How do you calculate land value?

Calculating land value, particularly for a land value tax, involves separating the value of the land from any improvements on it. This distinction is essential to accurately assess the land's true worth and ensure fair taxation. Here are some methods discussed by Lars Doucet:

1. Cost Approach:

   • This method involves estimating the replacement cost of the improvements, accounting for depreciation, and subtracting this from the total property price to isolate the land's value. Although commonly used, it can be imprecise due to outdated cost data and infrequent reassessments 1.

2. Capitalization of Rent:

   • Land selling value can be derived from its potential rental income. Essentially, the selling price reflects the net present value of the future income stream that could be produced by the land. This method helps in understanding the productive value of the land independent of any improvements made on it 2.

3. Use of Technology and Data:

   • Advanced methods such as multiple regression and geographic weighted regression are recommended to better separate land and improvement values in the appraisal process. These techniques help in adjusting calculations dynamically with market changes. It is also beneficial to keep property tax assessments updated more frequently, using real-time data to reflect current market conditions 1.

These methods require careful consideration and reliable data to implement effectively, especially when supporting systems such as municipal property tax assessment are outdated.