SHARE
Claudia De Cesare is a property tax adviser to the Secretariat of Finance for the municipality of Porto Alegre, Brazil, and she teaches courses on valuation and property taxation in the postgraduate program of the Federal University of Rio Grande do Sul in Porto Alegre. She has been a course developer and instructor in the Lincoln Institute’s Latin America Program for more than five years. She is also a member of the advisory board of the International Property Tax Institute (IPTI) and is the former technical director of the Brazilian Appraisal Institute (IBAPE).
Land Lines: Porto Alegre is known internationally for its innovative and democratic local administration. What is unique about this city compared to others in Brazil or Latin America?
Claudia De Cesare: Indeed, Porto Alegre has initiated many pioneering actions in public administration, including the use of the property tax as an instrument for value capture; the sale of building rights (solo criado); the use of building rights in place of cash to pay for expropriations of real property; and the collection of rents in exchange for the use of public space by infrastructure networks, such as telecommunications, cable TV and gas. For instance, five years before the approval of the national City Statute legislation regulating the use of progressive rates for the property tax, Porto Alegre passed local legislation to address this matter. Although the Supreme Court later ruled against this local action and in favor of the need for national legislation, the city has played a leading role in promoting debate on many polemic issues, including private rights, property rights and the public interest.
I think the reasons for Porto Alegre’s innovations include a clear definition of the policies and goals to be achieved, as well as “guts” by local leaders to tackle issues even when conflict is likely to occur. Public officials have maintained an overriding vision that the city must be planned democratically for the community at large and a conviction that public assets must be taken seriously. Not all initiatives have succeeded, but citizens now have a better understanding of the local government’s responsibilities and its limitations. The fact that one political party, in this case the labor party (PT), was elected to lead the city government for more than 15 consecutive years also contributed to the continuity and coherence of these public actions. This kind of political legacy is quite unusual in Brazil and Latin America in general.
LL: How has this proactive atmosphere affected the administration of the property tax?
CD: We can identify two periods in terms of property tax performance in Porto Alegre. Before 1989, local revenue from the property tax followed the typical pattern in Latin America. It was mainly symbolic, characterized by a low level of effort in administration, negligence in local tax collection, and extreme dependence on revenue transfers from the national and state levels. Following major property tax reforms that revised exemption policies, introduced progressive rates and established a new assessment list, the property tax collection rate grew more than 300 percent over the first two years. A major public education campaign emphasized the arguments for regular property tax payments, the importance of the tax for the provision of public services, and the reasons why the local authorities would not tolerate tax evasion.
A change in attitude by the city administration also led to more effective enforcement of property tax payments and legal actions to address tax evasion or disputes over assessed values. It was made clear there would be no amnesty for property tax debts. The participatory budget process also contributed to the rehabilitation of the property tax in Porto Alegre, as overall confidence in public administration increased (see Goldsmith and Vanier 2001). Since the early 1990s, the annual revenue collected from the property tax has been stable, representing nearly 0.95 percent of local GDP. At the national level, by comparison, the property tax represents only about 0.5 percent of GDP. Subsequent improvements in the property tax have not taken place, basically because the legislature has rejected several proposals for either reforms or major revisions.
LL: How important is the property tax in Latin America?
CD: Although the simple answer to this question is “it depends on the country,” the property tax is not a significant revenue source in any Latin American country, even though most countries have long established property tax systems. Only in Argentina and Uruguay does the revenue collected from the property tax represent more than 1 percent of GDP. In Brazil the average performance is close to 0.5 percent, and in Mexico and Costa Rica it is around 0.3 percent of the GPD. Moreover, in relative terms, there is great variability in the importance of the property tax within countries and cities that is not directly explained by the local GDP or population size. Part of the performance depends on political will, which varies enormously among cities.
LL: In your opinion, what are the main controversies related to property tax collection?
CD: I would say that the controversies include the real goals to be achieved with the property tax; the degree of universality in its implementation; the changes needed to take into account social, economic and cultural concerns; and the distribution of the tax burden for regulating the tax according to ability to pay. Concerning ability to pay, principally in Brazil, there is much discussion about application of progressive rates that vary according to assessed values. The underlying issue might be how simple the system should be.
Other issues have to do with the lack of consensus about the transparency of the system, local autonomy versus a national system for tax collection, and general political and economic instability that affects property value maps and other data. Furthermore, the public disclosure of information on the property tax, such as individual property characteristics, assessed values and annual tax payments, is not always considered secure.
LL: What would it take to improve property tax collection?
CD: In my experience, the successful performance of the property tax depends on a combination of adequate fiscal policies, a consistent legal framework for tax collection and an efficient administrative structure. For instance, the application of confiscatory (high) rates to vacant sites to promote land development is likely to stimulate tax evasion instead. In addition, political will and the capacity for negotiation with stakeholders are essential for the introduction of reforms or revisions in tax administration. Making the connection between public services and revenue collected from the property tax more evident to taxpayers is likely to contribute to a better collection rate. In other words, the role of the property tax would be enhanced if the community is accustomed to paying the property tax and understands its effect on improving public services. Finally, a trend toward a participatory fiscal culture, in which the community takes part in the decisions about public revenue collection and expenditures, could increase the acceptability of the tax, making its collection easier.
LL: What is changing in the region to influence the prospects for tax reform?
CD: I believe tax administrators understand and care more today about the property tax. They are aware of the pressing need to increase revenues through better performance of the tax, in spite of challenges due to its high visibility and historically poor performance record. They also recognize the need to break this paradigm, in relation to both taxpayer expectations and the role of the property tax as a component of the national taxation system. Several isolated yet promising experiences have made it clear that property tax reform in Latin America is viable, but it requires political will, innovation and a commitment to overcome perceived barriers to its implementation.
LL: What are the main differences in the property tax environment of Latin America compared to North America?
CD: The U.S. and Canadian systems are certainly more mature and transparent than most Latin American systems, largely because information is available in the public domain and technology is easily accessible. Some of the important differences observed in Latin America are illegal occupation patterns, the lack of reliable information on land tenure, the large number of informal property transactions and the prevalence of progressive housing construction. All of these characteristics of Latin American land use present distinct challenges to developing procedures to assess property values and administer a fair and consistent tax policy. Concerning the use of technology in the administration of the property tax, last year I learned about a cadastral system in Mexico that is as effective as the best systems used in the U.S. However, this is unusual; there is great variation in the use of technology among different local authorities in Latin America.
LL: Based on your research, what are some of the positive and negative impacts of switching to a land value-based tax system for residential properties?
CD: The conclusion of my study was quite unexpected, since the hypothesis supported the opposite argument. Using a database from Porto Alegre, I found that the main result from using land value as the tax base was the tendency toward more regressivity in the distribution of the tax burden, with low-priced houses clearly identified as the potential losers. The fact that part of the tax burden would be transferred from high-priced to low-priced properties is a real cause of concern. However, further investigation is necessary to address imperfections in the valuation model used to estimate land values and to examine other databases. In any event, the lack of knowledge about the use of land value as the tax base and its perceived advantages was identified as a major obstacle for its application in Brazil.
LL: How do you use various assessment tools and techniques to determine land value?
CD: One of the main arguments against the use of land value as the tax base is the great difficulty in estimating the value of improved sites. In my study, the use of hedonic models (MRA) for estimating land values was found to be viable. To compensate for the lack of data on undeveloped sites in highly developed areas (central areas and business districts), I used a reasonable number of houses that were sold for new development. Their market value was determined entirely by the potential of the site for future development, as well as by the neighborhood characteristics. Therefore, the findings support the hypothesis that eventual difficulties in land assessment do not prevent the use of land value as the property tax base, at least, in the case of Porto Alegre. Nevertheless, a lower degree of assessment uniformity was observed in the valuation of undeveloped sites, since site prices tend to suffer strong random variations and are highly influenced by the particular characteristics of the buyer and seller involved in each transaction.
LL: What do you think are the greatest challenges facing Latin America in the next five years?
CD: As discussed before, a major challenge is to pursue more effective property tax systems. I think the promotion and implementation of national programs for the improvement of the property tax is essential to reinforce the property tax at the local level. On a more personal note, my goal is to develop a web-based system for collecting and disseminating information on property taxes in Latin America, allowing comparative analyses among municipalities according to predefined criteria. The system would have property tax administrators fill out data on the performance of the property tax on a regular basis, allowing for evaluation over time. This would greatly advance the project, now being supported by the Lincoln Institute, which uses conventional questionnaires to survey property tax information in the region.
Reference
Goldsmith, William W. and Carlos B. Vainer. 2001. Participatory budgeting and power politics in Porto Alegre. Land Lines 13 (1): 7–9.
Rampant informality, so emblematic of large cities in developing countries, poses many challenges for property taxation systems. For instance, tenure rights in informal settlements are often obscure or even unknown; buildings are constructed gradually over time, self-construction is common, and the whole unit may never be finished; property value depends on vague or intangible factors such as the security provided by community organizations; the occupant or even the legal owner may be too poor to pay taxes; administrative costs of tax collection are higher than in the formal areas, whereas assessed values are often much lower; and there is hardly any public investment in infrastructure and services.
These critical features of informal housing seem to violate many of the premises on which the administration of a property tax system is grounded: identification of taxable property and corresponding taxpayers; description of the property’s physical characteristics; determination of property values on a reasonable market basis and according to predictable measures; the taxpayer’s presumed ability to pay; collection costs that are relatively low compared to the revenue collected; and an expectation that tax revenues would benefit the area from which the tax was collected.
