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RE: Memo to PM on unaffordable housing - final draft

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  • Wetzel Dave
    Many thanks for this John which I m sharing with others in The Land Café. Too many points for me to answer at this time of night (I m still in my office) -
    Message 1 of 3 , Apr 1 12:03 PM
      Many thanks for this John which I'm sharing with others in The Land Café.

      Too many points for me to answer at this time of night (I'm still in my
      office) - but valuable comparisons and questions.

      Dave
      Dave Wetzel;

      -----Original Message-----
      From: hookerx2@... [mailto:hookerx2@...]
      Sent: 31 March 2005 17:54
      To: Wetzel Dave
      Subject: RE: Memo to PM on unaffordable housing - final draft



      Dave,

      Thank you for sharing this. It is a good starting point for a reply to your
      essay on a new way to finance transport. I can visualize what is happening
      in London with the Jubliee Line, but I live in a much more suburban
      landscape. This leads me to think that taxes and public financing are
      evolving based on density and development vs. redevelopment pressures, but
      that LVT would solve many common issues.

      Background.

      "There are two things residents hate: sprawl and density." unk.

      Albuquerque, New Mexico, USA (200 sq. miles today, 500,000+ pop.) and its
      enclosing county created zoning in the late 1950s. Much of it is based on
      detached, single-family houses on 8,000+ sf (722 m2) lots as the ideal land
      use. Everything else devolves from that definition. Heights are generally
      limited to 26 ft. (7.8m) or 2 stories. Commercial parking generally is 5
      spaces per 1,000 sf (90 m2). If parking spaces require 350 sf of land (32
      m2) each, and parking lots require landscaping at 10%, then every 90 m2 of
      building requires 175 m2 of land around it. Loading, trash and walking areas
      add more. Our theoretical limit on density with surface parking is 50%
      floor-to-land area ratio. In reality, we end up at 20 ~ 25%. Very suburban
      and not walkable.

      In much of the U.S. we assess a property or ad valorem tax on land +
      improvements as a totality. Land is generally assumed to be 1/3 or 1/4 of
      the value of the improved property. Here in New Mexico, we have a broad
      sales tax of about 6.75% of which around 2.5% comes to the city government.

      This property tax is used to pay for local government and capital projects
      and especially local primary and secondary schools.

      Most cities are deferring maintenance and improvements to public works
      because of a lack of cash each year. In Albuquerque, the estimate 10 years
      ago of unfunded needs was over $1.2b. The schools had a backlog of over
      $800m.

      Given the static nature of zoning while demand for land changes, we have
      long-passed a time where land on the edge of our Downtown, the University
      and a couple of other districts is more valuable as surface parking for rent
      than for single family houses. But the zoning will not allow higher density
      development and the existing neighbors will not allow re-zoning to occur.
      They hate the parking lots, too, and have succeeded in stopping new ones by
      fiat.

      To address the race between growth and the provision of public services
      (except schools and libraries), the city is ready to impose "impact fees" on
      new development that will be used specifically to pay for new and expanded
      streets, sanitary sewerage, storm sewerage, water, fire protection equipment
      and buildings, police protection equipment and buildings, parks, open space
      (natural lands). Telephone, heating gas, electricity and cable TV are all
      privately provided.

      The impact fee schedule is complex but not difficult to understand if you
      follow the details. Service districts are defined for each public service.
      Needs in each district are defined and priced. Impact fees are charged to
      meet the needs. Thus they are very high on the sprawling edges and very low
      in the developed core of the city. Discounts are offered for "affordable"
      housing and some other desired functions. Details are available through
      www.cabq.gov <http://www.cabq.gov> .

      I am not familiar with the Development Land Tax. That makes me wonder
      whether it is similar in effect to our impact fees. How is it defined?

      Another key difference is the balkanization of land use and taxation here in
      the US. As Albuquerque imposes its new fee system, developers claim that
      they will simply move their new projects out another 10 miles across the
      county lines.

