The Land Dollar – how we came to offer this as an option

We realised early on that imposing a land tax alone was politically well nigh impossible, even at half a percent. Raising it to the a full rental level would be harder.

a. The banks would block it. They hold the power because they issue mortgages backed by land.
b. The public wouldn’t like it because the value of their property would decline. This is unacceptable to those with big mortgages.
c. Property owners would argue they already pay rates and a mortgage so why should they have to pay a third time?

We realised early on that reforming the money system by spending money into existence to build infrastructure would result in rising land values for those with land near infrastructure. It would be difficult to control land inflation and hard to halt the march to further inequality.

Funding a full Basic Income is also a very tricky one.

During the summer of 2001-12 Deirdre had had a series of Skype calls with a Cambridge academic, the late Dr Adrian Wrigley. His solution was for The Treasury to cancel the mortgage and for a full land rental to be paid. The property would then have a covenant on it requiring owners to pay land rental to Treasury. No rates would then be payable. If the property was sold, the next owner would still have to pay that rental.

We only wanted the land to be bought/paid for, not the whole mortgage.

We soon learnt that using the preferred “covenant” idea was hard to explain to the public so we dropped it in favour of publicly owned leasehold land. However we started with a centralised model of public ownership and remained with that for almost 2 years. All the time we were a bit uneasy about land being owned by the central government.

Conversations .

Quite early on we decided that any work using only one currency became difficult. For instance, conversations about subsequent land value became convoluted and hard to resolve. So we recommended designing a second parallel (and competing) national currency, and link it from the start to completely new tax laws. Treasury not the Reserve Bank would issue the new currency to buy up land. We adopted Adrian’s excellent idea of having a Land Rental Index for each area and adjusting the rental each year accordingly. Only the land needs assessing not the improvements, so that is easy. And you only need a sample in each area.

Parity with the NZ dollar became a hot topic of debate. After discussion we eventually said “issue it at par, redeem it at par and let it float in between.”

The name of new currency changed many times – Tradeable Tax Credit, Treasury Note, Zeal and finally the Land Dollar. (We also went through a short stage of recommending Rates Vouchers for both Auckland and Christchurch.)

Then, in mid year 2014 we suddenly realised it didn’t have to be issued by Treasury at all. Eureka! It could be issued by Community Boards and flow upwards to central Government. We said ‘turn the funding model upside down, get rid of centralisation and restore local democracy’. We gave power to the local level of government – currency creation power, land buying power (compulsory where applicable), and revenue gathering power.

This would make it so the Community Board or its elected agent “owned” the land – a more politically acceptable solution. The local committee would have on it by right one or two people from the local iwi or hapu grouping, who would have veto power over any decision to buy land. Land would effectively go into a Community Land Trust. Land could be gradually taken out of the market place in this way and the people deciding which land to choose would be answerable to the locals. (Adrian had hoped it could be done voluntarily to avoid legislation and some will no doubt come in voluntarily)

A whole raft of tax laws applying to transactions using the new currency (the Land Dollar) would have to be passed right at the beginning. These would include all taxes on the rights to the use of natural monopolies. Natural monopolies are the rights to land, water, airwaves, minerals, fisheries, patents, domain names, hydro-electric power generation and supply, any public utility such as a port, airport or the monopolistic rights to reticulate wires, pipes, rails, roads and the like: the right to use water, air, land or the biosphere to absorb waste.

So what does the policy say now?

Our party wants to restore the concept of sharing the values of the commons, have a money system that doesn’t build in increasing debt, a growth imperative and competitive behaviour. We want to distribute the rent from use of the commons to all NZ citizens over one year old as a regular Citizens Dividend.
A new national currency the Land Dollar is to be slowly spent into existence at Community Board level to buy up land. No rates would be payable for those whose land is community owned. A local land committee would give local hapu/iwi veto power over decisions as some land may be sensitive even after Treaty settlements. The rent from the land would be shared with other levels of Government and as a Citizens Dividend – using participatory budgeting as there would be many simultaneous claims. Inflation would be controlled by a network of committees at different levels working with Treasury and Reserve Bank.
Transactions using the land dollar would attract no income tax, GST or company tax. But a whole set of different taxes is needed. This is because it must not be spent to plunder the earth, deplete resources, subtract from the social capital or pollute the water, air or biosphere. That means a full carbon tax for example.

For any currency to be effective as a means of exchange there has to be a circulation incentive built in. Adrian Wrigley suggested that rather than having a financial penalty built in for hoarding, to make it easier each note should be issued with an expiry date .

The electronic version when received by Treasury could be redated before issuing it as a Citizens Dividend. All citizens over one year old would receive it. Where there were dependents, the designated carer would receive it, thus changing the economic status of carers. In time this dividend would rise to a basic income, allowing a huge range of inventions and options for people who have been in unsatisfying jobs but have a passion or a hobby they want to pursue.

There are many unresolved issues. The property owner that has land bought with the new currency will have $100,000 plus to spend. Trades with the land dollar will not attract GST, income tax or company tax. We need actual examples, but believe a lot of it will be spent on labour to upgrade their homes or on the development of their small business.

