At Lincoln House

The Weblog of the Lincoln Institute of Land Policy

November 18, 2015

Cuba, on the Horizon

      Havana streetsceneAs a nation in transition, Cuba represents a unique opportunity for knowledge-sharing on land policy, which will be a foundational component of a more open economy. The Lincoln Institute, which has done work in the island nation for many years, is rekindling collaboration on key areas in land management and land-based financing, in parallel with the ongoing historic thaw in US-Cuban relations.
     "With the opening of private property markets and the new role of the foreign investor, Cuba is faced with a number of new challenges, as well as unprecedented opportunities to learn from the experiences of other nations in Latin America and beyond," said Martim Smolka, director of the Lincoln Institute's Program on Latin America and the Caribbean.
     Smolka recently returned from Havana, where he met with Cuban officials under the auspices of the United Nations Development Programme, and presented at a well-attended panel on land-based financing tools at the 15th International Convention on Land Use and Urban Planning.
     The future of property and land in Cuba - and how the country can develop in an equitable and balanced way - is one of the biggest issues facing the country. A very limited yet vibrant housing market has existed for many years, based on housing swaps, known as permutas, the indirect participation of foreign parties through Cuban family members or associates, and a lively informal land and housing market.
     Now, as Cuba transitions toward a more expansive property market, much work needs to be done to track titles and the ownership of land and property - essentially a new official land register and cadaster. The legal status of post-revolution properties needs clarification.
     "The landscape needs to be more legible," Smolka said.
     An updated land registry and legal infrastructure is not only crucial for a well-functioning property market, but also for the establishment of a property tax and other land-based financing mechanisms.
     The redevelopment of Havana Harbor provides a special opportunity to capture the increase in private land values generated by rezoning or public investment, and use it for the benefit of the public. Value capture tools can help in the ongoing building-by-building rehabilitation in the Old Havana historical center as well, in keeping with an effort to protect residents from displacement. The Historian's Office of Havana (Oficina del Historiador de la Ciudad de La Habana), responsible for the regeneration of the historic center of Havana, has designed an innovative value capture scheme to help fund the rehabilitation of buildings and overhaul of deteriorated urban infrastructure.
     The Lincoln Institute revisits Cuba with an open mind, Smolka said, but brings expertise and experience in Latin America and other parts of the world in transition, such as the potential establishment of a property tax in China, and administrative systems related to private land markets in Eastern Europe. Among the many publications to date in connection with our engagement in Cuba are the working paper, Urban Land as a Factor in Economic and Social Inclusion, a case study of Havana; and the Land Lines article, Using Land Value to Promote Development in Cuba, exploring the concept of value capture in a framework of land-based financing tools to promote equitable economic development.

November 17, 2015

Advancing innovation in scenario planning

    OPTG symposium photo - CopyAs part of a growing effort to harness technology for better long term planning, the Lincoln Institute of Land Policy, in partnership with PlaceMatters, is presenting the 6th Annual Open Planning Tools Symposium at the University of Texas at Austin.
   The symposium is the nation’s top gathering for developers of applications known as scenario planning tools, which help government agencies and the public make decisions about land-use, transportation and other issues that require thinking about the factors that will shape an uncertain future.
   “In the face of climate change, population growth and rapidly changing land use, the availability of technology to help us plan for an uncertain future is more important than ever,” said Armando Carbonell, senior fellow and chairman of the Department of Planning and Urban Form at the Lincoln Institute.
Communities have for many years used software in “visioning” exercises, but scenario planning tools have yet to be widely adopted across cities, counties, metropolitan planning organizations and other agencies that engage in long term planning.
   In 2012, the Lincoln Institute published a report, Opening Access to Scenario Planning Tools, recommending several actions to help expand the use of these tools, including establishing better data standards, providing for public education and technical training, creating a model scenario planning process, and improving interoperability between platforms through the use of open-source software development practices.
   The report coincided with the launch of an online clearinghouse to bring researchers, planners, and software developers together under the banner of the Open Planning Tools Group.
   As one example of how this group is helping to advance planning tools and technology, software developers have added several new tools to Envision Tomorrow, which lets planners and the public test different strategies for shaping the ideal urban community. New features include real-time feasibility modeling for redevelopment, a fiscal impact tool, and cloud-based scenario creation.
   The Lincoln Institute has announced it will support four new proposals to further develop and improve scenario planning tools: 

