Land Value rating
Shift to land value based rates
Wellington city should shift from setting rates based on capital value, to setting rates based on land value
Our current system rewards low intensity land use, such as the low rise Paddington townhouses in the CBD, car yards on Cambridge terrace, and land banking. Switching to rates based on land value would lead to better land use - more investment and in many cases more homes.
The productivity commission has repeatedly recommended switching to Land value based rating, in both it’s Using land for housing report and it’s better urban planning report.
The switch between capital and land value rating is an easy enough one for a council to do, and does not need any input from central government.
Facts and figures
- Land banking is more attractive with capital rating. Page 83 of the Productivity Commissions Using land for housing report gives some good examples of the difference between capital and land value rating - an almost 1.5 hectare undeveloped section paid half as much under capital rating as land value ratings, where a townhouse paid 75% more. This disincentives townhouses and makes land banking more attractive
- Page 84 of the same report says: "the available national evidence suggests that a concern for the distributional effects of valuation base on low income communities should lead councils to support land value rating" - In other words land value rating would be better for lower income people than capital value ratings.
- The Productivity Commission's Better Urban Planning report says on Page 6 "The base of all rates on property values should move over time to (unimproved) land value. This will enhance efficiency, generally improve equity, and prompt more banked land to be put on the market."
- Here's the RNZ article with councillors unhappy with the use of land at the Paddington.