Arden, Del., is only a half-mile off Interstate 95, but it feels a century removed and an ocean away from modern America. Half-timbered cottages and Arts & Crafts bungalows hide behind dense hedges on Arden’s narrow lanes, some of which are named, like the village itself, after places in Shakespeare’s plays. The main axis, cutting diagonally across the 162-acre tract, has a community center and Gild Hall (really) at one end, a 1,000-foot-long green and outdoor theater at the other. There is an old craft studio, now run as a museum, and a section known as “Little Arden,” which once housed artisans who worked in the studio, the forge, and the weaving shop. If William Morris hadn’t died in England in 1896, but had lived and boarded a steamer for Philadelphia, this is the utopian colony he might have started.
Morris was an inspiration for Arden, but its guiding light is revealed by a marker that sits next to a park just outside the village limits: Henry George Memorial Green. A journalist and political economist, and one of the most influential thinkers of the late 19th century, George wrote a book, Progress and Poverty, that sold millions of copies after it was published in 1879—more than any American book to that date, according to some estimates—and made its author a lecture-tour celebrity, a TED talk luminary of the Victorian age. George even ran for mayor of New York in 1886, coming second to the Tammany Hall candidate and earning more votes than the Republican, Theodore Roosevelt.
George’s main insight was that land and capital are inherently different, so society must treat them differently. “[T]here is a fundamental and irreconcilable difference between property in things which are the product of labor and property in land,” he wrote, arguing “that the one has a natural basis and sanction while the other has none.” An industrialist may build a factory on his land, and have a legitimate claim to the profits from its operation, according to George. But the land itself derives its value from scarcity—the supply of land is finite—and not from anything a landowner does. Therefore any profit from the land itself is unearned and belongs by right to the public.
George attributed to private land-ownership the unfortunate paradox that rents were always rising in cities but not wages. That was why, he argued, material progress (referenced in the title of his treatise) had not eliminated poverty, as one might expect, but had actually contributed to it. George believed the only answer was to make land common property. As a capitalist reformer rather than a Marxist revolutionary, however, he did not advocate seizing private lands. “[R]ecognition of the common right to land involves no shock or dispossession,” he wrote, “but is to be reached by the simple and easy method of abolishing all taxation save that upon land-values.” The single-tax movement was born.
By the time George died in 1897, his acolytes had already put his ideas into practice. Three years earlier, 28 Georgists founded the colony of Fairhope, on Alabama’s Mobile Bay, “to establish and conduct a model community or colony, free from all forms of private monopoly,” as their constitution read. The group bought acreage along the shore and held it in common, doling out 99-year leases to new arrivals. Arden, founded in 1900, followed the same model, attracting a host of nonconformists, including the writer Upton Sinclair and the socialist activist Ella Reeve “Mother” Bloor. Arden was successful enough to birth two adjacent spin-offs, the villages of Ardentown (1922) and Ardencroft (1950).
“Why Henry George Had a Point”
For much of recent memory, there has been little in the way of single-tax inspired community building or policy-making. But now Georgism seems to be back. In March 2015, Peter Orszag, who was the director of the Office of Management and Budget under President Barack Obama, wrote a Bloomberg op-ed titled “To Fight Inequality, Tax Land.” The next month, The Economist—hardly an organ of radical policy proposals—ran a story headlined “Why Henry George Had a Point.” Both articles sprang from a paper given by Joseph Stiglitz, the Nobel Prize–winning economist, arguing for a land-value tax. More recently, some activists in the pro-growth YIMBY movement have taken up the banner of the land-value tax, or LVT. And the Labour Party made LVT part of its platform in the U.K.’s general election in June, a proposal that Conservative Party opponents assailed as a “garden tax” that “could force homeowners to sell off their family gardens to lower their bills.” Over the years, however, LVT has attracted supporters from across the political spectrum, from Winston Churchill and Milton Friedman to John Dewey and Clarence Darrow.
The resurgence of Henry George shouldn’t come as a surprise, given how property values have skyrocketed past average incomes in many countries, resulting in punishingly high house prices and rents from Vancouver, B.C., to Sydney, Australia. In the U.S., rental income as a share of GDP hit a new peak in early 2017: There are now only 12 counties in the entire nation where a minimum-wage worker can afford a one-bedroom apartment priced at market rate. Home ownership increasingly defines the divide between the haves and have-nots. There are clear parallels with the Gilded Age context in which George was writing (and some clear differences—for one thing, land ownership is more broadly distributed now than it was then).
Arden as LVT Case Study
So what does a Georgist city look like? In late May, I sat down with Jeffrey Politis, Arden’s current town-assembly chairman, in the dining room of his bright Cape Cod, overlooking a backyard with a treehouse worthy of a children’s novel. We were joined by Mike Curtis, a lifelong resident of Arden and committed Georgist. (Politis, an engineer, moved to the village in 1999 knowing little about George or LVT.) Together they showed me how LVT is applied in Arden, which now has a population of about 450 and a median house price of $319,000. Impressively, the village has maintained its system of common land ownership and 99-year leaseholds for more than a century. Each leaseholder pays annual land rent to a trust. The amount depends on the size of the lot, ranging from roughly $2,000 to $7,000. Since Arden doesn’t provide all its own services, most of the land rent goes to New Castle County for schools and roads—the trust pays residents’ property taxes—although some of the money covers Arden’s own costs of trash removal, tree trimming, and the like.