This comparison depicts the essence of the conventional wisdom on informal occupations and the reasons why they are generally disregarded for taxation purposes, but misconceptions and prejudices are evident. This article examines some of these biases and their consequences for property tax collection in informal areas. The Latin American situation is used to illustrate this debate, but this study is still exploratory due to limited data. The arguments discussed indicate promising directions for further analyses, rather than conclusive findings in most cases.
Informal Occupations
In land occupation and housing, informality is a multidimensional phenomenon involving thorny issues related to land tenure; noncompliance with urban norms and regulations, such as minimum lot size, allowance for public spaces, and street layouts; inadequate provision of public services and equipment; and occupation of improper areas, such as environmentally protected or ecologically risky areas and contaminated brownfield sites.
Slums originated by land invasions are the first image of informality that comes to mind, but other social and physical forms of informality range from pirate subdivisions, usually characterized by market sales of land having no clear title, to situations where even legally qualified owners with titled land do not conform to existing urban norms and regulations.
According to the United Nations–Habitat (2003), about 928 million people (32 percent of the world’s urban population or 43 percent of the population of developing countries) currently live in slums with precarious urban infrastructure and inadequate public services. If current trends and policies continue, the report estimates that slum populations will increase by 37 million per year to reach a total of 1.5 billion people in 2020. Although Latin America accounts for 9 percent of the world’s population, it comprises about 14 percent of those who live in slums.
Why is Informality a Problem?
Informality disorganizes the functioning of urban land markets, since illegal, irregular, and clandestine operators are able to reap higher profits by avoiding some costs, such as taxes, the cost of protecting the land from invasions, or the cost of providing basic urban infrastructure and services. Contrary to expectations, land prices per square meter in informal settlements are often higher than those in formal areas, when discounting investments related to the provision of water, electricity, drainage, sewerage, and other services.
Moreover, informality is expensive for society. The costs of curative policies to upgrade irregular settlements are higher than the cost of new land development, and indirect social costs include the presence of criminal activity and natural disasters caused by development in environmentally sensitive areas. The evidence also suggests that informality is both a cause and an effect of urban poverty. The geographic distribution of poverty tends to overlap with the spatial pattern of informal arrangements, although the magnitude and persistence of informality cannot be entirely explained by poverty. A survey conducted by the Instituto Pereira Passos (2002) based on the Brazilian Census of 2000 found that about 64 percent of the population classified as poor actually lived outside the slum areas.
Myths of Informality
There are many prevailing myths about how informal settlements are either established or operated, including the perception that occupants in informal areas are neither willing nor able to pay property taxes. In fact, not only are occupiers usually willing to pay the tax as a way to legitimate their land tenure, but they are often quite able to pay it. New occupants, in fact, have already paid the property tax in the form of higher land prices, yet the payment went to either the subdivider or original landowner instead of the government.
Moreover, payment of the property tax by occupants of informal areas is likely to legitimate their right to demand public services and other urban improvements from government authorities. Many informal occupants also realize that private provision of basic services through informal means, such as buying water from a truck, is likely to be more costly and risky than payment of the property tax.
Other myths or assumptions about informality include beliefs that occupants of informal settlements are necessarily poor; informal settlements are occupied only by unemployed and informal workers; formal property title is necessary to obtain access to credit; informal settlements are homogeneous entities clearly distinguished from formal settlements; and occupation of informal settlements is made through nonmarket transactions.
Property Tax Collection
In an attempt to relate property tax collection per inhabitant to the presence of informality, we used data based on a survey of municipalities conducted in 1999 by the Instituto Brasileiro de Geografia e Estatística (IBGE 2001). Table 1 presents data that measured two criteria: the occurrence of slums (i.e., informal settlements caused by invasions) and the existence of all types of irregular land development. Slums occur in 27.6 percent of all municipalities in Brazil, while irregular land development (including slums) occurs in almost 44 percent of them. The maximum value of property tax collected is higher in larger municipalities and those with slums and other irregular developments, and the revenues also tend to be higher on average than in those municipalities without such development.
However, Table 2 illustrates the difficulty of monitoring property ownership and tax collection records by comparing the presence of cadastres in municipalities with records on slums and informal settlements. Local cadastres cover information on slums in 52.5 percent of the municipalities in which they are found, but only 39 percent of those cities have complete records on informality. By comparison, 50.5 percent of municipalities with irregular land developments have this information included in their cadastres, and 51 percent of the cases with records have complete information. Thus, one cannot reject the hypothesis that the larger, richer, and more developed municipalities are also the ones with better records on informal occupations.
Using the IBGE database, a model for multiple regression analysis was developed to test the relationship between informality and the property tax collected per inhabitant. The relationship was controlled with other attributes available in the database, including the average income per inhabitant, the size of the population, and a group of variables associated with the role of the local administration in promoting urban development. Based on this model, which explains approximately 72 percent of the variation in the property tax collected per inhabitant, the following factors have proven to be influential in determining the amount of property tax collected.
In addition to the level of income, the findings clearly indicate the importance of an effective administration of the property tax. In other words, even in the presence of informality municipalities achieve better results in comparative terms if they maintain updated cadastres and maps, include informal properties in the cadastre, and have a broad framework of urban legislation. In summary, when focusing strictly on the property tax performance, the major cause of concern is not the presence of informality itself, but the way public officials deal with it for property tax purposes.
The Property Tax as a Tool to Reverse Informality
A more vigorous property tax is likely to affect informality directly. For instance, the portion of the property tax levied on land value constitutes a strong antidote to force the existing stock of serviced land to the market. The property tax may also be important as a tool to influence the decision-making process for which areas should receive urban services. Indeed, communities without a property tax system are particularly vulnerable when it comes to seeking public attention.
The property tax can also be an educational mechanism for helping citizens realize their rights and duties, including the need to contribute to public expenses. The government’s commitment to allocate tax revenues fairly and equitably provides greater legitimacy to the tax. Furthermore, a property tax may be one mechanism to reduce land prices through the capitalization effect (Bahl and Linn 1992). Usually local government recognition of occupancy has no direct, legal effect on guaranteeing property titles at the public registry, but informal occupiers may perceive it as a kind of a green card to access the legal world.
Rabello de Castro (2000) has argued that there are solid legal grounds to use cadastres for property tax purposes to legitimize tenure rights, and that the courts would have no difficulty in admitting such records as trustworthy evidence. Finally, there is an advantage for the property tax to cover informal property because its application requires specific knowledge of the area, which has immensurable value to the city management.
Policy Recommendations
Informality poses particular challenges to property tax administration, including the need to design feasible and politically acceptable procedures. Following are some policy recommendations for consideration.
Even though most informal property is excluded from the property rolls, the above requirements should be applied to informal properties if a higher level of efficiency in property tax collection is to be achieved. The argument about high collection costs to exclude low-valued properties (or low-income families for that matter) from the tax-rolls should be reckoned against the benefits of promoting broader fiscal citizenship.
A Longer View
The collection of property taxes in informal areas may be not only possible under certain circumstances, but also attractive for pursuing a more effective urban policy that is capable of mitigating informality and its negative effects for society in general and for individual occupants of these settlements in particular.
Despite the difficulty of providing empirical evidence on its theoretical impacts on the land market, the part of the property tax levied on the land value is likely to produce effects that are critical to mitigate the distortions and dysfunctions in land markets with a high degree of informality. These effects include stimulating land development; deterring land speculation; reducing land prices; increasing the supply of urbanized land; encouraging more compact cities; promoting more efficient provision of urban infrastructure and services; and encouraging a more rational pattern of development. Indirect benefits may include the relevance of the information generated to identify property, the use of paid property taxes as a paralegal means to legitimize tenure rights, and last but not least the opportunity for accessing citizenship and becoming integrated into society.
In summary, when focusing on the property tax performance, the major cause of concern is not so much informality itself, but the way public officials treat informality and how they administer a property tax system. In this context, the introduction of the property tax into an environment with rampant informality requires special caution. The challenges to operating the property tax in informal areas include the need to understand the informal market, curb intervening land ownership claims from previous or absent owners, improve administrative capability, and legitimize public actions that result in social benefits to the poor. In addition, public officials need to overcome prejudice and misconceptions regarding informality and introduce efficient property tax initiatives that may actually reduce informality.
About the Authors
Martim O. Smolka is senior fellow and director of the Program on Latin America and the Caribbean at the Lincoln Institute of Land Policy.
Claudia M. De Cesare is a property tax advisor to the Secretariat of Finance in the municipality of Porto Alegre, Brazil. She is on the advisory board of the International Property Tax Institute (IPTI) and is a faculty member of the Lincoln Institute.
References
Abramo, Pedro. 2003. A teoria econômica da favela: quatro notas sobre a localização residencial dos pobres e o mercado imobiliário informal, in A cidade da informalidade: o desafio das cidades latino-americanas, Pedro Abramo (Org.). Rio de Janeiro: Librería Sette Letras, Fundação Carlos Chagas Filho de Amparo a Pesquisa do Estado do Rio de Janeiro, and Lincoln Institute of Land Policy.
Bahl, R.W., and Johannes F. Linn. 1992. Urban Public Finance in Developing Countries. Washington DC: Oxford University Press.
Instituto Brasileiro de Geografia e Estatística (IBGE). 2001. Perfil dos municípios brasileiros: Pesquisa de informações básicas municipais, 1999. Rio de Janeiro: IBGE.
Instituto Pereira Passos. 2002. Evolução da população de favelas no Rio de Janeiro: Uma reflexão sobre os dados mais recentes. Prefeitura da Cidade do Rio de Janeiro. http://www.rio.rj.gov.br.
