Killer Arguments Against LVT, Not (111)

Landed Gent in today's FT:

Sir, I would like to point out that Prof Roger Sandilands (Letters, April 6) doesn’t live in the real world. Land may be a “gift of nature” but is horribly expensive to maintain, as any gardener will know.

As the owner of an estate in a National Park I can assure the professor that the cost of maintenance of the landscape is considerably more than the income it produces and that owners, in the main, hold the land as a family obligation rather than a business proposition.

N B B Davie-Thornhill, Matlock, Derbyshire, UK.

We've done this one to death, see e.g. Part 108 in relation to farm land.

The rental value of any plot of land (for economic or tax purposes) is after deducting all maintenance costs of the land itself or any improvements thereon (be that hedges, sea walls, drainage, buildings or utility connections).

So if the land itself is subject to a covenant* which imposes high maintenance costs**, this depresses the rental value; if subject to a covenant* which prevents its further development, this also depresses the value. If the rental value is thus depressed to £nil (or indeed a negative figure) then the Land Value Tax thereon would quite simply be £nil.

Happily, about ninety-five per cent of land in the UK (by market rental value) does not fall into this category; or else it would have no market value and they would be giving away houses and office buildings.

* A covenant is something imposed by society in the same way as an unspoiled view or a nearby train station is protected or provided by society, so the two clearly have to be netted off.

** Conversely, if somebody is a hobby gardener (it is not clear into which category Landed Gent falls) and spends hundreds of pounds and hundreds of hours every year keeping his or her garden looking nice and growing their own fruit'n'veg, then the enjoyment 'income' clearly exceeds the cost and these costs are irrelevant (this is about as relevant as any other expensive or time-consuming hobby which people choose to pursue). In such cases, the enjoyment 'income' minus the actual costs will be capitalised into the land value anwyay.