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| 29 Oct 2026 | |
| Equity + Justice |
| Housing Committee |
By Aaron Bell, AIA Philadelphia Housing Committee
On September 8, 2026, the AIA Philadelphia Housing Committee gathered to explore a tax policy gaining renewed attention in land use and urban development circles: the Land Value Tax (LVT).
Why should architects care about tax policy? Zoning tells us what may be built on a site; tax policy helps determine whether it is financially feasible to build at all. To unpack one idea at that intersection, the committee invited guest speakers Josie Faass (Executive Director of the Progress and Poverty Institute), Russell Richie (Director of Strategy and Impact for the Progress and Poverty Institute), and Joshua Vincent (Executive Director of the Center for the Study of Economics) to discuss LVT. The meeting drew 60 members eager to learn about an approach that is unfamiliar to many, though far from new. The idea dates to the nineteenth century, most famously to Henry George's Progress and Poverty (1879), and versions of it have been adopted, debated, and in some cases repealed in Pennsylvania municipalities for more than a century.
Figure 1. The Henry George Birthplace at 413 S. 10th Street in Philadelphia, where the author of Progress and Poverty was born in 1839.
This primer summarizes the ideas discussed, the case advocates make, and the questions that remain open. It is intended as a starting point for conversation, not a verdict.
A land value tax is a tax on the value of land alone, not on the buildings or other improvements on it. Two parcels of the same size, in the same location, with the same zoning would owe roughly the same land tax, whether one holds a surface parking lot and the other a twelve-story apartment building.
The idea has a long history in economics. Economists since Adam Smith and David Ricardo have observed that because the supply of land is fixed, taxing it does not reduce how much land exists. Taxes on buildings, labor, or investment, by contrast, tend to discourage the very activity being taxed. For this reason, supporters often describe LVT as one of the least economically distorting ways to raise local revenue.
In practice, most places in the US that have used LVT have done so in a partial form known as a split-rate (or two-tier) tax, which taxes land at a higher rate than buildings rather than exempting buildings entirely.
Figure 2. Conceptual illustration: how a typical property tax and a land value tax treat two neighboring parcels with the same land value.
A land value tax begins with a fundamental question: What creates property value, and how should it be taxed? Consider a vacant parking lot or an underused single-story building on a busy commercial corridor next to a SEPTA station. Is it valuable because of what the owner has built on the site, or because public investment brought transit, utilities, commercial activity, clean and well-lit streets, and an educated workforce to its doorstep? The answer is both, and the distinction matters.
A property’s value has two parts. The building reflects what the owner invested. The land reflects location: transit, utilities, nearby commerce, safe streets, an educated workforce, most of it created by the surrounding community and public investment. A land value tax falls only on the second part, returning a share of publicly created value to the public while leaving the owner’s own investment untaxed.
A familiar rule of thumb in economics is that whatever you tax, you get less of. Most property tax systems tax buildings along with land, so the more an owner invests in a property, the more they owe. If a client invests in higher-quality materials, sustainable systems, or thoughtful design, the assessed value of the improvement rises, and so does the annual tax bill. Advocates argue that, over time, this produces fewer and more modest improvements.
The same structure works in the opposite direction for land that sits idle. Because a vacant or underused parcel is taxed lightly, the cost of holding it while waiting for surrounding values to rise is low. Advocates argue this rewards speculation and keeps well-located sites off the market, contributing to an artificial scarcity of developable urban land.
Shifting the tax from buildings to land, proponents contend, reverses both incentives: owners are no longer charged more for building better, and holding valuable land idle becomes more expensive. The expected result, they argue, is greater pressure to develop or sell underused parcels, particularly along transit corridors where public investment has already raised land values, supporting the kind of transit-oriented infill that current zoning often already permits.
Figure 3. The incentives LVT advocates describe under each approach.
In Philadelphia, conversations about housing production and tax policy have long centered on the 10-year property tax abatement. Heralded by many as one of the most successful bipartisan policies of its era, it is widely credited with helping spur a generation of development, and proposals to extend or restructure abatements periodically return as a way to encourage the next wave of construction. For architects navigating market cycles, tools that unlock future project work are understandably appealing.
Some policymakers have described the abatement as a scalpel rather than a cure: a precise instrument that addresses an immediate condition but does not change the underlying one. When the abatement expires or is scaled back, the pressure returns, and the patient finds itself back in the operating room every 10 to 15 years.
LVT advocates make a related argument. In their view, abatements are needed in the first place because most municipal tax codes tax improvements. Rather than offsetting that penalty temporarily, they propose removing it structurally, and they point to two potential effects:
Untaxing Construction by Design. Instead of providing a temporary abatement, advocates argue, shifting the tax onto land would reduce the tax on new construction and renovation on an ongoing basis. Developers could assess project feasibility knowing their tax liability would not spike simply because they invested capital to build new multifamily housing or rehabilitate an aging property.
A Uniform Playing Field. Supporters also argue the approach could reduce the need for specialized exemptions, which often draw public criticism as developer "giveaways." Under LVT, they contend, the tax burden would fall most heavily on owners of high-value, well-located land that is not being put to productive use.
Whether a land tax shift would serve a city's long-term fiscal health better than abatements is a question that deserves careful analysis. The abatement's effect on Philadelphia's tax base has been debated for years, and any alternative, including LVT, would need to be modeled for revenue stability and for its effects across neighborhoods and property types.
