Land Value Capture
When the public builds a subway station, the value of adjacent land skyrockets. Land Value Capture (LVC) is the mechanism by which the public reclaims that generated value to pay for the subway itself.
The Free Rider Problem
Under a standard property tax system, if a city builds a $2 billion transit line, the landowners near the stations experience a massive windfall in land value without having contributed a dime to the project. This is a massive public subsidy to private landowners.
Mechanisms of Capture
- 1. Land Value Tax (LVT): Shifting property tax burden off buildings and onto the underlying land value. Automatically captures uplift. Use the LVT Estimator tool.
- 2. Tax Increment Financing (TIF): Freezing the base tax revenue in a district, and using future tax increases to pay off infrastructure bonds. Read the TIF Guide.
- 3. Special Assessment Districts: An extra fee levied only on parcels directly benefiting from the infrastructure.
Common Pitfalls
| Mistake | Result |
|---|---|
| TIFs for Private Dev | Using TIF to subsidize a private stadium rather than public infrastructure drains the general fund. |
| Delaying Implementation | Speculators buy the land upon announcement of transit, absorbing the value before LVC is enacted. |