Jim Meredith over at Archizoo bemoans the state of retail overbuilding in America and looks at ways to prevent it. These range from “certificates of need” as some states require for hospital expansion to new zoning standards. Take a look for yourself.
This reminds me that I’ve been remiss in following up on my “Buildings Suburbs That Last” series. So look for more installments of that shortly. This post isn’t per se about that, but does talk about how we discourage overbuilding.
In some states – and I don’t have a full list, but know it includes Midwestern states like Illinois and Indiana – collect property taxes in arrears. That is, in 2009 you are sent the bill for your tax year 2008 taxes. Normally this doesn’t matter to you since you owe taxes every year, but when it comes to newly developed property it does.
When you go out to a cornfield in the suburbs and convert that into houses, the land is usually assessed at a very low agricultural rate. It can take a while for the property to even be re-assessed as higher value residential, then it will be another year or more before the value of that property is factored into the property taxes.
The net result is that when you buy newly developed property in the suburbs, whether for a house or for a new retail center, you are in effect getting a one or two year tax abatement as a reward for building on a corn field. If you had bought and existing home, you’d start paying the full tax value of that home immediately. But by buying a new development, you get a couple of years of farm field taxes. Given the size of many property tax bills, you can see how this encourages sprawl.
I know this effect is real because I’ve benefited from it personally some years back when I purchased a new construction condo in Chicago in a building erected on an old parking lot. This was infill development, not sprawl, but the same principle applies.
As a general rule, I’m not sure we should be encouraging people to build new vs. re-using existing. At a minimum, we ought to at least have a level playing field. In that regard, figuring out how to start prospectively collecting taxes on the fully improved value of the parcel immediately should help to reduce the incentive to sprawl.
This is not my idea, by the way. If the person who gave it to me wants named credit, I’m happy to add to the article.
More Reading on the Suburbs
Review: Retrofitting Suburbia
The Future of the American Suburb
Building Suburbs That Last Series:
#1 – Strategy
#2 – New Urbanism and Parcelization
#3 – The Mother of All Impact Fees
Would'nt it be great if there was tax assessment moratorium for properties in "blighted" areas within the city? I mean half the westside of Chicago is vacant empty lots on prime streets with mature trees and utilities already built. If we can freeze taxes for TIF funds than why not residential development? Wouldn't that tool do more than anything to resettle the abandoned areas of the city? Over a million people left the city between 1955 and 1990, many from the westside for DuPage County, imagine the revenue from increased sales taxes and eventual property taxes! Theres a few exurban suburbs worth of land between Western and Central Ave.
the urban politician says
I highly doubt taxes are preventing developers from building houses in those "blighted" areas on the west side. A more likely reason is crime, drugs, gangs, poverty, etc etc.
In the past 10 years plenty of development occurred in the city, it just didn't occur in areas dealing with the issues I mentioned above.
There has been some movement into East Garfield Park in the last five or so years.
Lower property taxes would be another incentive but wouldn't draw people from the exurbs. It would draw people who would be willing to live around poor minorities from elsewhere in the area.
And please "West Side"
It wouldn’t draw all the exurbanites but since many of the people moving to the exurbs are from the city, Polish and Mexicans looking for their first home, the dream, it may go long way in keeping folks in the city proper. Like the article said a policy to end arrears would help curb the type of mega sprawl Ive seen out west by Sugar Grove and conversely the suspended taxes on inner urban redevelopment could really help to. As for people fearing living amogst poor minorities, the concentration of poor people into an area with few jobs and plagued by gangs and social ills can could very well be mitigated via gentrification. Very few of the people living there own there property and rely fon absentee landlords ( slumlords?) that live out of state and collect section 8 vouchers. Allowing the market to rule could break the government slum system in place and for those who do own property the gains would be tremendous allowing them to certainly move into a new economic class, in other words, wealth creation. For those that dont own the options would be to move or take advantage of some of the new jobs created by resettlement and become renters.
The Urbanophile says
When run-down or vacant properties in the central city are redeveloped, they benefit from the same effect.