Why are real estate prices a problem?
A yearly income of $124k was required to afford the median house in May 2025, while the median household income was around $80k.
A yearly income of $124k was required to afford the median house in May 2025, while the median household income was around $80k.
Real estate prices are derived from the sum of the property value and the land value.
Since the property value generally depreciates over time due to material wear, and the size of the plot stays the same, then rising real estate prices must be caused by rising location values.
The location value comes from the value of improvements on nearby land.
The landowner gains a share in the value of improvements that nearby landowners make to their lands, even though they did not pay for those improvements.
This is great if you're the landowner, you get to watch the value of your land increase, while you don't have to do any work.
Improvements to your land value are socialized, while you get to privatize ownership of a share of that value.
When everyone can afford enough land to live on, this system works well for everyone involved. Everyone gets to own a share in the value of the community.
What happens when the land starts to run out?
People no longer are able to afford a plot of land, yet they need a place to live. Thus rent is born.
The rent price comes from a sum of two sources.
If all the land in an area has been bought and the workers start to make more money, rent rises to match what workers can afford.
Everyone needs a place to live, and will generally pay whatever it costs, since the alternative is homelessness.
The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price.- Adam Smith, Wealth of Nations
It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take;
but to what the farmer can afford to give.
The only way to get ahead in this system is to make more money than the average worker, and hope that your landlord doesn't increase your rent fast enough until you can afford your own property.
The landowners soak up the wealth created by the hard work of the workers, largely through no effort of their own.
The landowners have a rightful claim to rent derived from building and maintaining the property, but no rightful claim to the rent derived from the location value.
This broken system is only further compounded by the fact that when your average worker sells their land, it is usually sold for a higher price.
Land naturally tends towards being owned by a small group of individuals, who collectively own the wealth produced by the workers, which they have no honest claim to.
Even worse than this compounding trend is the fact that the average worker becomes dependent on that unearned claim to social wealth.
This traps the worker into depending on a system which increasingly takes away his share of wealth and concentrates it to a small group of people.
Societies built on this kind of system are addicted to privatizing land values, and so are blinded to the solution, in the same way that any drug addict ignores solutions to their addiction.
Through this blindness, only solutions which manage the problem are politicially viable, while curing the underlying disease is never taken seriously.
Take now ... some hard-headed business man, who has no theories, but knows how to make money.
Say to him: "Here is a little village; in ten years it will be a great city—in ten years the railroad will have taken the place of the stage coach, the electric light of the candle;
it will abound with all the machinery and improvements that so enormously multiply the effective power of labor.
Will in ten years, interest be any higher?"He will tell you, "No!"
"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"
He will tell you, "No; the wages of common labor will not be any higher;
on the contrary, all the chances are that they will be lower;
it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder.""What, then, will be higher?"
"Rent, the value of land. Go, get yourself a piece of ground, and hold possession."
And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe;
you may lie around like the lazzaroni of Naples or the leperos of Mexico;
you may go up in a balloon or down a hole in the ground;
and without doing one stroke of work, without adding one iota of wealth to the community, in ten years you will be rich!
In the new city you may have a luxurious mansion, but among its public buildings will be an almshouse.
- Henry George, Progess and Poverty
Left leaning solutions propose to solve this problem through high taxes, creating strong worker regulations, and using that wealth to create a robust social safety net.
These solutions try to use the government to force the ideal vision of society, rather than by changing the underlying incentives which are killing society.
They are doomed to fail, because no matter how high taxes are, or how strong worker regulations are, or how strong the social safety nets are, land rents will continue to be privatized.
Both the workers and the businesses will slowly have more and more of their wealth captured by landowners and the government, until businesses are no longer profitable.
Once they are unprofitable, workers will lose their incomes and sell their property to live, which will only make the problem worse in the long run.
Solutions further to the left will try to have the government centrally manage everything, including ownership of land.
However, this steals the fruits of labor from the individual, which destroys the incentive to create wealth.