      Another concern is whether any new system will be "unfair" by causing the
      price of housing to rise more than it might otherwise. Similarly, we have
      many property owners (especially elderly) who are "land rich and cash poor"
      as you note below. There is a concern that LVT would force them to sell.
      Your Stakeholder Allowance (our Homestead Exemption) would help alleviate
      that concern, but is it sufficient?

      It is helpful to compare your situation to ours to understand our problems
      more clearly.

      John Hooker


      -------------- Original message --------------

      Paul,
      My proposals for LVT are as follows:


      1. Does it apply to all private freeholders with a single property?
      YES.
      But each landowner would have a "Stakeholder Allowance" of say £830 (similar
      to the personal allowance that applies to income tax). i.e. All landowners
      would be excused payment for the first £830 of the LVT bill on ALL their
      land.
      For the Duke of Westminster this relief would be insignificant but it would
      greatly reduce household LVT bills for owner-occupiers.
      2. Does it apply to asset rich income, poor pensioners who own the freehold
      of their homes, or any other similar asset rich income poor household, like
      a redundant low paid freeholder unemployed and on benefit?
      YES.
      But see 1. above.
      Also consider that the income from LVT would be used to abolish other
      detrimental property taxes on buildings and (if set high enough) could
      reduce other taxes that hit the poorest hardest.
      In addition, by reducing land prices, LVT will enable marginal firms to
      expand into affordable premises, thus creating more employment - putting
      additional income into the pockets of the poorest families as well as
      reducing the Government's costs associated with unemployment or under
      employment.
      Because of the mechanism that economists call "marginal cost pricing" LVT
      will create greater efficiencies in the economy leading to a higher GDP and
      reduced costs. (e.g. With empty city/town sites brought into use unnecessary
      urban sprawl will be avoided reducing the need for long commuting - saving
      time for individuals and transport costs for society).
      3. Is there a relationship to council tax?
      The local form of LVT (called Site Value Rating) would replace Council Tax
      and business rates.
      4. Do local authorities and central government pay it on land they own?
      YES.
      Otherwise no incentive to use their land efficiently.
      Read the history of the Soviet system where land was held in common - but
      grossly abused and wasted - as the rental value of land was not collected.
      This all added to their production costs and helped destroy their
      inefficient system.
      5. Would a CLT or an LLP pay it?
      YES.
      Again, if not - no incentive to use their land efficiently. However, LVT
      requires the valuation of land based on its optimum permitted use. If the
      permitted use is of low rental value like low cost housing, organic farming
      or an urban community farm - then the land value is low and the LVT will be
      low.
      However, if we want, as a society, to subsidise any activity (even churches,
      charities or private schools) it would be far better to do that with a cash
      grant than to encourage the inefficient use of land by exemptions which
      maybe the rich could use to avoid paying their LVT obligations. (In USA some
      film stars buy large houses with huge grounds. They then purchase a few cows
      and claim a farming exemption!)
      Would Housing Associations pay it?
      YES.
      See previous answer.
      In addition Housing Associations have to acquire land at current market
      prices. Cheaper land arising from LVT see the next answer) would reduce
      Housing and CLT costs considerably.

      Why can't it be passed on to tenants in rent or to be paid by housing
      benefit?
      Most landowners already charge the full economic rent of their sites. If
      they could charge more they would - but nobody would be able to afford to
      occupy at the higher rent. Similarly, if they increase their rent demand by
      the amount of the tax, tenants would leave their premises empty. With the
      LVT obligation to pay regardless of occupancy, they would soon reduce their
      rental demand to find a tenant to provide an income with which to meet their
      LVT obligation.

      LVT will also reduce the land cost element of housing for three reasons:
      a) It will increase the supply of land where people need to USE it.
      Landowners will have a clear incentive to bring their land into use. Thus
      increasing the supply - which will reduce the price.
      b) LVT will drive out speculation. Nobody would hold onto empty or
      under-used land whilst paying the annual LVT. This reduces the hope value
      currently reflected in land prices. Investors would channel their wealth
      away from sterile land speculation into productive industry - thus providing
      workers with modern capital equipment (making our factories more efficient)
      and a requirement for more workers to staff the new factories etc. giving a
      positive improvement to GDP.
      b) Consider the Ricardo Theory of Rent. If land rent is taxed, then a
      potential purchaser will only be receiving a part-rent free site. This
      reduces the purchase price of the site in the same way that a leasehold site
      is worth less than a freehold site - (the only difference is that instead of
      the leasehold purchaser paying a part of the annual rental value to a
      landowner, the purchaser on all sites will be paying a part of the annual
      rental value to the Government in the form of LVT.

