Land Value Tax (LVT)

Please also see the web site of the Labour Land Campaign.

For details about why land is particularly important please see our article on land and land ownership.

LVT is:

  • fair - those with most pay most,
  • easy to understand - see below,
  • simple to implement,
  • cheap to collect,
  • impossible to avoid,
  • collected nationally but distributed to Local Authorities according to local needs,
  • not a new tax - it replaces one or more existing taxes,
  • not a new idea - it has been round for over 150 years,
  • in use elsewhere in the world. E.g. USA, Denmark, Singapore, Taiwan.

LVT is not:

  • a "land tax" - it isn't a flat rate of £X per acre or X% per acre.
  • a "garden tax" - it doesn't tax homes or gardens, it taxes the market value of land.

What is it?

  • LVT is a percentage tax applied nationally to the market value of land.
  • Market value is what someone would pay for it if it came on the market.
  • The percentage charged would be sufficient to match the income generated by the taxes it replaces.
  • Initially it would replace the unfair Council Tax, Business Rates, Stamp Duty, Section 106 Arrangements, Community Infrastructure Levy and the Annual Tax on Enveloped Properties. (See notes at foot of this page.)

The value of any piece of land is determined by:

  • Where it is.
  • What it may be used for.

We can't change where land is, but we can change what it may be used for through our elected representatives and the planning process.

A local example of land values

Arable and grazing land round here is selling for between £8,000 and £10,000 an acre.

Green field land on the west and north west edge of Derby was zoned for housing by Derby City Council and South Derbyshire District Council and in 2017 Bloor Homes paid Richborough Estates (a company specialising in converting rural land into housing land) £11.9 million for 34 acres to be known as "Manor Fields". (£350,000 an acre.) Richborough Estates had previously purchased the land from the freeholder.

The very act of getting planning permission changed the market value from £10,000 an acre to £350,000 an acre.

252 houses will be built on this land making the land under each one worth over £47,000.

In addition Bloor Homes has paid £5.6 million towards local infrastructure but it managed to get out of the requirement to build affordable housing on the site by paying South Derbshire District Council £3.2 million (included within the £5.6 million) towards building such homes elsewhere. (We don't know where or when such houses will be built.) No way did Bloor Homes want to devalue the houses on its site by mixing in affordable homes.

Radbourne Estate owns 3,000 acres between Dalbury Lees and Derby. The estate is partly in trust (to avoid tax) and partly in the hands of members of the Chandos-Pole family. Over the last few years the Estate has sold land for development bringing in millions for the Chandos-Pole family.

What did Richborough Estates and the Chandos-Pole family do to justify these windfalls? Nothing. We (society) granted permission, they made millions - on which, no doubt, they will do their best to avoid paying tax.

According to Wikipedia:

"The Manor of Radbourne has been held by the Chandos family from the time of the Norman Conquest. It is one of the few UK landed estates that has passed only by inheritance and marriage since the Conquest, when William the Conqueror's ally Henry de Ferrers was granted it in the 11th century.

Another example of untaxed land taken by violence and theft.

Getting round the law

Almost all major developments require additions to infrastructure: roads, schools, medical centres, shops, affordable homes, etc. Section 106 of the 1990 Town and Country Planning Act enabled local authorities to negotiate with developers for these changes to be carried out by the developer as a condition of granting planning permission.

The 2008 Planning Act introduced the Community Infrastructure Levy (CIL). Rather than having to carry out specific infrastructure work the developer pays a levy to the local authority which then decides how to allocate it to infrastructure projects

A whole industry has grown up offering services to remove or minimise Section 106 and CIL obligations - such as the on-site affordable homes requirement in the case of the Manor Fields development described above.

Examples of land values

  • Building land is worth more than agricultural land.
  • Arable land in East Anglia is worth more than hill land in North Wales.
  • "Hope" land is worth more then no-hope land. "Hope" land is in areas, usually on the edge of a settlement, which may or may not be zoned for housing at some time in the future.

    When such land changes hands the title usually includes an uplift clause (also known as an "overage" clause") so the seller can get some share of the increase in value of the land if it ever gets planning permission. An industry has grown up to draft such clauses or to attempt to get them removed from land titles.

  • Building land in Kensington and Chelsea is worth more than building land in Swadlincote.
  • Building land without an agricultural tie is worth more than land with one.
  • Land in an area zoned for future housing is worth more than in an area that is not zoned.
  • Zoned land with planning permission is worth more than zoned land without.

Another way to think of land value

Most of us think of our homes as "property" - the combination of the house we live in and the land on which it sits - including the garden!

Most of us have insurance to cover the cost of rebuilding our homes if the worst comes to the worst.

Land value can be thought of as the value of the property (what we could sell it for) minus the cost of buildings.

The cost of building a house does not vary much across the country: bricks, concrete, timber, tiles, plaster, plumbing, wiring, paint, fixtures and fittings cost the same wherever you are. The cost of labour may vary across the country but overall the total cost of building/rebuilding will be pretty similar.

