Land Tax Helped Rebuild San Francisco

April 30, 2006
Column By TOM CANDON

Now that we've observed the 100th anniversary of the great San Francisco earthquake, it might behoove us to ask how the city by the bay was rebuilt so quickly.

University of California economist Mason Gaffney says in an article in Dollars & Sense magazine that it wasn't a foregone conclusion. The city had few assets in 1906. There were no grand bridges. Oakland has better rail and shipping connections, and the Panama Canal was unfinished. There was no local oil supply or easy mountain passes to the east, as in Los Angeles. There was no state or federal aid to speak of. The city was a tad hilly.

About all a razed city has is land. A reform mayor, Edward Robeson Taylor, taxed it. He raised the assessment on land to replace the part of the tax base - the buildings - that had been lost in the quake and fire.

Taylor was a colleague of the economist Henry George, who pioneered the land tax idea. The thought was that taxing land would encourage owners to get the most out of the land by building on it, or selling to someone who would. According to Gaffney, it worked in San Francisco.

The city's credit was quickly restored, and it began borrowing to rebuild infrastructure. The population grew by more than 20 percent in each of the next three decades. By 1930 it was the 10th-largest city in the country, achieved without expanding its land base, as Los Angeles had, or compromising its parks. It was more dense than any city except the borough of Manhattan, and on its way to becoming the economic, cultural and tourism center of the Pacific Coast.

Gaffney's article was aimed at the rebuilding of New Orleans, but it's got a message for other cities, including ours.

There's a bill before the General Assembly that would allow Connecticut cities of more than 80,000 souls to implement a split-rate property tax system in which land could be taxed at a higher rate than buildings. We now do it the other way around: Hartford buildings are taxed about three times more than the land on which they sit.

Late last week it appeared that the bill wouldn't make it, which is unfortunate. Cities should have the option to try the land tax. If nothing else, homeowners won't be penalized for fixing up their properties. The idea also promotes what ought to be a principal planning goal in the state - carefully increasing density in city and town centers and along transit corridors. This would encourage affordable housing, which in turn would help the economy.

Connecticut lost 132,000 people between the ages of 25 and 34, nearly 23 percent of the total, between 1990 and 2000, according to census figures. A major reason the young adults are looking at Connecticut in the rear view mirror is that they can't afford a house here. A blue-ribbon commission in 2000 said the state was short 68,000 units of affordable housing, a number that almost assuredly has risen, because housing prices have increased 60 to 80 percent since 2000, while wages have gone up 13 to 15 percent.

The response of state developers to this need has been to build suburban McMansions and lots of over-55 "active adult" housing. In other words, we've been serving the people preparing to leave the workforce, not those who want to enter it.

Much of the attractive 19th-century housing in Hartford was built as worker housing. Industrialists such as Sam Colt and Albert Pope understood that if they didn't build housing for their workers, the machinists and assemblers would have no place to live.

Connecticut is getting to that point again.

Let's say we put 5,000 housing units in the town centers along the New Haven-Hartford-Springfield rail line, and reintroduced good commuter rail service. Workers who chose to live near the train would not have the expenses of long-distance auto commuting (gas is how much a gallon?). They would provide the ridership that would lessen the rail subsidy. They would get the advantages of city living. They wouldn't be late for work every time a tractor-trailer jackknifes on I-84. At the other end, there would be less pressure to develop what's left of the farms and forests in the state.

What Henry George and his friend Mayor Taylor understood is that people respond to incentives. New York City school officials just announced they will offer housing subsidies of up to $14,600 to entice new math, science and special education teachers to work in the city's most challenging schools. Yale University has spent more than $13 million on a program helping employees buy houses in the city. The split-tax idea is another incentive.

If we understand where we want to go, it isn't that hard to get there. San Francisco did.