Frequently Asked Questions

Land Value Taxation (also known as split-rate property taxation,  or two-tiered real property taxation, not just LVT) is a type of real property taxation. Whereas the typical property tax taxes land and improvements at the same rate, LVT applies to land at a higher rate while simultaneously reducing, or even eliminating, the tax on buildings.

For example, in Allegheny County, Pennsylvania, Clairton has levies at  103 mills on land and 4.32 mills on buildings rather than 29.5 mills on both (City and School District combined).

  • Even when structured in a revenue-neutral manner, a shift to land value taxation usually results in net tax reductions for most
  • LVT minimizes the problem of inaccurate or radically higher assessments because of the reduction in the share of building values in tax calculations.
  • By reducing or eliminating the tax on improvements, there is a greater incentive to build, build with higher quality materials, ensure maintenance, avoid blight, and redevelop economically depressed
  • Since the era of Community Development Block Grants ended, aid to cities from state or federal authorities has dried up, never to return. This program helps achieve the same goals with no public
  • When cities DO get permission to give out tax abatements, they lead to a revenue loss to the community with no assured payoff later. Land taxation is purely revenue neutral to the city. There is NO tax shifting to citizens and property owners who have already done their
  • LVT also has the advantage of being a "value capture tax." A new public works project may make adjacent land go up considerably in value. With LVT, the levy on adjacent land goes Thus, those most benefited by public improvements -- i.e., those whose land value went up most, would pay for those improvements.
  • LVT results in better land-use patterns and more in-fill development, reversing the incentives of headlong
  • Several Nobel Prize winners in economics have publicly stated their approval for government revenue raised from land taxes.
  • Support for Land Value Taxation cuts across political lines. Free-market economists like how it reduces distortions in economic decision-making. Environmentalists embrace sprawl reduction and self-funded public transportation. Developers appreciate how it makes new homes more affordable for their customers. Progressives support reducing the tax burden on poor and working families. Small businesses notice the reduction in their overhead from the decrease in taxes.

In the United States, LVT is best associated with Pennsylvania; nearly 20 cities, school districts, and boroughs have implemented LVT. In Harrisburg, the tax on improvements is only one-sixth of the land tax. Many urban economists credit the "Renaissance" of Pittsburgh over the last three decades to Pittsburgh's increased shift to Land Value Taxation in 1978.

LVT incentivizes the development of land for all uses, the full spectrum of land values and locations. It achieves this by making the practice of holding vacant or underused land excessively expensive while making improvements on that land cheaper. This incentive to develop land suitable for development will precipitate putting homes, stores, offices, schools, and other uses closer to one another. In partnership with proper zoning practices, LVT makes it fiscally prudent to develop mixed-use neighborhoods, the goal of Smart Growth and New Urbanism theories.

As land taxes go up and building taxes come down, developers will be encouraged to build with greater compactness, quality, and density since they will want to maximize land use for a reasonable return on investment. The developer's customers will want more and better building since they know that no "tax penalty" with a more significant tax burden on the quantifiably better improvement. Better materials, LEED, Green Certifications, and higher construction where appropriate (i.e., valuable commercial corridors) becomes possible.

LVT is a progressive tax that will not price any income level group out of the market. As in the past, like land value will produce a like building on the lot. A wide array of land values can exist for different uses in a compact area through zoning and the marketplace.

Since LVT encourages investment in maintenance and improvements of properties, people will take more pride in their neighborhoods, increasing their willingness to stay and fostering local roots and shared identity. Simultaneously, because it is feasible to build different housing market levels, economically diverse communities can exist, much like our towns and cities of the past 100 years.

Case studies show that LVT does not pressure the development of areas designated open space or preserved as parkland. Zoning changes will ensure protection for these from development, along with existing tools such as TDRs and establishing non-taxed parkland. Also, by encouraging growth in urban areas that are already developed, LVT makes it less attractive for developers to seek land in rural areas to build on. A developer in an urban or inner-ring suburban core may take advantage of the need to use less land and establish community "pocket parks," raising the inherent neighboring land value and capitalizing the project into a fairer selling price.

LVT makes vacant land in urban areas more expensive to hold without developing. This pressure creates a sense of urgency for the landowner to find a buyer. Without the artificial inflation of land prices by speculators, urban land is more attractive (read inexpensive) to builders after zoning and infrastructure are in place.

LVT is closely related to land value capture concepts used to fund transit development projects. TOD's often fail to achieve critical mass. Too many parcels surrounding the transit nodes do not see development hoping that the private land banking will end in a speculative windfall.

LVT will fiscally streamline the development process making it less expensive to build. It will keep land prices nearer to actual market value minus the inflation of the asset price caused by speculation.

Development decisions expand in scope by relying less on the tired trope of maximizing profit with equity high-end residential or commercial development. Less reliance on an eminent domain (Kelo v. New London) can make the whole urban rejuvenation fairer system fairer and reduces distortions caused by tax subsidies, abatements, and the sweetheart deals. Taxpayers are paying for breaks to others, turning markets into zero-sum games.

LVT does this by promoting housing ownership and encouraging housing maintenance. It is essential to prevent blight and deterioration before it occurs. A single problem property can enable responsible residents of nearby properties to give up and move out of the neighborhood and discourage new home buyers from investing in the community. With LVT, homeowners who know they will not pay higher taxes by investing in their homes will be more willing to do so.