Rabello de Castro, S. 2000. Habitação: Direito e governança – Duas sugestões para ação governamental. Fundação João Ribeiro. Cadernos de Textos 2: 321–338.
UN–HABITAT. 2003. The challenge of slums: Global report on human settlements. Nairobi, Kenya: United Nations Human Settlements Programme.
SHARE
As the world’s most populous country and its third largest economy, China and its rapid urbanization and development will represent one of the defining trends of the twenty-first century. Over the past 30 years, China has made remarkable economic and social progress, lifting hundreds of millions out of poverty and catapulting China onto the international stage.
This economic transformation has also involved an institutional transformation as China’s centrally planned economy has moved pragmatically to a broad reliance on market mechanisms. This movement has been especially challenging in the case of land, which for decades was owned by the state or peasant collectives. Progress has been made in urban areas, where the leasehold term of land ownership is now normally 70 years, but in rural areas collective land ownership continues.
Despite its noteworthy accomplishments, China is facing critical land policy issues that will determine the direction of its future economic development and urbanization.
With these diverse issues in mind, the Lincoln Institute of Land Policy’s China Program was inaugurated in 2003 and continues to focus on improving the quality of public debate and decisions concerning land policy and urban development in China through sound research and the leveraging of international experience and expertise.
The China Program has grown considerably in capacity, scope, and geographic footprint, highlighted by the establishment of the joint Peking University–Lincoln Institute Center for Urban Development and Land Policy in October 2007. The Center’s mission is to study land, urban, and fiscal policies and to facilitate education, training, policy analysis, and research. Having this joint facility in Beijing provides the China Program with an ongoing domestic presence that expands the Institute’s networks and resources and brings together government officials, practitioners, and foreign and domestic scholars to engage in dialogue and to share experiences to promote a better understanding of land policy, urbanization, and property taxation in China and around the world.
The China Program has identified six key research areas that are highly relevant to China’s future development and also offer the best opportunities to utilize the Lincoln Institute’s expertise and resources.
Adoption of a Property Tax
China’s 11th Five-Year Plan (2006–2010) elevated the issue of a property tax onto the official agenda, and pilot property tax projects are currently under way in more than 10 provinces. However, the issue’s sensitive political nature, lingering technical difficulties concerning data and valuation, and continued debate about the exact form of any proposed property tax have slowed implementation and made it unlikely that a broader property tax and related tax policy reforms will be implemented before the 12th Five-Year Plan begins in 2011.
Through close working relationships with the State Administration of Taxation (SAT), the Ministry of Finance (MOF), and the Development Research Center for the State Council (DRC), the China Program has offered a number of educational programs and provided significant intellectual and capacity building support for China’s adoption of a property tax.
For example, in October 2009 representatives of the British Columbia Assessment Office, the Altus Group, and ESRI Canada led a China Program training workshop on property tax implementation and design of computer-assisted mass appraisal (CAMA) systems. More than 50 SAT officials participated, including representatives from each of the property tax pilot cities.
Delegates from the SAT and the Lincoln Institute attended a three-day conference on valuation and mass appraisal at the University of Pretoria, South Africa, in March 2009, before traveling to Johannesburg’s valuation office to discuss the challenges of implementing a property tax in that country.
In November 2008, training on technical aspects of property valuation was provided in Beijing by property tax experts from Canada, the United States, South Africa, and Hong Kong for more than 40 administrators and assessors from China’s property tax pilot cities.
Local Public Finance
Fiscal policy reform is a key component in addressing many of the social and economic problems China faces. Restructuring the current tax system and promoting balanced tax and expenditure responsibilities at the local government level is one of the main policy objectives of the Chinese government. The underlying efforts are closely related to the future development of any property tax, a necessary and critical solution to local public finance challenges.
The China Program is focused on issues of fiscal decentralization, public service financing, land-related taxes and fees, regional inequity, intergovernmental finance, and the role of property taxation in a modern public sector finance system. Representative activities have included a January 2009 workshop in Beijing on fiscal policy and economic growth in China with leading fiscal policy scholars and experts, including officials from the MOF, DRC, and SAT.
An international conference held at the Lincoln Institute’s headquarters in Cambridge, Massachusetts in May 2008 focused on local public finance and property taxation. Those proceedings will be edited and published in a Lincoln Institute book in 2010, and the volume will be translated and published in China as well.
Land Policy and Land Management
The revision of China’s Land Management Law has been a sensitive issue over the past several years, as the country struggles to define rural land rights, land expropriation, and the public good. With a new land law revision on the horizon, land-related issues remain at the forefront of China’s policy agenda, particularly issues concerning urban and rural property rights, land expropriation, land use efficiency, land use planning, land conservation, and urban expansion and sprawl.
In June 2009 the China Program co-organized a roundtable discussion on the most recent draft revision of China’s Land Management Law with the Land Law Committee of the China Land Science Society in association with the Ministry of Land and Resources (MLR). Experts and prominent scholars from across the political spectrum engaged in direct dialogue and discussion with government officials at MLR who are working on the revision.
The China Program is now compiling and translating several land management laws from a dozen developing and developed countries for use by Chinese officials and scholars. The Program also cosponsored a comprehensive survey of land use and farmland conservation issues in a dozen provinces in China, and is building a database for future research on land management issues.
Urban Planning and Development
Rapid urbanization has led to the explosive growth of Chinese cities and their populations, presenting an enormous challenge in terms of city planning, infrastructure, and transportation. New approaches to urban planning are fundamental to the development and management of cities, as well as a prerequisite to ensuring the efficient use of land and integrated development in China. Efforts also must be made to use land sensibly and to coordinate the spatial layout of urban areas, thereby avoiding rampant and uncontrolled urbanization.
The China Program cooperated with the Chinese Society for Urban Studies and the Urban Planning Society of China, affiliated with the Ministry of Housing and Urban-Rural Development, in organizing the July 2009 International Forum on Urban Development and Planning, which featured the theme “Harmony and Ecology: Sustainable Cities.”
In cooperation with the Lincoln Institute’s Department of Planning and Urban Form, more than 20 international speakers attended a symposium on megaregions and spatial planning practice worldwide, held in Beijing in October 2008.
Affordable Housing
Housing policy, and in particular affordable housing, is becoming an important focus for China’s policy makers during this period of rapid urbanization. With upwards of 15 million new urban residents expected annually over the next decade, the growth in the supply of affordable housing is an immediate concern. In addition to a one-year joint policy research project with the DRC, the China Program is conducting original research in the field of housing policy and introducing international experience to China’s policy makers and the academic community.
For example, in July 2009 the China Program organized a symposium on low-income housing policy in China to provide a platform for international and domestic scholars and government officials from DRC, the Ministry of Housing and Urban-Rural Development, and the People’s Bank of China to engage in dialogue and discussion. Papers from the symposium will be published in an edited volume for distribution in China. The China Program also hosted an international conference entitled Housing Policy and Housing Markets in China in Cambridge, Massachusetts, in May 2009, and is preparing an edited conference volume for publication in both English and Chinese.
Environmental Challenges
With international attention focusing on recent climate negotiations in Copenhagen, there is a pressing need for timely research on low-carbon development and the complex linkages between land, transportation, and urban and environmental policies in China and globally. The China Program is leading research on environmental taxation in China from a global perspective and developing a database of environmental tax statistics.
The Program organized a roundtable on green cities at Peking University in September 2009, which drew strong interest from domestic and international academics and signaled the need for further study of environmental policy issues in the future. And in May 2008, the Program, joined by Loeb Fellows from the Harvard University Graduate School of Design and Chinese policy makers and academics, held a roundtable discussion at Peking University that addressed urban transformation and sustainability.
Building Capacity to Address the Issues
Since its inception the China Program has been committed to enhancing the capacity of both current policy makers and academics and researchers whose analysis and opinions will influence China’s future policies and reforms. This educational emphasis continues with the establishment of the Peking University–Lincoln Institute Center, which has become an important platform for reaching and engaging students and scholars at Peking University and other academic institutions through training programs, fellowships, lecture series, online education, and research publications.
Training the Trainers
This annual program aims to enhance the capacity and awareness of scholars throughout China regarding urban economics, planning, public finance, and related land policy issues. The courses target university faculty and professional researchers, as well as select government officials, with the goal to increase competence through intensive professional seminars on issues related to land policy in China. More than 70 participants on average attend each two-week training program. Leading experts in their fields from around the world offer the participants an invaluable international perspective. The China Program’s recently launched online education platform seeks to build on previous training programs and to move progressively toward more specialized trainings.
Fellowships
The China Program awards several types of fellowships to international and Chinese scholars and graduate students working on Chinese land and urban policy. Two or three international fellowships are awarded annually to leading scholars and professional researchers based at universities around the globe. In addition to producing important research on issues ranging from the spatial structure of megacities to household carbon emissions in Chinese cities, the international fellowship is an invaluable tool to increase scholarly dialogue between China and the world. These fellows are an integral component of the China Program’s other activities, such as teaching at Training the Trainers programs, reviewing other fellowship proposals, and speaking at seminars.
Fellowships for Chinese graduate students and junior researchers are administered through the Peking University–Lincoln Institute Center to bring young scholars into Chinese land and urban policy studies. Approximately 15 dissertation fellowships are awarded to aspiring scholars annually, while an additional 6 or 8 research fellowships help strengthen the capacity of scholars based in China’s leading institutions.
