Or take the illustration of a slum area. Each tumble-down tenement is
rated and taxed on the assessment based upon its annual rental value. In
many places in the central parts of towns the total of these assessments
is less than the sum for which the whole site could be sold as a
building area, nevertheless if all the tenements fall or are pulled down
the site may remain vacant for years and no rates or taxes are paid. But
if substantial and decent buildings are erected on the site, immediately
the assessment is raised to their full annual value. The individual or
public body that has cleared away the slum and erected something decent
in its place is thus immediately punished for doing so, with the result
that such a thing is seldom done except at the public expense. The
remedy for all these absurdities is quite a simple one. No one disputes
that the sums necessary for municipal and imperial taxation have got to
be provided. The question is, in so far as they are to be raised from
lands and buildings, how can they be assessed most fairly and with the
least injury to trade and commerce? They should be assessed upon the
value of land which is not due to any effort of the owner or occupier;
they should not be assessed upon nor increased because of any buildings
which he may have erected or any improvements which he may have carried
out.
This question was closely investigated by the Land Enquiry Committee
appointed by Mr. Lloyd George in 1913. They were unanimous in condemning
the existing system and in regarding the one which I have just described
as the ideal. They were, however, met by great difficulties in its
immediate practical application, because, owing to the long prevalence
of the wrong system, an immediate and total change would bring about
rather startling alterations in the value of existing properties. The
Committee closely considered these objections, and a number of
alternative methods of bringing the change into operation gradually and
without these drastic changes in value were put forward. The one which
immediately suggested itself as the simplest, and from many points of
view the most desirable, was to leave the rates and taxes of existing
properties on their present basis, to impose them at their present rate
on the annual value of all unoccupied land, but to exempt from rates and
taxes all future buildings and improvements of every kind.
To illustrate the way in which this would work, let us revert to the
case of a block of slum property. As long as it remained in its present
condition the existing valuation based upon the annual rent obtainable
for it would apply, but any parts of it which now are or may hereafter
become unoccupied, would, instead of escaping as they do now from all
rates and taxes, contribute on the basis of the value of their sites,
which would be assessed at an annual rent for the purpose of comparison
with the existing valuations, at least until the capital values of the
whole rating area could be ascertained. If any improvements were carried
out the assessments would not be raised on that account, as they would
be under present conditions, and if a whole area were pulled down,
replanned and rebuilt, the assessment instead of being based, as it
would be to-day, on the annual value of the reconstructed property,
would be based upon the site value alone. Gradually in this way site
value would become the prevalent basis of assessment. "It is obvious,"
as the Committee said in 1913, "that unrating of future improvements is
from the economic point of view of far more importance than the unrating
of existing improvements; if we want to encourage new buildings and new
improvements, what is really important is to ensure that new
improvements (not old ones) shall be exempt from the burden of rates."
The Committee were, however, compelled to reject this suggestion at that
time on the ground that "it would cause an unfair differentiation
between the man who had already put up buildings or improvements, and
the man who put up buildings or improvements after the passing of the
Act." But as between buildings and improvements which existed before the
war and those which come into existence under post-war conditions no
such unfairness could operate, because the increase in the cost of
building even to-day is greater than the benefit which would accrue from
the unrating of improvements. The present is therefore the unique
opportunity for bringing into force this much-needed reform in the most
effective way, free from the difficulties which had to be met in 1913.
If it had been carried out immediately after the Armistice it would, in
my opinion, have done more than anything else to solve the housing
problem, and even now it is not too late. In fact, in view of the
present unemployment it would be most opportune. Incidentally it would
soon render unnecessary the renewal of the Rent Restriction Act. I
understand that something on these lines has been introduced in New York
to meet a similar problem.