Congratulations to Zerorez Tri-Cities on their ribbon cutting! You can find them at 801 S. Steptoe St., Kennewick, WA 99336

Congratulations to The Hampton Inn Richland for a fantastic ribbon cutting! Go check out their newly renovated guest rooms at 486 Bradley Blvd., Richland, WA 99352

Thanks to everyone who made it out for our State of Higher Education luncheon on June 24th! 

School impact fees can affect whether new housing is developed in Washington. A recent report from the Building Industry Association of Washington examined how school districts utilize these fees and evaluated districts based on enrollment trends, fee levels, and access to capital facilities plans. The main point of the report is that school impact fees should be linked to actual student growth, clear facility needs, and transparent public planning.

School impact fees are levied on new developments to help pay for school facilities needed because of growth. They can support the construction of new school buildings or the addition of classrooms, but cannot cover regular operating expenses like salaries, supplies, or maintenance. This is important because impact fees are separate from general school funding. They are intended to address growth-related capital needs.

The report states that these fees can raise housing costs during a time when Washington already struggles with affordability. For builders, impact fees increase the cost of constructing new homes. For buyers and renters, these costs may be passed on through higher prices. For employers, this is important because housing affordability affects workforce recruitment and retention, as well as employees' ability to live near their jobs.

The report evaluates districts based on enrollment changes, fee amounts, and the availability of a recent, easily accessible Capital Facilities Plan. It expresses concerns that some districts continue to charge impact fees even when enrollment remains steady or declines. According to the report, this raises questions about whether certain fees are truly related to actual growth.

For growing communities, including parts of the Tri-Cities, the challenge is finding a balance. Schools need enough space to support new families, but housing must remain affordable for workers and employers. If fees are too high, unclear, or not tied to actual growth, they can prevent the construction of the housing communities needed.

The report suggests increased transparency, improved tracking, consistent fee calculations, and clearer guidelines for assigning impact fees. The key point for business leaders is that school funding, housing costs, and workforce needs are closely connected. A more effective system should support school capacity while ensuring housing development remains fair, predictable, and affordable.

Access the full report: Making the Grade: Grading school impact fees

Congratulations to Prodigy Homes on the successful ribbon cutting for their model home in Harmony Estates! You can check it out at 8034 W. 12th Ave., Kennewick, WA 99336.

Thanks to all who joined is for Business After Hours with Hayden Homes! You can tour their model home at 6401 N. Rd. 52, Pasco, WA 99301.

Thanks to everyone who made it out for a great ribbon cutting at Pahlisch Homes' new amenity, Basecamp at Solstice! You can check it out at 11911 Dunsmuir Dr., Pasco, WA 99301.

Land Value Taxation, or LVT, is a way to generate public revenue by placing more taxes on land value, especially in high-demand areas, and less on the structures built on it. Supporters claim it can promote new housing and business development, decrease vacant lots, and boost funding for local services. Critics warn it might increase costs for landowners who lack cash reserves and can be difficult to implement fairly. Part 2 of this series explores the main advantages and disadvantages of LVT for residents and businesses in Washington, along with the history and legal framework in Washington State that could influence its feasibility.

Land Value Taxation (LVT) offers an alternative method to generate revenue by taxing land value, especially in areas with high demand. Supporters argue it promotes development, reduces vacant properties, and funds local services, while opponents warn it might shift costs to landowners and be challenging to implement fairly. This series explains what LVT is, how it affects businesses and neighborhoods, and its legal limitations in Washington.

In Part 1, we discussed LVT and its impact on building and reinvestment incentives. Now, we examine what these changes could mean for Washington, including benefits, risks, history, and legal limits.

One benefit is that LVT can encourage development in high-demand areas by lowering taxes related to upgrades. It helps businesses modernize, expand, or redevelop, and can boost housing supply where land costs are high, supporting affordability—though LVT alone doesn't guarantee lower rents.

Another advantage is stability. Land cannot be moved or hidden, making land taxes more difficult to evade than other types of taxes. Economists consider land taxes efficient because the supply of land is fixed, which results in fewer negative side effects.

