We commonly accept that land is owned in our culture. If we want to get picky, and most don’t, we would say that title to land is owned. But we do that without realising that there is actually a difference, a significant difference, between the two.
At the most basic level, something is ours because we made it; because we traded some we made for it; because it was gifted to us. The act of human creation is actually a critical prerequisite for something to be able to be owned.
Land is different. Getting away from the complexities of our culture and systems, what we call ‘ownership’ of land is actually an agreement with others regarding the right to use that land. What today we call a ‘title’. What we own is the monopoly, not the actual land.
Land title has more in common with a set of taxi plates, that it does with the taxi itself. The plates provide the license to operate.
Land title has more in common with a fishing quota, that it does with the ocean in which fish are caught. The quota grants a licence to catch a certain amount, or to operate a certain amount of equipment.
While this may seem semantic, it has significant consequences. It goes to the heart of why land value is a suitable basis for council rates, and why the value of improvements there on is not.
Consider this. If rates go up on the value of land, the value of land will drop in response. If rates go up on the value of improvements, the cost of those improvements is increased.
In different words. If an ongoing charge is levied against the possession of land title, the capital value of the land will drop proportionally in response. If an ongoing charge is levied against something that we build, its cost will be compounded.
Again. If rates are raised on the value of land, all it does is change a capital cost into a ongoing cost. If rates are raised on improvements, they increase the cost of those improvement.
One of these things is not like the other.