The China Program’s in-country presence at the Peking University–Lincoln Institute Center also facilitates interactions among the fellows, including the provision of constructive feedback on their ongoing research. All fellows are invited to Beijing for a mid-term progress report, where they share their initial research findings with peers and a panel of international experts. This event has proven to be an effective way to help domestic junior scholars and graduate students build research skills and promote studies of urban and land issues in China.
Speaker Series
The China Program also regularly invites distinguished individuals drawn from the Lincoln Institute’s network of leading scholars and policy makers to speak to the Beijing scholarly community on vital topics ranging from planning support systems to fiscal federalism and decentralization in the United States. This speaker series helps meet the demand for knowledge about international development and urbanization experiences and how these cases can be adapted to fit China’s needs.
Online Education
The Lincoln Institute has long history of employing online education as a tool to reach a broader audience and maximize its resources. Given the vast geographic distances in China and its emphasis on training and capacity building, the China Program has similarly been interested in online education for some time. The establishment of the Peking University–Lincoln Institute Center has accelerated the process of making information, analysis, and data available online, and widened the network of collaborators interested in tapping into the Institute’s expertise.
Through the Center, the China Program engaged a local online education company to develop a China-centric platform, which was inaugurated in the summer of 2009 during the China Program’s Training the Trainers session on urban economics and planning. The two-week program was recorded and translated into Chinese, and is accompanied online by Chinese transcripts of lectures and associated PowerPoint presentations and other materials.
The value of the online platform has become apparent almost immediately. During the fall 2009 program and demonstration on property taxation and CAMA, which was also recorded for later conversion to the online platform, attending SAT officials expressed their eagerness to use the platform to demonstrate the concepts to their colleagues and superiors.
Publications and Web-based Resources
As the China Program has increased its research capacity and professional support with the establishment of the Peking University–Lincoln Institute Center, it is producing a steadily increasing series of working papers, books, and training materials that are extending the Lincoln Institute’s and the China Program’s expertise on and influence in China. During 2008 and 2009, nine books were published or made ready for print, and eight other books are at various stages of development. The China Program and the Center’s fellows and visiting fellows have also produced about 40 working papers and a number of focused reports and policy briefs, which will soon be available online.
Complementing all of these activities is the Peking University–Lincoln Institute Center’s revamped Web site. It provides a window into the China Program’s mission and vision, and is an important link between the Lincoln Institute’s and the China Program’s dual educational and research objectives. Drawing together Chinese and English working papers, training and education materials, and conference proceedings from both the Lincoln Institute and the Peking University–Lincoln Institute Center, the Web site is a rich repository of impartial knowledge and an expanding platform for scholarly dialogue concerning the ascendant land, urban, and environmental policy issues in China.
In 2010, the China Program will continue to strengthen its online resources to synthesize and disseminate its recent research to a broader audience of Chinese scholars and policy makers through new publications and focused policy reports, while also striving to advance academic debate through research, demonstration projects, conferences and other activities.
About the Author
Joyce Yanyun Man is senior fellow and director of the Lincoln Institute’s China Program, as well as director of the Peking University–Lincoln Institute Center for Urban Development and Land Policy. She is also professor of economics in the Peking University College of Urban and Environmental Science.
SHARE
In most countries, government property is not liable for property taxes; indeed, the whole idea may be seen as a circular shifting of money (Bird and Slack 2004; Youngman and Malme 1994). The United Kingdom has taken a very different perspective recently. Regarding it as important that both government and local government occupiers are aware of the true cost of holding property, the UK insists on a system of notional rents and ensures liability for local property taxes.
From the enactment of the Poor Relief Act in 1601, the generally accepted starting date for the taxing of local property in the UK, until 2000 when changes were enacted, property occupied by the government or Crown was not subject to property tax or “rates.” However, the Crown did accept that it was appropriate to make some contribution to meet the costs of local services and paid ex gratia contributions in lieu of rates (CILORs). This process suffered from a number of problems: the contributions were voluntary; Crown property did not appear in the valuation lists; and the basis upon which the contributions were made lacked the rigor and transparency of valuation that applied to all other property.
The Local Government and Rating Act was introduced in 1997 for England, Scotland, and Wales (with an amendment in 1998 for Northern Ireland) to effectively place all Crown property on the same footing as all other taxable property, liable to be assessed for rates. These provisions came into effect from April 1, 2000. As a result, such iconic buildings as the Palace of Westminster and the Tower of London are now being valued in the same way as all other property for the first time.
Valuing Commercial Property
Valuation officers of the Valuation Office Agency (VOA), a part of Her Majesty’s Revenue and Customs (HMRC), are responsible for compiling and maintaining commercial (nondomestic) property rating lists for England and Wales. The local assessors are responsible in Scotland, and the Land and Property Services have responsibility for Northern Ireland. Broadly speaking, the rateable value of a nondomestic property is based on the annual rent that it could have been let for on the open market at a standard date (the antecedent valuation date). For England and Wales, the antecedent date of the 2000 lists was April 1, 1998; for the 2005 lists it was April 1, 2003; and for the 2010 lists, which came into effect on April 1, 2010, it was April 1, 2008.
Table 1 shows the number of taxable properties in England and Wales and their total rateable (taxable) value. Comparisons with capital value-based property taxes are a little difficult because it is necessary to know the relevant yields to make the comparison, but even so it is clear the level of taxation is unusually high for a property tax. The tax level for England and Wales is approximately 45 percent, but this is on rental, not capital, values.
The UK government sets a separate uniform tax rate (poundage) for England known as the nondomestic rating multiplier. For Scotland and Wales, it is set by their respective assemblies, and for Northern Ireland each district council sets its own rate. This determines the sum payable on every pound sterling of rateable value to arrive at the full rates bill. Local authorities remain responsible for calculating the bills and collecting nondomestic rates payable on properties within the authority’s area. They do not, however, retain the rates they collect but pay them into a national pool (one each for England and Wales). The money in the pool is then redistributed to local authorities with special arrangements for the City of London.
Background on the Crown Exemption
Prior to the 2000 rating lists, certain properties occupied by the Crown, e.g., central government offices and Ministry of Defence establishments, were exempt from rating and did not appear in any rating list. The Crown did, however, make an ex gratia CILOR based on a notional rateable value.
The Crown was neither expressly mentioned in the Poor Relief Act of 1601, the original rating act sometimes referred to as The Statute of Elizabeth, nor in the General Rate Act 1967 that replaced it. As it was a principle of UK law that the Crown was not bound by an act of Parliament unless specifically mentioned, there was no liability for rates. Further, no rates could be imposed with respect to property occupied by its servants whose occupation amounted to occupation by the Crown. This position was upheld by Jones v. Mersey Docks 11 HL Cas. 443 (1865).
However, as far back as 1860, the government accepted the principle of the Crown paying something by way of ex gratia CILORs with respect to property occupied for public purposes. This practice was made uniform in 1874. The Treasury of the UK, by formal Minute, adopted the principle that property occupied for the public service should contribute to the local rates equally with the other property in the parishes in which it was situated, having regard to its character in each case. The Treasury Minute established the Rating of Government Property Department (RGPD) to undertake the assessment of all government property with the intention of adopting in each case as far as possible the same principles as were applicable to the valuation of private property. Nineteenth-century case law established that the exemption applied only to property occupied by the Crown itself or its servants, but not to other property occupied for public purposes. Generally, therefore, the exemption applied to property occupied for the purposes of the central government and the Royal palaces and parks, and to other property occupied by servants of the Crown (for example, occupation by government ministers or by military personnel of Royal Naval, army, and Royal Air Force bases).
In 1896, a further Treasury Minute reaffirmed the principle of equal contribution and made certain concessions in order to carry it fully into effect. The concessions included periodical revaluation, punctual payment, and a contribution with respect to the Houses of Parliament.
The following were the main characteristics of the CILOR in the last few years of its existence:
The CILOR arrangements differed from standard rating procedures in the following main respects:
Rationale for Removal of the Crown Exemption
The government debated the removal of the Crown exemption as far back as World War II. The Central Valuation Committee, in a letter of January 21, 1947, to the Minister of Health, while in effect suggesting such a removal also stated that it had long been its view that the then-arrangements for the rating of property occupied by the Crown were in many respects unfair and unsatisfactory to local authorities, who at the time set their own rate levels. In the 1950s, the English local authority associations expressed their dissatisfaction with the Crown exemption and went so far as to say that the manner of assessing CILORs was completely arbitrary and frequently worked to the detriment of local authorities. They estimated the rateable value of Crown property in England and Wales in 1952 to be around £14 million out of a total rateable value of about £341 million, which would equate to £2.2 billion based on levels of value at the 2010 revaluation.
In the mid-1990s the government considered several drivers for change:
The Local Government and Rating Act 1997 made provision to end the Crown exemption from nondomestic rates in England, Wales, and Scotland, effective April 1, 2000. Rating authorities would collect rates on Crown properties directly from the departments concerned, rather than from the CPU. These authorities also would be able to proceed with enforcement proceedings against the Crown, as they would with other ratepayers. Although this would happen in only the rarest of cases, rating authorities would in principle be able to take steps against a government department to obtain a liability order for unpaid rates if the need arose.
It has been suggested by the rating profession in the UK that, since rating is a tax, valuing and taxing properties occupied by public bodies is a waste of public resources. Properties that might fall in this category include those occupied by the Ministry of Defence, National Health Service, and local authorities. Superficially, valuing and taxing these properties may appear unjustified. The difficulty is that many activities traditionally carried out by central or local governments are now also performed in the private sector. Leisure centers are just one example. Exempting local authority properties from rates when they compete directly with the private sector could be argued to be unfair as it would give the public sector a fiscal advantage.
