The traditional property tax is a barrier to the preservation of affordable housing. Although it is typically only 1% or 2% of value, it is applied not only when an improvement is made, but every year thereafter so long as that improvement adds value to the property. Using a net present value calculation, the property tax on improvements has an economic impact equivalent to a one-time sales tax of between 10% and 20% on construction labor and materials. That's a significant barrier to maintaining and improving affordable rental housing.
Fortunately, some jurisdictions have remedied this situation by reducing the property tax rate on building values. This makes it much cheaper to maintain and improve buildings. These jurisdictions maintain needed revenues by increasing the property tax rate on land values. Counter-intuitively, higher taxes on land motivate development of high-value sites, discourage the hoarding of vacant lots and boarded-up buildings, and actually help keep land prices more affordable.
Thus, by reducing the property tax rate on building values and increasing the tax rate on land values, jurisdictions can help preserve and maintain affordable rental housing near transit. For more information, see http://www.justeconomicsllc.com