Addressing the land question: Focus on equity

In my previous article, I unpacked the problem of iniquitous allocation of land resources in three domains.

Solving the misallocation problem is not, therefore, merely a question of fixing markets and incentives. It requires societal acceptance of the ailment - the use of land to enhance inequalities and promote narrow rather than broad prosperity. Policy solutions will be effective if, and only if, they increase inclusivity.

The first and most immediate task is to agree to a single principle governing the deployment of all types of land.

Every redeployment or deployment of land should be demonstrated to reduce inequality.

In the case of private residential land, deployment keeping equity considerations paramount will be tough. Noisy, selfish elites, especially the so-called "middle class," by now addicted to real estate appreciation, will have to be discouraged by using policy measures from treating residential real estate as a capital investment.

Several fiscal and regulatory instruments exist for this purpose. (For example, taxing luxury developments so that the rate of return on them is lower than on more equitable developments, imposing an absolute ceiling on the development of high-end residential property until 90 per cent of the existing stock is occupied or rented etc.) The key would be to (a) notify and quantify these instruments and (b) link changes in valuation to a public benchmark such as a geographically calibrated consumer price index. Many other suggestions in the 2014 proposals (cited in the previous article) are of immense complementary value in this endeavour, but the crucial thing is to accept that any redeployment of land that reduces equity will not be countenanced. Note that compensating people for their land is not equitable. The key question, when it comes to equity, is what the land will be used for.