Supporting economic development. Advancing equity. Reducing greenhouse gas emissions.  Maximizing community investments. Increasing infill and lessening sprawl.

These are a few of the potential advantages of land value tax (LVT) districts, in line with Michael Krantz, acting program manager of Metro Transit’s office for Transit Oriented Development.

On Nov. 15, Krantz presented via Zoom at an event sponsored by several environmental and community groups on a white paper his office produced about pending laws that will enable Minnesota cities to create such districts.

In these districts, the land value portion of properties could be taxed at a better rate than the constructing portion, with the district collecting the identical amount of revenue as may very well be raised with a traditional property tax.

In line with Krantz, LVT is powerful for supporting economic development. In a traditional system, he said, the property taxes on vacant land are very low, so the inducement for holders of those lots to develop the land or sell it’s also low. This is particularly true, he said, if the worth of that land has been increasing yr after yr and possibly increasing at a faster rate than what they’re paying in taxes.

On the opposite side of the equation, said Krantz, a developer who could also be thinking about developing the lots might be very aware of the proven fact that in the event that they developed so much, the property taxes on these parcels goes to extend dramatically. So, in line with Krantz, the event that they’re considering must be able to covering this significant increase in property taxes, which in some cases may deter development.

But with LVT, Krantz said, property taxes are the identical for vacant land and developed land so the inducement to carry on to vacant lots goes way down since the property taxes are much higher on them. Conversely, said Krantz, a developer goes to be rather more interested in developing such lots since the property taxes are going to be much lower than they might have been in a traditional system.

From an equity perspective, Krantz said that his office’s study showed that areas of concentrated poverty could see a decrease in property taxes under a LVT system because these areas are likely to make more efficient use of land, with the buildings representing a bigger percent of total value on these parcels.

Furthermore, in line with Krantz, it’s value considering the role that our property tax system plays in our current housing crisis, from a scarcity of supply but additionally from a pricing perspective due to the rents which are needed to make a development work in the traditional system.

His office did a case study for a luxury apartment constructing in northeast Minneapolis and determined that if eight units within the constructing were made reasonably priced under town’s inclusionary housing policy, there could be an annual reduction in revenue of about $250,000. But when the constructing were in an LVT district, it could see a decrease in property taxes of $400,000 annually.

Krantz said he thinks pairing LVT districts with inclusionary housing or other reasonably priced housing policies may very well be a strong way of achieving affordability without additional investment from cities.

With respect to reducing greenhouse gas emissions, Krantz said that the University of California at Berkeley has done incredible work evaluating the potential advantages of varied policies for reducing greenhouse gases. He notes that the urban infill is by far one of the crucial vital things that we will do to cut back greenhouse gas emissions.

Krantz said that land value per acre data along the sunshine rail’s Green Line indicated that LVT would increase development near the road, which supports infill and transit oriented development at the identical time that it’s discouraging sprawl. He said that this shows that LVT can guide recent economic development towards existing investments and make more efficient use of them.

In sum, Krantz’s presentation and white paper make a compelling case for passage by the MN legislature of the bill that will enable cities to create LVT districts, which currently they’re not legally authorized to do.  Let’s legalize LVT in Minnesota for the advantage of our communities.

Wealthy Nymoen is the president of Common Ground USA Minnesota Chapter. He will be reached at minnesotacommonground@gmail.com