However, downsides include significant transition challenges. LVT can change how taxes are shared, causing land-rich owners in high-value areas to pay more even if their property is modest. This impacts long-term residents, nonprofits, and homeowners in neighborhoods where land values are increasing. If taxes rise faster than income or profits, it can seem unfair unless measures like phase-ins or credits are put in place.

Admin challenges involve accurately distinguishing land value from building value, which can be complicated and may result in disputes and political conflicts. A clear valuation process and open communication are crucial.

Washington's Constitution mandates property tax uniformity. Courts have classified all real estate as a single category, making it more difficult to implement split-rate taxes, which tax land at a higher rate than improvements. Levy caps also restrict revenue growth, creating challenges for applying LVT.

Washington has a long history of property taxes but has not implemented a statewide land value tax system. Its property tax structure has evolved through constitutional provisions, court rulings, and policy reforms. Debates about land value taxation frequently arise in discussions on housing and urban growth, but legal restrictions on uniformity prevent the establishment of a true split-rate tax.

Overall, LVT aims to tax the value generated by location and community investment without taxing improvements. It could encourage redevelopment, lower vacancies, and help businesses expand, but it also shifts costs onto financially strained landowners, requires complex assessments, and faces legal challenges under Washington’s constitutional rules.

In conclusion, LVT encompasses more than just economic factors; it also presents legal and design challenges. Any credible proposal in Washington requires a fair, transparent system and a legal process that adheres to the Constitution.

Land Value Taxation, often called LVT, is an alternative way to generate public revenue. Instead of heavily taxing buildings, it focuses on land value, especially in high-demand areas. Supporters say this method can encourage the development of homes and businesses, reduce empty lots, and help communities fund local services. Critics warn it might shift costs onto landowners without additional income, and that implementing it fairly can be challenging. In this two-part series, Part 1 explains what LVT is and how it could affect businesses and neighborhoods. Part 2 examines the potential benefits and drawbacks for Washington residents and businesses, along with relevant history and legal limits affecting Washington State.

Land Value Taxation (LVT) is a method of taxing land based on its value, while applying lower or no taxes on buildings and other improvements. The main idea is that land's worth mainly comes from community assets like roads, schools, nearby jobs, public safety, and parks. LVT aims to share this collective value to support public services without punishing property owners for improving their structures.

This method differs from the typical property tax, which generally taxes land and improvements as real property. In a standard system, a business that expands its store, adds housing above shops, or renovates a warehouse might face a higher tax bill because the property's value increases. LVT seeks to minimize this “penalty” on building and reinvestment by emphasizing the land’s location value.

For businesses, the main practical change is how the tax system influences their behavior. If a business owns valuable land but uses it sparingly, such as a low-rise building with a large parking lot in a busy district, LVT could increase their tax bill more than they currently expect. On the other hand, if a business develops more intensively or redevelops a vacant parcel, LVT can make that investment easier to justify because the tax rise from new construction would be less than under a system that heavily taxes buildings.

For local communities, LVT is often viewed as a way to curb land speculation. When someone owns a vacant or underused lot in a high-demand area, expecting prices to increase, they still pay taxes based on land value. This can encourage earlier development, leading to more housing, additional commercial spaces, and greater activity in business districts. Some studies of “split-rate” systems in the United States, where land is taxed at a higher rate than buildings, have shown signs of increased building activity in certain areas, although results vary depending on local design and market conditions.
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LVT is best viewed as a change in incentives. It focuses on taxing land value more and building value less, encouraging development and reinvestment in areas where land is scarce and expensive. Although this seems simple, the actual effects depend on who bears more of the tax burden, who bears less, and how quickly any new system is implemented. In Part 2, we will examine the likely winners and losers among Washington businesses and residents, as well as a key factor in Washington: the state’s legal rules around property tax uniformity and what that means for whether LVT can be successfully implemented here.

​Sources

• Local Housing Solutions, “Land Value Taxation” overview.
• Lincoln Institute of Land Policy, foundational explanations and policy reports on land value taxation.
• Oates & Schwab (1997), research on impacts of split-rate taxation (Pittsburgh).

This article was written with contributions from AI to organize the information and improve its readability.