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Overall Land Value Capture SWOT

Summary

In economics “rent” is defined as payment in excess of necessary supply price. Since the supply price for land is zero, as it is a gift of nature, any payment for land is rent. Land value capture is a method of returning land rent to the public sector. It is an equitable, efficient and sufficient form of public finance.

The classical economists had a clear understanding of how and why land values increase as population increases and society develops. David Ricardo was the first to formulate the Law of Rent, building on ideas of those who preceded him. He wrote that, when an economy is growing, “rent is not only absolutely increasing, but that it is also increasing in its ratio to the capital employed on the land.”

Adam Smith and Henry George asserted that gains in land value/rent, generated by the efforts of the community as a whole, should be captured for the benefit of the community as a whole. George, in his book Progress and Poverty, explained how the failure to capture increase in land values for public benefits eventually and inevitably results in significant market distortion, severe maldistribution of wealth, and numerous social problems.

Neo-liberal economists eliminated land as one of the three factors of production, subsuming it into capital. They base their arguments on only two factors, labor and capital. Their variety of economics also discarded important concepts about what happens to land values as market economies progress along with the understanding of the root causes of the wealth divide. (For more information on this topic see The Corruption of Economics by Mason Gaffney and Fred Harrison.)

The theoretical and analytical insights of classical economists concerning land and land values hold important keys for how to harness market forces to more readily secure affordable access to land, hence enabling people to procure adequate shelter and fulfill other basic needs. Correcting market distortions by capturing land values for use by the public sector while reducing or eliminating taxes on labor and production, is a major one of those keys.

The Law of Rent explains how land values and consequently housing costs rise faster than wages, to the point where all advances in technology and wealth production inevitably push more and more workers to mere subsistence living conditions and worse. We see the situation quite clearly now in developed countries where, for most people, housing can only be owned by means of mortgaging, which means long-term, compound- interest debt, with a steadily escalating portion of the individual¹s income or wages going toward monthly mortgage payments. Those who rent housing live, for the most part, at or near subsistence levels, with little or no savings. Renters pay approximately ten times the cost of their rental unit over the course of a lifetime.

Developing countries must guard against replicating this system. They can instead move forward with properly harnessing economic incentives for both efficiency in wealth production and fairness in wealth distribution via land value capture policy.

Land economists estimate land and resource rents to be 30-40% of Gross Domestic Product (GDP). Yet worldwide, 94% of taxes fall on labor and productive capital, on average, with less than 6% on land and resource rents. The property tax, historically levied primarily on land value and a major source of public funds, is now a relatively small tax in most countries compared to income and other taxes. And within the property tax as currently structured in most places, around 70% of the taxes are assessed on buildings and just 30% on land.

Economists who specialize in property taxation tend to agree that the virtues of a tax on land values are contradicted, if not negated, by a high tax on improvements. They regard taxing improvements as a disincentive to construction and maintenance and an incentive to hold unimproved land off the market, leading to artificial shortages of land. Such a tax imbalance sets up a dead-weight loss for production in general and impedes further improvements. An enormous amount of socially generated economic surplus, in the form of increases in land and resource values, is essentially unearned income, captured by a few when, of right, it should be captured for the many.

Land value capture is essential in order to “recover public investments” called for in the Habitat II Action Agenda and also in Habitat I. Well planned, skillfully implemented public investments in transportation and other infrastructure improvements result in higher land values, which, if captured, are nearly always enough to pay for them. Thus the public – society as a whole - receives back the higher value created by public expenditure.

As for the private sector, if infrastructure improvements are made by private investment, then that sector can capture land values up to the point where the investment is repaid. Such improvements, therefore, will have been made with no public debt whatsoever. The increased productivity of those now living in improved locations further increases the land values (land rent) of such locations and thus this increased, socially generated value should be captured by public authorities for funding of additional public benefits.

When a society captures land value, land does not disappear, but becomes more affordable and available to those willing and able to put land sites to good use. But if we tax wages and profits too heavily then labor and productive capital will indeed disappear. Capital deteriorates and increasing numbers of those willing and able to work become destitute and vulnerable to homelessness and starvation.

When full land value capture is reached (most land economists assert that full land value capture is achieved when 10% of the capitalized value of land is recovered) the land tenure system becomes essentially a “pay for benefits received” system. Those with the best and most valuable land pay the highest fees for its use, protection, and infrastructure benefits. Private land use is thus conditional upon payment of fees to the public at large according to the desirability of particular sites. The more efficiently individuals, groups, and businesses use their land sites, the more advantageous is this to the community as a whole. Viewed in this way, a land value capture system synergizes the values of both fairness in land access and efficiency in land use.

