Many large American assessment jurisdictions still treat land valuation as an afterthought, and whenever deficiencies in land valuation are brought up, these jurisdictions respond to critics with a perfectly sensible question:
Well, what do you suggest we do instead?
Unfortunately, the IAAO, the governing body that sets standards, isn’t much help in this regard. The entire chapter on “Land Valuation” in their standard on Mass Appraisal handbook is two whole paragraphs:
Furthermore, whenever I propose some method to assessors, they respond with genuine concerns:
We need to be able to explain and defend land valuations It needs to be straightforward to retrain our staff It needs to not be a bunch of extra work
Fancy computer models have their merits, but even when they perform well they tend to score poorly on exactly these three points, so adoption tends to be an uphill battle. Is there perhaps a simple and straightforward method we’ve been overlooking? What if we flipped the entire question of land valuation on its head?
What’s the simplest thing a jurisdiction can do to improve land valuation?
As always, we’re not looking to make the perfect the enemy of the good. What we really care about is improvement over the status quo, which in many cases is a simple but misguided rule of thumb. Is that setting our sights too low? On the contrary, history strongly suggests “good enough” is an acceptable target; the historical German colony in Qingdao, China enjoyed great economic success directly in line with theory despite a fairly crude valuation method. Meanwhile in the USA, we can draw similar confidence from the long legacy of the Somers System, a popular wisdom-of-the-crowds approach that was used to power land valuations in large American cities across, and which persisted for many decades.
We also have a simple, objective test that will tell us for sure when we’ve hit the mark:
An LVT based on these land values will yield the benefits predicted by theory.
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