So why does a new "Executive Home" on an estate within the M25 cost vastly more than the same home on an estate outside Swadlincote? The answer is simple, the land costs more because of the location factor.

LVT taxes the value of the land, not the value of the buildings.

LVT has a number of advantages over other forms of taxation:

  • It is impossible to avoid (you can't hide land in a tax haven!) - unlike other taxes.
  • It is simple to understand.
  • It is simple and cheap to implement.

    RICS surveyors have been assessing land value since 1868.

    Every sale of land updates the Land Registry so local values are easy to see.

    Land values can be made visible to all via maps on the Internet (as done in the USA).

  • It is simple to identify the payee - the freeholder - the person named on the Land Registry.

    Unpaid LVT becomes a lien (a debt) on the land recorded on the Land Registry.

  • It is self-adjusting - it rises or falls as the value of land rises or falls.
  • It can be national, local or both.
  • It becomes expensive to hoard land banks.
  • It spreads the tax load fairly - those who have most, pay most.
  • It promotes the best use of land - there is no point leaving it idle if you pay tax on it.
  • It promotes a shift of economic development towards areas with lower land values.

Implementation

  • Register all land. Six months.
  • Value land. Twelve months. There will be a simple appeals procedure.
  • Establish LVT rates to bring in the same as the taxes it replaces.
  • Collected nationally (keeps costs down) but distributed locally (for local needs).
  • Introduced over five years: Council Tax and Business Tax will fall as LVT rises.

Handling objections to LVT

Of course, large landowners and tax avoiders (like the owners of The Daily Mail, The Daily Telegraph, The Sun and The Times) will try to create objections to LVT - but they are easy to handle:

  • "What about a widow living on a fixed income in a big house?"

    LVT can be delayed and recovered from the value of the land when it is sold or passed on. It becomes a "lien" (like a debt) recorded in the Land Registry. Local authorities can borrow to make up for the relatively small number of such liens.

  • "This is a Garden Tax - what about people with large gardens?"

    Don't be daft! It has nothing to do with gardens - see above! LVT is a tax on land value, not a tax on homes, buildings or gardens!

    You are not going to be charged extra because you have a big garden - LVT is not a new tax on top of Council Tax - it replaces it. However, if you do have a big garden, and you apply for and get planning permisison for a four bedroom house on it, then of course the value of that land will go up! It doesn't take a genius to figure that out!

    You can build what you like on your land (subject to planning permission) and what you build will not change the value of the land. Of course, planning permission for a mansion will make the land worth more than planning permission for a cottage - simply because someone ("the market") would be willing to pay more for the land with such permission.

    "Garden tax" is a scare tactic pushed by the tax avoiding, landowning, non-domicile owners of The Daily Mail (Lord Rothermere), The Daily Telegraph (The Barclay Brothers), The Times (Rupert Murdoch) and The Sun (Rupert Murdoch).

  • "It will be impossible, we don't know who owns much of England!"

    This is called "landowners shooting themselves in the foot!"

    Correct - we don't know who owns land which has not changed hands since 1862 because landowners ensured there is no compulsory registration of land.

    Landowners will have six months to register their land before the scheme comes into force. This gives them plenty of time to dig out the deeds and register them. Land remaining unregistered after six months will be transferred to local authority ownership to replace some of the community farms we have lost over recent decades.

  • "It's too complicated, it is impossible to value all the land in the country."

    Duhh! Complicated it isn't.

    It does what it says on the tin - it's a simple percentage tax on the market value of land. Those who advise on tricks to avoid tax will have to find more socially useful jobs to do.

    Land is valued as soon as it is sold - the value is recorded on the Land Registry. Over time this builds up a pattern of land values across the country and modern Geographic Information Systems (GIS) can make this information available to us all on the Internet.

    Other land can be valued by people who have been doing the job since 1868 - members of the Royal Institute of Chartered Surveyors (RICS).

    Land values change year-on-year - during the agricultural slump of the 1930s land values dropped but these days they tend to rise - partly because so many people see land as a reliable investment. LVT may alter that since land will become less attractive to hedge funds, fat cats and speculators once they have to pay tax on it. This may reduce land prices which will in turn reduce the cost of new houses, which may or may not be a good thing. The market decides.

    It ain't rocket science!

    Click the image below then scroll down to see an example of land values in Ebensburg PA, USA.

  • "It will be far more than Council Tax!"

    No it won't.

    The level set for LVT will depend entirely on which taxes it replaces and what the income will be used for.

    Obviously it will be less if it is used exclusively to replace Council Tax - simply because the tax base has been increased to include land that has never been taxed before.

    Those who have avoided paying tax for hundreds of years will now have to contribute towards their social responsibilities - so expect loud squawks from major landowners - and they carry a lot of clout, especially in the Tory party.

