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“Protecting property values” was a canard used to justify racist housing policy in 1910, and continues to be an excuse used today. But what if property wasn’t privately owned? Jacqueline Luqman talks to Rich Nymoen about why a land value tax could reduce inequality and address segregation in housing.
JACQUELINE LUQMAN: This is Jacqueline Luqman with The Real News Network.
In 1910, Baltimore Mayor J. Barry Mahool uttered the words that would become both the rallying cry and the justification for racist housing laws across the United States. He said, “Blacks should be quarantined in isolated slums in order to reduce the incidents of civil disturbance, to prevent the spread of communicable disease into nearby white neighborhoods, and to protect property values among the white majority.” The canards of segregating black homeowners from white homeowners for the safety of black people and to keep the peace between the races maybe outdated arguments that you might not hear much today, but the idea that keeping black people out of white neighborhoods is done to protect property values is indeed a very current argument that is still used.
So here to talk to me today about why property values or the way we think about and tax property can be a way to address the legacy of housing segregation, is Rich Nymoen. Rich is President of Common Ground USA, an all-volunteer group that promotes commons based approaches to land issues. He’s been active on land issues for over 20 years and lives in Saint Paul, Minnesota. Rich, thanks so much for joining me.
RICH NYMOEN: Good to be here. Thanks, Jacqueline.
JACQUELINE LUQMAN: So you wrote an article that was absolutely fascinating to me for the Robert Schalkenbach Foundation connecting housing segregation to property values and to how this idea of land value tax would address the legacy of housing segregation. So just to get a good foundation of what we’re talking about, how do property values tie into the legacy of housing segregation?
RICH NYMOEN: Well it’s not obvious, I don’t think, at first. I first started learning about these issues back when I was in law school and I had class where we read a book called American Apartheid, talked about how housing segregation both was created and the effects that it had. And obviously in the introduction you talked about some of the outright efforts that were made to keep the housing segregated, but as you read more about the issue, you realize that the whole issue of property values plays a big part of it. And if you work on housing long enough, I think you eventually realize that when people are talking about property values, they’re talking about land values. So not the value of the building or the structure that they’re living in, but the value of the underlying land.
So when people are saying they’re concerned about property values, what they’re saying is they’re concerned about their underlying land values. Because typically when you buy a home, you’re borrowing from the bank in order to pay for not only the structure but for the underlying land. So if the land value is going to go down, then that means you’re going to be owing more on the mortgage than your house was worth. And so people really become concerned about trying to protect that asset value when, if the land was rented, instead of people just had title to the house but rented the land from the community, it wouldn’t be a concern anymore because if for some reason land values went down, that just would mean that you owed less in land rent. You wouldn’t be in danger of being underwater on your mortgage because you wouldn’t be borrowing for that portion of the home. So hopefully that gives some idea of how the connection exists.
JACQUELINE LUQMAN: And you mentioned something I thought was really interesting, the idea that this fight to protect property values was a major contributor to what you call the push and pull effect that white homeowners experienced in regard to protecting their neighborhoods, their property values. What are the push and pull effects that property values create?
RICH NYMOEN: Yeah. So those are terms that experts on that of study housing segregation use. So they talk about push and pull effect both in terms of individual homeowners but also institutionally. So where banks are willing to land and where insurers are willing to insure also has push and pull effects. But so what pushed me does that in terms of the homeowner, if they’re afraid that something’s happening in the neighborhood that’s going to lower their property values or the land values, then that pushes them out of the neighborhood into some other neighborhood that they think will have increasing land values so that they can increase their net worth without having to pay anything down on their mortgage. That just because land values are increasing, their asset’s going to increase in value. So that’s the pull effect. The push effect is a fear of dropping property values or land values, and the pull effect is wanting to bind to someplace that’s going to have increasing land value.
JACQUELINE LUQMAN: So in response to the very overt connection between protecting property values from the incursion of black people to addressing issues that were created by this policy that was started in Baltimore and became the blueprint all across the country for racist housing segregation ordinances. There was a movement in the early 20th century by a group of really influential intellectuals and reformers to look at how property is valued in text. And you raise this in your article, can you… So this is where land value tax comes into play and can you explain what this is?
