Land value taxation (LVT) is an alternative to traditional property tax systems, in which property taxes are levied based only on the value of the underlying land and not on the value of any buildings or other improvements to the site.

A city may choose to adopt a land value tax for several reasons. One of the main reasons is to promote efficient land use and development. A land value tax incentivizes property owners to develop their land to its highest and best use by taxing the value of land rather than the buildings or improvements on the land. This can lead to more compact, sustainable development patterns and discourage land speculation and vacancy.

A land value tax can also help generate revenue for the city while minimizing the tax burden on improvements such as buildings and infrastructure. This can spur economic growth and investment in the city, as property owners are not penalized for improving their properties.

Furthermore, a land value tax can also help address issues of inequality and promote social justice. By taxing the value of land, primarily determined by location and external factors, a land value tax can capture some of the unearned windfalls that come from rising land values and redistribute that wealth back into the community.

Overall, a land value tax can be a powerful tool for promoting sustainable development, generating revenue, and addressing social and economic issues within a city.

To simplify this question, ask another question: what does a city want to happen?

If a city reduces – or eliminates – the tax on buildings in order to encourage construction and rehabilitation, the community can appreciate the essentials: 4 walls and a roof. A city builds roads, establishes infrastructure, built schools, and provides public safety to make the investment in the building remain stable.

Places that use LVT see tax reductions on every building. Consciously or not, "free riders”that profit from doing nothing add nothing for the community financially, aesthetically or in the totality of what makes a good place to live.
There's a real cost because of these free riders. Holes punched in the urban fabric – vacant lots, “free parking” and decaying neighborhoods drive up taxes for the good actors who are discouraged from doing the right thing for themselves and for the community.

In fact, everyone can benefit from LVT. In real life, a downtown parking lot owner in Philadelphia doesn't benefit that first. But put in a building that's appropriate for the parcel and LVT pays off immediately with reduced taxes on buildings.

Land value tax isn't used more widely primarily due to plain old unfamiliarity, political resistance, concerns about implementation complexities, and the perception that it could significantly impact the real estate market for landowners while ignoring potential benefits like encouraging subsidy-free development and reducing land speculation. Some argue that calculating the tax is difficult because land value is difficult to accurately separate from improvement value. In reality, every homeowner with an insurance policy knows what the house is worth: it's what the insurance company will pay to replace it. What's left over is land value. It's done many times a day all over the world.

No. The heavy hand of zoning can stop development in its tracks. In real life, development and new construction take place in areas that are generally helpless in the face of powerful developers. If cities made it easier for builders to operate inside their city limits, they would do it there.

In the past 50 years, LVT has been studied more, implemented more, and makes more sense for a cash-strapped municipalities don't want to give away the store in subsidies.