Substantial evidence exists, from even partial implementation of land value capture around the world, to demonstrate that land value capture works in practice as well as theory. Historically, public recovery of land value was used consciously by various governments for various purposes. For example:

  • Hong Kong and Singapore targeted land rent via land lease systems; at the time of their founding, there was not much else to constitute a tax base. A significant amount land value continues to be captured via this approach, though currently full land rent is not captured by the public sector.
  • Indeed, all the “Asian Tigers” have more experience with recovery of land value than the mainstream literature usually gives them credit for. In fact, the results from their taxing land probably has as much to do with their success, if not more so, as does their more-noted public/private partnerships.
  • The state of California, USA, via enabling legislation permitted localities to tax land, not improvements, in order pay for irrigation and other infrastructure. The result was that enormous tracts of underutilized land was sold at affordable prices, thus giving land access to those willing and able to use land for agricultural production.
  • Australia and New Zealand likewise chose to tax land, not improvements, in order to break up enormous ranch land tracts that kept out farmers. Sydney, a world-class city by any standard, still does tax land to a significant degree as do some other cities around the world.

Our Land Rights and Land Value Capture program includes a number of SWOT analyses of historical examples of land value capture applications from around the world, including Australia, Argentina, California, USA, Denmark, Hong Kong, Jamaica, Pennsylvania, USA, Singapore, Republic of South Africa, South Korea, Taiwan, Tsingtao, China, and others.

Land value capture is called for in both UN Habitat I and Habitat II Action Agendas. Habitat’s Global Land Tool Network considers land value capture to be a key policy for funding infrastructure and public services as well as for meeting the Millennium Development Goal of significantly improving living conditions for at least 100 million slum dwellers by 2020

The Vancouver Action Plan – the 1976 founding document for UN Habitat – states: Social justice, urban renewal and development, the provision of decent dwellings and healthy conditions for the people can only be achieved if land is used in the interests of society as a whole…. Excessive profits resulting from the increase in land value due to development and change in use are one of the principal causes of the concentration of wealth in private hands. Taxation should not be seen only as a source of revenue for the community but also a powerful tool to encourage development of desirable locations, to exercise a controlling effect on the land market and to redistribute to the public at large the benefits of the unearned increase in land values… The unearned increment resulting from the rise in land values resulting from change in use of land, from public investment or decision or due to the general growth of the community must be subject to appropriate recapture by public bodies (the community).

STRENGTHS

Land value capture promotes affordable land access by discouraging land hoarding, land speculation and land price escalation. Unemployment and wage slavery results when people are locked out from affordable, potentially productive land. People with access to land cannot be easily exploited. They can, if they wish, be self-employed.

But where this option is closed, people can be exploited and oppressed. Where land is owned by only a few and where land value is captured by the few who hold the best and the most land, these few individuals grow enormously wealthy from the surplus funds accruing from rising land values. They usually then invest this unearned income in capital and financial instruments that collect interest from the indebtedness of the many who lack access to finance capital and/or land resources. Ownership of both productive capital and finance capital, like ownership of land, thus becomes concentrated in the hands of a few, expanding the gap between the very rich and the rest of the people. Land value capture is thus a key policy promoting fundamental economic justice starting with fairness at the root of economic production – land access.

Wage and other labour taxes can and should be reduced as the amount of land rent captured for public benefit increases. Lowering income and wage tax burdens on people automatically raises their purchasing power. The combination of affordable land and greater purchasing capacity results in greater access to land (effective demand) for housing and basic needs production, and much less need to borrow and incur debt. Land value capture in this way encourages work and production while discouraging land hoarding and land speculation.

When land is treated as a profit-making market commodity, not as humanity’s birthright, people eventually come to be treated as market commodities. Hence the terms “labor pool” and “labor market” and the voicing of concern about “labor costs.” Land value capture is a basic, essential reform to establish fair market economies which benefit society as a whole. Land value capture curtails the exploitation of working people and establishes a truly level playing field of equal rights to the gifts of nature.

With a sufficiently robust land value capture system, the consequent affordable land access enables working people and those seeking work to gain power from which to negotiate higher wages. People literally have a place to stand from which to leverage themselves. This is why it is important that land value capture be implemented on both urban and rural land, especially where rural lands are held by only a few large landowners. Just as people migrate now to cities to find cash employment, they should have the option to return to rural areas to gain direct access to productive land. Renewable energy and global information technologies, combined with ecological village development programs, are making the rural return option both viable and attractive.

