Land, as the solid part of the surface of the earth we all live on, is a peculiar civic asset. While technically abundant, in a rapidly urbanizing world, land increasingly reveals itself as surprisingly scarce. In economic terms, this scarcity makes land an ideal vehicle for storing value. However, land value doesn’t appreciate out of thin air. Civic assets play a major role in the way we assign value to land. Increase in land value is a direct reflection of factors like proximity to economic activities and public services and infrastructures (such as schools, libraries, public transit and amenity-rich, safe and green public spaces) as well as planning decisions (density and zoning regulations). On a societal level, land value is also intrinsically tied to our collective expectations of future growth and prosperity.
And yet, our model of private property functions with a ‘winner-takes-all’ dynamic, where property tax – our main tool for capturing value – only scares up a fraction of the wealth created through our collective endeavours.
How can we better redistribute the value stored into land? Value capture is not new — contractual mechanisms have been in place since medieval England, when Henry VIII created a ‘betterment’ levy to capture value for flood defences, and now exists in many forms (split property taxes, betterment levy, tax increment financing, bonus zoning, etc.). What is new is our ability to rapidly understand, and prove, how value flows. For example, with data rich infrastructure and digitised land registries, we can monitor in real-time how public investment changes property prices. Emerging tools like smart contracts and digital property deeds can automatically distribute value uplift between multiple parties. This could give communities a way of setting the terms for what happens in the places around them; enabling them to invest in their neighbourhood’s civic assets, without the fear of being priced out by their desire to improve their community.