While the public sector occupies other buildings whose current use clearly does not compete with private business, it is difficult to justify exempting some publicly occupied properties and including others. The original justification for rating buildings occupied by public sector bodies (including the removal of Crown exemption in 2000) was to establish a level playing field, ensure that the costs of occupation were fully recognized, and make transparent the contribution of public sector bodies to the cost of providing local services.
The Valuation of Iconic Buildings
The removal of the Crown exemption precipitated the need to value a wide variety of unusual properties. Rating in the UK is an occupier’s not an owner’s tax and is based on broad actual use rather than highest and best use. Very old buildings often have to be valued, though many of them have been modernized and used for diverse purposes, such as offices, commercial mixed uses, or, at least in part, tourist attractions.
The traditional comparison valuation approach could be made with similarly used properties to enable determination of an indicative rental value for some structures, but for others the task was much more difficult. For example, Somerset House on the River Thames is a purpose-built office block, but it is the world’s first purpose-built government office block, dating back to 1776, and it has been used in commercial filmmaking, and so is difficult to compare to other buildings.
Valuing unusual properties is not confined to Crown properties or those for which the rental comparison method cannot be used because there are no relevant comparisons. In such cases, the use of the Receipts and Expenditure (R&E) or income method may be a more reliable guide to assessing the market rental value of a property. This method is appropriate if the property to be valued is commercial in nature or has a degree of monopoly, and an occupier would be motivated primarily by the prospect of profit in its use of the property and, indeed, makes a profit (Bond and Brown 2006).
If neither the comparison nor R&E methods can be used, then the Contractors Basis or cost method is applied where the property is provided primarily for public purposes and is not occupied for commercial profit, or where the property concerned is commercial but it is not a profit center with its own accounts. In both cases the occupier (or owner) would be prepared to incur the cost of a replacement property to carry on the use of the property.
In addition to the problem of valuation is the UK complexity of having a separate tax on domestic property. In England, Scotland, and Wales this is the Council Tax, but in Northern Ireland the system is one of Domestic Rates. If any part of a property is used for domestic purposes, as defined in the legislation, then that use is assessed for the domestic tax. Thus, Buckingham Palace and Windsor Castle, both royal palaces, have a rating assessment on the non-domestic, commercial element and a council tax on the domestic sections of the buildings.
Palace of Westminster
The Palace of Westminster, also known as the Houses of Parliament, is a royal palace and the meeting place of the two chambers of the Parliament of the United Kingdom—the House of Lords and the House of Commons. The Palace is the center of political life, and Westminster has become a metonym for the UK Parliament and the Westminster system of government for which it is named. The Elizabeth Tower, often referred to by the name of its main bell, Big Ben, is an iconic landmark of London. The Gothic Revival architecture by Sir Charles Barry dates from only 1840, but the remarkable Westminster Hall with its hammer beam roof dates from 1097.
The Palace of Westminster has been part of a World Heritage Site since 1987. The Palace had a rateable value of £14,700,000 in the local 2010 rating list (£5,500,000 in the 2000 rating list). If the standard tax rate of 45.8 percent is applied, then the tax liability ignoring any reliefs would be around £6,730,000 per year. The assessment actually combines four buildings: the Palace, Portcullis House, 1 Derby Gate, and the Norman Shaw buildings. All parts are valued on the comparative method with respect to offices, with allowances for layout and size if appropriate. In the case of the Palace the two chambers are valued at 65 percent of the main rate per square meter. There is a further end allowance to reflect the overall amount of floor space in the property.
Buckingham Palace
Buckingham Palace is the official London residence and principal workplace of HM Queen Elizabeth II, both with respect to her position as British monarch and head of state of many countries around the world, and as head of the Commonwealth. Located in the City of Westminster, the palace is a setting for state occasions and royal hospitality. Originally known as Buckingham House, the building that forms the core of today’s palace was a large townhouse built for the Duke of Buckingham in 1705. Buckingham Palace became the official royal palace of the British monarch on the accession of Queen Victoria in 1837.
Buckingham Palace is used in part as one of the monarch’s residences but consists mainly of offices. Recently limited commercial use has been introduced, as part of the building is open to visitors. The commercial portion has a rateable value of £1,300,000 in the local 2010 rating list. It is valued using two methods. First, the R&E or income method is used to reflect the commercial component (approximately 400,000 people visited during 2011). The property is open for 63 days per year with limited opening hours, so the relevant receipts are annualized, and 5 percent is added to reflect the fact that longer opening hours would generate more ticket sales. The trading accounts as published show that the rateable value equated to 6.3 percent of Fair Maintainable Receipts. Second, the Contractors or cost method is used for the Queen’s Gallery. The residential component of the palace has 775 rooms, including 52 Royal and guest bedrooms, 188 staff bedrooms, 19 state rooms, and 78 bathrooms. In 2011–2012 it had a council tax bill of £1,369.
Tower of London
Her Majesty’s Royal Palace and Fortress, commonly known as the Tower of London, is a historic castle on the north bank of the River Thames in central London. It dates to the Norman Conquest of England in 1066, and the White Tower, which gives the entire castle its name, was built by William the Conqueror in 1078. The Tower has served variously as an armory, a treasury, a prison, a menagerie, the home of the Royal Mint, and a public records office. Now it is home to the Crown Jewels and is one of the country’s most popular tourist attractions, having some 2.55 million visitors in 2011.
It is protected as a UNESCO World Heritage Site (and by some very high walls and elaborate alarm systems). It is valued by the R&E method, due to its particular value as a tourist attraction, and the rateable value equates to approximately 4.7 percent of fair maintainable receipts. For the local 2010 rating list the property had a rateable value of £1,790,000 (for the 2000 rating list the value was £1,180,000).
Stonehenge
Stonehenge is a prehistoric stone circle on Salisbury Plain comprising a megalithic rock monument of 150 enormous stones set in a circular pattern dating back to 3000 BC. While there are larger stone circles in the world, including one nearby at Avebury, Stonehenge is unique because the Sarsen stones are surmounted by lintels connecting to one another and once formed a complete, connected ring. Stonehenge was built over a period of 1,500 years. It is a World Heritage Site attracting some one million visitors per year. Given the commercial operation of the property, it has been valued using the R&E method at a rateable value of £700,000.
Summary
Crown-owned and occupied property is currently valued in accordance with normal valuation methods and principles. The removal of the Crown exemption has resulted in the “correct” valuation of unique and often iconic historic buildings. The valuation methods applied have to reflect the use of the buildings and, where rental evidence is limited, the cost-based approach may be required. This latter approach brings with it significant difficulties when applied to buildings that are several hundred years old. In such circumstances valuers have to be creative, artistic, and scientific in their valuations.
About the Authors
William McCluskey is a researcher in the Built Environment Research Institute, University of Ulster, Northern Ireland, UK.
David Tretton FRICS FIRRV is a visiting professor in the School of the Built Environment, University of Ulster, Northern Ireland, UK. He was formerly Head of Profession and Director of Rating at the Valuation Office Agency, London, and is currently the technical editor of the RICS Valuation–Professional Standards (Red Book).
The authors thank Patrick Bond, BSc FRICS Dip. Rating IRRV (Hons), head of Commercial, Leisure and Civics National Specialists Unit, Valuation Office Agency, London.
References
Bird, R. M., and E. Slack. 2004. International handbook of land and property taxation. Northampton, MA: Edward Elgar Publishing.
Bond, P., and P. Brown. 2006. Rating valuation: Principles and practice. London: Estates Gazette.
Citizens Charter White Paper. 1991. Citizens Charter Open Government, Cm 2290, HMSO, London.
Youngman, J. M., and J. H. Malme. 1994. An international survey of taxes on land and buildings. Boston, MA: Kluwer Law and Taxation Publishers.
SHARE
Strengthening Municipal Fiscal Health in China
Since 2013, Zhi Liu has been a senior research fellow and director of the China Program at the Lincoln Institute of Land Policy, and director of the Peking University–Lincoln Institute Center for Urban Development and Land Policy (PLC). Prior, Zhi was lead infrastructure specialist at the World Bank, where he worked for 18 years, with operational experiences in a number of developing countries.
Zhi received a B.S. in economic geography from Dr. Sun Yat-Sen University (China), a M.S. in city and regional planning from Nanjing University (China), and a Ph.D. in urban planning from Harvard University.
LAND LINES: The Lincoln Institute recently initiated a global research agenda on municipal fiscal health. This effort arises from the recognition that a number of cities in the United States and in many other countries including China suffer financial hardship. What is the nature of municipal fiscal distress in China?
ZHI LIU: It’s very different from the financial troubles faced by cities in the United States. The two countries are at very different stages of urbanization. While the U.S. is highly urbanized, with more than 80 percent of citizens living in urban areas, according to the 2010 census, China is only halfway through the urbanization process. Today, 750 million Chinese citizens live in cities, accounting for 55 percent of the total population. By 2050, the urban population is expected to reach 1.1 billion, or 75 percent of the total population. Over the last two decades, with the exception of a few mining cities, almost all municipalities have seen rapid population growth and spatial expansion, generating a significant demand for public investment in urban infrastructure.
In China, the main sources of funding for urban infrastructure investment are revenues from land concessions and local borrowing from commercial banks, often using land as collateral. Urban land is owned by the state, and rural land is collectively owned by villages. The Land Administration Law stipulates that only the state has the power to convert rural land into urban use. This sets the stage for the municipal governments to take rural land for urban development through the land concession process. As it goes, municipal governments expropriate rural land, service it with infrastructure, and sell the land use rights to real estate developers. The compensation to farmers for the farmland taken is low, based on the land’s agricultural production value instead of market value for urban use. When the demand for real estate development is high, the land concession fees are bid high, and the municipal governments stand to collect a huge amount of revenues. For the last 10 years, revenues from land concessions have accounted for more than one-third of total local fiscal revenues.