  • From Social Vulnerability and Neighborhood Effects to Planning Knowledge: Tools for Considering Social Equity in Scenario Planning: This project, led by Robert Goodspeed of the University of Michigan, will create tools to investigate which populations might be vulnerable to planned change, the demographic profile and anticipated well-being of residents for each scenario, and what effects a given scenario will have on the residents of surrounding areas.
  • Alpaca: An Economic Evaluation Plug-In for Scenario Planning Tools: This project, led by Colby Brown of Manhan Group LLC, will create an open software library that will calculate property prices and values as a result of the interaction between competing consumers in the real estate market, enabling the computation of more robust economic indicators to address topics such as housing affordability, fiscal effects, income inequality, and gentrification.
  • Open Vulnerability Mapper: This project, led by Bev Wilson and Arnab Chakraborty of the University of Illinois at Urbana-Champaign, will support better planning for climate change through an open source tool to map where the most vulnerable people live and where the most hazardous places are. The mapper will be developed for the Chicago area, with a toolkit for adapting it to other places.
  • Scenario Tools for Equitable Corridor Reinvestment and Affordable Housing Preservation: This project, led by Elizabeth Mueller of the University of Texas at Austin and Jennifer Minner of Cornell University, will build on a metric developed for Austin, Texas, which helps cities identify areas most vulnerable to displacement from infill development, where preservation is urgent. It is intended to help replicate this tool in other fast-growing cities, with integration into a widely used scenario planning tool known as ET+.

   These projects support the Lincoln Institute's goal of fostering better planning practices to address major social challenges such as climate adaptation, housing affordability and inequality. In the coming months and years, the Lincoln Institute will mobilize new research and development to further advance tools that address these challenges and others, such as water resource allocation.

November 10, 2015

Detroit’s Property Tax: Averting Another Disaster

   Detroit_and_the_Property_Tax_heroHaving emerged last year from the largest municipal bankruptcy in U.S. history, Detroit is still hindered in its recovery by structural flaws in its property tax system, according to a new report published by the Lincoln Institute of Land Policy. Detroit’s high property tax rates, delinquency problem, inaccurate assessments and overuse of tax breaks, coupled with limitations imposed by the Michigan constitution and state statutes, continue to expose the city to fiscal stress.
   “Property tax reform is just one of several challenges facing Detroit and its residents, but tackling it could have a real impact on the city’s economy and quality of life, and could serve as an example for other cities struggling with population and job losses and a shrinking tax base,” said Gary Sands, a professor emeritus of urban planning at Wayne State University and co-author of the report with Mark Skidmore, a visiting fellow at the Lincoln Institute and a professor of economics at Michigan State University.
   The report, Detroit and the Property Tax: Strategies to Improve Equity and Enhance Revenue, suggests several reforms to help strengthen Detroit’s property tax, including the following: 

  • Continue to improve assessments: Vastly over-assessed properties have contributed to Detroit’s historically high property tax delinquency rate, which has been improved but is still about 30 percent, or 10 times the median rate for major cities in the U.S.
  • Improve the targeting of tax abatements: Detroit has granted property tax breaks to about 11,400 properties, or 3.5 percent of all taxable private properties. Research shows that the fiscal benefits of abatements are often outweighed by the costs, suggesting this tool should be used more judiciously.
  • Implement a land-based tax: A land-based tax is based purely on the value or size of a piece of land, with no additional tax for new development or improvements. This approach is favored over the traditional property tax by many economists because it discourages holding property vacant or underutilizing land (e.g. a community garden on a prime piece of downtown property), and encourages development.
  • Eliminate the state’s taxable-value cap: Imposed by voters as part of Proposal A in 1994, the taxable-value cap restricts the growth of the tax base as the real estate market recovers. It also gives preferential treatment to longtime homeowners, locking in low effective tax rates at the expense of new buyers.
  • Reduce statutory tax rates: Detroit has the highest tax rate of any major U.S. city, more than double the average rate for neighboring cities. Lowering the rate could reduce delinquency and help increase property values, and could help offset increased tax burdens that may otherwise result from reducing abatements or eliminating the taxable-value cap.

