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Writer's pictureThomas Busse

My Solution to Housing, Economic Development, and Land Use: a Land Value Tax.

The idea of land value taxes replacing property and other taxes has been around for more than a century. Both libertarians and socialists get onboard with it. The problem is, too often in politics, math is hard and politicians have to pander to emotion.


So, here's a video explaining exactly why Land Value is the least bad way to tax and why transitioning to it is the solution for fixing downtown Portland.


I work on SW 5th Street in Downtown Portland, and a block away from me is the Washington Center at SW 4th owned by the Menashe Family - a prominent real estate development family with considerable political influence. The building is boarded up and blighted. Often it is occupied by fentanyl addicts, and my bus station right outside it often smells of urine. Menashe properties bought it in 2014 for $9M (it sold for $13M in 2005) and did nothing. The adjoining office building sits empty.


Here is its assessment history. As you can tell, when the Menashes bought the property and boarded up the building, the assessment on the building (the "improvements") tanked - also depriving Portland of tax revenue.

In 2020, the county collected $102M in tax revenue. Today, the county just collects $35k, which is the income-tax-deductible speculative cost of sitting on the building and hoping the developable value of the land goes up as Downtown Portland improves. If the Menashes can cash out in 10 years by selling the land at $12M, the annual cost of paying $35k means they have no incentive to improve the property, remove the blight, or supply Portland with sorely needed housing by investing in new construction. Working class Portlanders owning homes beyond the 205 are essentially subsidizing the Menashes' speculation.


But what if 100% of the assessment was on only the land, improvements/development remained untaxed, and we froze the region's entire assessment to raise the same government revenue? In that case, the assessment solely on the land of this property would be substantially higher. This would discourage real estate speculation and encourage renting the property and building improvements. The assessment on this land would be higher because the land value is raised from the improvements of neighbors, such as the Expensify building on SW 5th.


This does not mean rents would go up because under such a scheme, the way to increase revenue needed to pay the taxes is to build more rentable units - the type of dense urban infill dreamed of by Portland planners one block from Portland's transit mall. In fact, it is unlikely this building would ever have been sold to the Menashes with its tenants evicted and shops boarded up.


The way to get such a change passed in the legislature is to propose a bill to create a study group and then phase in a pilot program - converting only Oregon Metro to a land value tax structure, then eventually the city, county, special districts, etc.


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