Property Rights & Politics
Oregon’s Land-Use Debate Raises Idea: Developers Should Pay for Gov’t “Givings”
The Portland-area Metro planners see potential for up to $1 billion in windfall profits tax on landBy Dan Richardson, 5-02-06
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When John J. Wallace proposed in pages of the state’s namesake newspaper that land developers’ profits be split with the government, he stated a sort of anti-position to Oregon’s Measure 37.
Measure 37 orders government to pay land owners when regulations devalue their property, or else waive those regulations. But what about regulations that increase property values? Wallace wrote that “when it comes to the worth of real estate, the government giveth and the government taketh away. By harnessing this essential principle, we can balance the opposing forces in the land-use wars.”
The idea’s simple: If property owners profit from land use regulations, they should split the money with the government.
“For example, imagine that a city council decides to triple residential housing density close to a light-rail station. Let's say a nearby vacant parcel once valued at $1 million doubles in value overnight. Effectively, local government has "decreed" this increase to $2 million in property value, so it also may decree that the increase must be shared. The owner can keep half, and the state will take the other.”
This good-for-the-goose approach to land-use planning would, argues Wallace, “make land-use compensation work for everyone.”
Of course, developers will want nothing of the sort. Property rights don’t include responsibilities, don’t you know? Not to neighbors, and no way to the larger public.
Wallace’s position might be seen as the staking out of an extreme position to counteract another extremity encapsulated in Measure 37 — making the idea of a Big Look at the state’s land use system all the more moderate and palatable.
Of course, Wallace has a potent point: If the traditional developers’ risks are to be eliminated at the expense of land-use planning, then maybe so should their profits. The two are inseparable — or were, before Measure 37.
But two bad ideas — eliminating the power of the state to regulate land, and forcing private developers into bed with the government — don’t necessarily balance each other out. No, they might well compound one another.
This bears further study.
Oh, it’s been studied some already. The greater Portland Metro government has been contemplating a real estate “givings” tax, or “windfall tax” on land profits since December 2002. The idea is to pay for farmland preservation and other land-use goals, including potentially compensating landowners under Measure 37, says Metro.
Metro finally and very recently published a study (“The Fair Growth and Farmlands Project”) estimating that for the Metro area alone, “Revenues from this source of funds, using a reasonable set of assumptions, could range from $100 million to more than $1 billion over 20 years.”
Measure 37's backers promised to help landowners recoup profits presumably lost to regulatory “takings"; we can be sure that government will soon see dollar signs in reaping back from its “givings.”
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Comments
Mr. Wallace's idea is simple alright--it's simply awful! The fly in the soup is the government getting half the money that would otherwise go to the private landowner to invest. No thanks. A better solution is transfer of development rights coupled with performance zoning and leave the government out of the equation as much as possible. As the economy grows as a result, the government will get its due from the increase in tax revenue that an improved economy will create. Performance zoning will assure quality of life. Transfer of development rights will assure fairness and economic well being.
Steven B.
Actually, the idea of "givings" is a great idea.
Having carefully researched the false claim that paying landowners incentives to protect wildlife habitat provides public benefit--it doesn't--I realized that in fact landowners were double dipping. They were getting tremendous subsidies from the incentives approach (Farm Bill programs, etc.), not to mention benefitting from low cost grazing leases as well as all of the other tax breaks, incentives, and subsidies voted to them by their representatives in the State legislature, while at the same time they were benefitting mightily from ecological conditions, say, presence of a ranch on the borders of a national forest or a national park--consequences of government action--where they were able to take advantage of that situation to operate very lucrative ranch hunting programs by charging high "trespass fees" to hunters.
When this issue first came up in Wyoming in the context of the so-called Private Lands/Public Wildlife program, which proposed giving landowners hunting licenses they could sell on the open market, I proposed in return that landowners who received such licenses be required to pay a royalty to the state on the proceeds of the sale of the hunting licenses. The silence from the landowners was deafening. Can't interfere with their double dipping.
The issue IS responsibility. There are no property rights without property responsibilities.
Dan