    The property tax and other land-based financing mechanisms are a key component of the Lincoln Institute’s Municipal Fiscal Health campaign, a multi-year effort to help restore the capacity for local governments to provide basic services and plan for the future. Over the past few years, the Lincoln Institute has been engaged in research on several aspects of municipal fiscal health in Detroit, including papers on land value, tax delinquency and Michigan’s assessment growth limit.

November 04, 2015

Property Tax Reform and Cautionary Tales

     Recently, Lincoln Institute fellows Daphne Kenyon and Sally Powers convened property tax experts for a panel discussion, Property Tax Reform and Cautionary Tales, a session at the annual conference of the International Association of Assessing Officers in Indianapolis. 
     Richard England, Professor of Economics and Natural Resources at the University of New Hampshire and a Visiting Fellow at the Lincoln Institute, gave a talk titled, “Preferential Assessment of Rural Land: Is it Time for Reform?” He discussed a type of preferential assessment known as use value assessment, or current use assessment. England argued for the greater use of financial penalties for those landowners who remove their properties from current use and develop it, citing Vermont’s system of penalties as a model for other states.  Adam Langley, a Lincoln Institute Senior Research Analyst, presented his research on homestead exemptions and property tax credits. Langley discussed the important distinction between flat dollar homestead exemptions and credits, which make the property tax more progressive, and percentage exemptions and credits, which do not.
     The second half of the panel featured two cautionary tales. Justin Ross of the School of Public & Environmental Affairs, Indiana University, gave a talk on the effects of Indiana’s tax caps, which were inspired by California’s Proposition 13. Intended to ensure tax stability for taxpayers, Indiana's caps have had several negative unintended consequences, including pushing many local governments into budget deficits. Finally, Professor Jon Sonstelie of the University of California, Santa Barbara, described the growth of parcel taxes in California, and attributed their growth to the effects of Proposition 13. Parcel taxes are taxes on real property that are not related to the value of that property. Instead, they are often a flat amount per property.

October 22, 2015

Innovating affordability

IMG_4035It was fitting to be in London, as white-hot a real estate market as can be found in New York or San Francisco, for Lincoln Institute President George W. “Mac” McCarthy to set the record straight about affordable housing. As the first guest at the third annual CityLab Live breakout sessions, McCarthy had praise for the suite of strategies to bring about more balanced and diverse urban communities, including shared-equity housing, community land trusts, and inclusionary housing – in London, as much as 30 percent of new residential development is required to be affordable. But, he said, market-based solutions alone in the current context would take decades for cities to catch up to the housing gap, estimated by McKinsey to require $16 trillion to be closed by 2025.
     Private developers will naturally follow the path of least resistance, catering to high-end demographics, McCarthy said in a conversation with Jennifer Bradley, director of the Center for Urban Innovation at The Aspen Institute, co-sponsor of the three-day symposium with Bloomberg Philanthropies and The Atlantic. “It’s a matter of political will,” he said, adding that “it’s really all about the competition for land and the markets for land.”
     Seeking to debunk some myths about private investment in housing development, McCarthy shared the affordability calculator, developed by Cornerstone’s Rick Jacobus, author of the recently published report Inclusionary Housing: Creating and Maintaining Equitable Communities. By tweaking various elements in the prospectus of development projects – the cost of borrowing, subsidies, density bonuses, the cost of production, and zoning requirements such as minimum parking, the calculator shows how a significant portion of homes can be affordable while protecting a decent return for private investors. “This is an existence proof,” he said. “If we had the will, we can produce affordable units.”
     The discussion was covered by Kriston Capps for CityLab, highlighting the affordability calculator and the notion of a moral element in the provision of affordable housing. “This makes the affordable housing conversation a little more legible,” said Bradley, adding that “housing is not just about finance – it’s about politics, design, and regulation.”
     Singapore, where the homeownership rate is about 80 percent, is an example of a city able to take dramatic measures to rework the housing sector. “They’ve done it by taking land out of the equation,” McCarthy said, making “the entire city essentially one big community land trust.” He also singled out Champlain Housing Trust in Burlington, Vermont, as capable stewards of both affordable purchased homes and rentals in the region. (The same week as CityLab Live, the National Community Land Trust Network met in Louisville, Kentucky for its annual meeting).
     Also joining the breakout session were Steve Adler, mayor of Austin, dealing with rapid population growth, increased housing costs, and London Deputy Mayor Richard Blakely, who shared the challenges of trying to integrate affordability in the city’s astonishing growth. London is also focused on land-based initiatives, getting more land to market, and applying covenants to ensure affordability. Sheela Patel, director of SPARC, brought the conversation to the global scale, reminding the audience that housing in the cities of the developing world is a matter of home-made scrap materials on a tiny spot of occupied land, where residents are constantly worried about eviction. Finally, Peter Rabley, director of investments at the Omidyar Network, also emphasized the importance of land in the housing equation, as well as incremental interventions to help poor residents make improvements at their homes and avoid eviction.