RICH NYMOEN: Yeah. So the whole land value tax idea, it’s most associated with a reformer from the late 1800s whose name was Henry George. And he was really famous at one time for arguing that if individuals were going to have individual title to land–as opposed to the way indigenous people hold land–if you’re going to individually hold land, then you should be doing that on a rental basis from the community. So you should be paying rent to the community for any land you have at hold on an individual basis. But he said that rent wouldn’t necessarily have to be paid in the form of a lease payment. It could be, but it could be paid in the form of a tax on the rental value of the land and that could take the place of other more aggressive taxes. So that started what was called the Single Tax Movement that was really influential up until about the 1930s, so yeah. A lot of prominent people were big supporters of it, like Helen Keller and Emma Lazarus and Jose Marti and Albert Einstein and Tolstoy. And they’re such proponents of it, not really for the tax aspects of it but for the fact that if you put this into effect, it meant that people would be holding their land on a rental basis.
So a lot of those issues that come along with concerns about property values kind of go away because as I said, if land values go down, that just means you’re paying less in land rent to the community. And if they go up, it doesn’t really mean a benefit for you, it just means you’re paying more in land rent. Politically, it’s always been difficult to do this through the tax system. I mean there’s been some successes with it in different places, but about a hundred years ago there was some effort to do this on a more direct level by creating what are called the Single Tax Counties, which were essentially land rent communities. So there’s… They still exist today. There’s one in Arden, Delaware and in Arden, Delaware the homeowners, they are titled to their houses, but they’re renting the land that the houses are on from the city and the city uses that land rent both to pay for the services that the city provides. But then they also use that land rent to pay the County and school property taxes for the homeowners.
JACQUELINE LUQMAN: I think you raise a very important point that translates very well I think into the issues of inequality that we face today that are based in housing segregation that started, at least was codified, began to be codified in 1910. Because we’re not just talking about inequality and housing, we’re also talking about inequality of opportunity in areas such as good quality schools, access to health care, even access to employment opportunities that all stem from housing segregation. So what you’re saying is, and Henry George’s idea was that the revenue from land rent would go to the municipality or the city to pay for services such as public schools, such as public hospitals, such as public libraries and other types of publicly funded infrastructure. People still have deed to their homes. But what is not happening is that a private entity, like a financial institution or a private investor is making all of that money off of a mortgage on the land. Is that how this would work?
RICH NYMOEN: Yeah, that’s exactly right. So the community collects the land rent and that makes a lot of sense because it’s the community that creates the value of the land. So nobody created land, it’s just a gift from nature. And the value of it is created by the surrounding population and wealth of the community and also the community’s investments in things like schools and police and fire and infrastructure. All those public investments increase the value of land. So it makes sense to collect that increased land rental to pay for those services. And then yes, you’re right. So because there’s always been this close connection between borrowing to buy land and all that land rent payments are currently essentially being funneled to the banks and to the 1% instead of having a funnel upward, it’s being funneled to the community and being shared for the benefit of everybody. Everybody in the community.
JACQUELINE LUQMAN: So for people who are watching this, I’m just going to say the words that everyone is afraid to say. We are talking about a type of redistribution of economic resources, right? But how is it different from a… How is land value tax a different kind of redistribution, one that we should be less afraid of than the redistribution of wealth that some people in political circles say that we should not do it all?
RICH NYMOEN: Yeah, I don’t know if it’s really a redistribution, it’s just kind of a correcting the distribution. So it makes sense because the community is creating the value for those land rent payments to be going to the community. It doesn’t really make sense to be going to private parties because they didn’t create the value. So I don’t really see it as being redistribution as much as making sure the distribution is going as it should be.
JACQUELINE LUQMAN: Ah, wow. So you said earlier that there are some communities that still exist that implement land value tax. How successful are those communities to your knowledge? How many are they and how can we implement this idea nationwide?
RICH NYMOEN: Well, let me be clear. So there’s two kinds of communities. There’s communities like Arden, Delaware and Fairhope, Alabama where the town has title to the land and the homeowners have title to the building, but they’re paying land rent to the town. So it’s a very direct relationship there. There’s also towns, particularly in Pennsylvania, that tax the value of land more than they tax the value of buildings on the land. So there’s 16 or 17 jurisdictions in Pennsylvania that use a land value tax approach to this. It’s very effective in terms of being able to apply to a very wide area. The drawback of it is that it’s not as transparent as the land rent approach, so people don’t really realize that what they’re doing is paying land rent when they’re paying a land value tax. So that’s kind of a tradeoff between the two approaches. But one thing about the land value tax was not only does it have the kind of the benefits that we’ve already been talking about in terms of changing the way land rent is distributed, but it’s been shown to have tremendous kind of stimulus effects.
