Literally. Someone asked me today what the solution was to the persistent homelessness problem, the encampments and other visible signs of distress we see, to say nothing of the high cost of housing for those who have not yet fallen to that level. Seattle has budgeted $167M to help its homeless neighbors but at a headcount of 12,000, that’s about $14,000 per person. And what happens next year? Do we budget the same again? Or do we build permanent housing for all? How do we pay for that?
The solution to both homelessness and high housing costs requires us to see them as symptoms of the same problem, the scarcity and resulting high price of land.
Thomas Paine said much the same in 1797:
Whether that state that is proudly, perhaps erroneously, called civilization, has most promoted or most injured the general happiness of man is a question that may be strongly contested. On one side, the spectator is dazzled by splendid appearances; on the other, he is shocked by extremes of wretchedness; both of which it has erected. The most affluent and the most miserable of the human race are to be found in the countries that are called civilized.
To understand what the state of society ought to be, it is necessary to have some idea of the natural and primitive state of man; such as it is at this day among the Indians of North America. There is not, in that state, any of those spectacles of human misery which poverty and want present to our eyes in all the towns and streets in Europe.
Poverty, therefore, is a thing created by that which is called civilized life. It exists not in the natural state. On the other hand, the natural state is without those advantages which flow from agriculture, arts, science and manufactures.
By allowing land — the natural inheritance of everyone — to be carved up and sold, we have created scarcity and, with it, poverty. Well done, us.
So what is the solution? We can hardly expropriate the land but we can tax the unearned income it makes possible. Once again, Henry George has the solution at hand:
I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent.[61]
This means ground rents, land value taxes, leasehold, whatever you like, but the bottomline is that the wealth created on a parcel of land was never created by the owner and as such belongs to those who did…the community.
A well-calibrated ground rent model that pushes the cost to acquire the right to develop land as low as possible is what we need. Let those who use land to make their living pay rent for it, as they have required from working people. Idled or underused land will be developed as housing or some other commercial activity, rather than held as a speculative asset.
As we have seen from the Mercer Megablock project, developers will pay a ground rent: the land there commanded a $1M per acre per year. Maybe some think $3M a year isn’t enough but anyone who knows how to use the future value function in Excel or Google Sheets knows that over 99 years, that project would have paid $1,263,069,231 over that term. Consider what that could bring in across the whole of Seattle, not just the 500 acres of downtown. Even a rent as low as $100,000/yr would remit $42,102,307 over a 99 year term.
So the answer is literally under our feet. Set ground rents on land, reduce property taxes on improvements to encourage development, adjust zoning to maximize what can be built — no parking, taller buildings — and watch developers get to work. Any city that has a housing crisis and parking lots downtown is a failure. But it doesn’t have to stay that way.