At Lincoln House July- August 2014

A new era begins

George W. "Mac" McCarthy officially began as president and chief executive officer of the Lincoln Institute of Land Policy this month. McCarthy, most recently part of the leadership of Metropolitan Opportunity at the Ford Foundation, succeeds Gregory K. Ingram, who retired last month. In the July issue of Land Lines, McCarthy filed his first Report from the President.

It is an honor to follow Gregory K. Ingram as the fifth president of the Lincoln Institute of Land Policy, and to join you for my inaugural issue of Land Lines. It will be a challenge to live up to Greg's accomplished leadership and remarkably productive years at the helm of the Lincoln Institute since 2005. I hope that I can combine my skills and experience with the Lincoln Institute's formidable tools and talented staff to continue its singular mission: connecting scholars, public officials, and business leaders to blend theory and practice in land policy in order to address a broad range of social, economic, and environmental challenges.

Tectonic forces - natural, man-made, or both - are reshaping our planet. As we contend with climate change, accelerating urbanization in Asia and Africa, the aging of populations in Europe and North America, the suburbanization of poverty in the United States, and the financial insolvency of American cities, the land use decisions we make today will dictate the quality of life for hundreds of millions of people for the next century. Comprehensive plans and policies that equitably govern land use, political and social systems that ensure sustainability and sound economic analyses to address these challenges are in critical demand and will remain so for decades to come.

Lincoln Institute affiliates explore these matters in this issue of Land Lines. The 2013 Lincoln/Loeb Fellow Lynn Richards, incoming president of the Congress for the New Urbanism, lays out 10 nifty steps U.S. communities have taken to make their suburbs more pedestrian-friendly, with affordable housing to offset the suburbanization of poverty and with denser mixed-use development and public transit to reduce automobile use and help to slow climate change. Architect and 2014 Lincoln/Loeb Fellow Helen Lochhead discusses the winners of Rebuild by Design, the international competition that fostered design innovations that will integrate resilience, sustainability, and livability in the re-gions affected by Superstorm Sandy. Public Affairs Director Anthony Flint reports on the Lincoln Institute's seventh annual Journalists Forum on Land and the Built Environment, which explored prospects for making smarter, more equitable infrastructure investments in 21st-century cities. Finally, in the Faculty Profile, senior research analyst Adam Langley discusses the Institute's Fiscally Standardized Cities (FiSCs) database - a newly developed tool that will provide the foundation for important new analyses that will guide local responses to fiscal challenges in the United States.

And just a little about me. Over the last 14 years, I worked at the Ford Foundation, where I occupied a unique perch within global philanthropy that allowed me to support, demonstrate, and test new approaches to solve vexing social problems. Some of my proudest accomplishments include founding the National Vacant and Abandoned Properties Campaign and helping to build and grow the nation's field of shared-equity housing through collaborations with the National Community Land Trust Network and other partner organizations. I helped to design and then took leadership of Metropolitan Opportunity, the Foundation's next generation of community and economic development programming, which seeks to reduce the spatial isolation of disadvantaged populations in metropolitan regions by integrating land use planning, affordable housing development, and infrastructure investment to better serve all residents.

I came to Ford with a research background in housing, economics, and public policy analysis. I enjoyed the opportunity to work with scholars across the globe on issues as diverse as the birth of the environmental movement in Russia, the role of trade imbalances and debt in driving macroeconomic cycles, and the impact of homeownership on the lives of low-income families. I played the role of teacher and mentor to thousands of students and have tracked their successes with great pride. I presented research, advocated for policy change, and enjoyed successful collaborations with researchers, advocates, and public officials on four continents. And now I am delighted and honored to join you in this venture with the Lincoln Institute of Land Policy.

Taxing land's true value

The land value tax is getting attention these days, mostly as a way to spur redevelopment. New York City Mayor Bill de Blasio has promised to raise taxes on vacant parcels in outer boroughs.Legacy Cities are similarly interested in the theory that taxing land based on its value would prompt owners to improve the properties to start making a return. In recent years, Camden, New Jersey investigated implementation of a land value tax, and so did New London, Connecticut, where other redevelopment efforts led to the Supreme Court's landmark Kelo decision.

New London never moved forward on the idea, but recently Connecticut lawmakers passed legislation allowing municipalities to apply to participate in a pilot program in land value taxation. Last week, the Lincoln Institute held a special workshop in Hartford for elected officials, assessors and other tax officials to gain more understanding of how the tax might work. The event was moderated by Tom Condon, deputy editorial director and columnist at The Hartford Courant.

Land value taxation, often introduced in the U.S. as a split rate property tax, is a separate tax on land as distinct from buildings, with the market value of land affected by factors such as location and size. Buildings generally compose the greater part of the base of a standard property tax. A number of communities in Pennsylvania have adopted or experimented with LVT, notably Pittsburgh, as well as several nations outside the US including South Africa, Australia, New Zealand, Jamaica, and France. "We're not sailing in unchartered waters here," said Richard England, a visiting fellow at the Lincoln Institute and co-author with Richard Dye of Assessing the Theory and Practice of Land Value Taxation, published in 2010.

