land value capture: an economic analysis

Does society get back the investment we make in infrastructure? An Australian economist thinks not, here is his view from a summary of one of Shann’s publications, where he asks about how a different attitude could help provide affordable housing..

The Turnbull Effect

“Year by year, exclusive forms of ownership concentrate wealth in the hands of a few at the expense of the many. Year by year, the public debt load rises and private citizens suffer the consequences, including massive cuts in state subsidies for affordable housing. It is inefficient, it is unjust, and it has to change.

Shann Turnbull has designed a way to end this process. His suggestion is a Co-operative Land Bank (CLB)  that creates a way to reward private investment for commercial or industrial purposes in an area in the medium term, whilst diverting ownership, wealth, and responsibility into the hands of local residents over the long term.

He proposes that the ownership of the urban land base be separated from the ownership of buildings on the land. The land belongs to the CLB. Its shares are distributed to residents according to the area occupied by their dwelling (for example one share per x square metres). Ownership in a dwelling or commercial or industrial building takes the form of a transferable lease from the CLB. The leases on dwellings are perpetual, but those for commercial or industrial buildings are time-limited so such investors retain ownership only until they recover the value of their investment. Voting privileges in CLB deliberations are reserved to those who hold community shares.

Consequently, residents acquire equity in the entire site. Profits and rents are channeled to the CLB, which also captures the rise in land values due to public investment in infrastructure. It becomes self-financing. Incentive for entrepreneurship is preserved, and the machinery that enriches the few and marginalises the many is dislocated.

Turnbull’s work helps form the basis of the discussion of alternative tenure and its linkage to transition found in The Resilience Imperative: Co-operative Transitions to a Steady-State Economy, by Michael Lewis and Pat Conaty (New Society Publishers, 2012).


 

This article is part of the i4 special series, Housing We Can Afford. It is produced in partnership with the BC-Alberta Social Economy Research Alliance (BALTA) and with funding from the Social Sciences and Humanities Research Council of Canada (SSHRC).

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