This article was originally published in The Detroit News on October 31, 2023.
Detroit’s property woes are longstanding and deep-seated. As a former attorney within the Detroit Land Bank Authority (DLBA), I witnessed the toll of neighborhood blight first hand. The DLBA is Detroit’s last-resort residential property owner, currently holding 71,000 properties–many of which came to it through tax foreclosures. Some foreclosures were family homes previously owned by working-class Michiganders struggling under the weight of property taxes. Others were vacant, unsafe, and abandoned lots stuck in a cycle of land speculation where absentee owners hoped for increased property values without additional investment.
What Detroit needs is an environment that supports existing homeowners and the city’s housing supply growth. But with the city’s sky-high property taxes–which hit new and renovated homes especially hard–neighborhood investment will remain unattractive unless it can clear a steep tax hurdle.
This is why a split-rate land value tax (LVT), as one outlined by the Lincoln Institute of Land Policy, may prove to be a critical tool. An LVT would tax structure values at one-fifth the tax rate on land value, with traditional property taxes applied equally to land and structure value. This means any increase in structure value, whether from new construction or a renovation, is taxed the same as if the underlying land had itself increased in value. By setting a lower tax rate for structures than land, an LVT would simultaneously provide tax relief to city residents and reward those who build or renew Detroit’s housing supply rather than passively speculate on vast tracts of empty land.