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Since the mid-1960s, the percentage of personal income we're spending on housing has increased nearly 50%. And yet, for the first time ever, most young Americans can't afford to buy homes. Soaring rents are pushing the "working poor" into the ranks of the homeless.

What can be done? Let me tell you a Washington secret Behind all the brave rhetoric, nobody really knows.

Recently the Senate Committee on Banking, Housing and Urban Affairs published A New National Housing Policy, a 1,000 page book consisting entirely of recommendations from organizations "concerned about" the housing crisis. Among them, they propose expenditures of well over a trillion dollars! And yet, even the best of their proposals would merely ameliorate the housing crisis. Many would render us dependent on housing subsidies without end.

Right now, people like Jack Kemp and Jesse Jackson are gearing up to do battle over whose housing subsidies (aka "tax expenditures," aka "universal operating grants") are Kinder and Gentler. It'll keep the fur flying ... and the cameras going.

However, those of us who'd build a humane, sustainable society know that it won't do simply to spend more money. The housing market itself needs to be changed, and desperately needs to be fit into a context that honors such values as fiscal responsibility, social justice and ecological wisdom.

Land prices are key

There's one big question nobody seems to be asking: Why are housing costs soaring?

Recently we spoke with Walter Rybeck, president of the Center for Public Dialogue, former special assistant for urban policy to Wisconsin Rep. Henry Reuss, and - psst! -follower of Henry George's economic theories. It didn't take Rybeck long to demonstrate that the major factor in soaring housing costs is, by far, soaring land prices.

"Over the past two decades," Rybeck told NEW OPTIONS, "the Consumer Price Index has been rising at 12% a year. Wages [for construction workers] have been rising at 11-15% annually. Construction costs for both frame and brick residences have risen 12.5% since 1970. Mortgage costs have risen at an average rate of less than 4% a year.

"However, from 1956-81 (the latest available year) the market value of vacant lots increased 64% a year!"

By George

If land prices are the major factor in housing costs, then getting control of land prices would appear to be the major factor in providing affordable housing.

Many innovative, decentralist/globally responsible housing activists have been focusing on how to hold down land prices. Like Rybeck, more and more of them are rediscovering Henry George (1839-1897), probably the most original major American economist until Herman Daly (#44).

Like Daly, George has been ignored by establishment and left-wing economists alike. His ideas don't fit onto the old left-right spectrum. His contemporary, Karl Marx, called him "the capitalists' last ditch," partly no doubt because George's book Progress and Poverty (1879) was even more widely read - by working people - than Marx's books.

Progress and Poverty argued that land should be taxed heavily, buildings and improvements not at all.

Two-rate property tax

Over the last month, we've talked with two of the most distinguished neo-Georgist economists: Rybeck (cited above) and Steven Cord, president of the Center for the Study of Economics. Both make their living in part as consultants to state and local governments (Cord is even dialoguing with Jamaica's new government). Both helped 10 Pennsylvania cities implement a modest version of George's land value tax.

"Under the current property tax," Cord told NEW OPTIONS, "land and ... buildings are subject to the same tax rate. I would just subject the land to a higher tax rate and the buildings to a tower tax rate.

"When I go into Pennsylvania cities, I say to them, just have two tax rates in the property tax instead of one, with a higher rate on land and a lower rate on buildings. [Start at a ratio of two-to-one or three-to-one, and] spread the rates apart in future years as you see fit"

God & society does it

How does Cord justify taxing land more and buildings less? "All land rent is exploitation," the mild-mannered, very pro-business Cord told NEW OPTIONS. "If the whole Gross National Product is produced by workers and investors, what is left for a landowner to claim?"

Rybeck couldn't agree more. "I've boiled land values down to three basic things, " he told us.

"One is nature, or God. [Nature gives us] scenic vistas, and the fertility of the soil, and access to water, and coal in the ground.. .. "The second thing that gives land value is people. Just the presence of population. . ..

"The third thing is government t- public works and public services. An area with well-paved streets, or good schools, becomes worth more than an area without...

"So landowners [make money not because they've produced anything, but because of] nature and society. And to collect those land values - as [even] Adam Smith said - does not take away anything that the landowner owns."

"Land has got to be privately owned," Cord told us. "Nobody really wants to attack private ownership of land. But we can [recapture community-created land values] by collecting the rental income from land in taxation."

Nine easy pieces

The land value tax "is a wonderful tax to adjust to," says Cord. "The usual tax just produces revenues. This tax produces revenues and promotes economic [vitality]." Among the things it would do:

• Reduce land prices. "The reason it brings prices down, "says Rybeck, "isthatwhat you pay for a piece of land is determined by how much it [is expected to] bring in to you." And a kid value tax would lower the expected rate of return.
  
• Curtail land speculation. "The cost of holding land out of use, or in an inefficient use, would be [much] greater with a land value tax," says Cord. "[You'd] have to use land more efficiently."
  
