even as low as 40%. This has significant
implications for the distribution of the tax burden in a geoist economy.
-- Roy Langston