In 1943 the Canadian land economist H. Bronson Cowan, director of the International Research Institute on Real Estate Taxation, visited Melbourne to conduct research in the municipalities of Brunswick and Camberwell. His techniques inspired a number of local professionals to form the Land Values Research Group (LVRG).
Under its founding director, Allan R. Hutchinson BSc MIEAust (1907–1988), the LVRG published world-leading empirical studies demonstrating that site-value rating — the imposition of municipal rates on land values alone, exempting the value of buildings — is more conducive to economic growth than systems that include buildings as the tax base.
Expressed in qualitative terms, that conclusion is obvious: taxing buildings deters construction and consequently impedes the industries that lie upstream or downstream of construction or require accommodation for workplaces and workers. In other words, it impedes the whole local economy. On the other hand, taxing the value of land cannot reduce the supply of land, because neither the land, nor its value, is produced by the owner.
Hutchinson’s contribution was to quantify the economic damage done by taxing buildings, which is the flaw in property taxation.
By 1994, forty Victorian municipalities had voted in favour of the site value rating system whilst twenty-three remained operating under net annual value rating, most of the latter on the purported premise that rating on unimproved land values penalises the elderly.
However, unlike Queensland and New South Wales which have accepted the results consistently demonstrated by the LVRG and international studies, every Victorian municipality has been brought to operate under rating on improved values. Unilateral government action had ignored all the municipal rating polls in Victoria between 1920 and 1992 where voters actually chose unimproved land values as the superior revenue base.
So the question must be asked: who benefits from this curious retrogression? LVRG studies provided below show that it is the holders of vacant land and under-developed real estate who mostly benefit.
Under Hutchinson’s leadership, the question of the relative advantages between rating improved or unimproved values has been resolved in favour of site value rating.
On his death in 1988, Hutchinson was succeeded by Bryan Kavanagh. As a professional property valuer and a student of Georgist economics, Kavanagh knew that the land market is characterized by bubble-burst cycles and that the bursts are followed by recessions in the wider economy. On this basis he had predicted, in an article published in The Valuer in July 1987, that the next recession would be in 1991/2. This was correct to within one year.
Seeking a reliable method of diagnosing a land bubble, Kavanagh began aggregating statistics on property turnover in the several Australian States since 1972, and eventually noticed that whenever the turnover exceeded 19% of GDP in a nationwide trend, and then returned below 19% (as it always did), recession followed within 2 years. He concluded that the ratio of property turnover to GDP is a veritable barometer of the economy, and that a ratio exceeding 19% indicates an economically damaging bubble. He is therefore unimpressed by the Greenspan doctrine that one cannot recognize a bubble until it bursts. Australian real estate re-entered bubble territory, according to Kavanagh’s criterion from 1996. As Kavanagh wrote in May of 2007,
The volume of debt contained within the height and breadth of the recent residential bubble offers a strong degree of confidence to suggest that Australia will experience a severe economic recession within two years of the graph retreating back below the 19% bubble line.
Kavanagh received copious but tragically brief assistance from the late Tony O’Brien, whose landmark study “Land Monopoly and Income Polarisation in Australia 1950 to 2000” (Progress, September-October 2001) was published six months before his untimely death.
Kavanagh also blogs at The Depression.
The late Philip Day, LLB DipTCP PhD, was the principal author of the LVRG’s submission to the 1996 National Tax Reform Summit. In 1997/98, the LVRG sponsored the “National Tax Reform Challenge”, offering a prize for the best attempted refutation of that submission. Among the unsuccessful contestants but whose submission was an excellent one was Gavin R. Putland, who, like Hutchinson, came to the study of economics from an engineering background.
Putland was hired by Prosper Australia in 2003. As Communications Officer and later as Research Officer, he was the author of numerous submissions, “talking points” and “working papers”. In 2008 he officially assumed the LVRG directorship, which was merged with his role as Research Officer, thus formalizing the arrangement that the LVRG is the research arm of Prosper Australia, and making the LVRG directorship a paid position for the first time.
Putland’s early priorities included raising the profile of the LVRG (especially as regards its forecasting of the present economic crisis) and identifying further land-based statistics that can serve as “barometers” of the wider economy.
In December 2013, the directorship of the LVRG returned to an honorary position, with Putland remaining director.
Inspired by LVRG studies, the Prosper Australia Research Institute, established in 2014, has largely overtaken the LVRG research role in this much-neglected area of study.
LAND VALUES RESEARCH GROUP publications since 1943
Books and other
1.1 Footscray: Social Effects of Municipal Rating 1944-45 (73 pp) Study conducted to find the social effects of a change of the rating system from annual rental value basis to the unimproved capital value. 56 photographs and a statistical appendix. Footscray part 1 – Footscray part 2 – Footscray part 3 – Footscray part 4 – Footscray part 5 – Footscray part 6 – Footscray part 7 – Footscray part 8 – Footscray part 9 – Footscray part 10 – Footscray part 11 – Footscray part 12
1.2 Fitzroy: Report on Reclamation of an Industrial Suburb 1947-48 (60 pp) A study made in the industrial-residential former City of Fitzroy at the behest of council, to obtain information on the extent to which a change to site value rating would help regenerate blighted areas. 96 photographs and statistical appendix. Fitzroy part 1 – Fitzroy part 2 – Fitzroy part 3 – Fitzroy part 4
1.3 Shopping Centre Survey 1956-1958 (l2 pp) Comparisons of retail business centres and their degree of modernisation or obsolescence in towns of various sizes, according to municipal rating system. Reprinted from “The Valuer” July 1959.
1.5 Public Charges Upon Land Values in Australia 1963 (48 pp) Study of the effects of local government rating systems and land taxes on the social and economic development of the Australian States – with graphs and charts.
1.6 Considerations of the Merits of Site Value Rating 1964 (6 pp) HJ Manning in “The Valuer” July 1964
1.7 Should local government rates be based on ‘improved’ or ‘unimproved’ values? 1968 (20 pp) Digest of submissions to the 1966 NSW Royal Commission into Local Government Finance and Rating of Land.
1.9 Land Rent as Public Revenue in Australia part 1 (47pp) Centenary Essays No. 3 published by the Economic and Social Science Research Association, London 1981.
1.10 The Recovery Myth 1994 (20 pp) A counterfactual, employing analysis of total Australian real estate sales, suggesting there can be no real economic recovery until the depressionary phase of the current Kondratieff Long Wave Cycle has played out.
1.11 The Coming Kondratieff Crash 2001 (10 pp) Analysis of Australian total real estate sales, published in the British journal Geophilos, indicating the probability of a slowly-emerging financial collapse. May Australia be a proxy for other nations?
1.12 The Taxable Capacity of Australian Land and Resources 2003 (47 pp) A time series analysis of Australia’s land and resource rents by Dr Terry Dwyer demonstrating they could replace personal and company income taxes. Published in refereed academic journal Australian Tax Forum.
1.13 Collapsing Economies and National Resource Rents 2005 Video LVRG director’s address at a symposium at Melbourne University, forecasting the economic depression signifying the end of the current Kondratieff Long Wave.
1.15 From the subprime to the terrigenous – Dr Gavin Putland, June 2009
1.16 Why land tax can’t be shifted onto tenants – Dr Gavin Putland, June 2011
1.17 Against all odds, AHURI quantifies stamp duty/land tax switch – Dr Gavin Putland, March 2012
1.18 A classical view of ‘fiscal devaluation’ – Dr Gavin Putland, September 2013
1.19 Ramsay and Pigou: Crypto-Georgists – Dr Gavin Putland, September 2013
- Primary Production Studies
2.2 Rosedale Shire 1944— Grazing and Dairy Farm Study
2.3 ‘Farmrates’ on primary producing properties 1956 Mulgrave Shire (now City of Monash)
2.4 Greensborough — Orchard and Poultry Farms Study
2.5 Frankston and Hastings Shire Primary Producers 1961 Orchard Area Analysis and Balance Sheet for Rural Ridings
2.6 Eltham Shire — North Riding Farm Properties
2.7 Site Value Benefits the Farmer 1962 Statement prepared at the request of the ‘Develop Victoria’ Council.
2.8 Results speak for themselves – rural 1975
- Provincial Rating Studies
3.3 Corio 1969
3.4 Korumburra 1968
3.6 Morwell 1956
3.7 Newtown 1972
3.11 Wangaratta 1959
3.12 Warrnambool 1953
3.13 Wonthaggi 1986
3.14 Yea 1958
3.15 Un-taxing Buildings in Rural Towns 1975: results speak for themselves
3.16 Why Site Value rating is better, and how to implement it with no losers 2008 A guide for local Councillors in Victoria, by Dr Gavin Putland.
4. Interstate and Overseas Rating Studies
4.1 Launceston Rating Study part 1 1946
4.2 How Site-Value Rating Would Affect Devonport Survey conducted for the Devonport Junior Chamber of Commerce, with the co-operation of the Devonport Municipal Council, Tasmania.
4.3 How Site-Value Rating Would Affect Clarence Survey covering all assessments, conducted at the request of the Clarence Municipal Council, Tasmania.
- Urban Rating Studies
5.2 Box Hill City — Incidence of Board of Works Rating
5.6 Coburg City — Incidence of Board of Works Rating
5.7 Heidelberg City — Incidence of Board of Works Rating
5.8 Malvern 1961
5.9 Oakleigh 1945
5.10 Rising Municipal Costs 1949 A comparative study of relative abilities of alternative rating systems to provide increased rate yield.
5.16 Victoria’s Municipal Rating System 1996 Prepared for the Australian Institute of Urban Studies by Philip Anderson.
5.17 Why site value rating is better, and how to implement it with no losers 2008 A guide for local Councillors in Victoria, by Dr Gavin Putland.
- Decentralisation Studies
- Leasehold or Freehold Tenure?
7.1 “Unto John Doe” by The Honorable Justice Rae Else-Mitchell 1966 (8 pp) Reprint of The Sidney Luker Memorial Lecture on Property Rights and Compensation.
7.2 Leasehold or Freehold 1967 Paper presented to the Convention on Australian Natural Resources by A. R. Hutchinson, BSc, MIE Aust.
- Submissions to Royal Commissions and Inquiries
8.1 Brisbane Rating Inquiry Committee 1962
8.2 Victorian Land Tax Inquiry Committee
8.3 NSW Royal Commission on Local Government Finance and Land Valuation 1966 Original submission
8.4 Tasmanian Board of Investigation on Land Valuation 1970
8.5 Restore Railways Finances and Reduce Freight Charges part 1 1972 Submission to Victorian Public Accounts Committee of Inquiry into the Victorian Railways, 1972
8.6 What changes should be made to the taxation system of the Commonwealth of Australia? 1973 Statement of evidence to the Commonwealth Tax Review Committee 1973.
8.8 Tax Reform: A Rational Solution 1996 Submission to ACCI-ACOSS National Tax Summit