Land value capture fills public coffers without emptying private pockets. Because charges on land value tap into a surplus – the “economic rent” of land – land rent recovery raises public revenue without depriving citizens of their earned income or savings. Furthermore, land value capture makes possible the elimination of taxes on people’s homes and other buildings, wages, sales and businesses.

Land value capture promotes government efficiency and good urban planning. Sprawl is curbed and highest and best use of land is furthered by directing development to areas already serviced by roads, utilities, sanitation and other infrastructure. With more compact development, public transportation and other public services can more easily and affordably be built and maintained. This is of vital importance at this time as oil and other non-renewable energy prices continue to rise and thus increasing transport and energy costs.

A public sector, adequately funded by land value capture, can more readily pay not only for needed infrastructure but also for education, libraries, protective services and basic health care. Such public expenditures promote overall economic development. Public parks and other green space increase values in adjacent areas and encourage urban welfare through recreation. Thus as public benefits increase, land value is recycled back to the public at large forming the basis for a self-renewing city or region with little or no need for public indebtedness.

A transparent, well managed system of full land value capture might also utilize a portion of such funds to generate low-interest, revolving loan funds for housing construction, thus furthering access to shelter for all. With a citywide land value capture system, for example, a portion of these funds can be placed in a soundly administered housing loan fund available to individuals and private sector builders alike. If loan repayments are not forthcoming then the government would acquire the property for resale. There is additional security for the public sector when investing in building housing because successful development increases land values. Even if a few people default on repayment, the government still reaps the benefit of overall development through increased land values which can then be captured for public benefit.

Another practical option for governments using land value capture is that bonds for housing or infrastructure loan funds can be issued and repaid by capturing the increased land values which result from such improvements. This has clear advantages in terms of overall balanced and equitable economic development over systems which repay bonds from taxes on labor and productive capital.

The reality is that full collection of land rent would yield a substantial amount of public revenue, potentially so much so that a portion could even be distributed in direct “citizen dividend” cash payments, similar to how the US state of Alaska distributes annual individual dividends in amounts representing each Alaskan’s equal share of that state’s investment earnings from its oil profits (resource rent) investment funds.

Land privatization is not necessary to implement land value capture policy, which accommodates a variety of forms of land tenure. Tribal, clan, and extended family land bases can remain intact with a land value capture system, by constituting communal lands as types of leaseholds.

Land value capture is strategically important for the political, economic and social empowerment of women. There are enormous historical and present day gender disparities in land tenure worldwide. The largest and most valuable individual and corporate landholdings are predominantly owned and controlled by men. Public funds generated by land value capture would come primarily from these lands. Secure land tenure, affordable land access, and a fair, transparent, orderly system of public finance, all promoted by land value capture policy - strengthen women’s power and decision making capacities.

Land value capture, as a locally implemented public finance system, furthers decentralized, democratic decision-making power over how public funds are spent as well as transparency in how funds are raised, both of which put a brake on public corruption. The land value capture system is also simpler, easier, and cheaper to implement than other types of public revenue generating systems.

Financially, land value capture is the primary method by which members of society can recover the value of their land and natural resources, this recovery or capture being necessary in order to share those values. As long as citizens pay in rents to the public treasury, then the money cannot collect in the private pockets of landowners and land speculators. Once in the public treasury, then government can fund needed infrastructure improvements and eliminate other taxes that are counterproductive and make it harder for people to produce real wealth. As people grow more productive, they drive up the value of land in commercial areas, so by recovery of those higher values government would never lack funds. It could thereby stay out of debt and preclude inflation. Furthermore, a frugal government could use the surplus public revenue to pay residents a “citizens dividend”. Enjoying that financial cushion would make it easier for people to either negotiate higher wages and better working conditions or to start their own business.

Socially, land value capture reinforces equality. People would pay in an amount equal to the value of the land that they claim for exclusive use. In effect, they’d pay their neighbors for exclusive use of some portion of land. Those who claim the best would pay the most. Having to pay rent to one’s community prevents the concentration of wealth and the creation of class. When people are at par economically, they tend to regard each other as equals and treat each other much better, making criminal acts rare. And if government were to pay citizen dividends from a portion of the recovered land rent, then equality of social and economic conditions would be further enhanced.

