Land Value Taxes in Cleveland?

 What is a Land Value Tax, and how could Cleveland benefit from it?

Property taxes are a very important, yet contentious, part of generating revenues for the public sector in the United States. The revenues generated by property taxes provide crucial funding for public school systems and libraries, along with many other municipally-operated services. Despite these facts, there are also major drawbacks to using traditional property tax valuation systems, in which the values of both buildings and land are accounted for. The prime example of a negative aspect of this method is that, when property values increase, tax bills also increase; this can often lead to homeowners no longer being able to afford their property taxes. This is a major factor leading to resident displacement in cities experiencing gentrification. 

Traditionally, most property tax valuations have the same rate for both land and buildings. Changing to a land value tax ensures stable revenues and discourages speculation. Source: Portland State University

Enter land value taxation (LVT). Land value taxes are an innovative form of property tax that only factor in the value of unimproved land when calculating tax bills. According to the FHWA, this type of property tax helps to disincentivize land speculation, while also helping to incentivize development. There are several cities in Pennsylvania that have used land value taxes over the last decade, along with lower-rate taxes on building values. According to Strong Towns, many of these cities that have used LVT saw decreases in tax liability for most residents. Virtually all of the property owners that saw an increase in liability were absentee owners of vacant parcels. From an economic development perspective, this has been a major success. 

Reducing property speculation in Cleveland: Some examples

In Cleveland, where there is a lot of undeveloped land and increasing gentrification, this type of tax could create more housing options throughout the city in an equitable way. This would be especially helpful to help combat the malignant influence of LLCs that speculatively buy up properties. As such, it is important to not understate the transformative impact that LVT implementation would have in gentrifying neighborhoods.

For this post, I will be examining LLC ownership in two residential areas at risk for gentrification using data from Cuyahoga County MyPlace. The first example in question will be along W. 85th Street between Lorain and Madison Avenues. This street, in the Cudell neighborhood, is certainly at risk of gentrification in the coming years due to the proximity of Gordon Square and increased development along Lorain Avenue. Along this stretch of the street, there are 103 parcels with an address on W. 85th. Out of this total, 15 are owned by LLCs.The second example is along E. 115th Street between Wade Park and Superior Avenues. There are 79 parcels here with an address on E. 115th, and 20 of them are owned by LLCs. In addition, many of the other properties on the two streets had ownership under different kinds of companies, as well as many instances of private citizens owning multiple properties on a single street. There was even one parcel on E. 115th owned by “National Home Flippers, Inc.”

Simply put, these numbers are ridiculous. It’s obvious that these owners of questionable intentions are here to sit on lower-value residential properties, and then sell for massive profits. I would also suspect that many also act as absentee landlords who keep their tenants living in dilapidated conditions. 

Not only would a land value tax help to discourage this type of speculation on properties in Cleveland, but it would also help to pave the way for new development on vacant lots, which would boost the city’s revenues. This could be a significant boon to the Cleveland Metropolitan School District, as well as other city services that rely on property tax collection. Overall, a change to an LVT system would be extremely beneficial for the city and its residents. 

I hope that this post brought to light the issues with our current system of property taxation and the ways in which it promotes land speculation. Thank you for reading!