    The current system means that those in South Derbyhire pay over twice as much Council Tax as those in Kensington and Chelsea - for homes in the same tax band. LVT will level that out so everyone pays the same percentage based on the value of freehold land. Yes, more valuable land will pay more than the same amount of less valuable land - but that seems perfectly fair - those who can afford most, pay most - who could possibly object to that? Those who don't like it should follow the advice of Norman Tebbit in relation to bicycles!

    If it is coupled with measures to remove tax loopholes and fiddles used for tax avoidance (trusts, tax havens etc.) it could be even less.

    However, it might be better to consider which other taxes it could replace since many taxes impose a much larger burden on those with low incomes than on those with higher incomes.

  • "Greedy landowners and corrupt valuers will fiddle the system."

    You mean just as they fiddle the existing tax system?

    There will always be people who want to avoid their social responsibilities, who want to use the facilities provided by society without paying for them - no doubt The Sun would call them "scum".

    A Geographic Information System (GIS) on the Internet will make it very easy for us to see when a piece of land is grossly under-valued. Society will lock up fiddlers and confiscate their assets - so you have to be pretty stupid (or "Tim, nice but dim") to risk losing your land just to fiddle your tax bill!

  • "It will lead to over development."

    No it won't.

    The argument goes that since LVT is paid on all land it encourages the best use of that land. "Best use" is interpreted as "most profitable" so every acre of land will be used for highly profitable housing.

    This is nonsense.

    Society grants permission for use through the planning process. You can't turn your large garden, or your vast estate, into housing unless you have planning permission - which you are unlikely to get!

    It also comes as a surprise to many people (especially those who go out of their way to avoid paying tax) that profit isn't everything! Some people are motivated by things other than money.

    "Best use" means the best that can be done given what the land has permission to be used for. Farmers have been making these decision for centuries, they are far brighter than most people give them credit for and, while a good income is obviously important, many of them love their job, love their animals, love the land they work and want to create a pleasant environment in which to live.

    Of course, those large landowners who live off the the labour of their tenants and who take no active interest in what is going on, may well try to maximise their profits - so LVT taxes them for sitting on their backsides and the planning system determines what they can do with the land.

  • "There will be endless appeals against land values."

    Of course there will be an appeals procedure - that's only fair.

    However, the experience of other countries is that the number of appeals is extremely low and falls dramatically as the system beds in and people become used to it.

    The yardstick is simple: "what would it sell for if it came on the market now - given what it can be used for?"

Other possible uses for LVT

LVT could be used to remedy distortions in the housing market, locally or nationally.

For example, local authorities in relatively poor tourist hot spots, such as Cornwall, might wish to levy an additional local LVT on second homes and holiday lets.

Local authorities could levy an additional local LVT on domestic and business land left unused for specific lengths of time.

LVT could be used to replace or reduce other taxes besides Council Tax.

For example: VAT is a regressive tax, it takes a much higher proportion of income from those on low incomes than those on high incomes. LVT is the opposite.

Questions for the doorstep

  • Do you think Council Tax is a fair system given that people in South Derbyshire are paying almost three times as much as those in Kensington and Chelsea?
  • Do you think it fair that you have to pay Council Tax on your home while someone owning thousands of acres of land pays no tax on it?
  • Do you think it fair for developers to buy land and sit on it, without paying tax on it, hoping that house prices will rise?
  • Do you think empty houses, empty offices and empty factories should be left unused with no tax paid on them?
  • Do you think it fair that local authorities are preventing from borrowing to build social housing to help with the current housing crisis?
  • Do you think local authorities should be properly funded to meet the needs of local communities?
  • Are you in favour of those with the most expensive homes paying the most tax on them?
  • Are you in favour of scrapping all our current property taxes and replacing them with a single tax based on the value of land?
  • Are you happy that the value of land is determined by where it is and what someone is allowed to do with it?

Land Value Tax (LVT) is a Labour Party policy.

Vote Labour to ensure LVT is implemented and the current unfair system is scrapped.

Notes

  • Council Tax is unfair. People in South Derbyshire are paying betwen 200% and 300% more then those in the same tax band in Kensington & Chelsea.
  • Business Rates are a disincentive to business. At the moment they are part of the reason why shops are closing on high streets.
  • Stamp Duty (or Stamp Duty Land Tax) is a tax on higher value property.
  • Section 106 Arrangements are requirements to provide infrastructure and services placed on a developer as a condition of planning permission.
  • Community Infrastructure Level is a financial levy on the value of a development to enable the local authority to provide required infrastructure and services.
  • Annual Tax on Enveloped Properties is a tax on companies who own UK residential property valued at £500,000 or more.

This has become very messy as these taxes have grown over time. Some have been slappd on as knee-jerk reactions to public anger (i.e. media reports).

They all tinker at the edge.

The requirement is to provide local authorities with the resources to meet local housing needs, local infrastructure (roads, etc.) and local services (schools etc.)

This is best done by making things fair, simple, unavoidable and easy to collect.

LVT meets all these requirements and is so simple it can be understood by the average year 6 pupil - we know, we have tried it!