A Better Way To Tax Property? Minnesota Moves To Let Cities Decide
Most of today’s property tax systems discourage productive use and reward decline, leading buildings like this one to be left vacant. (Source: relux. on Flickr.)
Citizen advocates across the country are asking the same question: If taxes keep going up and services keep going down, why are there so many empty lots, vacant buildings and underused properties in our neighborhoods? The answer lies in how we tax property — and how that tax system discourages productive use of land while rewarding neglect.
Under most property tax systems today, the more a property owner invests in a building, the more they pay in taxes. Conversely, those who leave their land vacant or their buildings neglected often pay less. This creates an incentive to speculate — to hold land and wait for others to invest nearby so the value goes up — without doing anything to improve the site. That’s how we end up with decaying buildings, disinvested neighborhoods, and tax bases that can’t keep up with infrastructure costs.
Minnesota is now considering a commonsense alternative. A new bill, HF161, would allow cities to adopt a Land Value Tax — a better way to tax property that encourages productive use of land instead of speculation. The bill would give local governments the option to shift property taxes away from buildings and onto the underlying land value. That means property owners would no longer be penalized for improving their buildings, and those who leave land vacant in high-demand areas would pay more.
As Christian Cardenas recently wrote in the MinnPost, this approach could transform how cities like Minneapolis deal with vacant buildings and empty lots: "By discouraging speculative holding and promoting productive development, it helps stabilize housing costs — and when paired with affordable housing initiatives or rent stabilization policies, it offers genuine protection against displacement."
Strong Towns released a video in 2019 called "Thank You from a Land Speculator," which illustrates how the current property tax system discourages investment and leads to stagnation. In contrast, a land value tax realigns private incentives with community goals by encouraging property owners to make better use of valuable land.
And for those of you interested, a very early Strong Towns video (2012) breaks down the mechanics of a land value tax in a way that has held up well over time.
The current system isn’t working. Services are getting cut, infrastructure is falling apart, and cities keep chasing high-risk, low-return growth to balance their budgets. A Land Value Tax is a powerful tool for making better use of the land we already have.
If you're a local advocate looking for change, now is the time to start this conversation.
Buy a copy of "Strong Towns: A Bottom-Up Revolution" to dive deeper into how a land value tax fits into a more productive, prosperous model for cities. And if you're ready to bring this conversation to your community, get in touch with Strong Towns. We're here to help.