October 14, 2015

International Land Conservation Network to Launch in Berlin

ILCN image     In recognition of the growing importance of private and civic land conservation around the globe, conservationists from six continents will join together to mark the official launch of the International Land Conservation Network (ILCN) at the Network’s First Congress in Berlin, Germany on Oct. 19-21.
    A project of the Lincoln Institute of Land Policy, the Network is devoted to connecting people and nongovernmental organizations, building capacity and sharing ideas to promote the more rapid and effective use of civic and private land conservation strategies.
    The Network builds on the success of the Land Trust Alliance, which was launched by the Lincoln Institute in 1982. Now an independent organization based in Washington, D.C., the Alliance has grown to represent more than 1,100 land trusts in the United States.
    “Land trusts have preserved and protected 50 million acres of land in the U.S,” said Laura Johnson, Director of the International Land Conservation Network and Board Chair of the Land Trust Alliance. “Now we have a real opportunity to both learn from, and share expertise with conservationists in other nations as we work together to protect the natural systems upon which human life depends.”
    The formation of the international network comes at a time of great need for land conservation, with an estimated 2 billion hectares of degraded land – an area larger than South America – available for rehabilitation, according to the United Nations. An additional 12 million hectares are degraded every year.
    “We have enormous pressures across the globe – climate change, growth of population, pressures on cities and natural resources, development pressures, and I think most importantly, the disconnect now between people and nature,” said Rand Wentworth, president of the Land Trust Alliance. “There’s a very powerful need for local organizations to invite people back into a renewed relationship with nature.”
    At the Congress, participants will explore financial, legal and organizational strategies that help create and maintain privately protected land in different countries and settings.
    The Network will launch with the support of major international policymakers.
    “In these times of great challenges for nature conservation, such as climate change and biodiversity loss, it is becoming even more important to unite our efforts across borders, across continents and across the world to strengthen the protection and management of our natural capital,” said Daniel Calleja Crespo, Director-General for Environment of the European Commission.
    “I want to commend the ILCN for their leadership in the global land conservation movement,” said United States Senator Tim Kaine of Virginia. “By connecting and empowering nonprofit and private land conservationists around the world, you have the power to make a major impact.”