Occasionally, wealth taxes will be proposed as a solution.
This may involve taxing land, but tends not to tax land to the necessary degree, and instead institutes taxes which cause large deadweight loss.
Right leaning solutions propose to free up businesses by removing regulations, thereby increasing the amount of wealth which can be put to efficient use by businesses and workers.
However, that wealth will too be captured by land values, and society will eventually become dependent on having minimal worker protections and business regulations.
Solutions further to the right will propose things like restricting who can work.
These solutions are doomed to fail because even if the supply of workers decreases and the wage of the average worker increases, rents will rise to match those wages.
This is how far right societies can get absurd ideas like removing women from the workforce.
Once women were able to work, incomes increased, but so did rents.
Now, both men and women have to work to afford a place to live.
Far right views can see a problem, but misattribute the problem to certain groups of people, and not private ownership of land values.
Centrist solutions generally try to use government spending to stimulate the economy, particularly by building out infrastructure.
These solutions may help in the short term.
However, the wealth created will increase land values, which will get captured by the landowners.
The government may even sell bonds to fund these projects.
These bonds may even be sold to the landowners!
Now, the landowners get paid twice. Both from interest on the bond (which is paid by the taxpayers), and on the rising land values.
If the government can't afford to pay back the bondholders through taxes, then it may sell off assets, including land, likely to the very same wealthy landowners!
How fortunate for the landowners!
Once the land is owned by a small group of people and the economy is ruined, the only place left to extract more wealth so that the landowners can survive, is other countries.
Thus begins war.
The rental value of land, as opposed to the rental value of property, should be owned by who creates that value - the people of the community.
By taxing the rental value of land at 100%, landowners are no longer incentivized to buy land purely for rent seeking and land speculation.
In order to make money from land, the landowner will have to do something productive with that land.
The land rents can additionally be distributed back to the community in the form of a dividend. Every month, every resident gets a check for their share of the tax revenue.
The dividend can pay for basic needs, and businesses will have to provide incentives that people are willing to work for.
This solves the worst of the entitlement crisis, and also solves the worst of the issues around workers rights.
Similar to energy costs, when housing goes up, everything costs more, because all citizens need to afford a place to live, and so workers have to somehow make a livable wage.
By removing the economic inefficiencies of rent seeking and land speculation, housing development and businesses will be far more free to grow.
This will drive down rent prices, reducing the cost of everything, while improving the purchasing power of the workers.
Extreme ownership of land values is how there can be cities of great wealth, but huge amounts of homelessness and vacant buildings.
Instead of that land being put to good use, the landowners are waiting to sell the land to someone at a higher price, or charge an exorbitant rent.
So any city which has private ownership of land values will end up with extreme poverty and underutilized land, until it becomes unlivable and people move away.
In a general sense, whatever is taxed, society has less of. Whatever is subsidized, society has more of. Taxing the unimproved value of land results in less unimproved land.
In my opinion, the least bad tax is the tax on the unimproved value of land.
- Milton Friedman
In the same way that we Americans love the 2nd amendment, because it puts a limit on how much power the government can have, land value taxes put a limit on how much power landowners can have.
Standard investments get a return because something useful was created though the invested capital.
What is the source of the rise in value for a plot of land?
The purchase of the land hasn't created anything new. It makes no returns other than rent.
So the source of the rise in value is from the rise in rental value.
Has the value risen because of property improvements, possibly by building housing?
Or did the value rise due to increased desirability of the location?
If the rise came from increased desirability,
then no work has been done through the investment to bring about that value.
The value comes from the work of the community at large.
The rise in value is precisely how much wealth has been extorted from the community.
Land value taxes will put that wealth to good use, improving the lives of everyone.
In fact, you may say that the unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done.- Winston Churchill
It is monopoly which is the keynote, and where monopoly prevails, the greater the injury to society the greater the reward to the monopolist.
This evil process strikes at every form of industrial activity.
The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns,
is made to pay more to get them in proportion as is has exerted itself to make past improvements.