Robert Schwab, economic professor at the University of Maryland, began with a big-picture introduction, considering the fundamental questions of whether a tax is simple, fair, and efficient – the best taxes, in the view of economists, being those that minimize distortions, or change behavior in undesirable ways. A classic example is England's window tax; when assessment was based on the number of windows in a building, property owners simply built fewer windows or even covered existing windows, with disastrous effects for health, safety, and aesthetics.

The least bad tax is the property tax on the unimproved value of land, said Milton Friedman, and the political economist Henry George believed that if land was taxed anywhere near its rental value, no owner could afford to hold land and not use it. But as noted by John Anderson, professor at the University of Nebraska, the link between LVT and the decision to develop is not totally clear.

Adoption of an LVT presents two challenges: getting the assessment of land right, which requires keeping track of the sale of vacant lots, using computer assisted mass appraisal and GIS, and sophisticated sales data analysis; and minimizing abrupt shifts in the tax burden. Golf courses and car dealerships have objected to the land value tax, often through classic political lobbying, noted David Brunori from George Washington University and contributing editor at State Tax Notes. But otherwise landowners in the best locations – a mantra of real estate – will pay more, and in that sense the LVT is progressive.

But the history of the land value tax in the US has been checkered. In Pennsylvania, some 20 cities implemented a split rate tax beginning in 1913. Seven of those communities revoked it, including Pittsburgh, according to Zhou Yang from Robert Morris University. Municipalities seeking to participate in the Connecticut program must put together a committee and do a study before proceeding; Jeff Cohen from the University of Hartford, looking at two potential candidates, New London and New Haven, advised a phased-in approach, starting with a split rate tax, potentially even targeted to just one neighborhood at the start. So far, no community has formally applied to be part of the pilot program.

New research on inclusionary housing

Inclusionary housing policies - the increasingly common practice of requiring affordable homes linked to new market-rate residential development - need constant follow-up and careful record-keeping to ensure lasting affordability, according to new research published by the Lincoln Institute of Land Policy.

Achieving Lasting Affordability through Inclusionary Housing, available for downloading as a Lincoln Institute working paper, is the largest research study of inclusionary housing programs to date. The research, by Robert Hickey, Lisa Sturtevant, and Emily Thaden, was conducted in partnership with the National Housing Conference's Center for Housing Policy and the National Community Land Trust Network. A special webinar detailing best practices in inclusionary housing was offered in tandem.

Inclusionary housing, which link approvals for market-rate housing to the creation of affordable homes for low- and moderate-income households, are in place in 27 states and the District of Columbia, and in 482 jurisdictions overall. Nearly 80 percent of established programs are in three states – California, Massachusetts, and New Jersey – but interest is increasing, from North Carolina to Colorado.

A typical program is to require that 15 percent of a residential development be affordable, with the affordable homes built on-site, off-site, or in some cases created through an affordable housing trust fund to which developers contribute. To ensure long-term affordability, jurisdictions must not only set a time frame for the homes to remain affordable – 30 years, for example – but closely monitor those homes to make sure they stay affordable.

Good stewardship, the researchers say, requires strong legal mechanisms, effective monitoring for both for-sale and rental homes, and well- designed resale procedures to ensure that homes don't fall through the cracks, end up being offered on the open market at unaffordable prices, become lost to foreclosure, or fall into disrepair.

Ultimately, the researchers say, effective administration and stewardship necessitates adequate staffing. The study identifies the growing practice of forming partnerships with outside organizations, such as community land trusts, nonprofit agencies, for-profit firms/consultants, affordable housing developers, and housing authorities.

Over 80 percent of homeownership inclusionary housing programs require units to remain affordable for at least 30 years; one-third of inclusionary housing programs require 99-year or perpetual affordability for rental and/or for-sale housing. A closer look at 20 programs revealed the mechanisms needed to ensure lasting affordability – watching out for illegal sales, improper refinancing, over-encumbrance with second loans, and defaults that could jeopardize the continued availability of inclusionary homes; and establishing deed covenants, preemptive right to purchase, the right to cure a foreclosure, the right to purchase a home entering foreclosure, and requirements of notice of default or delinquency. In addition, resale formulas are being designed to balance the goals of ensuring lasting affordability for subsequent homeowners and promoting wealth-building among homeowners. The most popular resale formula used by case study jurisdictions ties the resale price to the growth in area median income (AMI) over time.

Odds & Ends

Use-Value Assessment of Rural Land in the United States by John E. Anderson and Richard W. England, is now available as an ebook at the Amazon Kindle store ... A dizzying glimpse at Hong Kong's cityscape, portrait in height and density ... As more plunge into a second career in farming, this New York Times story cites Lincoln Institute guidance on tax policies to encourage agricultural start-ups ... We're urbanizing even faster than we think, writes Diana Lind at Next City ... Housing prices jump around so much, can that be good for the economy? A column by Edward Hadas at Reuters cites our database, Land & Property Values in the U.S. ... A park is no longer just a park – as a matter of urban public space, it's become more complicated ... This month's highlighted working paper: First Glance at China's 2010 Census: Urbanization and Regional Dynamics, by Douglas Webster, Jianming Cai, and Larissa Muller.

— ANTHONY FLINT, Lincoln Institute of Land Policy

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