{"id":417,"date":"2019-04-09T03:30:00","date_gmt":"2019-04-09T03:30:00","guid":{"rendered":"http:\/\/irdp.tk\/?p=417"},"modified":"2020-09-28T03:31:36","modified_gmt":"2020-09-28T03:31:36","slug":"using-land-value-capture-to-beat-land-hoarding","status":"publish","type":"post","link":"https:\/\/irdp.my\/bm\/using-land-value-capture-to-beat-land-hoarding\/","title":{"rendered":"Using land value capture to beat land hoarding"},"content":{"rendered":"
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Land Value Capture is a rarely discussed policy tool. Interestingly, this was brought upon during a discussion session in the Malaysia Urban Forum 2019. The idea is to capture increment in land value for the purpose of urban regeneration.<\/p>

But what is land value capture? The Lincoln Land Institute Policy defines value capture \u201cas a process by which a portion of increments in land value attributed to community interventions, rather than landowner actions, are recouped by the public sector and used for public purposes. These unearned increments may be captured through their conversion into public revenues as taxes, fees, exactions or other fiscal means, or directly through on-site improvements to benefit the community at large\u201d.<\/p>

Discourage land hoarding<\/strong><\/p>

The fundamental of this idea is to discourage land hoarding by developers\/ landowners. Currently, land is taxed at a very minimal rate, encouraging owners to hoard the land and wait until the value of the land increase substantially (e.g. due to development by the government or surrounding location) before the land is developed. This allows the owners of the land to enjoy excessive profit without doing anything whilst postponing development of much needed land e.g. developers with plenty of land which should be utilized to increase the supply of houses at a lower price.<\/p>

Value gain due to government investment<\/strong><\/p>

The issue of land hoarding has been discussed since the late 19th<\/sup> century by Henry George who recommended the use of rent capture such as land value tax. He argued that firms and individuals should not enjoy appreciation in asset value due to investment in infrastructure by the government. For example, government expands the public transport facilities by building extensions of LRT and MRT. These investments increase the value of the lands that are located along the lines, profiting the owner of the land. In this case, the government should recoup its investment by taxing the owner of the land.<\/p>

Winston Churchill in his speech to the House of Commons in 1909 described this issue: \u201cRoads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains \u2013 and all the while the landlord sits still. Every one of those improvements is affected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived\u201d.<\/p>

Double-edged profit<\/strong><\/p>

Currently, many corporations make investments in land, and are simply hoarding, waiting for the right opportunities to unlock the value. Some corporations utilize the land by investing in plantation activities. However, when governments invest in infrastructure, for example highways, these companies will unlock the land and build property. The corporations will use current market value of the land, instead of the book value of the land. These companies are making profit in two ways: profit from property development, as well as profit from the escalating value of the land, purely because of government infrastructural investment.<\/p>

Buku Harapan and land hoarding<\/strong><\/p>

In Buku Harapan, the issue of land hoarding was discussed. Action by big developers including GLCs who do land banking resulted in surge in land prices, which contributes towards higher house price. In the manifesto, Pakatan Harapan has pledged to set a time limit within which the developers must develop the land. This action is to ensure that no corporations can hoard lands.<\/p>

Essentially, land value capture tax can be used to achieve three main objectives.<\/p>

First, to discourage land hoarding, which may contribute towards increasing supply of affordable properties and lower land prices.<\/p>

Second, the proceeds from this value capture can be used to finance more affordable housing initiatives and other urgent needs of the community.<\/p>

Third, the proceeds can be used by local council for infrastructure development.<\/p>

MOHD ARIFF MOHD DAUD<\/strong><\/p>

Senior Associate, IRDP<\/em><\/p>

Also published at:<\/em><\/p>