The city of Philadelphia is facing a vacant land crisis.
Philly has more than 40,000 vacant properties, 10,000 of which are under the city's control, and 30,000 of which are owned by private landowners. Some 20,000 of these properties are long-term tax delinquent.
This poses a number of problems for Philadelphia, namely because vacant properties are still consuming city services like police and fire protection, but they're not contributing to the tax rolls, or to the city's economy. Quite the opposite, they are destabilizing neighborhoods and subtracting value from neighboring properties.
One potential solution Philadelphia city council is considering to address this problem is a land bank - a single entity to manage all city-owned properties.
Currently, city-owned vacant properties are held by 4 different public agencies, making it unduly burdensome on prospective buyers to know who to approach to acquire properties. The city has recently taken an important step to address this confusion by creating a Front Door website for one-stop shopping.
The land bank would go further, by actually consolidating all city-owned properties under a single agency.
Unlike many cities, Philadelphia doesn't foreclose on landowners who don't pay their taxes, which is a key reason that they are facing an epidemic of chronic tax delinquency that leaves core public services underfunded.
Last week it was reported that the city and school district are owed $515.4 million in delinquent taxes - an increase of 9.3% in a single year. Collecting just one-fifth of this amount would close the $90 million budget gap that's been the cause of so much political acrimony in this year's budget debate.
A tax foreclosure plan pending in the state legislature would help Philadelphia to recover more of this outstanding revenue, allowing the city to foreclose on landowners who won't pay their taxes or make a good faith effort to enroll in a payment plan. These properties would be acquired by the land bank, and then sold off to private or non-profit buyers.
But there still remains a question about what to do about bad actors and speculators.
One concern raised at a recent PlanPhilly panel on vacant property reform was that speculators could form shell companies to buy up land from the land bank, and then just sit on it, preventing timely development of more productive uses.
Councilwoman Maria Quiñones Sánchez expressed skepticism that the city could ever truly outgun the speculators, but this skepticism may be unwarranted.
There is a very simple tax change that 20 other Pennsylvania municipalities and school districts have employed to drive speculators out of the market, incentivize development of unimproved land, and make their tax codes more progressive.
Instead of taxing buildings and land values at the same millage rate, Philadelphia could tax land at a higher rate than buildings. Or better still, abolish the tax on property improvements and tax only the land values.
The land value tax, or two-rate tax, is a direct tax on speculation. It penalizes owners of unimproved land for waiting to build, or building low-value uses on expensive land, while reducing taxes on higher-density uses that occupy most of the lot - working class row-homes, multi-family housing, condos, etc.
A 2009 study by the Center for the Study of Economics found shifting to a land value tax would reduce the average per parcel tax bill in all of Philly's councilmanic districts, and shift the tax burden away from buildings onto vacant lots.
Rather than rewarding blight and discouraging property improvements, as the current property tax does, the land value tax would bill the public costs of blight directly to the speculators.