      I really welcome this discussion and thanks for considering my proposal so
      thoroughly.




      Dave
      Dave Wetzel; Vice-Chair; Transport for London.
      Windsor House. 42-50 Victoria Street. London. SW1H 0TL. UK
      Tel: 020 7941 4200
      Intl Tel: +44 207 941 4200

      PA: Vicky Jennings 020 7941 4081
      Windsor House is close to New Scotland Yard. Buses 11, 24, 148 and 211 pass
      the door. (507 passes close by).
      Nearest Tube: St. James's Park Underground station.
      Nearest mainline stations: Waterloo and Victoria (Both a walk or short bus
      ride).
      Public cycle parking available outside Windsor House.



      -----Original Message-----
      From: Paul Nicolson [mailto:zacchaeus2000@...]
      Sent: 30 March 2005 09:06
      To: Wetzel Dave
      Cc: Peter Ambrose; Toby.lloyd@...; chris cook
      Subject: Re: Memo to PM on unaffordable housing - final draft


      Dear Dave,

      Some questions about an LVT on all land.

      Does it apply to all private freeholders with a single property?
      Does it apply to asset rich income poor pensioners who own the freehold of
      their homes, or any other similar asset rich income poor household, like a
      redundant low paid freeholder unemployed and on benefit?
      Is there a relationship to council tax?
      Do local authorities and central government pay it on land they own?
      Would a CLT or an LLP pay it?
      Would Housing Associations pay it?
      Why can't it be passed on to tenants in rent or to be paid by housing
      benefit?

      As you have spotted we have moved your way but I have not got my mind round
      the advantages and disadvantages of LVT on ALL land. Hence the questions
      which you kindly offered to field, thank you.

      Best wishes,

      Paul

      Rev Paul Nicolson, Chairman,
      Zacchaeus 2000 Trust,
      93 Campbell Road,
      London N17 OAX
      website http://www.z2k.org/ <http://www.z2k.org/>
      see also http://www.peanuts4benefits.co.uk/
      <http://www.peanuts4benefits.co.uk/>
      020 83765455
      0796 1177889

      ----- Original Message -----
      From: Wetzel Dave <mailto:Davewetzel@...>
      To: 'Paul Nicolson' <mailto:zacchaeus2000@...> ; Richard Best
      <mailto:richard.best@...> ; Peter Challen
      <mailto:101665.1247@...> ; Antonia Swinson
      <mailto:Antswin@...> ; Bill <mailto:bill@...> Dunster ;
      Bill Powell <mailto:whpowell@...> ; chris cook
      <mailto:cojock@...> ; Chris Goulden
      <mailto:chris.goulden@...> ; david <mailto:david.rogers@...>
      rodgers ; Iqbal Asaria <mailto:mia@...> ; Julie Jones
      <mailto:julie_jones@...> ; Leonora O'Shea
      <mailto:Leonora.O'Shea@...> ; Mark <mailto:markj.lon@...>
      Johnston ; Mark Thomas <mailto:m.thomas2@...> ; Richard Walker
      <mailto:walker.llc@...> ; Robina Rafferty
      <mailto:r.rafferty@...> ; Sophie Lindsay
      <mailto:sophie.lindsay@...> ; Stephen Hill
      <mailto:ca@...> ; Toby Lloyd
      <mailto:Toby.lloyd@...> ; john
      <mailto:j.veit-wilson@...> veit-wilson ; JR Bradshaw
      <mailto:jrb1@...> ; Jerry Morris <mailto:jerry.morris@...>
      ; Sue <mailto:s.middleton@...> Middleton ; dave.gordon@...
      <mailto:dave.gordon@...> ; Nicholas
      <mailto:nicholas.sagovsky@...> Sagovsky
      Sent: Tuesday, March 29, 2005 7:58 PM
      Subject: RE: Memo to PM on unaffordable housing - final draft

      Paul,
      Thanks for copying me in.

