Seattle Considers Land Value Tax Shift to Incentivise Development

A recent op-ed published in The Urbanist proposes a significant shift in Seattle’s property tax system, advocating for a move towards a Land Value Tax (LVT) to better encourage urban development and address the city’s growth challenges. The piece argues that the current method of assessing property tax, which combines the value of land with the value of improvements (structures), inadvertently penalises development and disincentivises building, particularly in areas with high land values.

Seattle’s Reliance on Property Tax

Property tax is a cornerstone of Seattle’s municipal finance, representing over 22% of the city’s total revenue in 2025. This makes it the largest single income category for the city, surpassing revenue from sales tax, business and occupation (B&O) tax, and utility tax. In the state of Washington, this revenue stream is particularly critical due to the absence of a state income tax. The author contends that the existing method of property tax assessment is antiquated and actively discourages necessary development.

Current Assessment Practices

Across King County and most of the United States, property taxes are calculated by summing the value of the land and the value of any structures or improvements on it. Taxes are then levied on this combined sum. The issue, according to the op-ed, is that the value of improvements often far exceeds the value of the land itself, leading to a disproportionately higher tax burden when development occurs.

Seattle’s Unique Geography and Growth

With its location on an isthmus, Seattle faces natural constraints on outward expansion, necessitating a focus on inward development to accommodate its growing population. Data from 2025 indicates that the total appraised land value in Seattle was $156.8 billion, with a remarkably similar $159.5 billion attributed to improvements. While not all properties are taxable, these figures highlight the substantial value present in both land and built structures.

The Development Disincentive

The current property tax system, the op-ed argues, acts as a direct disincentive to development. When a property owner invests in and builds on their land, their tax bill often increases significantly. The example of Onni South Lake Union, a large development assessed at $714.5 million for improvements in 2022 against $49.5 million for the land, illustrates this point. The improvements were valued at over 14 times the land value, suggesting that each added floor or unit incurs substantial additional taxes, contributing to high rents.

The author’s core argument is that tax code should prioritise taxing the inherent value of land, especially in desirable locations, rather than heavily penalising the quality or extent of the structures built upon it. If a developer chooses to build on less valuable land, they should not face a prohibitively high tax bill primarily based on the quality of their construction.

Differential Land Use and Tax Burden

The op-ed presents data illustrating how different land uses capitalise on their space and the resulting tax implications. For instance, gas stations, which typically have significant land area but minimal improvement value, pay a much lower ratio of improvement value tax to land value tax compared to single-family homes, townhouses, and apartments. This suggests that the current system benefits businesses with underdeveloped land, while penalising denser housing developments.

Mapping Land and Improvement Values

Visualisations created by the author, comparing appraised land value and appraised improvement value across Seattle, reveal key insights. Maps show that highest land values are concentrated in desirable areas like Downtown, South Lake Union, and the University District. However, the disparities in improvement values across the city are far more pronounced than those in land values. This concentration of improvement value in specific areas, while land values are more evenly distributed with gentler peaks and valleys, is presented as a symptom of the current tax code. The author questions whether this distribution is natural and argues that it discourages development on less valuable land, as the tax burden would be almost entirely based on the improvements.

Potential for Policy Change

The City of Seattle’s Office of Planning and Community Development is actively designating ‘neighborhood centers’ to encourage development. The op-ed posits that an altered property tax code, one that does not impose excessively high improvement taxes on structures built on lower-value land, could significantly aid in developing these designated areas.

Shifting to a Land Value Tax

A Land Value Tax (LVT) system would primarily tax the unimproved value of land, separating it from the value of any buildings or other improvements. Proponents argue that LVT encourages efficient land use, discourages speculation, and can generate substantial revenue without penalising new construction or investment in improvements. By taxing land based on its potential use and location, rather than its current development, an LVT could incentivise property owners to develop their land to its highest and best use, thereby increasing supply and potentially lowering prices.

Key facts
| Feature | Value/Description |
|—|—|
| Source | The Urbanist |
| Topic | Property Tax System Reform in Seattle |
| Proposed Solution | Shift to a Land Value Tax (LVT) |
| Rationale | Incentivise development, address high land values |

Implications for London

While the op-ed focuses on Seattle, the arguments presented have relevance for London’s own complex urban planning and housing challenges. London, like Seattle, faces high land values, significant growth pressures, and ongoing debates about how to encourage development while ensuring affordability and equitable growth. The concept of separating land value from improvement value in taxation could offer a framework for considering policy adjustments aimed at stimulating housing supply and urban regeneration in London. The current system, which can discourage development through high taxes on improvements, is a familiar concern in many global cities. Exploring alternative tax structures, such as LVT, could be a valuable part of the conversation for policymakers and urban planners seeking to unlock development potential and create more dynamic urban environments.

Source: The Urbanist – https://www.theurbanist.org/op-ed-the-case-for-shifting-to-a-land-value-tax/

Key facts