October 09, 2015

Pioneering legal expert Steve Small named Kingsbury Browne Fellow

    If you have protected farmland, forests or open space in your community, there’s a good chance you have Steve Small to thank. A legal pioneer who paved the way to make conservation easements tax-deductible in the U.S., Small wrote federal tax regulations credited with facilitating the conservation of millions of acres of private land.
    Small is the new Kingsbury Browne Fellow at the Lincoln Institute, and the winner of the Kingsbury Browne Conservation Leadership Award from the Land Trust Alliance.
    The fellowship and award, made in recognition of outstanding leadership, innovation and passion in land conservation, were announced Thursday at the Land Trust Alliance's Rally 2015: The National Land Conservation Conference, in Sacramento.
    “Steve is an indefatigable source of energy and creativity for the use of easements and land conservation in America,” said James Levitt, Manager of Land Conservation Programs for the Lincoln Institute.
    The Kingsbury Browne fellowship and award is named for the Boston tax lawyer who is considered the father of America's modern land trust movement, a network of land trusts that have conserved more than 37 million acres. Browne’s 1981 gathering of conservation leaders from across the country evolved into the Land Trust Alliance, today representing more than 1,100 member land trusts.
    A special short film celebrating Browne’s life and career can be viewed here.
    A former attorney-advisor in the Office of Chief Counsel of the IRS, Small wrote the federal Income Tax Regulations on Conservation Easements, a critical legal framework for private land conservation. He has been involved in the protection of more than 1.5 million acres of land, working with more than 500 property owners in more than 45 states on land conservation strategies.
    The fellowship is just one piece of the Lincoln Institute’s active engagement in land conservation, which includes the publication of the Working Paper Cowboys and Conservation, the Policy Focus Report Conserving State Trust Lands and the book Conservation Catalysts, and the establishment of The Practitioners Network for Large Landscape Conservation, a group of leaders and innovators on the forefront of today's conservation strategies.
    In the fellowship, Small will engage in research, writing and mentoring, under the Lincoln Institute's Department of Planning and Urban Form.
    The Kingsbury Browne fellowship and award is in its tenth year. Previous winners were Jean Hocker, a former president of the Land Trust Alliance and longtime board member at the Lincoln Institute; Larry Kueter, a Denver attorney specializing in agricultural and ranchland easements in the West; Peter Stein, managing director of Lyme Timber Co; Audrey C. Rust, president emeritus of the Peninsula Open Space Trust based in Palo Alto, Calif.; Jay Espy, executive director of the Elmina B. Sewall Foundation; Jamie Williams, president of The Wilderness Society; Laurie A. Wayburn, co-founder of the Pacific Forest Trust; Mark Ackelson, president of the Iowa Natural Heritage Foundation; and Darby Bradley, president of the Vermont Land Trust.

September 24, 2015

Making inclusionary housing work

Inclusionary_Housing_web_heroFrom Seattle to San Francisco to Chicago to Portland, Maine, debates are raging over inclusionary housing – the requirement that developers reserve a percentage of new residential development as affordable. Some say the policy discourages development, or, in an argument that could reach the Supreme Court, threatens property rights. Meanwhile, New York City Mayor Bill de Blasio faces dual criticisms that his inclusionary housing proposal goes too far, or not far enough.
     Today the Lincoln Institute released a new report, Inclusionary Housing: Creating and Maintaining Equitable Communities, that separates myth from fact, charting a path forward for policymakers and showing how inclusionary housing can be used effectively to reduce economic segregation.
     “In hot-market cities, skyrocketing housing prices push middle class and low income residents far away from well-paying jobs, reliable transportation, good schools and safe neighborhoods,” said Lincoln Institute President George W. “Mac” McCarthy. “Inclusionary housing alone will not solve our housing crisis, but it is one of the few bulwarks we have against the effects of gentrification—and, only if we preserve the units that we work so hard to create.”
     Through a review of literature and case studies, author Rick Jacobus of Cornerstone Partnership offers solutions for overcoming the major political, technical, legal and practical barriers to successful inclusionary housing programs.
     “More than 500 communities have used inclusionary housing policies to help maintain the vibrancy and diversity of neighborhoods in transition, and we’ve learned much along the way,” Jacobus says. “Research shows that if programs are thoughtfully designed and implemented, they can be a valuable tool at a time when affordable housing is desperately needed.”
     In particular, the report addresses the concern that inclusionary housing can impede new construction by making development less profitable. According to the report, many cities have avoided such impacts by allowing flexibility in how developers comply and offering incentives, such as the ability to build at greater densities.
     Other key findings and recommendations in the report include:

  • Rapid construction of market rate housing actually fuels the need for more affordable housing by changing the character of neighborhoods.
  • Inclusionary housing programs have been challenged in court, but programs can be thoughtfully designed to minimize legal risks.
  • Follow-up in the form of enforcement and stewardship is critical. Some communities have created thousands of affordable homes, only to see them disappear after subsequent sales.

     The Lincoln Institute has for many years developed strategies to establish permanently affordable housing, including the establishment of community land trusts and other shared-equity arrangements. The effort is in recognition of the ongoing housing affordability crisis in many cities. Stratospheric rents and home prices in hot real estate markets are displacing longtime residents and changing the character of cities and neighborhoods.