Environmentally, land value capture motivates landowners to use their land efficiently. As each person uses less land, or gets more output from their land, then society as a whole need use less land overall, which spares the more pristine areas. Efficiently used urban land curbs sprawl and promotes highest and best land use enabling the provision of infrastructure at lower costs. Also, paying land rent to the public treasury discourages land hoarding and enables owner occupancy. Owner occupants tend to treat their land better than do absentee owners, thus lessoning the need for society to pay to enforce environmental land use laws.

Politically, this approach to funding infrastructure and public services has appeal for most all the major players. When people understand it and are given the opportunity to vote for it, the majority chooses to move forward to implementation. Politicians who are truly working to improve conditions of society can work together beyond party identification to get the reform passed into law.

The proposal to build infrastructure and to pay for it by recovering the resultant rise in land value, for instance, is easy to explain and considered to be fair by nearly everyone. The research of Nobel laureate William Vickrey clearly showed that there never has been a desired public improvement that could not have paid for itself by recovering the increase in surrounding land site value. (See “William Vickrey – Contributions to Public Policy” by Richard Ar nott, Department of Economics, Boston College, October 1997, page 19.)

Land value capture, when robustly implemented, can break up huge and unjust concentrations of underutilized land. It can do so without losses in efficiency or creating debilitating resentment. Other approaches to agrarian land reform often lead to bloodshed or reduced output per acre and leave society divided into hostile camps. The bottom line Is that land value capture can pay for infrastructure and at the same time enable a peaceful land reform with rising agricultural output.

WEAKNESSES

Too few economists understand the importance of land as a factor of production, especially in a complex market economy. They have not been exposed to the significance of the “law of rent” or to how flaws in market systems, such as the inability to provision basic needs for all and the increasing maldistribution of wealth, can be corrected via public capture of land rent while reducing taxes. Without trained land economists to advise them as to how to properly harness market forces of supply and demand, public officials and the people as a whole are at a loss as to how to address these market distortions.

The law of rent may not be recognized by some economists, but it is understood by investors. Anticipation of higher land values as development proceeds encourages them to purchase land for speculation, a form of land hoarding. Those who engage in “rent-seeking” – the private appropriation of land value – are often a formidable force lobbying governments not to implement land value capture and spreading misinformation about this policy approach. For instance, they may try to convince homeowners that they would have to pay more under a land value capture system than they do with wage income taxes. Or they might tell public officials that land value capture is an insufficient source of public revenue. Public officials who themselves are engaged in rent-seeking activities tend to work against implementation.

Fortunately, information technology can now be utilized to give the citizenry accurate information about the benefits of this approach and specifics as to who would pay more and who would pay less if this system of public finance were to be implemented in a specific location. Information and communications technology can also help determine which public officials and government lobbyists derive or hope to derive profit from the private appropriation of land rent.

Land value capture can be difficult to adopt because for most people it is not an obvious and clear idea but one that requires some explaining. It is not immediately apparent how and why it works and why it is fair. Yet popular understanding and popular support often determine whether or not government will adopt a new reform. Time, attention and human and ideally some financial resources must therefore be devoted to public education for it to be implemented with popular support and for it to remain in place once adopted.

Some people, upon learning of its stellar real-world results, react that it must be too good to be true. Or they say, if it works so well, why isn’t it more widely accepted? It’s as if the reform should not have so many benefits in order to win over more adherents! The only way to respond is to explain the ethical and rational basis for the policy and to do the preliminary research in order to demonstrate the specifics of its implementation in a particular city or region.

Another main obstacle is that some people see any payment to their government as a tax, a confiscation by politicians, for as much money as they can squeeze out of citizens, to fund programs of questionable value or even to be consumed by corruption. What might change that perception is that proponents could earmark the funds for specific projects and pledge the surplus to an annual cash dividend to be paid to area residents.

When the decision to implement LVC is made, if the government moves too slowly the momentum can be lost, or if the government recovers too little land rent it can appear that this reform is ineffectual. With lack of transparency and insufficient public awareness, even the best public policies are vulnerable to corruption.

Socially, care must be taken and adjustments made if need be in order to make certain that land value capture does not negatively impact vulnerable people. There are a number of ways to do this as detailed in GLTN land value capture documents on implementation.

Environmentally, in that LVC does stimulate economic growth where needed, the growth could spin off more pollution, if government fails to enforce people’s right to a healthy environment.

The recovery of rent has not encountered any economic problems, as long as the collection agency, typically the local government, does its job properly. Government must not try to take more than the actual amount of rent. Also, government must make sure to uphold environmental protections, so that landowners and their investors do not over-develop in sensitive areas, such as along riverbanks or on steep hillsides.

