What is Land Value Rating?
- Land Value Rating calculates rates on land values only, not on any buildings.
- It is the site which is enhanced in value by services and not the owner’s improvements.
- Since the value of land is increased by the works and services rendered by local government, the community may properly collect part of the land value to pay for the services which add to the value of the land.
- The rating of land sites provides a means whereby the community may recover the cost of providing those services.
What is Land Value?
Land value is the value of the land without any improvements; i.e. just the land.
Land has a value because of its advantages to its user. When many potential users want to occupy the same space, competition for the site forces the value of land upwards. We see this either in its purchase price or its rental value. The advantages offered by a particular site may be a gift of nature, or may result from community activity. The additional value created by either of these means is termed ‘economic rent’. It is an unearned increment.
Land value is essentially a people's value. It comes into existence with the presence of people, and grows as population grows. It disappears when the people leave the localities, notwithstanding that all improvements remain.
Land is a natural resource, like air, water and minerals. It is nature’s free gift to all people. Unimproved land was there for a million years before us, and will still be there one million years after we have passed on.
The value of land is increased by the works and services rendered by local government:
Roads, pavements, parking, drainage, street lighting and cleaning, water supply, sewerage, parks and gardens, playing areas, child-health and a wide range of public safety amenities all make sites more desirable, and add value to property.
Some sites have natural advantages over others. Greater fertility, milder climate, better outlook or better public amenities all add value to land.
The opportunity to benefit from these services and advantages is directly reflected in the market price for sites. They may be regarded as being more desirable as business sites, for commercial or industrial use, or perhaps just for residential amenity. But, all community-created value accrues to the landholders.
In an urban local government district, the nearer land is to the core of a municipal district, the higher is its value. A property in the centre of a town will have the whole range of municipal services available to it, while a similar sized property on the outskirts will have few services available. The value of such a property will be far less.
In an ideal system, landholders, who receive the benefits provided by the community, would pay the community the market worth of the privilege. That is absolutely just. See: Justice of LVR.
Land value is itself a cost/benefit measurement.
If a municipal council spends its revenue wisely, that expenditure makes it a better place in which to live or to use commercially. All benefits which arise from public expenditure are reflected in the value of land. Justice decrees that land values constitute the true basis from which local government revenue shall be derived.
Since land value is entirely due to the presence and enterprise of the community, the community may therefore ethically take part of the land value to pay for those services which add to its value.
We, the people, create land value; it is not only our right, but our obligation, to capture that value for the public good.
Land Value Rating is the most efficient and most equitable system available. Since it calculates rates on land values only, it will encourage quality developments. For a full list of the benefits, see Benefits of Land Value Rating.