Private land value capture, better known as naked speculation, has financed land development for centuries.
In the 1960s, the Walt Disney Company used shell companies to secretly purchase 27,000 acres of swampland in the US state of Florida for $200 per acre to build its Disney World resort.
The company only needed 10,000 acres, but it knew that its investment would drive up land prices for the whole region.
Disney kept this information under wraps to capture the land value increment for itself.
Once the development was announced, the same land was valued at $80,000 per acre, a tidy windfall of more than $2bn on an investment of just over $5m.
Disney sold or leased the extra land to help cover the costs of building Disney World.
For 75 years, the Lincoln Institute of Land Policy has obsessed over how land gets its value.
One thing we have learnt is that information has great power over the value of land. In recent years, we have tracked an exponential increase in interest in the potential of land value capture — the public recovery of the share of land value attributable to public actions.
We have helped design and implement myriad value capture instruments to generate revenue for essential but seemingly insurmountable infrastructure needs.
But while the public sector strives to capture small shares of publicly generated land value, private landowners are walking away with much bigger spoils by arbitraging information.
The climate crisis has opened a whole new area of land speculation. Reports like the Intergovernmental Panel on Climate Change’s Climate Change and Land, which painstakingly documents positive and negative climate effects worldwide, are like catnip to investors looking to acquire land that will benefit from climate change.
Land with privileged access to scarce resources like water, on higher ground, or containing critical habitats targeted for conservation, is a prime target for speculators.
Ironically, environmental advocates unintentionally fuel speculation by producing detailed analytics for conservation or climate resilience purposes, only to see private investors use the data for profit.
Land with privileged access to scarce resources like water, on higher ground, or containing critical habitats targeted for conservation, is a prime target for speculators
Conserving land to address the climate crisis is already expensive.
But every dollar gained by land speculators represents an additional dollar of public or philanthropic investment that will be needed to protect critical habitats.
If policymakers are serious about mitigating climate change or conserving resources, they cannot allow private investors to stay 10 steps ahead.
A land value increment tax – on realised unearned gains in land values – is a well tested tool for minimising speculation.
The LVIT has been applied at rates as high as 90% in places like Taiwan, where it now ranges from 40% to 60%.
The revenues generated can be invested in climate resilience or habitat protection, ensuring that increases in land value are used for public benefit.
Mitigating the climate crisis and the preventing mass extinction will require unprecedented changes in land use across the globe.
Without proactive measures to minimise the impact of private land speculation, we will drain public and philanthropic coffers before we can even make a dent in these existential challenges.
It is hard enough to build political will to tackle climate threats.
Why would we unwittingly allow others to escalate the cost of our efforts for their own private gain?