September 23, 2015

Value capture, catching on

    The concept of value capture, which recognizes increases in property value triggered by government action and public investments, has been in the news of late, not coincidentally right here in our backyard. The Massachusetts transportation secretary, Stephanie Pollack, floated the idea as a way of confronting cost overruns in the proposed Green Line light rail extension north of Boston. The state has established a Value Capture Commission to explore ways of engaging the private sector in the financing of critical transportation infrastructure. The City of Cambridge similarly suggested that private developers and landowners might contribute more directly to transit operations that are such a critical element in the success of such booming areas as Kendall Square.
     Our research on value capture in the context of land-based financing tools goes back many years, and the idea has a prominent place in the promotion of municipal fiscal health. Martim Smolka, director of the Program on Latin America and the Caribbean, and author of the report Implementing Value Capture in Latin America, has been conducting research, courses, lectures, and workshops, most recently in Sao Paulo, where additional floor-area ratio (FAR) is auctioned in a stock market. Those discussions have centered on several common concerns in the implementation of value capture, such as whether charges to property owners are passed along to consumers in the form of higher prices, or doubts about the ability of local officials to determine the precise land value increment linked to government action.
      Next month, Lincoln Institute president George W. "Mac" McCarthy will make a presentation at Meeting of the Minds in Richmond, California covering land-based financing tools to allow cities to make critical investments in infrastructure. Armando Carbonell, chairman of the Department of Planning and Urban Form, will also present on value capture at the 45th Anniversary of the Loeb Fellowship in Cambridge, Mass., and value capture will be the subject of an upcoming talk at TEDxBeaconStreet. In addition, the Latin America program is commissioning further research on value capture, and conducting more workshops and online courses.

September 01, 2015

Unintended consequences in Colorado tax limits

     Tax and expenditure limits enacted as part of a 1992 voter initiative have led to inconsistent and unequal property tax burdens in Colorado, with state taxpayers increasingly subsidizing a handful of often-wealthy school districts, according to new research published by the Lincoln Institute of Land Policy. Moreover, more than 80 percent of Coloradans pay more in school property taxes than they would if voters had never enacted the Taxpayer Bill of Rights (TABOR), the state’s signature tax and expenditure limit approved in 1992, according to the research.
     “Since the early 1990s, Colorado has enacted layers of reform in pursuit of two conflicting goals – lower property taxes and well-funded public schools,” said Phyllis Resnick, lead economist for the Colorado Futures Center at Colorado State University and lead author of the Lincoln Institute working paper, Measuring the Impact of Tax and Expenditure Limits on Public School Finance in Colorado. “The result is greater inequality and inconsistency, and surprisingly, a greater tax burden for most Coloradans.”
     Resnick and co-authors Charles Brown and Deborah Godshall analyzed the impact of reforms intended to reduce property tax burdens and control spending for public education. Using a mathematical simulation, they also modeled what tax burdens would be without two property tax related provisions of the Taxpayer Bill of Rights, a 1992 state constitutional amendment that limited taxes and spending for all units of government and barred tax rate increases without voter approval.
     Highlights of the research include:

  • Taxpayers in 74 school districts – representing 81% of the state’s population – now pay more in school property taxes than they would if the Taxpayer Bill of Rights were never enacted.
  • In most districts where property taxes have decreased, a greater share of school costs are now paid out of the state’s general fund.
  • Among the 21 school districts with the lowest school property taxes, residential taxpayers have enjoyed property tax reductions from 59 percent to 97 percent since 1993, and nine of these districts are in the top quartile for household income in the state.
  • Disparities in school funding among districts have increased with the more frequent use of override levies, particularly in school districts that have benefited from lower base property taxes subsidized by greater state aid.

     “As these results show, Colorado’s experience should serve as a cautionary tale for other states as they consider enacting tax and expenditure limitations,” Resnick said. “In many cases, Colorado’s property tax limits relied on simple formulas that failed to take into account the complex factors affecting school district financing, such as changing local economic conditions and volatile school enrollment. As a result, these limits have served mostly to redistribute – rather than reduce – Coloradans’ tax burden.”
     The paper can be downloaded at the Lincoln Institute website, along with a research summary that includes infographics.