Moreover, municipal governments further expand their financing capacity by using land assets as collateral to secure commercial loans from commercial banks. Before a recent amendment, the Chinese Budget Law did not permit local governments to borrow. However, most municipal governments bypassed the law by creating their own local financing vehicles—known as urban development investment corporations (UDICs)—that borrowed commercial loans or issued corporate bonds for the governments. The size of outstanding local debts has grown rapidly over the last few years, reaching at least one-third of the GDP now.
The land-based financing mechanism has helped municipal governments in China raise a significant amount of funds for capital investment. However, the success has also created incentive for municipal governments to rely on land concessions and UDICs too heavily. Today, China’s economy is growing more slowly than before, and the mechanism is running out of steam in many localities where conversion of rural land for urban use exceeds the real demand. Some cities have borrowed much more than they can repay, leaving them heavily indebted.
Many empirical studies, including some funded by the Lincoln Institute, find that China’s land-based financing mechanism is one of the main causes of other urban issues that we face today. Skyrocketing housing prices, growing local debts, excessive land-taking, growing tension between the farmers and municipal governments over land-taking, and widening gaps of income and wealth distribution between urban and rural populations are among the major issues.
LL: The international mass media has been reporting on these issues. How will China address them?
ZL: There is a high level of consensus on the root causes of the problems. In November 2013, the central government announced a set of reforms, and a few are directly related to urbanization policy and municipal finance. For example, the scope of land expropriation will be narrowed to the confine of public purposes, and villages are allowed to develop their land for urban use under the premise that it conforms to planning. The reforms also call for acceleration of property tax legislation; reform of hukou, the household residential registration system, to help farmers become urban residents; and government efforts to make basic urban public services available to all permanent residents in cities, including all rural-to-urban migrants.
LL: What are the implications of hukou reform on municipal finance?
ZL: The government is phasing out China’s longstanding hukou system, and the implications for municipal finance will be significant. Hukou was designed to identify a citizen as a resident of a certain locality, but for several decades the government used the system to control rural-to-urban migration. A rural hukou holder could not become an urban hukou holder without the government’s approval. Without urban hukou, a rural migrant worker is not eligible for public services provided by the urban governments.
Since the economic reform, the expanding urban economy has absorbed a large number of rural-to-urban migrant workers. Earlier, I mentioned China’s urbanization rate of 55 percent and urban population of 750 million. These numbers include the 232 million rural migrants who stay in cities for more than half a year. If they were excluded from the calculation, the level of urbanization would be just 38 percent. Due to their rural hukou status, however, migrant workers don’t have access to many services enjoyed by urban hukou holders, despite the fact that many have labored and lived in cities for years. Municipal governments determine the extent of many urban public services—such as public schools and affordable housing—according to the number of urban hukou holders inside the municipal jurisdiction. Phasing out hukou would significantly increase the fiscal burden to the municipal governments for public service provision. Some scholars in China estimate that the cost of providing full urban public services to each rural migrant would be at least RMB 100,000 (roughly $16,000 U.S.). The total outlays for all current rural migrants would be at least RMB 23 trillion (about $3.8 trillion U.S.).
LL: China is introducing the residential property tax. What is the status of that initiative?
ZL: The government is drafting the first national property tax law as part of the ongoing reform of public finance. China is one of only a handful of countries without a local property tax. The current taxation system relies heavily upon taxes on businesses and transactions, and very little upon taxes on household income and wealth. In a more urbanized China with a wealthier population who own residential properties, the property tax would be a more viable source of municipal revenues. Today, 89 percent of urban households own one or more residential units, and the value of those properties has much to do with urban public services. Property tax will allow cities to tax urban residential properties whose value would benefit from the improved public services made possible by property tax revenues. It should also fill part of the fiscal gap left by the expected reduction of revenues from land concessions. However, property tax will not be a major source of municipal revenues any time soon. It may take one or two more years for the National People’s Congress to pass the new law. It would also take perhaps two to three years for cities to establish the property database and assessment and administration system.
LL: It must be tough for cities to deal with declining revenues from land concessions without an immediate alternative—especially as they are coping with growing local debt, which has been widely reported. How will Chinese cities get out of this situation?
ZL: The situation is indeed tough. China’s economy is slowing down. The real estate sector is no longer as hot as it was in the last 10 years, resulting in lower demand for land and thus lower revenues from land concessions for municipal governments. Cities are now facing a fiscal gap. One possible way to fill the gap would be local government borrowing. However, as I mentioned earlier, many cities are indebted and have little capacity to borrow further. In fact, most cities in China do not have adequate capacity for debt management. The newly amended budget law permits provincial-level governments to issue bonds within the limit set by the State Council, but also closes the door on other forms of local government borrowing. Currently, the central government actively promotes infrastructure financing through public-private partnerships (PPP). While this is a good move, it won’t be sufficient to fill the infrastructure financing gap, as PPP is suitable mainly for infrastructure projects with a strong revenue flow. There are many other urban infrastructure projects that generate little or no revenues. In the long term, I believe that China should actively establish a municipal government bond market to channel funds from institutional investors to municipal infrastructure investment and enable local governments to access commercial loans based on creditworthiness. To do so, municipal governments need to develop institutional capacity on several fronts, such as local debt management, capital improvement planning, multiyear financial planning, and municipal infrastructure asset management.
LL: Is PLC’s work relevant to the current reform?
ZL: The PLC was jointly established by the Lincoln Institute and Peking University in 2007. By the time I arrived, in 2013, the center had developed its reputation as one of China’s premier research and training institutions on urban development and land policy issues. The center supports a number of activities, including research, training, academic exchange, policy dialogue, research fellowship, demonstration projects, and publication. We focus on five core themes—property taxation and municipal finance, land policy, urban housing, urban development and planning, and urban environment and conservation. Over the last few years, our research projects have touched upon land-based finance, local debts, housing prices, infrastructure capital investment and finance, and other topics relevant to municipal fiscal health. We have also provided training to Chinese government agencies on the international experiences of property tax assessment and administration. I would say that our work is highly relevant to the current reform.
Implementation of the new comprehensive policy reforms is generating considerable demand for international knowledge and policy advice in the China Program’s focus areas, especially property taxation and municipal finance. We plan to initiate a pilot demonstration project with one or two selected cities in China, to support the institutional capacity required for the development of long-term municipal fiscal health. Our team has started a study to develop a set of indicators to measure municipal fiscal health for Chinese cities. It is the right time for us to initiate this agenda in China.
SHARE
This issue of Land Lines highlights many aspects of the Institute’s international education program. We are engaged with colleagues around the world who share our interests in land and tax policy issues, which are often the most critical issues facing developing and transition countries. Policy makers, academics and citizens look to the Lincoln Institute for guidance and training on both the policy and practice of land use planning and development and the valuation and taxation of land and buildings.
However, I believe our international program can also provide important lessons for U.S. policy makers. For example, the participatión en plusvalías in Colombia is an effort to capture for public benefit the land value increments that result from public actions, such as infrastructure investment. The fairness of this policy seems very persuasive, and the Colombian effort to implement a practical instrument to capture this value can provide important insights.
Over the past six years, most of the Institute’s international work has been in Latin America and the Caribbean. Extensive networks of colleagues help us clarify the issues, identify partners, convene appropriate audiences and develop relevant pedagogical materials that supplement our basic curriculum. In learning from them we have been instrumental in fostering the debate on land and tax policy and have had a real impact in the region.
The Institute is also actively engaged with colleagues facing the challenges of implementing new tax policies in South Africa and Eastern Europe. The editors of a new Lincoln Institute book on property taxation in South Africa are using that volume in a series of seminars and workshops with municipal officials this spring, thus providing direct input to legislation now being debated in that country. Another recently published book by Institute faculty offers a comparative analysis of property taxation in six Central and Eastern European countries whose economies are in transition from a centralized to a market-based system.
The Institute also has a 30-year relationship with the Republic of China, in conjunction with the International Center for Land Policy Studies and Training, and we are beginning a new program in the People’s Republic of China through the Ministry of Land and Resources with Beijing and Renmin universities and the Chinese Academy of Sciences.
On a sad note, the Institute, Brazil and the world mourn the loss of Mayor Celso Daniel of Santo Andre, a city near São Paulo. He was tragically assassinated in January. Daniel had been a regular faculty member in our courses in Brazil and throughout Latin America. He was a progressive mayor and leader of the Workers Party in Brazil, and in 2000 he was re-elected for the third time with over 70 percent of the votes cast. He was a wonderful person and a close friend who will be missed.
In these turbulent times in so many countries worldwide, we will continue to reach out to those who are taking leadership roles in forging new alliances within their cities and regions to develop the most appropriate land use and taxation policies and practices.
SHARE
The demand for urban services surpasses the financial capacity of most cities around the world. To address this problem, many municipal governments successfully use the property tax, combined with other management instruments, to raise needed revenues. In Central America, El Salvador is the only country that does not currently have a tax on land and buildings. However, public officials, academic experts and business leaders have begun to discuss the necessity of establishing a property tax system and strategies for its implementation.