      Please note that house prices rise because the land value increases.
      Like a second-hand car the bricks and mortar devalue over time.
      (See article re Land value tax attached - I'd be happy to explain further).

      One suggested change to the policies you advocate:

      SUMMARY AND RECOMMENDATION
      Recommendation 6
      The tenure pattern of housing development in growth regions should be
      balanced and not dominated by speculative owner-occupied housing; the
      hoarding of land either before or after the receipt of planning permission
      by developers and speculators should be discouraged by an annual tax on the
      value of such land until it is developed.

      Could read:

      "Recommendation 6
      The tenure pattern of housing development in growth regions should be
      balanced and not dominated by speculative owner-occupied housing; the
      hoarding of land either before or after the receipt of planning permission
      by developers and speculators should be discouraged by an annual tax on the
      value of all land.

      This policy would not only deter land-hoarding and reduce tax avoidance and
      evasion but also allow non owner-occupiers to share in land wealth as the
      receipts could partly offset other taxes which not only damage our trade and
      GDP but equally seriously, fall disproportionately on families and
      individuals with lower incomes."

      Dave
      Dave Wetzel; Vice-Chair; Transport for London.
      Windsor House. 42-50 Victoria Street. London. SW1H 0TL. UK
      Tel: 020 7941 4200
      Intl Tel: +44 207 941 4200

      PA: Vicky Jennings 020 7941 4081
      Windsor House is close to New Scotland Yard. Buses 11, 24, 148 and 211 pass
      the door. (507 passes close by).
      Nearest Tube: St. James's Park Underground station.
      Nearest mainline stations: Waterloo and Victoria (Both a walk or short bus
      ride).
      Public cycle parking available outside Windsor House.



      -----Original Message-----
      From: Paul Nicolson [mailto:zacchaeus2000@...]
      Sent: 29 March 2005 13:48
      To: Richard Best; Peter Challen; Antonia Swinson; Bill Dunster; Bill Powell;
      chris cook; Chris Goulden; david rodgers; Iqbal Asaria; Julie Jones; Leonora
      O'Shea; Mark Johnston; Mark Thomas; Richard Walker; Robina Rafferty; Sophie
      Lindsay; Stephen Hill; Toby Lloyd; Wetzel Dave; john veit-wilson; JR
      Bradshaw; Jerry Morris; Sue Middleton; dave.gordon@...; Nicholas
      Sagovsky
      Subject: Memo to PM on unaffordable housing - final draft


      Dear all,

      I am attaching the final draft of the memorandum on unaffordable housing to
      be delivered to No 10, whoever is the PM, after the election is over. This
      is in confidence at this stage because we do not want it in circulation
      before the election is over. We would be very grateful if those of you who
      attended the housing seminar would check the appendices in which you have a
      particular interest.

      It is being prepared ready for print so we need any comments from you by
      Tuesday the 19th April at the latest to be finally ready for print by Friday
      22nd April. We expect Lord Morris of Manchester to send it to No 10 on the
      10th May.

      We would be very grateful for any help you can give with the costs of this
      exercise, which, considering the quality and quantity of the information
      that has been put together by Peter Ambrose, is by no means expensive at
      £11,500. We have raised £5000.

      With best wishes,

      Paul

      Commissioning Peter Ambrose including expenses 3000
      Making ready to print
      2500
      Printing 1000 copies (estimate)
      3500
      Z2K management an lobbying expenses
      2500
      Total
      11,500


      Rev Paul Nicolson, Chairman,
      Zacchaeus 2000 Trust,
      93 Campbell Road,
      London N17 OAX
      website http://www.z2k.org/ <http://www.z2k.org/>
      see also http://www.peanuts4benefits.co.uk/
      <http://www.peanuts4benefits.co.uk/>
      020 83765455
      0796 1177889




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