The Profitable Slums

...these tax policies make slums the most profitable of all housing investments; they often make it more profitable to let property decay than to keep it up or improve it; they often make it more profitable to misuse or under-use land than to put land to its optimum use; they give speculation in vacant land such preferential tax treatment that they set apart from the market action of supply and demand. ..ours is a tax-activated, tax-accelerated, tax-directed, tax-dominated economy. Every business decision has to be checked against its tax consequences; and when property owners check the tax consequences of using land better versus using land worse, or spending money for improvements versus letting properties decay, they find, too often, that our tax system penalises what is socially desirable and susidizes what is socially undesirable. ...here is the two-fold way our tax system harness the profit motive backwards in the building industry: The first way is that our system taxes the value of unimproved or under improved land so lightly that land owners are under no pressure to sell until they are offered many times what the land is worth; and so lightly that there is no tax restraint on its price. So the price of the land- which reflects the capitalised difference between the rent the land can be expected to earn and the taxes it must expect to pay-has soared clear through the roof. The home builders have voted three to one that this land price inflation is their number one problem in trying to meet this country’s need for better housing. ...the second way our tax system operates against our best interests is the manner in which it taxes improvements. Our system taxes improvements so heavily that it makes slums the most profitable of all real estate investments. And so our slums are still spreading faster than urban redevelopment can clear them out. Mayor’s Special Committee on Housing in New York. “The seemingly unstoppable spread of slums has confronted the great cities of the nation with chronic financial crises... The $2 billion public housing program has not made any appreciable dent in the number of slum dwellings... No amount of code enforcement until and unless the profit is taken out of slums by taxation. Architectural Forum Nov,1965