The more it has improved the town, the more it will have to pay for any land it may now wish to acquire for further improvements.
Renters and property buyers are already paying the tax - it just goes to the landlord instead of society.
If a landlord tries to increase rent, then the renters will find a cheaper place to live.
If all the landlords increase rent, then the LVT will go up, and land will be cheaper.
Now the renters can afford a place of their own.
Land value taxes won't directly cause rent to decrease, they just redirect the land rent to society.
They will indirectly cause rent to decrease by removing the toughest barriers to building more housing supply.
No. It will do the exact opposite. Land value taxes have no deadweight loss.
In fact, land value taxes incentivize growth by removing the equivalent deadweight loss brought on by rent seeking and land speculation.
The reason it has no deadweight loss is because land has a fixed supply, therefore taxing it doesn't change how much of it exists.
Currently, when a developer pays for the cost of building, they use land rent income to pay the costs.
The community pays in perpetuity the cost of building housing and infrastructure under the current system.
Under a land value tax system, the developer will have to charge more rent initially when building infrastructure.
However, this will not cause a huge disincentive to build.
The market rate will allow the future residents to decide what extra rate is fair to live in new housing.
One might think, "it's unfair that the first people have to pay extra",
but the alternative is everyone paying extra forever.
Modern surveying methods do a good job of this:
We have found in our application of these methods to data from
Berlin that the resulting land value estimates typically agree well with expert based land values.
Unlike those expert based estimates, the statistical methods we used are transparent and can be standardised.
Even though your local tax assessment might say that your land value is low and your property value is high, your property has been increasing in value due to rising land values, not rising property values.
Once land value taxes are in place, local governments will be incentivized to correct these assessments.
There is a kind of market effect in determining how much to tax land values.
If land values taxes are too low, land is underutilized due to rent seeking by private individuals.
If land value taxes are too high, land is underutilized due to an equivalent form of rent seeking by the local government.
When land value taxes are tuned correctly, revenue from the tax, and therefore the monthly dividend, is maximized.
Counties can compete with each other to find what the best ways of assessing land values are.
Land values taxes aren't meant to fix wealth inequality in general.
The only reason wealth inequality is a major issue is because people cannot afford food, housing, and healthcare.
Taxes to fix wealth inequality don't solve the underlying problem of unaffordable necessary goods and services.
In fact, they can make the problem worse due to inflation - more money purchasing the same (or less) goods and services.
Land and capital should be treated as two separate things, otherwise the issues caused by land inequality and wealth inequality are conflated.
Wealth in terms of capital does not prevent people from accessing food, housing, and healthcare.
Owning shares in a healthcare company does not prevent people from accessing healthcare. In fact, it increases access to healthcare by increasing investment in healthcare.
By taxing land values, inequality stops being a major issue, because people will be able to afford the basic necessities.
Nothing is more amusing than to watch the efforts of land monopolists to claim that- Winston Churchill
other forms of property and increment are similar in all respects to land and the unearned increment on land.
They talk of the increased profits of a doctor or lawyer from the growth of population in the town in which they live.
They talk of the profits of a railway, from the growing wealth and activity in the districts through which it runs.
They talk of the profits from a rise in stocks and even the profits derived from the sale of works of art.
But see how misleading and false all those analogies are.
The windfalls from the sale of a picture — a Van Dyke or a Holbein — may be very considerable. But pictures do not get in anybody’s way.
They do not lay a toll on anybody’s labor; they do not touch enterprise and production;
they do not affect the creative processes on which the material well-being of millions depends.
Generally not, landlords can still make money off of providing an honest service.
Slumlords will be put out of business, because they can no longer live off of privatizing land values.
Generally not, in many cases, the dividend will be enough to cover the land value taxes. At the very least, it will be enough to afford a place to live in a less in-demand area, so grandma won't go homeless.
There's already a huge homelessness problem. Land value taxes will take away the danger of homelessness from anyone who is capable of taking care of themselves.
