One concern raised at a recent PlanPhilly panel on vacant property reform was that speculators could form shell companies to buy up land from the land bank, and then just sit on it, preventing timely development of more productive uses.
Councilwoman Maria Quiñones Sánchez expressed skepticism that the city could ever truly outgun the speculators, but this skepticism may be unwarranted.
There is a very simple tax change that 20 other Pennsylvania municipalities and school districts have employed to drive speculators out of the market, incentivize development of unimproved land, and make their tax codes more progressive.
Instead of taxing buildings and land values at the same millage rate, Philadelphia could tax land at a higher rate than buildings. Or better still, abolish the tax on property improvements and tax only the land values.
The land value tax, or two-rate tax, is a direct tax on speculation. It penalizes owners of unimproved land for waiting to build, or building low-value uses on expensive land, while reducing taxes on higher-density uses that occupy most of the lot – working class row-homes, multi-family housing, condos, etc.
A 2009 study by the Center for the Study of Economics found shifting to a land value tax would reduce the average per parcel tax bill in all of Philly’s councilmanic districts, and shift the tax burden away from buildings onto vacant lots.
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