Land value capture

[kettal]

From Metrolinx document, The Big Move:

Land value enhancement is one promising tool wherein a portion of the “value uplift†of lands adjacent to future rapid transit corridors, major transit stations and mobility hubs is dedicated towards the cost of rapid transit improvements.

Is this funding model actually feasible? Does anybody have information on how it works and if it has been successful in any other cities?

 

[GregWTravels]

Value Capture is the more common name. I believe Taiwan and Hong Kong have used it, and Scotland studied it. Check out the Wiki entry, as there are links from it to various articles.

 

[afransen]

I suppose it is a more conservative version of a Land Tax, which seeks to tax land to the level of the implied rent, so that land has a zero net present value. Any public service improvements to the land would be captured through higher tax revenues.

 

[Mike in TO]

Essentially it become a tax on locational proximity to transit in order to fund transit. The advantage is that's it's a revenue tool to fund transit. The disadvantage is that it taxes and therefore decreases affordability of housing or affordability of commercial rents in proximity to new transit lines.

 

[valkoholic]

I agree with Mike in TO, it seems like a tax on good locations. The idea makes some sense in principal (if a metrolinx project adds $5 million to the value of a property, it's fair that property pay part of that back to metrolinx) but with any tax you need to be careful of what you're taxing. This could have the adverse effect of actually discouraging development near transit stations.

 

[LAz]

Hm, this would perhaps be a problem for people near/around such projects?

 

[sjc]

It's those people's own fault for moving to somewhere where they might one day build a subway.

 

[kEiThZ]

Ummm, they aren't talking about a new tax. They are just talking about how much revenue increases as a result of property values rising due to new/improved transit infrastructure. I think it's a reasonable way to look at the cost/benefit impacts of transit projects.

 

[Observer Walt]

This would be reasonable, if the tax were applied to commercial properties to the extent that you could identify an actual rise in value resulting from proximity to the new transit facility. Such increase in value would probably be measured in terms of increased rental revenue which could be generated (which is capitalized directly into market value). The market (sales or rental) would determine the increase in value; in some cases, it may be nil.

In the case of residnetial properties it would be politically tough to sell such a new tax. But we already (theoretically, at least) capture the increase in property values through the assessment system, resulting in increased taxes on such properties -- although the taxes go into general tax revenues, not specifically to fund transit improvements in the local area.

 

[LAz]

It's those people's own fault for moving to somewhere where they might one day build a subway.

Damn bastards gotta plan better then!

Lets displace that lower class. It's time to make money!




Jee, correct me if I am wrong, but the rising values are one factor as to why the DRL did not get built...

 

[gweed123]

This wouldn't really raise rents that significantly, especially for existing tenants. The apartment owners are limited to how much they can raise the rent (usually 2-5% per year max). It may gradually squeeze the lower income people out, but it wouldn't be like overnight all the poor people are gone just because there's a subway line that was put in. And besides, rents would go up on their own anyway, as those units would be in higher demand, so might as well have some of that money going to fund the transit that is causing the rent increase in the first place.

 

[kettal]

How about this:

1, excess land surrounding the new line is expropriated before construction
2, once construction is complete, the newly valuable land is sold to the highest bidder

 

[Glen]

The problem with such schemes is that the current system would already account for an increase in value. Property taxes would increase in accordance with the increased value without any new taxes. Double dipping will just stop the appreciation from happening on the assessment side*.

* Most likely some could be captured on residential in Toronto as the current rate is far below its revenue generating maximum. For commercial, not very likely, they are already on the far right of the bell curve were increased taxes are fully offset by decreased values.

 

[rbt]

The problem with such schemes is that the current system would already account for an increase in value. Property taxes would increase in accordance with the increased value without any new taxes. Double dipping will just stop the appreciation from happening on the assessment side*.

* Most likely some could be captured on residential in Toronto as the current rate is far below its revenue generating maximum. For commercial, not very likely, they are already on the far right of the bell curve were increased taxes are fully offset by decreased values.

This is true from the property owners perspective but it is not from the cities perspective as property assessments do not change the total revenue to the city. Assessments change the balance of what is paid between you, your neighbour, and the guy on the other side of town. By having a special piece of taxation above normal the city will gain additional revenue which may be used to pay off loans for the infrastructure.

You actually argued in favour of it by saying the property owner would see the same total payment.

 

[kEiThZ]

This would be reasonable, if the tax were applied to commercial properties to the extent that you could identify an actual rise in value resulting from proximity to the new transit facility. Such increase in value would probably be measured in terms of increased rental revenue which could be generated (which is capitalized directly into market value). The market (sales or rental) would determine the increase in value; in some cases, it may be nil.

Why do we need new taxes to "identify an actual rise in value"? Won't current tax system do that? The value of their properties increase, they pay more on the increased assessment base. The City gets more tax dollars.

In the case of residnetial properties it would be politically tough to sell such a new tax.

Not really. Hasn't been a tough sell elsewhere. In the last two decades where have you seen people protest against subway expansion because they are worried property values will rise too much. Didn't happen on Sheppard. Didn't happen at Downsview. Most people are happy to sell, take the cash and run!