Kenya Government should use the below guidelines to steer the development of a land policy that enables growth of the Republic.
Problems facing the Country that Land laws can resolve.
1. Unemployment.
2. High food prices.
3. High rental costs.
4. High house sale ,land prices and rapid land price escalation.
5. High cost of roads construction in Nairobi periphery
6. Huge traffic jam in Nairobi
7. High Income and Value Added tax
1. Unemployment.
The current land regime whereby any person who owns land in Kenya can leave it idle without any repercussion from the Government creates situations whereby the majority of Kenyans, who earn a living from farming, lack an opportunity to farm.
For example, assume a land owner in Nakuru owning 1000 acres of agricultural land in an area which can support rain fed farming. If the land owner chooses to farm on the land, he has no choice but to employ people, reducing the number of people who are jobless. If the land owner chooses to leave the land idle, as in the case currently on many parcels of agricultural land in Kenya, many Kenyans become jobless.
In developed countries, such land owners are given a specific agricultural target to meet by the Government. If they don’t meet this target in terms of agricultural productivity, then the Government instils measures to ensure that they don’t slow down the economy.
Below is a link to Virginia State, USA on how they determine the value of agricultural land to determine how each land should be looked at in terms of agricultural productivity.
Below is a link on how Oregon, USA , determines the value of forest land.
http://www.oregon.gov/DOR/timber/pages/index.aspx
http://usevalue.agecon.vt.edu/SLEAC.htm
When the land value is determined, a certain tax % of the annual land value is set . Land owners will then have to pay the Government the amount set whether land is idle or farmed. Since no one would like to pay money to Government without any gain, land owners will then be forced to farm on their land to earn the money to pay off the tax, hence in the process, create allot of employment for other people.
2. High Food Prices.
Currently, in Kenya, no land law prohibits a land owner from leaving their land idle. In developed countries, annual land value tax as explained above ensures all land is used for the zoning purposes set. If the land is zoned educational, it must be used as such. If the land is zoned agricultural, it must be used as such. This in effect will cause allot of agricultural production which in turn will reduce the demand hence lower food prices. Lower food prices will then enable the Government to Govern with less security issues and less chances of citizen unrest like was seen in the recent Arab spring riots due to high food prices.
For example, if all land owners in agricultural zoned lands in Kenya farmed, food prices will automatically fall down.
3. High rental costs.
If the Government of Kenya land laws prohibited land owners from leaving land zoned as residential to lie idle, the land owners will then be forced to develop the plots and in effect, increase the number of houses for rent hence reduce the overall rent due to competition.
Land zoned as residential, especially around urban areas is zoned a single or multiple dwelling depending on location. In Karen, Runda etc, the land is zoned as single dwelling per half acre plot. In Hurlingham, Ngara, Eastleigh etc, the land is zoned as multiple family dwellings per minimum 1/8th plot.
Land laws can be designed to encourage developers to construct as pr zone. The current situation such that even if the land is situated in a high density residential zone, the land owner is forced to apply for a costly change of user, doest encourage high density development. Also, most Government planners tend to automatically request that developers build lower density.This should be the other way round whereby Government planners would discourage low rise, low density developments. Many a time, developer have had to bribe Government planners to be allowed to build high rise.
Government can install an annual land value tax to force developers to build to the maximum zones for the area. For example, if a developer constructs a bungalow in an area zoned for high rise, the land value tax should be such that the rent accrued form the bungalow is almost swallowed by the tax . This will force the land owner to construct a higher density to circumvent this.
4. High house sale ,land prices and rapid land price escalation.
The current land regime should be changed to enable reduction of the rate of land price escalation.
When land law allows for people to buy land for speculation purposes, then wait for a few years and resell at a profit, this added profit is in essence a drain to the economy. Land as a finite, scarce resource, when held by a land owner idly , as happens all around Nairobi in Kitengela, Juja, Ruiru, Naivasha etc., ensures that less land for sale is available. When there is less land for sale, demand rises and people who need the land to use for a house, farming, industry, school etc. become desperate and pay higher. This high pay is what the land owner terms as profit. When the new buyer pays the high price, he then loads the costs into the consumer. If he builds a school, the fees will be higher. If a farm, his food sale price will be higher. This is in turn felt by the economy as rising cost of living. When cost of living rises, this becomes a high rate of inflation. When the rate of inflation rises, the bank interest rate rises. When bank interest rate rises, there is less money circulation in the economy hence a vicious cycle of poverty.
By installing an annual land value tax, where the land value is predetermined by the Government depending on the zoning of the area, this will prevent people buying land to hold and resell at a later date since the cost of the annual land value tax will have to be paid out of pocket by the land buyer. When speculation is discouraged this way, only land buyers who are planning to develop the plots will buy land hence low demand for land hence lower land price appreciation.
5. High cost of roads construction in Nairobi periphery
When Government installs an annual land value tax, this will in turn cause most land owners holding idle land around Nairobi to either develop so as to make money to pay off the tax or sell the land to developers ready to build. This will increase the amount of houses available near the city hence most Nairobians will not need to travel far off every day to far places such as Thika, Kitengela, Limuru etc. They will buy houses and rent near the city. This will save the tax payer money that could have been used to lay road infrastructure in these far away places away from the city.
6. Huge traffic jam in Nairobi
When many developments come up in the vacant lands near the city, Nairobians will then travel less distances to and from work, hence negating the need to use vehicles hence less traffic jams.
See the article below on how Texas, USA, encourages a pedestrian city.
http://www.keyetv.com/news/features/top-stories/stories/in-sprawling-texas-walkability-gains-toehold-16910.shtml
7. High Income and Value Added tax.
There are 3 factors of production|land|labour|capital.
Current VAT in Kenya is at 16% with income tax at 30%. Research shows that if labour and capital are taxed high, then people will not see the need to work so hard for the Government to then tax them. For example, if Kenya Government taxed employees at a hypothetical 100%, meaning they take all your salary as tax, then the employee will see no need to continue working.
The same applies to taxing capital e.g. if matatu owners were taxed 100%, they will see no need of the effort to run the matatu for 0 income, hypothetically speaking.
On the same note, hypothetically, if the Government taxed land at 100%, the land productivity will not be affect. Crops will still grow on the 100% taxed land, as in, the land does not change a thing after increase of tax, since land is not as a result of human enterprise, but rather a God given resource, just like the air we breath.
Therefore, from the hypothetical examples above, Kenya Government can reduce VAT and Income tax to spur more productivity and lower cost of living then increase or create a new tax on land value to compensate.
This land value tax will be impossible to evade since land can not be hid. This means KRA will easily meet its tax targets, targeting the well off land owners, and easening the poorer consumers.
Francis Gichuhi Kamau, Architect.
info@a4architect.com
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