So because you’re increasing the taxes on property that are being held, land is being held for speculative purposes. Like land that has nothing, no buildings on it or very little building on it was the increases. So it’s been… It puts development pressure on people who are just holding vacant underutilized sites for speculative purposes. It motivates them to either use the site or sell it to someone who put it to its full use. And then it’s lowering the taxes that are paid by properties that have a lot of building value on it. So it makes it easier for above average users to operates. So you get this really kind of beneficial spiral that occurs where the more tax you apply on land value, the more development you get and the more development you get, the increasing values you’d get, so you’re kind of continually increasing your tax base that way.
JACQUELINE LUQMAN: And in terms of addressing the legacy of racial segregation in this country, of course we’re not suggesting here that land value tax will solve racism. Because individual practices are still individual practices, and there will probably always be. And this is the argument of this particular host, we will always have to combat some type of racism in society. But in terms of providing a more even economic playing field as opposed to what we have now in as far as the legacy of segregation is concerned, how does land value tax help that?
RICH NYMOEN: Well I think an interesting way to think about it is in terms of that board game Monopoly. So that board game was actually invented to try and teach some of these principles. It was originally called The Landlord’s Game and it was invented by a Henry George follower named Lizzie Magie back in the early 20th century. And under the way the game was originally played, players could elect to change the rules mid-game. Because as you know, when you play Monopoly, eventually one person comes to monopolize the entire game and bankrupts everybody else in the process. Under the original rules you could switch to a different set of rules that would allow the land rent to be pooled instead of being paid to an individual player. The landlord rent would get paid into the kitty and then shared with everyone equally in the game. So you had this equalizing effect as opposed to this polarizing effect that is representative of our current economy.
JACQUELINE LUQMAN: Right. So again, let me go back to the… And this is the last question. Building on the models that exist, the two different types of land value tax models that exist, how do we move forward in implementing a land value tax model across the country?
RICH NYMOEN: Well, it’s really going to depend, state by state. So there’s some states that have actually constitutional provisions that prevent taxing land value at a higher rate than building values.
JACQUELINE LUQMAN: Really?
RICH NYMOEN: Yeah. So I know Ohio is one of them. I forget all the states that have that constitutional provision. So obviously that would require a constitutional amendment in those states in order to use the tax approach. But even if you weren’t able to get a constitutional amendment, I think it could still use some of these land trust approaches. So here in Minnesota we’ve been working on a couple projects. One we call it Municipal Land trust, and we’re exploring this for the city of Saint Paul. And the idea would be that when the cities sells properties, they could retain title to the land and only sell the building portion, and then the homeowner would pay land rent to the city in lieu of property taxes. So that’s one way you can do it. Kind of a piecemeal basis if for some reason either the constitution or your statutory framework doesn’t allow it to be done. I mean, there are some states where you can do it and then you would just cite some enabling legislation already in place, like Pennsylvania has. Pennsylvania and Connecticut both have enabling legislation that allows cities to use the land value tax approach. But if there’s something that makes it difficult to do it that way, you can always use the land trust approach to do something similar.
JACQUELINE LUQMAN: Well, this is a really fascinating topic. It truly is because I think it is an aspect of addressing the legacy of housing segregation that not a lot of people have considered. And it sounds to me like there’s quite a bit of promise, but we have run out of time, so we can’t possibly go into all of the different aspects of how this could work, why it could work and how we can implement it. But Rich-
RICH NYMOEN: If I can just make a quick plug.
JACQUELINE LUQMAN: Absolutely.
RICH NYMOEN: There’s a book called Land: A New Paradigm for a Thriving World. It’s by Martin Adams. And it does a really good job of explaining this in kind of plain language. So if people are interested in learning more, I’d suggest that they check this book out.
JACQUELINE LUQMAN: Absolutely. That’s a great plug and we will leave it there with some homework for you, viewers. Thank you so much, Rich, for joining me to broach this topic and I’m sure we’ll continue this discussion.
RICH NYMOEN: Thank you very much.
JACQUELINE LUQMAN: And thank you for watching. This is Jacqueline Luqman with The Real News Network in Baltimore.
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