We invite alternative solutions
We acknowledge this policy has been derived by discussing with a range of people at and between meetings and it has been largely driven by Deirdre, who has received feedback from meetings in Christchurch, Otaki, Wellington, Motueka, and two in Auckland at the Living Economies Educational Trust hui. This solution, we emphasise is one solution. If you have another, please present it!!
March 2015


The Tree issue in Titirangi is an example of why land should move to public ownership

11358921The architects who own the two Titirangi sections with the precious kauri and rimu trees on them should have their land bought by the Local Board and the rent should be reduced because of the restrictions they suffer in building, according to the New Economics Party.

Spokesperson Deirdre Kent said the tree issue in Titirangi is a graphic example of why land ownership should progressively move into public ownership. Local Boards should have power to create a second national currency to buy up community land. And if the use of the land is restricted because of historic building, conservation of trees or building height limits, the rent should be reduced as the part of the land already serves a public purpose.

The land rent should be in lieu of rates and the revenue shared by other levels of government.
She said if the Auckland Council (preferably the Local Board if it had the power) buys this land destined for low cost housing there will be four beneficial outcomes:
1. The trees can be saved
2. the housing produced will be genuinely low cost because the cost of the land will not be included into the cost of the housing
3. the citizens Auckland will enjoy a dividend from the land rental in perpetuity
4. The citizens of New Zealand will enjoy a more bouyant economy as lower cost of housing results in lower mortgage payments therefore less interest payments and less bank profits streaming across the Tasman to Australia.
“The financing of land purchase on a large scale is eminently possible. It is only political will that is needed to create a second national currency that can be spent into existence through land purchase by councils,” said Ms Kent

For further comment phone Deirdre Kent 06 364 7779 or 021 728 852


What has Precinct Properties buying public land to do with hungry children in our schools?

Anyone notice that 20-22% of schoolchildren in New Zealand are hungry every day? What has this to do with the recent sale by Auckland Council of the most valuable property in the country to a private company, Precinct Properties?

Well, plenty. Let me explain. If Mayor Len Brown had played Monopoly enough as a kid he would know that the way to get rich is to buy properties. Well, read “buy land” actually. When a representative of Precinct Properties spoke on National radio tonight he was open when he said, “Our emphasis is on owning land freehold” Of course. “Freehold” means “free of rent”. How nice.

So instead of leasing the land to a developer, the Auckland Council has sold 2 acres of the most valuable land in the country and thinks it has done a deal. But the “deal” is really Precinct Properties 100: Council 0. Precinct Properties knows it because they know the City Rail Link is about to start and the uplift in land value is theirs to capture – and other land owners near the hubs.

It is not news that land near rapid transit hubs will rise in value. When the Jubilee Line Extension was built in London in the late 1990s, it was discovered that the uplift in land values of properties within 1000 m of a hub was £13 billion. The cost of the extension was a mere £3.5 billion. Yes, that means private landowners get windfall gains from public expenditure. The public loses all round and windfall gains are all privately collected by “freehold” land “owners”. Nice. Thanks!

7215470It’s not a coincident the sale happened right now. Auckland Council was busting to start the link but delays were frustrating them. Imagine the Precinct Properties smooth talk to gullible Mayor Len Brown: “If you let us buy the QE11 Square we will build a wonderful new building and attract huge expansion in Auckland. It will also enable you to start the City Rail Link.” “Wonderful” says Len. And he thinks: “Just what I want. People will remember me as the one who got the City Rail Link and did so much for the development of Auckland.”

Of course there will be development. The start of the rail link is just what landowners near the City Rail Link hubs are hanging out for.

Our party says clearly we need more land in public ownership, not less. In fact there should be a law against selling public land. If the government or council want to have land utilised it should lease the land never sell it.

OK, that is at the moment dreaming, as all the momentum is exactly in the other direction.

But there is a partial and realistic solution – get land owners round the area to share part of their windfall gain with the council so the council can gradually pay off the loan to build the link. It can be done through targetted rates under the law. Targetted rates are used extensively by Wellington Regional Council and by almost every council. It is only a fraction of the windfall gains in land value that is targetted. And this is politically acceptable. People understand that they should share their gain with the public purse. If a landowner benefits from public spending they should pay higher rates. Spread over 20 years, it will pay a significant proportion of the cost of the City Rail Link. The Sydney Harbour Bridge and the Melbourne Rail Link were partially funded this way. The process is called Land Value Capture and it exists in various forms all over the world.

So what has this got to do with hungry children? Remember the Campbell Live recently showed that of one class of 28 Year 11 students at Decile 2 Kelson Girls College, 18 of them didn’t have lunch and ten came to school with no breakfast. 8 had no breakfast and no lunch. “Many students are needy. Their parents are really struggling to make ends meet,” said the school principal.

When people and businesses with the most valuable land (think central Auckland) have a windfall rise in land value, money that rightly belongs to the whole public flows into the coffers of the land “owners”. Businesses like Precinct Properties. Of course the propaganda is that it is owned by mums and dads, yes very wealthy mums and dads, but mostly big investors like insurance companies and pension funds. Calculations earlier show that every year the public is deprived of something like $37 billion through the uplift in land values that occurs with development. A real estate agent last week told a friend in Howick that values there were rising by $15,000 a month and he could see no end to it.

Yet the “mums and dads” of the Year 11 students at Kelston Girls College are paying rates or rents and often catching buses to work two jobs. Mostly they will be renting. They won’t be getting any unearned windfall from uplift in land values. That is how people get rich, not by working. Wherever you find a really rich person or company you will know they are landowners who have received unearned gains from rising land values.