Every year, residents elect seven assessors who decide how to levy rates on the 197 leaseholds. And every year, Politis and Curtis say, it’s a difficult task. The real-estate market may indicate the value of a given lot, but what portion of that amount reflects the value of the land alone? In urban and suburban areas, there are few remaining unbuilt parcels of land, so there are few comparable properties. Should leaseholders close to the village green pay more for proximity? Access to open space is an advantage—except when it’s not; in the 1970s, the green was a haven for drug use, and assessors and residents once battled over what that meant for their land rent.
Is Arden more or less desirable than other communities nearby? Politis and Curtis said they weren’t sure, and they didn’t think that the land-rent system was much of a factor, anyway. “People who want to be in Arden, want to be in Arden,” Politis said. He added that leaseholders treat their properties just like regular homeowners. Both men agreed that the high ratio of open space in Arden (it comprises almost half of the total land) is a big part of its appeal. In part because of the extensive park maintenance, Curtis estimates that leaseholders pay about 20 to 25 percent more in land-value taxes than landowners pay in property taxes in nearby towns. The community in Arden has nevertheless remained protective of the village green and woods, and Curtis attributes that to the underlying philosophy of common ownership. “What land rent encourages is subconscious,” he said.
In fact, Arden doesn’t look anything like it should, at least in theory. Economists believe that LVT is superior to a property tax because the latter disincentivizes owners from improving a property, while the former might encourage them to make the “highest and best use” of their land, given that it is taxed at the same rate regardless of what stands on it. In other words, LVT should encourage higher density because of owners building up and adding structures to lots. Meeting the demand for urban housing with ramped-up construction would help keep rents and home prices in check, and could rein in urban sprawl, since fewer home-seekers would be pushed to the margins of a city. Developers who “bank” land, purchasing it and waiting for some future time to build, would possibly be nudged by a land-value tax to hurry up and get started. On paper, at least, the LVT city sounds like the kind of hyper-urbanized place that Ed Glaeser and Vishaan Chakrabarti, AIA, dream about.
Arden, however, despite various outbuildings here and there, didn’t seem any denser than other towns dating to the same era of early suburbanization, like Takoma Park, Md. One reason why: the village is subject to county zoning. A leaseholder who wanted to build, for example, a small apartment building on his or her lot, with a café on the ground floor, would bump up against the county’s “Neighborhood Conservation” zone, which “protect[s] the residential character” of all the Ardens. As it turns out, reconciling a local Georgist tax paradigm with county, state, and federal laws and taxes is no easy task.
Putting LVT into Practice
Still, many municipalities have adopted some form of land-value tax. In Pennsylvania, 15 or so jurisdictions collect LVT, paired with property taxes, in a dual-tax model. A standalone LVT carries political risks, since it could hit the land-rich and income-poor—taxpayers more likely to be elderly—the hardest, unless some mechanism corrected for that. Pittsburgh has gone the furthest of any major city in the U.S., phasing in a dual tax in the early 20th century and then, in 1974, raising the land-tax rate to 3.9 times the rate on buildings. The system fell apart in 2001, however, after a dysfunctional assessment process caused rates to spike, outraging homeowners.
“Proposals to tax land values more heavily than improvement values can find support in both historical experience and economic theory,” wrote the economists Richard F. Dye and Richard W. England in a 2010 report on land-value taxation published by the Lincoln Institute of Land Policy. Yet there is little hard data to predict exactly what would happen if a city like San Francisco or New York adopted LVT, in part because there are so many variables to consider: How the rate would compare to the property taxes of nearby municipalities; how land values would be assessed; how much public revenue the LVT would raise compared to the prior system; what the local zoning laws are; and whether the LVT is tethered to a property tax or supplants it entirely.
If implemented successfully, LVT would clearly be a boon to architects. A land-value tax would stimulate construction and soften or remove the disincentive to construct higher-quality buildings that currently exists under the property tax system. Perhaps it’s no coincidence that one of the co-founders of Arden was an architect: Will Price, who laid out the village and designed several buildings there. Price also designed the fanciful and now-demolished Marlborough-Blenheim Hotel in Atlantic City, N.J., the largest reinforced concrete building in the world when it opened in 1906.
George’s Missed Opportunity
After we had finished talking, Curtis offered to take me for a ride in his 1929 Model A. (I asked him if he’d restored it himself: “At my age, I don’t have the time for that,” he quipped.) As we slowly rumbled along the lanes in the open air, he told me about his life, pointing out the old swimming pool where he spent childhood summers. Curtis grew up in Arden. His grandparents moved from Fairhope in 1911, on the instructions of his grandmother’s doctor, for the cooler climate. His grandfather was a fervent Georgist and a close associate of the man himself, and was at his bedside when George died of a stroke a week before his second attempt at becoming mayor of New York—an election that Curtis believes George was poised to win. If he had, everyone might already be paying land rent.
Curtis says he is frustrated that attempts to realize George’s idea have stalled out. “Out of all the developments that have been founded since Arden,” he asked, “why didn’t more of them try it?” Perhaps, finally, more of them will.