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Squandered Opportunity: The Social Cost of Underutilized Land

In our previous article describing speculation on vacant urban land, we pointed out that the attention paid to vacant housing often overlooks another type of pernicious vacancy: housing units that aren’t even built in the first place. Sometimes this looks like plots of land lying vacant for decades, even in the face of exorbitant rents, earning juicy speculative profits for the owner as their land rises in value. But speculative profiteering doesn’t only occur on wholly vacant land. It also occurs on underutilized land. In this article, we examine the social harms that arise from underutilized land, consider ways of measuring it, and propose policies to discourage it.

Everybody Works But The Vacant Lot: How Speculators Profit From Our Thriving Cities

As academics, advocates, and pundits scramble to explain the rising burden of housing costs in American cities, much has been written about the specter of vacant housing. A symptom of wealthy speculators, vacant units indicate that many investors are happy to park their wealth in real estate and profit from growth in land values without the hassle of actually having to build or rent-out empty units.

This narrative is often paired with calls for a tax on vacant units, which is expected to push these units into being made available for use by tenants. While there are merits to this argument, it misses the forest for the trees, as it entirely fails to identify and fix two other ways in which scarce space within our cities is wasted: through vacant and/or underutilized urban land. Just like vacant dwellings, vacant and utilized lots are held out of use by speculators when they could instead be housing many more people. 

In this article, we will summarize the existing research on the causes and consequences of urban land, which primarily centers on the existence of blighted land in struggling cities.

Moving the Land to Those Who Will Use It

“Could I begin life again, knowing what I now know, and had money to invest, I would buy every foot of land on the island of Manhattan.”

So wrote one of the original robber barons of the early nineteenth century. Yet almost 200 years later, the idea of holding land as a road to riches is alive and well in New York City. Though, of course, owning land is not so bad when the owner also uses it productively, provides employment, or builds affordable houses. But owning ground to make money on it while doing nothing to it is a problem New York doesn’t need.

In 2022, New York City is facing a new onslaught from the financial sector and their hedge fund billions. The city is enormous––700 square miles. But under the current cruel system, struggling families and small businesses have the nearly impossible task of finding a decent location to live or do business.

Vacant Land Usage and LLCs in New York City

LLCs are a way to combine the benefits of a traditional corporate structure with enhanced anonymity and reduced tax-liability, making them the ideal method for limiting risk while at the same time maximizing profits. This incentivizes land speculation rather than reinvestment in the land in the form of development. At the same time, LLCs provide no incentive to improve the properties they own, leaving many areas of NYC blighted and underutilized. This has obvious negative consequences for the neighborhoods in which they are located. Because LLC owners are anonymous, there is no way to exert pressure on them to either improve or sell their properties. This is why this tool is such an important means to increasing transparency and accountability in LLC ownership.

For there to be transparency and accountability, however, it’s important that the pertinent information is accessible to the public. Again, this is where the CPTR mapping tool comes in. It identifies vacant and underutilized parcels in NYC and illuminates them on an interactive map which allows anyone to see if a parcel is owned by an LLC or privately owned.

Bias in Property Assessments: Sources and Solutions

So we’re left with these dual realities: the premise of property taxes is sound, but the execution is inequitable. And for us at the Center for Property Tax Reform this brings two questions immediately to mind: First, where does bias in property assessments come from? (After all, professional assessors’ primary objective is to create valuations that are “fair and equitable,” not for some property owners, but for all of them.) And second, recognizing that many current assessments fall short of meeting the fair and equitable standard, what can we do to fix them?

It was with these questions in mind that we created our “Bias in Assessments Handbook.” The Handbook combines an extensive literature review with data gathered through one-on-one interviews with professional assessors in some of the nation’s largest jurisdictions – assessors who have personally and professionally dedicated themselves to identifying and remedying regressivity and inequities in their jurisdictions’ assessments and can speak with authority about how to do it right.

Is a Land Value Tax Right for Roanoke, Virginia?

This report provides the results of a preliminary analysis to determine the on-the-ground effects of implementing a land value tax (LVT) in Roanoke, Virginia. While the findings contained herein give an accurate representation of changes in the general tax trends within the City that will result from the adoption of an LVT, CPTR recommends the conduct of a series of more detailed analyses to determine parcel-level and other effects before proceeding with adjustments to existing property tax codes, and is prepared to carry out this work with the participation and support of the City of Roanoke.