135
development. That amount would then be assessed an annual ground rent of 4.5 percent, which is
approximately the estimated market return on a secure investment in improvable land. For example,
consider a 100 square meter house in Lusaka, assigned a minimum development value of K115,000
per m2 , in 1993 kwacha. The improvement would be estimated to be worth at least K11.5 million. The
land value would be estimated to be not less than 10 percent of that, or K1.15 million, 4.5 percent
of which would give an annual ground rent due of K51,750 in calendar 1993. For 1994, of course,
the ground rent should be adjusted upward by the change in the CPI during 1993. If one were to
assume that the land under the average house in Lusaka were worth 25 percent of the price of the
improvements, 13 rather than 10 percent, then the ground rent due during 1993 should have been on
average K129,375. However, further research aided by experts on valuation would be needed to
determine whether 25 percent is in fact an appropriate estimate. Perhaps it would be feasible to follow
the Hammar report model, and categorize each sector of the city into low-, medium-, and high-cost
construction areas.
A related question is whether public policy should continue to subsidize residential areas with
relatively large gardens behind walls, in which relatively small but high-cost houses sit. Further study
should consider a mechanism that will base ground rents on an average amount of land per dwelling
but charge more for estates so large that two or more houses could readily occupy the land without
losing all the amenities. Eventually, as land values rise in the market, the very large stands will be
divided or will be used to build condominium apartment buildings.
A private landlord will not refrain from collecting annual rent from a tenant just because the
tenant chooses not to live in, or to till, a dwelling or a piece of farmland. The landlord will collect
the rent in any case, since the tenant had by lease the right to dwell or the right to till, excluding
anyone else from doing so. Likewise, the state should collect ground rent on vacant lots and idle
farmland.
In discussions of the proposed land development fund (following section), it is usually assumed
that the fund will have ground rents as an important source of funds with which to operate. It should
be noted, therefore, that until and unless economic ground rents are in fact imposed and collected as
effectively as a private landlord would impose and collect them, the proposed fund will lack the
resources with which to work. At the same time, the state, acting as the landlord, needs to think like
a good estate agent. Ground rents collected will need to go into improved road maintenance and other
infrastructure investments that in turn justify the significant increase in ground rents.
VI. Proposed tax reforms
Proposed changes in land laws are now circulating in two closely related draft laws: the Land
Titles Act and the Land and Deeds Registry Amendment Act. The Land Titles Act draft includes a
provision that "any person who holds land under customary tenure may convert it into leasehold
tenure." This would add the land in question to the supply of land on which annual ground rents
13 The Hammar study suggests that over the world, land values tend to be from 10 to 40 percent of the value of
improvements on urban residential stands, with the least desirable locations being on the low end and the best locations being
on the high end. This is certainly consistent with experience in the United States and in various countries of Latin America
and the Caribbean.