Wednesday, 26 December 2012

Town planning: Parks

Having looked at infrastructure, let's assume that our economically rational, benevolent town-planning monarch (the idealised 'state') is now thinking about parks.

He starts with the basic area of 100 'units' from the previous example, with 48 plots for homes/gardens, 36 units of roads (including utilities) and 16 units of spare bits (which could be used as mini-parks, allotments or larger back gardens), and he decides to 'lose' three built-up plots and one unit of 'spare' and have four units of 'park' instead.
Those 'parks' will cost money to maintain and will also generate a little bit of income (charges for bowling greens, tennis courts, rowing boats and income from the hut which sells tea and ice cream), or the 'park' might be a municipal swimming pool, but let's ignore that.

Once we join up these units we end up with a larger park in the middle, which covers 16 out of 400 units, i.e. only 4% of the whole area:
Instead of having 4 x 48 = 192 plots which he can rent out or sell off, he now only has 4 x 45 = 180, so superficially, he's lost just over six per cent of his potential income, but is it not likely that that the average rental value of those remaining plots is not (say) ten per cent higher? Wherever you live, you are within a couple of blocks' walk of a few different parks, each one catering for slightly different tastes, and the houses directly overlooking an open green space or a boating lake will have a rental value that is even higher than the other houses.
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Thus the notion that a council would seek to maximise its income from Land Value Tax by selling off (or granting planning permission for) all the publicly accessible open spaces is a nonsense, there is an optimum level for everything and the optimum level for the amount of parks is far greater than zero per cent (whether it is five or ten or fifteen per cent, I do not know, it's not as scientific as that).

For a real life example of this, see Central Park in Manhattan, where the planners bought up and demolished existing buildings in order to have a nice big park. The amount of property tax income 'lost' is far outweighed by the extra value which teh park adds to every occupied plot.

11 comments:

Bayard said...

I used to live on the Shaftesbury Estate in Battersea, which was built in the 1870s, mostly for rent, with a playing-field sized green space in the middle. A few years after the estate was finished, the silly sods who owned the houses built all over it.

Mark Wadsworth said...

B, good counter-example.

If they are really evil, they sell off the houses and people pay extra on the assumption that the park will be preserved, then they build on the park as well. At least if you are a tenant or you bought the house for cheap subject to LVT you get a lower rent or LVT bill in future.

James Higham said...

So what is the optimum level?

Mark Wadsworth said...

JH: "So what is the optimum level?"

Like I said, I do not know, I'm not sure there is a precise optimum, but it must be somewhere in the region of five to ten per cent. Then there's stuff like town squares, which are handy for markets, brass bands, travelling fairs, circuses, demonstrations, jubilee parties and so on. Or pathways along canals and rivers.

Ben Jamin' said...

LVT would only concentrate the minds of local planners if there was a formula for divvying LVT up nationally/locally.

Perhaps, under LVT, Councils should give national Government grants, not the other way round? Just a thought.....

Ross said...

This reminds me of playing Sim City when I was younger. I'd always build doughnut shaped blocks with a park in the middle.

Sim City, like Monopoly, is therefore a good teaching tool for city planning and taxation.

Mark Wadsworth said...

BJ, common sense says that local councils (who are, let's assume also in charge of town planning) get to keep a certain percentage of LVT arising in their area, the rest gets chucked into the national pot and dished out again per capita (like Business Improvement Districts and Business Rates).

Even if they only keep ten per cent, that does not matter. That is still incentive enough, and a good planning decision will still increase local revenues.

R, one day I will have to look into that whole Sim City thing.

Unknown said...

The important thing about a land value tax, is that it should be progressive. The more land value by value you own, the higher the tax rate should be. If you own a low value amount of land, a tax rate of zero may be appropriate. This is to counteract the profit gained due to monopoly ownership of land.

Mark Wadsworth said...

Unk, that is the beauty of returning at least half of total LVT receipts as Citizen's Dividend (to replace the welfare/pensions system and personal allowances).

Let's say the CD is average £8,000 per household and the LVT is 100% of site premium rental value.

One household occupies land with rental value £10,000, pays net £2,000 (an effective tax rate of 20%.

Another household occupies land with rental value £20,000, pays net £12,000 (an effective tax rate of 60%).

Another household occupies land with a rental value of £100,000, pays net £92,000 (an effective tax rate of 92%).

... and so on. That is inherently "progressive" without the need to have different rates of LVT (which would create all sorts of loopholes by people with lots of land splitting it up into separate holdings via nominees and so on).

Unknown said...

Mark,

I am not sure I understand. I think the citizens dividend needs to be per adult.

So assuming one person owns land of value £10000 in your example, they pay net £2000.

If they buy additional land worth £10000, then they pay £10000 more. The marginal rate on the extra land of 100%, and the extra rate on the extra land isn't increasing as it does with income tax.

So it looks to me as if it isn't progressive at all.

Mark Wadsworth said...

Unk,

1. Yes of course the Citizen's Dividend is per person, I was illustrating the point. I could have said "A household with two adults receiving £4,000 Citizen's Dividend each".

2. Income tax is "progressive" in the sense that you pay 0% on the first bit, 20% on the next bit, then 40% and then 50%. The highest income tax rate you can theoretically have is 100%.

3. The ideal LVT rate is close to 100% ANYWAY. You cannot have a rate that is higher than that. So the LVT rate itself is not "progressive", it is the CD which makes it "progressive".

So typical households pays effective rate of 20% LVT and other household occupying lots of land pays effective rate of 92% (and getting close to 100%).

This is a lot more progressive than income tax currently is - bearing in mind that income tax is inherently less "progressive" than LVT in the first place.