Weighting the debating of rating

[It's easy to administer because the rateable value per unit area is a smooth function of location, and because the rateable value doesn't change when on-site buildings are upgraded or downgraded.]

[True. The site owner can build the maximum amount of accommodation permitted by the zoning scheme without being penalized by a higher rates bill.]

[True — again because there's no penalty for building.]

[True, because the rateable value per unit area depends on location.]

[True. A family that has borrowed heavily to build a $150,000 house on a $150,000 lot has less capacity to pay than a speculator who has bought an adjacent $150,000 vacant lot. But under LV they pay the same rates bill. The only recognition of capacity to pay is that richer people tend to live in more desirable suburbs, which have higher land values but not necessarily higher building values.]

[True. Because values of buildings are limited by construction costs, fluctuations in “property” values are actually fluctuations in land values. So if rates are levied on land values only, they will better respond to changes in values, hence changes in ... er ... capacity to pay. So why isn't this in the “advantages” column?]

[The supporting text implies that the “anomalies” are the large increases in rates bills on the west coast, where land values have risen much more than on the east coast — the implication being that this “disadvantage” would be alleviated if those who have missed out on increases in property values paid a higher share of the rates!]

[Indeed it doesn't. The market value of land accounts for the use to which the land is allowed to be put, rather than the use to which it is actually put. Therefore LV rating does not punish those who put the land to the best allowed use. So shouldn't this be in the “advantages” column?]

[True if we define “growth pressure” as adding to the supply of accommodation, which LV rating does not deter in any way. But shouldn't we rather classify the demand for accommodation as growth pressure, and the supply of accommodation as relief of the pressure?]

[True if “received” and “used” are defined narrowly enough. Land values are heavily influenced by the availability of services on the land, but not by whether the services are actually consumed. If that's a problem, the solution is to charge for actual consumption of the services — not to change the rating base to CV.]

[So true that when Dunedin implemented CV just over two decades ago, the council split the General Rate into a “Separate Rate” and “Special Rate” in order to bypass the ratepayers' right to demand a referendum to reverse the decision. So true that Wellington implemented CV by a process that had to be retrospectively legalized by the Central Government. So true that the ratepayers' right to a direct vote on the rating system was abolished by the Labour-led Central Government in 1989, clearing the way for CV to be imposed across the country. (See my submission to the Royal Commission on Auckland Governance.)]

[Indeed it does — by penalizing people who use land more efficiently by building and rebuilding.]

[The report of that Review didn't mention the fact that 90% of municipalities in NZ had adopted LV by ratepayer-initiated referenda by 1982 (see that submission again).]

[It was 10% before the ratepayers lost their right to vote on the rating system. The fact that the democratic decision of the ratepayers has been usurped in half the municipalities is now being offered as a justification for further usurpations.]

[Yep. Under CV, the family that has borrowed to build a $150,000 house on a $150,000 lot pays twice the rates of the speculator who has bought the $150,000 vacant lot. CV reflects ability to pay like Auckland Harbour reflects the city skyline: upside-down!]

[True. The differentials might be used to offset some of the perverse incentives that wouldn't arise under LV. Unless, of course, the perverse incentives are the reason why CV is preferred, in which case differentials might be used to make them worse.]

[The inclusion of “can” is a deliberate understatement. If you tax buildings, you deter their construction and therefore reduce the supply of commercial accommodation — forcing up commercial rents — and reduce the supply of residential accommodation for potential customers and employees. It's a double whammy for business. And this is being proposed in the midst of the worst global recession since the Great Depression.]

[Yep. That's what happens when you deliberately penalize improvements.]

[No kiddin'! To include buildings in the rating base is to tax development — not merely the natural resource (land) appropriated by developers, but the actual product of their work. What better way to discourage something than to slap a tax on it?]