All land value must be constantly sustained

EAST COAST FLOODS 60TH ANNIVERSARY

Older people will remember the East Coast floods which occurred at the end of January 1953, devastating coastal areas all the way from Lincolnshire to Kent, as well as parts of the Netherlands and Belgium. The upper picture shows the centre of Felixtowe, Suffolk. The cause was a combination of high spring tides and a storm, resulting in a surge tide in the North Sea. After that, sea defences were improved, at vast expense.

The issue came to mind when Caroline Lucas was interviewed on the radio recently when the Second Reading of her Private Members Land Value Tax Bill was due to be debated but got talked-out. She pointed out that LVT captures increases in land value arising, for instance, from planning consents. This is true, but the picture is much bigger than that. If the East Coast sea defences were neglected, the land that they protected would soon become worthless.

LAND VALUE DEPENDS ON CIVIL ORDER

Land value in its entirety depends on the state of civil order being maintained. Land titles must be backed up by the force of law. Infrastructure must function. Property rights must be respected. If these things break down, then land has no value. If the kind of disorders such as occurred in the summer of 2011 were not quickly brought under control, what value would remain in the land? More mundanely, land values are sustained by the constant working of the drainage system, public transport, the cleaning and repair of the streets, and so on.

Land rental values, which are the primary value of land, are the value of these benefits. Land price is the capitalisation of rental value, on the assumption that the benefits will continue to be provided. Unlike rental value, the price of land is a hope value based on expectations which may or may not be realised.

Two conclusions can be drawn from this. The first is that to equate land price with land value is a mistake. Land value is its value NOW, which is its rental value. The second conclusion is that ALL land value is something that is continually sustained and re-created. When the question of INCREASES in land value are raised in discussion, it is important to go on to stress that land value exists because of the activities of the community at the present moment.