One perceived weakness – not an actual weakness – is that it would be difficult to appraise the value of a location. However, this is a task that private parties accomplish all the time when selling or buying or leasing or renting land. And some governments asses land rather well. The Canadian province of British Columbia has a reputation for doing a good job. Foreign assessor come from all over the world to study BC’s assessment practices. Australia also has jurisdictions and private firms that do this job well. So the land assessment and land value capture techniques are available for others to learn wherever they are on the globe.

One challenge of recovering rises in rent to fund new infrastructure is to determine how much of the rise in rent is due to the new infrastructure. Many factors increase site value, such a growing population, general rise in income, decrease in crime, decrease in taxation, etc, as would two improvements to infrastructure, say, a new dam and a new highway, in the same area at the same time; determining which contributes how much to the increase in area land value is problematic. One solution to recovering too much rent is simply to be sure to always recover less than all that is available, leaving some rent available for recovery by other public agencies or leaving a small portion in the pocket of the landowner.

Another challenge is what to do with the larger flow of land rent once the infrastructure improvement has been paid for. Often, government fails to recover the bountiful rents. That leaves the higher rents in the hands of landowners. Those who are allowed to privately appropriate the land rent then too often contribute to politicians who pass legislation to repeal public recovery of land rent. Thus, the very success of early rent-recovery sometimes makes it difficult to continue with this method of public revenue generation. One solution might be to pay residents an annual citizens dividend from a portion of land rent so they would have a strong and personal motivation to support the sustained use of this policy.

OPPORTUNITIES

With the problems of climate change, rising energy prices, the extreme and growing worldwide wealth divide, the sub-prime mortgage crisis and other breakdowns and shortcomings of the capitalist banking and economic system now apparent to nearly everyone, this may be an excellent time to bring forward land value capture as a fundamental policy approach that can address many of the social, economic and environmental problems of our times. The fact that all UN member states have recommended this public revenue approach by consensus as stated in the UN Habitat I and II Action Agendas can provide impetus and legitimacy for its adoption by public authorities throughout the world.

The great advances in the use of computers for public record keeping and for maintaining up-to-date land value assessments along with other forms of information and communications technology provide enormous opportunities for the successful implementation of land value capture.

Financially, land value capture offers an opportunity to build the basis of prosperity for an entire society. By aligning economic incentives, land value capture prods people to make productive use of valuable land sites while the removal of tax on effort fully rewards people for their work and accomplishments. Since most people strive for a better material existence there should be a receptive audience for this public finance policy.

Socially, land value capture presents a key to equality, another virtue that humans are hardwired to appreciate. It’s quite natural for all of us to want to be treated with respect, as an equal, and to see others treated that way, too. Land value capture is a way to level class and lift up the most humble. Perhaps one of the best ways for this policy to have immediate support and impact on the poorest members of society would be to distribute a portion of the captured land rent as direct citizen dividends.

Environmentally, land value capture is a powerful tool to conserve resources and rescue the planet. It spurs people to use land in the most efficient ways possible, thus decreasing the energy costs of transport, curbing sprawl development, and promoting farmland cultivation closer to cities. If at the same time taxes are removed from labor and capital, then entrepreneurs can more quickly move cutting-edge renewable energy and other planet-saving technologies into the market, eliminating the pollutants that are wrecking the planet.

The opportunity to recover resultant rises in land rent to fund improvements in infrastructure is substantial. The need for public transportation, water and sanitation, and repairs to roadways and bridges is vast. Paying off government bonds for such projects via rent-recovery makes the bonds more secure and thus more attractive to investors. If the bonds are more secure, then the government selling them can lower the interest rate they offer on the bonds and thereby save money. Hence a government that is mature enough (that is, has a reputation for honesty and ability) to enter into the bond market should logically be quite interested in land value capture policy.

Since infrastructure is the necessary under-girding for development and prosperity, it seems logical that all the players in the development arena would also warm up to rent-recovery – all the business sectors involved in real commerce and not just “rent-seeking” the families wanting homes and clean water, and other beneficiaries of functional infrastructure. Another sector who might welcome “geo-bonds” – government bonds paid back via value capture (earth’s worth) – are the local rich who would like to keep some (if not all) of their savings in their home country (rather than in Swiss banks, for instance). If government bonds were secure – and made secure by repayment from rising site rent – then there would be less capital flight and more domestic savings. Countries with newly emerging economies could eventually develop their own markets for stocks and bonds.

