Here’s why growing cities should tax land to pay for essential services

A family living in the Makoko slum, Lagos.

Africa is urbanising at an unprecedented rate. The continent’s urban areas are already home to over 427m people – but this number is expected to double in the next 25 years.

People moving from rural areas into the cities expect better public services and infrastructure. And yet, many municipal authorities lack the capacity to provide these.

Part of the problem is that city authorities are constrained in their ability to collect taxes at a local level. In developing countries, local taxation raises only around 2 per cent of GDP, as opposed to 6 per cent in the developed world.

The result is local authorities remain overly reliant on transfers from central governments. These are constrained in a number of ways and tend to be both unreliable and insufficient to support city growth.

Citizens of underfunded cities are at risk of not receiving basic services, including water, housing, electricity, and healthcare. Large, sprawling informal settlements emerge, which can spawn health risks and constrain incomes.

Local authorities can become better at raising their own revenues. The most obvious way for them to do this is through taxing land, still a major untapped source of revenue.

Economists have long argued that land taxes are the best source of revenue for funding cities’ growth. However, most land remains untaxed in the developing world – in part because imposing new taxes means going up against vested interests. When there is no land tax in place, private owners of land reap the gains from growth of and investments in a city without having to pay for them. They are likely to lobby hard against the introduction of taxes that enable the gains to be shared by all.

City authorities are legitimate only to the extent that they represent this wider interest. Otherwise, rapid urban growth, without increased public investment, will result in numerous social and environmental problems.

Another challenge to implementing these types of taxes is unclear ownership structures that often lead to overlapping claims on land. Administrative reforms and technological improvements that formalise land rights not only provide the basis for taxation, but remove uncertainty that discourages investment. Such reforms, such as updating and digitalising the land registry, can also encourage more efficient and effective tax collection at the local level.

It is only fair that, as a government invests in infrastructure and services in a growing city, it should get some benefit from the commensurate increase in land and property values in that city. It is in the wider public interest for the government to see a return on its investment, which it can then re-invest in other areas.

With good citizen communication, city authorities can gain majority support to tax land. Otherwise they risk continuing to under-provide provide the adequate services and infrastructure their cities need to become productive places that support economic growth.

Our new brief Financing fast-growing cities looks at taxing land and other practical policies for city authorities to raise much needed revenue.

Paul Collier is a professor at the University of Oxford and the director of the International Growth Centre. Astrid R.N. Haas is senior country economist at the International Growth Centre.


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CityMetric is now City Monitor, a name that reflects both a ramping up of our ambitions as well as our membership in a network of like-minded publications from New Statesman Media Group. Our new site is now live in beta, so please visit us there going forward. Here’s what CityMetric readers should know about this exciting transition.  

Regular CityMetric readers may have already noticed a few changes around here since the spring. CityMetric’s beloved founding editor, Jonn Elledge, has moved on to some new adventures, and a new team has formed to take the site into the future. It’s led by yours truly – I’m Sommer Mathis, the editor-in-chief of City Monitor. Hello!

My background includes having served as the founding editor of CityLab, editor-in-chief of Atlas Obscura, and editor-in-chief of DCist, a local news publication in the District of Columbia. I’ve been reporting on and writing about cities in one way or another for the past 15 years. To me, there is no more important story in the world right now than how cities are changing and adapting to an increasingly challenging global landscape. The majority of the world’s population lives in cities, and if we’re ever going to be able to tackle the most pressing issues currently facing our planet – the climate emergency, rising inequality, the Covid-19 pandemic ­­­– cities are going to have to lead the way.

That’s why City Monitor is now a global publication dedicated to the future of cities everywhere – not just in the UK (nor for that matter just in the US, where I live). Our mission is to help our readers, many of whom are in leadership positions around the globe, navigate how cities are changing and discover what’s next in the world of urban policy. We’ll do that through original reporting, expert opinion and most crucially, a data-driven approach that emphasises evidence and rigorous analysis. We want to arm local decision-makers and those they work in concert with – whether that’s elected officials, bureaucratic leaders, policy advocates, neighbourhood activists, academics and researchers, entrepreneurs, or plain-old engaged citizens – with real insights and potential answers to tough problems. Subjects we cover include transportation, infrastructure, housing, urban design, public safety, the environment, the economy, and much more.

The City Monitor team is made up of some of the most experienced urban policy journalists in the world. Our managing editor is Adam Sneed, also a CityLab alum where he served as a senior associate editor. Before that he was a technology reporter at Politico. Allison Arieff is City Monitor’s senior editor. She was previously editorial director of the urban planning and policy think tank SPUR, as well as a contributing columnist for The New York Times. Staff writer Jake Blumgart most recently covered development, housing and politics for WHYY, the local public radio station in Philadelphia. And our data reporter is Alexandra Kanik, whose previous roles include data reporting for Louisville Public Media in Kentucky and PublicSource in Pittsburgh, Pennsylvania.

Our team will continue to grow in the coming weeks, and we’ll also be collaborating closely with our editorial colleagues across New Statesman Media Group. In fact, we’re launching a whole network of new publications, covering topics such as the clean energy transition, foreign direct investment, technology, banks and more. Many of these sectors will frequently overlap with our cities coverage, and a key part of our plan is make the most of the expertise that all of these newsrooms combined will bring to bear on our journalism.

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As for CityMetric, some of its archives have already been moved over to the new website, and the rest will follow not long after. If you’re looking for a favourite piece from CityMetric’s past, for a time you’ll still be able to find it here, but before long the whole archive will move over to City Monitor.

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I want to thank and congratulate Jonn Elledge on a brilliant run. Everything we do from here on out will be building on the legacy of his work, and the community that he built here at CityMetric. Cheers, Jonn!

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Sommer Mathis is editor-in-chief of City Monitor.