If someone does have a plot of land in a highly valuable area, then it will have to be put to good use or sold to someone who can put it to good use. That's the price which is paid for land value taxes, which is an enormously smaller price than what we currently pay.
The land rent must be owned by someone - wouldn't it be better to be owned by the people rather than a small group of individuals?
The first rule of economics is that there are no solutions - only tradeoffs.
The first rule of politics is to ignore the first rule of economics.
- Thomas Sowell
Even though a farmer's land might have a huge market value, the rental value of that land will be quite low.
If a farmer can only make $50k/year on the land, then they might only be willing to pay a few thousand a year if they were to lease the land from someone else.
A huge threat to farmers is inheritance taxes. The revenue generated from land value taxes would allow for eliminating inheritance taxes.
No. Companies will still make money off of the production and sale of goods, which depend on R&D and exploration
To incentivize this further, the land value tax on new discoveries can be increased over a set number of years.
This ensures that companies can still make a profit strictly from exploration and research without compromising the land value tax system.
People will still own their capital investments, and can make passive income off of that.
There's no issue with that passive income, because it was derived from their own wealth, rather than the wealth of the community.
It's the addiction to using housing as an investment/retirement vehicle which got us into this mess.
Without choosing to break that addiction, we will be stuck in the same cycle of increasing poverty until resolved by a violent war.
The price of individually owning land isn't solely the market value of that land.
Hidden in the price is the increasing impoverishment of the great masses of people.
Is individual ownership of land worth the guaranteed diminishing wealth of your descendants?
The real issue that people fear from "You will own nothing, you will be happy", is that people will not own the fruits of their labor.
The ills of communism begin when the government taxes away the honestly earned wages of the workers.
Land value taxes selectively tax away the unearned land rent, leaving the workers with the fruits of their labor.
Effectively, landlords are the true communists of today, living off wealth taken from the backs of the workers.
What they live off is communism where wealth is given to a select few - in the extreme called national socialism or dictatorship. (inb4 everyone I don't like is a nazi)
A dividend backed by a land value tax gives that wealth back to the workers, who worked hard for it.
Land value taxes will incentivize land to be put to the most profitable use.
If there is a low supply of natural landscapes, then the price to visit it will be high, and so more natural landscapes will be built.
What truly ruins nature is the massive urban sprawl caused by the incentive to own large plots of land.
Removing these issues will result in denser housing, reducing sprawl, and restoring nature.
Additionally, if people are willing to pay for nature near to their homes,
then natural landscapes will be built close by, in proportion to what the residents are willing to pay.
Let's look at a simple hypothetical example:
This does have an interesting property for the case that someone doesn't work:
They are able to afford a minimal standard of living that society can support.
This may seem unfair to the workers, but now the people own their labor, rather than a small group of landowners.
If people choose to work to provide for more than the basic requisites of life, then they're free to do so.
Land value taxes and similar taxes have been used to great effect in many areas.
Harrisburg, Pennsylvania:
I should note that the City of Harrisburg was considered the second most distressed in the United States twelve years ago under the Federal distress criteria.
Since then, over $1.2 billion new investment has occurred here, reversing nearly three decades of very serious previous decline.
None of this happened by accident and a variety of economic development initiatives and policies were created and utilized.
The two-rate system has been and continues to be one of the key local policies that has been factored into this initial economic success here.
I do not think that the man who makes money by unearned increment in land is morally worse than anyone else- Winston Churchill
who gathers his profit where he finds it in this hard world under the law and according to common usage.
It is not the individual I attack; it is the system.
It is not the man who is bad; it is the law which is bad.
It is not the man who is blameworthy for doing what the law allows and what other men do;
it is the State which would be blameworthy if it were not to endeavour to reform the law and correct the practice.
Successful land value capture has contributed to large and persistent budget surpluses with implications for intergenerational equity.- Phang Sock Yong, Professor of Economics, Singapore Management University
The progress which Singapore has made from the poverty of the 1960s represents an excellent case for the ideas of Henry George.