• Increase production and rehabilitation of housing. As it is now, says Rybeck, "those who build, renovate and maintain housing are penalized" through higher taxes on buildings and improvements; while "those who let houses fall into disrepair are financially rewarded with lower taxes. . . . Those who completely waste precious resources by tearing down housing or by holding housing sites out of use get the biggest tax breaks of all" Shifting taxes from buildings to land would reverse that sequence.
  
• Lower sale prices of homes. Pittsburgh is the only big U.S. city that's implemented a land value tax (albeit a modest one). In 1988, the average sale price of a Baltimore home was $124,000; a St. Louis home, $96,000; a Pittsburgh home, $51,000.
  
• Lower rents. "Un-tax buildings and they will be cheaper to build and maintain," says Cord. That would tower rents.
  
• Reduce property taxes for homeowners. "If you switch taxes off buildings onto land," says Cord, "then most homeowners will pay less in [total] property taxes.... Anywhere from 65% to 80% would pay less, it would vary from community to community."
  
• Rejuvenate center cities. "Hearts of cities [would be] rejuvenated," says Rybeck, "[since the land value tax] discourages owners from holding prime sites idle," or using them as parking lots, etc.
  
• Protect the countryside. "By taxing land more, buildings less, urban land would be used more efficiently," says Cord. "The urge to spill and sprawl over the surrounding countryside would be considerably reduced."
  
• Promote sane transportation. If we cut down on urban sprawl, we could move much more easily to transportation systems based on trolley cars, pedal power and foot power (see NEW OPTIONS #52).
  

Three glitches

We thought we saw three flaws in the neo-Georgist remedy, and asked Cord and Rybeck about them.

• Won't downtown development be heated up to a fever pitch? "If the [free] market and the land tax were just 'let loose,' it might destroy [certain parts of town]," says Rybeck. "[You'll definitely need zoning laws] to maintain the architecture or character of a place."
  
• Won't landowners just pass the land tax on to their tenants? "The landowner may [try to] pass the tax on," says Cord. "But how much rent can you pay? You're already paying a market rent. The land tax doesn't make the land any more desirable. ... If the landowner charges you too much," he'll lose you as a tenant
  
• What do you say to homeowners whose property has been increasing in value? "Say you bought your property for $40,000 and it's now worth $120,000," says Rybeck. "It looks very nice. And yet, if you try to capitalize on it, and sell your home to get another home of equal value and of equally good location - then you have to pay that much [again]. So it's a paper game, really.
  
  "The other thing [I'd say] is that as these inflated prices go up and up, people with short memories or who don't know history tend to think this is the only direction [prices] can go. [Well, it isn't!]
  
  "So to take the inflated value out of this land boom would be to ensure greater stability in the economy - not just for homeowners, but in the economy as a whole."br>

The resistance

With so much going for it, why hasn't the land value tax been adopted more widely? What - or, more precisely, who - has been holding it back?

Cord fingers "the owners of downtown property, downtown land in particular. They tend to work behind the scenes and sabotage our efforts [in Pennsylvania and elsewhere]."

Rybeck says, "I think it's fair to say that if you were a land speculator or a slumlord, or a parking lot operator in [a big city], this would not be the happiest thing for you to see."

Cord: "We suspect developers would pay less with this [than they do now]. But many of them hold land which they 'bank' for future development And they don't trust guys who talk about using land rents for public purposes. They don't cotton to us."

Rybeck: "At the top of my list I would put, not the vested interests, but just the fact that the economists and the people who've known about it have done a very poor job of educating the public."

Cord: "The average guy would pay less with a shift in taxes to land. But he doesn't know that . . . Too often those small people stay home and sit on their hands and watch television, while the developers and speculators are out there in full force on property tax night [at city hall]:"

Plus there's another barrier that Cord and Rybeck may have been too polite to mention. Too many Georgist theorists and organizations have an air of the cult about them. Nothing can keep you from having an impact faster than that

Next steps

Still, with a bit of hick, "Lower Taxes to the Ground" (or, "Own Production, Not Creation") will be a rallying cry of activists in the 1990s.

Interest in the land value tax knows no ideological boundaries. Among its present-day champions are libertarians and socialists, Wesleyan University professor Robert Wood (a former Secretary of Health, Education and Welfare) and black activist Chuck Turner (a key player in the movement to turn one of Boston's poorest neighborhoods into a separate city).

A mass membership organization - Common Ground USA - has just been formed to mobilize people to work for Georgist goals.

"One of our purposes is education of the populace," Marion Sapiro, membership director of Common Ground, told NEW OPTIONS.

"[Another purpose] is to get legislation introduced into every state where enabling legislation is necessary. [Most state constitutions] prevent taxing land and improvements at differing rates...."

The Berkeley/Oakland and Eastern Massachusetts Greens are seeking to put the land value tax into the U.S. Greens' political platform (due this summer).

Someday soon, most Americans are going to get tired of listening to Jack Kemp and Jesse Jackson argue about how to throw money at the housing problem. Will Common Ground and the U.S. Greens then be ready to roll?