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Taxing taller buildings

Ryan Avent offers this thought experiment:

“Divide the District into two areas: the [downtown] zones (CBD, NoMa, Ballpark), and the rest. In each area, all limits on height will be eliminated. In their place, the city will level a “floor tax”; a developer can build as high as he or she likes, but must pay a one-time fee for each floor-equivalent (say, for each 10′ of height) above the currently existing development limits. This is not in lieu of other city taxes, which would still be paid; the city would basically be selling height permits. So downtown, a developer could tear down a 13-floor building and replace it with a 20-floor building, provided that it paid the floor tax for each of the 7 floors above the previous height. In Brookland, a developer could build an 8-floor building on land currently zoned for 2-story construction, provided it paid the floor tax on the 6 additional floors.”

“My question is: where would you, urbanists and District residents, set the two tax rates (one for the office zones, one for the rest of the city)? You’re not allowed to reject the system out of hand; given that this policy will be put in place, but given the freedom to set the tax rates however you like, which rates would you choose?”

I’m not opposed to talking in terms of this kind of model, provided we adequately price things that aren’t usually adequately priced, but the model Ryan proposes is too simple in at least three ways:

  1. Metro stations matter. Two geographic zones is not enough. At least three are needed: One for downtown, a second for outer areas near Metro stations, and a third for the rest. Really even more than that are probably necessary, but I can’t see taking this discussion at all seriously without at least those three.
  2. Land use matters. Ryan doesn’t care if new construction is residential or commercial, but I do. I want to incentivize different land uses in different areas, so I want a model that takes land use into account. There should be options to apply a different tax rate to different land uses.
  3. Other buildings matter. Cities without height limits (or with limited ones) often see a handful of very tall buildings surrounded by empty or dramatically underused lots. Any model to allow taller buildings in Washington should be structured in a manner that reduces the likelihood of this happening. This would be possible (but cumbersome) to do under Ryan’s proposed model by adjusting the extra floor tax rate based on the height of buildings on all properties with a certain radius, say 3 blocks. For example, the tax rate to build extra floors would be much higher if there’s a parking lot across the street than if there’s a bunch of 12 story buildings, because we really don’t want that empty lot to stay empty.

So with a more sophisticated model in hand, what’s our goal for the city? The purpose of any regulatory tool is to produce results, so let’s identify the desired results. My vision for the city is that it be filled with mixed-use neighborhoods (of which downtown is one) that are active 18 hours a day, rather than being single-use ghettos for offices or bedroom communities. I want the most intense uses to be within walking distance of Metro stations and closer to the regional core. Within the more intense areas, I want bustling sidewalks that are pedestrian friendly and devoid of empty spaces. I want a variety of old and new architecture, and do not want large areas to be visually banal or identical. I want to guarantee that our special national symbols are not overwhelmed by common buildings, and that we enhance our public spaces.

So how can we structure Ryan’s model (with my additions) to result in the city I want? Here’s one possibility, structured to encourage residential development downtown, both residential and office development in the outer Metro station areas, and neither in the outer non-Metro areas:

  Downtown Outer Metro Outer Non-Metro
Office High tax rate Low tax rate High tax rate
Residential Low tax rate Low tax rate High tax rate

Concern number 3 from above would still be an issue, so this table would only be the base tax rate, which would have to be adjusted according to the height of buildings on nearby properties. I want to minimize the number of empty lots all over the city, so any time there are empty lots nearby (or perhaps even lots with particularly short buildings) the tax rate would climb, to disincentivize land banking. The adjustment formula would also vary depending on the zone, because I have unique goals for each area. For example, in downtown I want to preserve views of some of the monuments, so proximity to those monuments would trigger a much higher tax rate.

Where to actually set the numbers is a question that would require a lot more study. I’m not comfortable making specific suggestions without knowing just how much of an incentive or disincentive certain rates would be to potential developers. What rate do I need to make adding a few residential floors to new buildings downtown too good to pass up? What rate do I need to allow a handful of 50-story downtown skyscrapers for the people who really feel they need them, but not so many that it saps demand away for office development in Tenleytown and Silver Spring? Until we have answers to those questions, we can’t be expected to set rates. But I do think Ryan’s model – or a much more sophisticated version of it – could potentially be a happy compromise to the height limit issue.

April 6th, 2011 | Permalink
Tags: proposal, urbandesign



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