THREATS

Financially, land value capture is threatened by the business cycle. When business is booming, it seems nobody wants to rock the boat by making any fundamental changes. When times are bad, people go into crisis mode with little time to consider deeper dimensions and policy solutions. Ironically, land rent recovery for public benefit would smooth out the boom/bust phases of the business cycle replaced by a soothing climb/glide cycle, more like breathing or the natural cycle of the seasons.

Socially, this policy approach is mainly opposed by those few – mainly real estate speculators and owners of particularly large or valuable areas of land - who would pay more land rent into the public coffers. Often when proponents bring the idea into the public dialog, those who want to retain land rent for themselves either ignore the proposal or argue strenuously against it, using all the usual false claims. If broad society understanding and support for this policy is lacking, land rent-seeking opponents will rally their forces to oppose, reduce or eliminate this approach to public finance and fair wealth distribution.

Many people might not immediately see any connection between this policy and improved living conditions. If the policy is not sufficiently understood by the populace it is at risk of being rescinded, in which case people would suffer economic deterioration as a result, which is what has happened previously when the policy has lost momentum.

Environmentally, land value capture policy implementation is hindered by stories of how a cousin tax, the property tax, pressures poor landowners to sell out prematurely to developers. Land value capture should first be implemented in urban areas, which would absorb most needed new development, before applying it to an entire region. Thus the the land value capture fee owed by rural landowners would likely be less than the taxes that a typical rural landowner now pays. This would decrease development pressures, retain open space, and enable more viable small farming operations.

But the main threats to public capture of land rent are two. One, most people do not know it or understand it or are not interested in such issues so that this powerful tool too rarely gets a fair hearing. We have addressed this issue in the “weaknesses” section. The other threat is that whenever some political players do propose this public revenue approach and succeed in getting some version passed into law, then landowners oppose it.

The landowners in opposition could be rural owners of latifundia in Latin America or urban homeowners in Anglo America. The former are already rich by their national standards due to retaining rents and feel no compulsion to share their unearned gains. The latter, middleclass homeowners around any major city around the globe, are not rich from rent but have no savings and need the value of the land under their homes to qualify for loans, to send their children to college, and to retire upon selling their empty nest and moving to a smaller home in an area of lower site values.

Large landowners wield significant political power in most nations. Public officials too often do their bidding, not the bidding of idealistic reformers. Large landowners have opponents, but they are sometimes opponents with an agenda of force, of either violent revolution or forceful redistribution of land. Very few – outside of some open-minded activists, academics, and government officials – are listening to the idea of leaving land titles in place while charging landowners the annual rental value of the land they keep others from using, while removing other taxes.

To mollify the large landowner, proponents should always tie rent-recovery to tax-abolition or at least to substantial reductions of taxes on people’s efforts, on buildings, businesses and income, thus encouraging land hoarders to use their land in ways likely to promote local employment and local production.

To mollify the small owner of a plot beneath a home, proponents should emphasize the fact that tax on their home and improvements to their home would be substantially reduced or ideally completely eliminated as part and parcel of this reform. The house itself would retain full value. Elimination or sharp reduction of taxes on income would enable homeowners to save a significant amount personal funds from earned income. Homeowners also should be informed about the generational equity issues. Since land value capture promotes housing affordability, the children and grandchildren of current homeowners will more easily be able to afford their own homes with this policy in place.

Another threat could come from lenders who make most of their profit off mortgages which typically cost a borrower at least twice the selling price of the home-plus-land. Since land value capture stabilizes and most often reduces the price of land, and reduction of taxes on income increases savings and purchasing capacity, home buyers and those seeking other types of loans would not have to borrow so much and consequently banks would not make as much in interest payments. It is possible, however, that as poverty is lifted ad prosperity spreads, there could be an increase of effective demand for loans for homes and productive enterprise.

Lastly, a threat to this policy approach could come from economists and academics who do not want to see their discipline simplified so that the general populace could understand it, making them feel less special and less knowledgeable. This is known as the “priesthood syndrome” since in the past the priesthood did make literacy in general illegal. Or an academic or reformer could have a pet proposal that they may hope to advance by derailing other proposals, regardless of how beneficial other ones may be to society, as land value capture.


This SWOT analysis was written by Jeffery J. Smith, founder of the Geonomics Society and Alanna Hartzok, Co-Director of Earth Rights Institute for use by the UN Habitat Global Land Tool Network’s program on land rights and land value capture.