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Welfare Reform on the Web (November 2011): Social housing - overseas

Land rent and housing policy: a case study of the San Francisco Bay Area rental housing market

S. E. Barton

American Journal of Economics and Sociology, vol.70, 2011, p. 845-873

When people rent an apartment, part of their rent payment covers the costs of the construction, maintenance and operation of the building (building rent), and part of the payment is for access to the location (land rent). Land rents are high in desirable areas in the urban core, meaning that owners make large profits even though they have not contributed to development of the neighbourhood. Residential rents in the San Francisco Bay Area are among the highest in the USA due to excessive levels of land rent. As a result, very-low-income tenants have less income remaining after payment of rent than tenants did in 1960.The author argues that government should address the problem by subsidising non-profit housing organisations, particularly land trusts that remove residential land from the market. Taxes on land rent would be a particularly appropriate funding source.

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