Pennsylvania has more experience with land value taxation than any other state. Pittsburgh used a split-rate system from 1913 until 2001, and more than two dozen Pennsylvania municipalities have used blended land and building tax rates to varying degrees. Allentown, which adopted a two-tier system in the late 1990s, is frequently cited by advocates as a success story. Researchers continue to debate how much of the development seen in these places can be attributed to the tax structure itself, and several municipalities have rescinded their split-rate systems over time.
Figure 4. Selected milestones in land value taxation in Pennsylvania.
Philadelphia has considered the idea before. An earlier push in the 2000s met resistance, including from owners of large surface parking holdings. Advocates suggest the conversation has new relevance today as city-building priorities shift toward transit-oriented development, bike networks, and human-centered streets, a marked contrast to the mid-century urban renewal era that cleared large areas of cities to accommodate the automobile.
Accurately valuing land separately from buildings has historically been a practical hurdle. Proponents suggest that advances in open data, mapping, and mass appraisal tools now make this more achievable than in the past.
As with any significant change to a tax system, LVT raises questions that merit close examination before any implementation:
Given the complexity of overhauling a city's tax code, the presentation sparked a lively conversation among AIA members. Below is how the panel addressed several of the questions raised during and after the session.
Q: Where does the Use & Occupancy tax fit into this?
A: LVT advocates like us generally don’t think U&O is a good tax. It’s a tax on labor/capital, so it discourages work and investment, and is especially challenging for small businesses. Our ‘dream’ reform is to reduce all taxes on labor and capital (the wage tax, BIRT, etc.) and make them up with taxes on land (see, for example, this recent working paper suggesting that replacing the wage tax with a land tax would bring 26-78k jobs from the suburbs back to the city, depending on building supply elasticity, incl. zoning). As a more practical, incremental matter, LVT advocates like us generally focus on replacing the tax on buildings with a tax on land; this is easier to model than other tax swaps, and the shift stays within the city’s property tax base (unlike the wage tax, which suburban commuters also pay), so it is easier to model and the politics are more straightforward.. If we got “cut building tax, raise land tax” passed, then we would almost certainly be interested in advocating for reducing U&O, wage, BIRT, and making them up with land.
Q: Would this yield any concerns to lower income communities of color that are already worried about gentrification? In some ways I think no because building improvements wouldn't yield greater taxes but if many new developments are happening in a neighborhood, would this economically push out existing homeowners?
A: We agree that it’s important for people to be able to stay in the places they put down roots, and we think that LVT helps with this. First, cutting taxes on buildings, and raising them on land, means a tax cut for most property owners, and our models show that this cut is progressive by race and income. So LVT would help with the tax burden the minute it was implemented. Second, shifting taxes from buildings to land would increase housing supply, which would lower housing costs and rents over time. LVT would therefore make it easier for everyone who wants to live in a neighborhood, to actually live there. Constraining supply so it can’t meet demand, especially from (existing) lower-income residents, is what causes gentrification and displacement.
Q: Would LVT make existing owners oppose upzoning, since it would raise their land tax?
A: Typically, we want to upzone land because allowing more businesses and residents to share expensive land will enhance affordability. Unfortunately, when land is upzoned, it becomes more expensive, thwarting the intent of the upzoning. The land value increase becomes a windfall to the landowner and encourages more speculation. If we shift the tax off of buildings and onto land, then publicly-created land value is returned to the community. This reduces land price inflation and helps keep land prices more affordable. Thus, the Tax Shift is very compatible with upzoning.
We agree Philadelphia needs upzoning in addition to LVT, and the two policies work best together. Upzoning on its own tends to raise land values without producing much housing: owners capture a windfall and can hold out for more. A land tax is what turns zoned capacity into built capacity, by making it costly to sit on a newly valuable site.
Aaron’s concern is real but smaller than it looks. An upzoning does raise land values, and under LVT the tax on that increase is larger than today (today’s assessments rise too, just at a lower rate). But the tax takes only a share of the gain, so an upzoned owner is wealthier, not poorer; the issue is cash flow for owners who want to stay, and the fix for that is deferral or a phase-in, not abandoning either policy. The biggest land-value jumps from upzoning fall on parking lots and assemblable sites, not on rowhouse lots where the existing house remains the best use, so most of the added tax lands on exactly the parcels the policy is meant to move.
LVT also changes the incentive for the body that decides zoning. Today the city gains revenue from upzoning only when buildings go up, and with the abatement not even then for a decade. Under a land tax, the base grows the day zoning changes, so Council and the budget office gain a direct reason to upzone, and every other neighborhood gains a stake in a bigger base and a lower rate.
A Final Note on Education: Here’s one final thing we would emphasize, related to some of these comments. Education is, as we briefly mentioned in the talk, absolutely paramount to any successful and durable LVT reform. Where LVT has been rescinded, it has generally been a result of low understanding of LVT, how it interacts with systems like zoning, etc. King County in Washington state, for example, has a good program of town halls that engage with faith communities about the tax system. That could be a model for education during and after any LVT reform.
Architects are often among the first to see how policy plays out on an actual site: in feasibility studies, in pro formas, and in value engineering decisions about what stays in a project and what gets cut. That vantage point gives the profession a valuable perspective to bring to policy conversations. The goal is not to champion a particular outcome, but to understand how fiscal policy shapes the built environment and to help clients, communities, and decision-makers weigh the tradeoffs.
Interested in learning more or have questions? The AIA Philadelphia Housing Committee welcomes your questions and will continue exploring this and related topics in future programming. Reach out to the committee, review the resources below, or connect directly with our guest speakers, who have generously offered to continue the conversation.
Guest Speakers:
Meeting Resources:
