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, all Victorian municipalities have been brought to operate under rating on improved values.
So the question must be asked: who benefits from this curious retrogression? LVRG studies provided below show that it is the holders of vacant and under-developed real land who profit most.
Under Hutchinson’s leadership, the question of the relative advantages between rating improved or unimproved values was decidedly resolved in favour of site value rating.
On his death in 1988, Hutchinson was succeeded by Bryan Kavanagh. As a professional property valuer and student of Georgist economics, Kavanagh recognised that the land market is characterized by bubble-burst cycles and that the bursts are followed by economic 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 proven correct.
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 a certain percentage of GDP in a nationwide trend, and then returned below that point, recession followed within 2 years. He concluded that the ratio of property turnover to GDP can act a barometer of the economy. This contradicts Alan Greenspan’s doctrine that a real estate bubble may not be recognised until it bursts. On Kavanagh’s criterion, Australian real estate re-entered bubble territory in 1996. He 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, who blogs at The Depression received 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.
The late great administrator 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, Dr Gavin R. Putland, had provided an excellent submission, and like Allan Hutchinson, came to the study of economics from an engineering background.
Putland was hired by Prosper Australia in 2003. As Communications Officer and later Research Officer, he was the author of numerous submissions, “talking points” and “working papers”. In 2008 he officially assumed the LVRG directorship, which merged with his role as Research Officer, formalizing the arrangement of the LVRG as the research arm of Prosper Australia, the LVRG directorship becoming for the first time a paid position.
Putland’s early priorities included raising the profile of the LVRG (especially in connection with its forecasting of the present economic crisis) and identifying further land-based statistics that serve as “barometers” of the wider economy.
In December 2013, the directorship of the LVRG returned to an honorary position, with Putland remaining as director.
Inspired by LVRG studies, the Prosper Australia Research Institute, established in 2014, has largely overtaken the research role of the LVRG in the much-neglected area of study of the Australian land market.
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. Footscray
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 1949
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. Shopping Centre Survey 1956-1958
1.4 How Victoria Adopted Site Value Rating 1962 (22 pp) How Victoria Adopted Site Value Rating 1962
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. Public charges on land values in Australia 1963
1.6 Considerations of the Merits of Site Value Rating 1964 (6 pp) HJ Manning in “The Valuer” July 1964 Consideration of the merits of site value rating
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. Should local govt rates be on Improved or Unimproved values
1.8 Natural Resources Rental Taxation in Australia 1978 Natural Resources Rental Taxation in Aust 1978
1.9 Land Rent as Public Revenue in Australia (47pp) Centenary Essays No. 3 published by the Economic and Social Science Research Association, London 1981. Land Rent as public Revenue Australia 1981
1.10 The Recovery Myth 1994 (20 pp) A counterfactual, employing analysis of total Australian real estate sales, suggesting there can be no genuine long term economic recovery until the playing out of the depressionary phase of the current Kondratieff Long Wave Cycle. The Recovery Myth 1994
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?The Coming Kondratieff Crash 2001
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. The Taxable Capacity of Australian Land and Resources 2003
1.13 From the subprime to the terrigenous – Dr Gavin Putland, June 2009
1.14 Why land tax can’t be shifted onto tenants – Dr Gavin Putland, June 2011
1.15 Against all odds, AHURI quantifies stamp duty/land tax switch – Dr Gavin Putland, March 2012
1.16 A classical view of ‘fiscal devaluation’ – Dr Gavin Putland, September 2013
1.17 Ramsay and Pigou: Crypto-Georgists – Dr Gavin Putland, September 2013
- Primary Production Studies
2.1 Rating Rural Land Values 1943 Rating land values - rural 1943
2.2 Rosedale Shire 1944 Rosedale 1944
2.3 ‘Farmrates’ on primary producing properties 1956 Mulgrave Shire (now City of Monash) Farmrates on primary producing properties 1956
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 Frankston Shire primary producers 1961
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. Site Value and Farmers 1962
2.8 Results speak for themselves – rural 1975
- Provincial Rating Studies
3.1 Ararat 1968 Ararat 1968
3. Benalla 1955 Benalla 1955
2
3.3 Corio 1969 Corio 1969
3.4 Korumburra 1968 Korumburra 1968
3.5 Hamilton
3.6 Morwell 1956 Morwell 1956
3.7 Newtown 1972 Newtown 1972
3.8 Sale 1954 and outcomes Sale 1954 study and outcomes
3.9 Seymour 1982-1985 Seymour 1982 - 1985
3.10 Stawell
3.11 Wangaratta 1959 Wangaratta 1959
3.12 Warrnambool 1953 Warrnambool 1953
3.13 Wonthaggi 1986 Wonthaggi 1986
3.14 Yea 1958 Yea 1958
3.15 Un-taxing Buildings in Rural Towns 1975: results speak for themselves Un-taxing buildings 1975
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 1946 Launceston 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.
4.4 Land Value Rating in New Zealand 1943 Supplementary (2) re NZ submission
4.5 Canberra: Federal Parliament Betrays the People 1971 Canberra - Federal Parliament Betrays People 1971
4.6 Western Australia 1974 West Aust rates inquiry Oct 1974
Western Australia 1977 West Aust rates inquiry Oct 1974
- Urban Rating Studies
5.1 Rating urban land values 1943 Rating land values - urban 1943
5.2 Box Hill City — Incidence of Board of Works Rating
5.3 Brunswick – H. Bronson Cowan 1943 Brunswick - Bronson Cowan 1943
5.4 Camberwell progress under site value rating 1956 Camberwell progress under SV rating 1956
5.5 Camberwell minimum and composite rates, including reports from Councillor Allan Hutchinson 1969-1975 Camberwell minimum and composite rates etc 1969-1975
5.6 Coburg City — Incidence of Board of Works Rating
5.7 Heidelberg City — Incidence of Board of Works Rating
5.8 Malvern 1961 Malvern 1961
5.9 Oakleigh 1945 Oakleigh 1945
5.10 Rising Municipal Costs 1949Rising Muncipal Costs 1949
A comparative study of relative abilities of alternative rating systems to provide increased rate yield.
5.11 South Melbourne 1961-1981 South Melbourne 1965-1981
5.12 Site Value and Business 1969 Site Value and business 1969
5.13 NAV Penalises New Houses 1972 NAV penalises new houses 1972
5.14 Victorian Local Government Rating Study 1979 Victorian Local Government Rating Study 1979
5.15 Municipal Rating Polls in Victoria 1992 Municipal Rating Polls in Victoria 1992
5.16 Victoria’s Municipal Rating System 1996 Prepared for the Australian Institute of Urban Studies by Philip Anderson. Victoria's Municipal Rating System 1996
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
6.1 Decentralisation Key 1964 Decentralisation key 1964
6.2 Essentials for a National Policy on Balanced Development 1962 Essentials for Balanced Development 1962
- 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 NSW Local Govt Royal Commision 1966 - original submission
Supplementary submission #1 Supplementary submission (1)
Supplementary submission #2, re NZ submission Supplementary (2) re NZ submission
Supplementary submission #3, re corrections to Sydney Metro Water Supplementary (3) re corrections to Sydney Metro Water
8.4 Tasmanian Board of Investigation on Land Valuation 1970
8.5 Restore Railways Finances and Reduce Freight Charges 1972Restore Railways Finances and Reduce Freight Charges 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? 1973What Changes Should be Made to the Cwealth Tax System 1973
Statement of evidence to the Commonwealth Tax Review Committee 1973.
8.7 Tax Reform: A Rational Solution 1996 Submission to ACCI-ACOSS National Tax Summit Tax Reform a Rational Solution 1996