El Salvador’s taxation system is recognized as being inequitable and the amount of tax actually collected is very low, thus affecting the level of public investment. Decades of civil war and economic chaos left the country without an established tradition of fiscal management and controls. Changes in the taxation system began in 1993 when the former patrimonial tax on personal and business property, including real property, and the 5-percent sales tax were both abolished and replaced by a 13-percent sales tax. These taxes, and an ongoing income tax, are all collected by the central government.
The only municipal tax is an archaic and complex tax based on commercial, industrial, financial and services activities. Because of their limited capacity to raise revenues, municipalities have few opportunities to contract loans from national banks and no possibility of obtaining loans from international financial institutions. Administrative deficiencies, cadastral problems and limitations of the legal framework also contribute to the weak financial base of the municipal governments. Since metropolitan San Salvador encompasses such a large part of this small country, local taxation and other fiscal planning programs introduced there have a significant impact on the entire country.
In 1998 the Municipal Council of San Salvador proposed increases in its business activity tax, raising immediate debate among business organizations and municipal officials. Business leaders argued that the proposed tax program would generate additional costs, compelling them to raise the price of goods and services and possibly provoking inflation. They demanded incentives for new development in exchange for any changes in the tax system. The Municipal Council defended its proposal, arguing that the current tax structure was seriously inequitable because it punished smaller enterprises while offering advantages to larger ones.
The Municipal Council of San Salvador and the Trade and Industry Chamber of El Salvador formed a joint commission to investigate the complex issues involved in the proposed tax reform, and the preconditions such as updated cadastres, the legal framework and technical training that would be necessary. While no concrete mechanisms for implementing land and building taxation were incorporated into the discussion, it was significant that these key stakeholders reached consensus on the need for a property tax in the future.
Benefits of an International Perspective
In a precedent-setting meeting of public officials and private stakeholders in January 1999, the Lincoln Institute and the Planning Office of the Metropolitan Area of San Salvador (OPAMSS) examined many issues regarding the development and implementation of a property tax system. This was the third in a series of Institute-sponsored programs designed to share international expertise and to help develop a new framework for a more equitable tax system in El Salvador.
Particularly in a small country like El Salvador, an adequate property tax system can have positive and strategic effects not only on local finances but also on macro-economic policies and on the re-engineering of a country’s financial sector. Alven Lam, a fellow of the Lincoln Institute, explained that restructuring the taxation framework has been essential to allow some Asian countries, such as Japan, Thailand and Indonesia, to recuperate from their economic crises. The recent fiscal problems in Brazil and ongoing debate about the functioning of the financial sector in El Salvador added a sense of urgency to this discussion of the broader economic context of a local property tax.
The seminar also addressed the importance of integrating land and building taxation as a fundamental tool to promote effective urban land management. Vincent Renard of the Econometric Laboratory of the Polytechnic School in Paris commended the initiative taken by the San Salvador Municipal Council and other local governments to modify their taxation structures, but stressed that these policies can not be isolated from an overall understanding of real estate markets. He also criticized urban planning approaches, such as the current tendency in El Salvador, to over-regulate land use through legal measures without any link to land taxation and fiscal incentives.
A third area of concern to the policy debate was the political and economic implications of property taxation. Among other things, it is critical that those involved in establishing a property tax system consider the political culture of the society, the consolidation of municipal autonomy, the transparency of real estate markets, and the use of the property tax as a tool for economic and social development. Julio Piza, from Externado University in Bogota, described different applications of the property tax in Colombia. He highlighted a common problem, the difficulty of measuring the land and building tax bases due in large part to obsolete current cadastres and the lack of other land information systems.
Although discussion of property tax reform in El Salvador has been overshadowed by recent national elections, the new president has expressed interest in land and tax policy. Among the seminar participants were many municipal and national leaders from the political and business sectors who are committed to modernizing their municipal taxation and fiscal management programs. The fact that they met to openly discuss these difficult issues is a hopeful sign. Key factors for future progress include the political will to promote a local property tax, the continued involvement of the business community, and recognition that the tax is both a practical financial instrument to meet immediate needs and an important tool for economic growth and urban development.
A major challenge for El Salvador, as for other countries experiencing social and economic transitions, is establishment of equitable and effective provisions for property valuation and tax collection. Starting with a simple rate structure and gradually introducing more sophisticated instruments can ease the implementation process. Issues such as innovative urban land management and the possibility to capture increments in land value are also critical for the future fiscal growth of El Salvador.
Patricia Fuentes is subdirector of Urban Development Control and Mario Lungo is executive director of the Planning Office of the Metropolitan Area of San Salvador (OPAMSS).
Municipal Revenues
Metropolitan Area of San Salvador, 1993
Sources of revenue:
a) Municipal taxes 41%
b) Tariffs and user fees 36%
c) Transfers from central government 8%
d) Other municipal revenues 5%
e) Loans 4%
f) Other sources 6%
Revenues per capita (US $) $15.59
Capital investment per capita (US $) $1.04
Debt service as a percentage of total expenses 6.55%
Source: Indicadores Urbanos y de Vivienda, Vice Ministerio de Vivienda y Desarrollo Urbano, 1996, San Salvador.
SHARE
Last October the Lincoln Institute sponsored the fourth annual symposium for recipients of David C. Lincoln Fellowships in Land Value Taxation (LVT). This fellowship program was established to provide funding for in-depth research by scholars and practitioners working on various aspects of the tax and to present a forum for continued learning and sharing among the fellows and Institute faculty.
The fellowship topics include theoretical or basic research as well as research on practical aspects of the administration and implementation of LVT in the U.S. and around the world. This focus on practicality is appropriate since these fellowships are named for David C. Lincoln, the chairman of the Lincoln Foundation and founding chairman of the Lincoln Institute, who has continually challenged the Institute and the fellows to answer such questions as, how can we get LVT put in place and how can we demonstrate the impact?
This year’s symposium presentations reflect the diversity of the work supported by the program. Richard England reported on his efforts to measure the feasibility of getting a two-rate tax adopted in New Hampshire (see page 8 of this newsletter). He developed a model to estimate the number of taxpayers who would gain or lose with various forms of the two-rate tax. His research suggests that to gain support from taxpayers a new two-rate tax needs to be coupled with some kind of tax credit.
David Brunori conducted a national survey of state legislators who sit on finance or tax committees to determine their familiarity with land value or two-rate tax schemes. To his surprise most were familiar with the two-rate tax and believed that a movement to use it would stimulate economic development. Given that favorable view toward LVT, he was hard pressed to explain why so few policy initiatives have moved in this direction.
Other fellows focused on LVT experiences outside the U.S. Frances Plimmer and Greg McGill reported on their updating of the classic case study of property values in the town of Whitstable in the United Kingdom. Riel Franzsen and William McCluskey reported on their cataloging of all of the LVT efforts in 37 of the 54 member states of the British Commonwealth. Yu-Hung Hong described the existing tax structure on property in the People’s Republic of China and suggested alternative schemes for introducing an expanded LVT system as part of the taxation reform presently being considered there.
On a more empirical track, Suzi Kerr reported on efforts to measure the revenue requirements of growing and declining communities in New Zealand, and Courtney Haff reported on econometric efforts to estimate land value in New York City. All of these papers will be available on the Lincoln Institute’s website when they have been completed.
The list of fellows and their research topics for 2003–2004 is shown on pages 16-17 of this newsletter. Again, the diversity of topics reflects the Institute’s continued support for investigations into viable experiments with the LVT and examples of how to measure the impact. I look forward to the results of this work and the discussion at the next symposium.
SHARE
The content of the Institute’s work program has evolved significantly over the past two years, and its annual activities have increased by about half since 2004. Reflecting this evolution and growth, the Institute’s programs and staffing are also changing.
The former Department of Planning and Development has been replaced by two new departments. The Department of Planning and Urban Form, headed by Armando Carbonell, addresses planning and its relation to the form of the built environment with a focus on three themes: spatial externalities and multijurisdictional governance issues; the interplay of public and private interests in the use of land; and land policy, land conservation, and the environment. The Department of Economic and Community Development, headed by Rosalind Greenstein, connects planning to development and fiscal issues with a focus on four themes: the city, land, and the university; neighborhood planning and development; fiscal dimensions of planning; and urban economics and revitalization.
The Department of Valuation and Taxation, headed by Joan Youngman, continues its focus on land taxation, property taxation, and the valuation process within an expanded program. The main activities of the Department of International Studies continue to be its programs in Latin America and in China focusing on land and tax policy issues. Other international activities include work in Eastern Europe on administration of market value based property taxation, in South Africa on property taxation and land markets, and in Taiwan on infrastructure development and planning.
This year the Institute established a new position, Manager of Public Affairs, and Anthony Flint took up this work in late July. He will be responsible for disseminating information about the Institute’s products, findings, and activities, particularly with the media and through the Internet. He will develop the Institute’s Web site as an outreach tool, writing regular columns, making the site more interactive, and strengthening its capacity as a key Internet portal for those interested in land policy.
Anthony covered transportation, planning and development, architecture, and urban design as a reporter for the Boston Globe from 1989 to 2005. For the past year, he was Smart Growth Education Director at the Massachusetts Office of Commonwealth Development. While a visiting scholar at the Harvard Graduate School of Design (GSD), he wrote the book This Land: The Battle over Sprawl and the Future of America (Johns Hopkins University Press, 2006) on the forces influencing urban growth in the United States. Anthony became familiar with the Institute as a Loeb Fellow at the GSD in 2000 and has since contributed to the Institute’s annual journalists program and authored an Institute working paper on density. A graduate of Middlebury College and Columbia University’s Graduate School of Journalism, Anthony will continue to do research and writing.
The Institute also has been adapting its training programs to take advantage of the capabilities of the Internet. Several of the Institute’s basic courses have been made available for distance education and Internet-based instruction. These typically involve videotaped presentations that can be downloaded from the Internet or a CD. Examples include the introductory courses on conservation easements, mediation of land use disputes, and planning fundamentals. This shift has freed up resources for new classroom courses, such as one based on the book The Humane Metropolis, published this fall by University of Massachusetts Press in association with the Institute.
The Latin American Program has developed several Internet-based courses offered live with real-time instructor feedback on the students’ work. These courses on urban land policy and property taxation topics are presented in Spanish and Portuguese to participants in Latin America.
Finally, the Institute will soon launch a program of evaluations of land policy programs in the United States. One of the first of these will assess the performance of smart growth policies that have been applied to different degrees in many states. This work is part of a new Institute initiative to improve our knowledge of what works and why in land policy.
SHARE
Daniel McMillen has a joint appointment in the Department of Economics and the Institute of Government and Public Affairs at the University of Illinois. He is also a visiting fellow in the Department of Valuation and Taxation at the Lincoln Institute of Land Policy. Before moving to Urbana-Champaign, he was a member of the economics departments at the University of Illinois at Chicago, University of Oregon, Santa Clara University, and Tulane University. McMillen received his Ph.D. in economics from Northwestern University in 1987.
Since 2005, McMillen has worked on a number of Lincoln Institute projects, including two David C. Lincoln Fellowships with Rachel Weber, a member of the Urban Planning and Policy Department at the University of Illinois at Chicago. He has also collaborated with Richard F. Dye of the University of Illinois on a series of Lincoln-sponsored projects on land valuation and assessment limitation measures.
McMillen has been co-editor of Regional Science and Urban Economics since 2007. He also serves on the editorial boards of other leading journals in urban economics, real estate, and regional science, and as a consultant for the Federal Reserve Bank of Chicago. He directed the Center for Urban Real Estate at the University of Illinois at Chicago from 1999 to 2005, and has served on the board of the American Real Estate and Urban Economics Association.
Land Lines: How did you become associated with the Lincoln Institute of Land Policy?
Daniel McMillen: I first came to the Lincoln Institute in 1989 for a conference on “Growth Management and Land Use Controls.” It was an honor to be invited there as a relatively new assistant professor and to have the chance to meet many leading urban and public finance economists. I returned for another conference in 1996. I was impressed by the quality of the research being conducted by and for the Lincoln Institute on land use, land and property taxation, and the regulation of land markets. When I had a sabbatical in 2005–2006, the Lincoln Institute seemed like an ideal place to work. I spent much of that year in Cambridge, and have been involved regularly ever since.
Land Lines: What was the first project you conducted for the Lincoln Institute?
Daniel McMillen: I began working with Richard F. Dye on a study of teardowns and land values in the Chicago metropolitan area. A teardown is a property that is purchased solely to replace the existing structure with a new one. Teardowns have been remarkably controversial because they drastically alter the character of long-established neighborhoods. In 2006 the National Trust for Historic Preservation declared Chicago to be the “epicenter” of teardown activity, so the city offered an ideal setting for such a study.
We collected data on sales and demolition permits for homes in Chicago and several suburbs. An assessment file including the structural characteristics of each home allowed us to test a key prediction of theoretical models of demolitions—that is, when a home is purchased as a teardown, it is valued only for the land on which it rests. Our results supported this theory by showing that structural characteristics did not influence the sale prices of teardown properties.
This study has important practical implications because it suggests that teardowns can be used to estimate land values in areas where many homes are being demolished and replaced by new structures. One of the impediments to a land tax is the difficulty of estimating land values in built-up areas where there are few sales of vacant land. Teardowns may help make land taxation feasible in large urban areas that are undergoing redevelopment.
Land Lines: What other research topics have you investigated?
Dan McMillen: I have worked on a series of projects with Rachel Weber analyzing property assessments in Chicago. In a paper published in the National Tax Journal, titled Thin Markets and Property Tax Inequities: A Multinomial Logit Approach, we developed a new approach for determining whether property assessments are regressive in the sense that assessment ratios tend to be lower for higher-priced properties. We use a statistical (logit) model to estimate the probability that a property will have an assessment ratio in the upper or lower end of the distribution rather than in the middle. Although we do find evidence of regressivity, we also find that assessments tend to be much more accurate in neighborhoods with a large number of sales. Thin markets—areas with few sales—have a much higher probability of both unusually high and unusually low assessment ratios.
In subsequent work to be published in the Public Finance Review, titled Ask and Ye Shall Receive? Predicting the Successful Appeal of Property Tax Assessments, we develop an empirical model of the appeals process for property assessments. We find that thin markets have many more appeals and a higher proportion of successful appeals than areas with many sales. Taxpayers who appeal their assessments tend to live in moderate-income neighborhoods in newer, larger homes with assessments that increased significantly since the previous reassessment year. In contrast, successful applicants tend to live in smaller, older homes and in neighborhoods that have experienced relatively slower rates of property appreciation.
Land Lines: What conferences have you organized for the Lincoln Institute?
Daniel McMillen: For several years, I have helped organize the conference “Recent Advances in Urban Economics and Public Finance,” at which many of the leading researchers in urban economics and public finance present new work. The conference provides the opportunity for authors to summarize their papers and receive useful feedback from an enthusiastic, knowledgeable audience.
The conference includes both established and emerging scholars. It was very important to me to meet recognized scholars when I was an assistant professor at the University of Oregon, and I want to return the favor by using these conferences to help junior scholars meet more established researchers.
This year Daphne Kenyon, another Lincoln Institute visiting fellow, and I formalized this mentoring goal by introducing a junior scholars program that matched young assistant professors with the editors of key urban economics and public finance journals, including Regional Science and Urban Economics, Public Finance Review, the Journal of Regional Science, Real Estate Economics, and the National Tax Journal. After a session with the full panel of editors, each junior scholar met individually with one of the editors, who provided comments on a working paper the scholar had prepared. The junior scholars came from a variety of universities and organizations, including the University of Michigan, the University of Southern California, the University of Oklahoma, Georgia State University, the University of Georgia, Winthrop University, Washington University, and the Federal Reserve Board.
Land Lines: How has your association with the Lincoln Institute influenced your research?
Daniel McMillen: I have published many papers that deal directly with issues of land use, land and property taxation, and land policies. My association with the Lincoln Institute has encouraged me to think more about the policy implications of my research and to expand its potential audience beyond academic economists.
For example, I wrote a paper on the costs and benefits of teardowns for Land Lines (July 2006) as a direct result of a presentation for the Lincoln Lecture Series. A surprising number of people in the audience were convinced that teardowns should be heavily regulated because they could never generate any benefits. However, teardowns may also offer new tax revenues, an improved housing stock, and perhaps even reduced urban sprawl. Economists become so used to thinking in terms of costs and benefits that they tend to take it for granted that others use the same framework to analyze issues. Although I think a strong case can be made for regulating teardowns, this kind of experience helps me realize how vital an economist’s perspective can be in shaping policies that lead to good outcomes.
The Lincoln Institute has also encouraged me to think about the implications of my research for assessment practices. When I presented my work on teardowns in an Institute-sponsored session at the International Association of Assessing Officers (IAAO) conference in 2005, the participants were very interested in using teardowns to improve land assessments. They wanted to know what data would be required and what statistical procedures to use. This conference and subsequent contact with IAAO members provided inspiration and background for my work on assessment regressivity and assessment appeals.
My Lincoln Institute affiliation has also led to contacts with legislators and other policy makers. Richard Dye, David Merriman, and I produced a study for the Illinois Department of Revenue that analyzed the effects of Cook County’s cap on the growth rate of residential property assessments. This work motivated a 2007 conference on assessment limits held at the Institute where academics, local government officials, and state legislators heard presentations about the experience with assessment limits in Colorado, Idaho, Illinois, and Minnesota.
One lesson from the conference was that assessment limits have important distributional effects that transfer taxes from fast-growing areas to those with low rates of appreciation, or from residences to commercial or industrial properties. This conclusion surprised many people who thought that assessment limits simply lowered property taxes for everyone. To share this work with a broader audience, Richard Dye and I wrote a Land Lines article (July 2007), titled Surprise! An Unintended Consequence of Assessment Limitations, in which we presented the algebra and explanations behind such policies.
Land Lines: What are your current projects for the Lincoln Institute?
Daniel McMillen: I am returning to my work on teardowns. I am working with Arthur O’Sullivan, professor of economics at Lewis & Clark College, to develop the implications of an options model of teardown investments. The basic implication is that the sales price of a property can be decomposed into the value of the land and the value of the structure, with the weights to each component depending on the probability that the structure will be demolished. Whereas land accounts for the entire value of a property when the structure will be demolished immediately, structural characteristics have more influence on the sales price when the owner is likely to live in the home for some time. We are now testing these implications using updated data on property sales in the Chicago area.
I am also extending my work on assessment practices by developing new statistical procedures to analyze the distribution of assessment ratios. My preliminary results suggest that the variance of assessment ratios is much higher at very low sales prices and that assessments tend to be more accurate for relatively high-priced properties. I am working to develop a set of computer programs that will make the analysis of assessment ratio distributions readily accessible to assessors and other practitioners.
We plan to continue our junior scholars program as a companion to the Urban Economics and Public Finance conference. These conferences play an important role in mentoring young scholars and in helping to introduce the Lincoln Institute to academic researchers, which my own experience shows can be a formative intellectual experience.
