> This is the problem -- who determines how much these things are worth? And if you risk other people pricing you out of property you currently hold a lease for

> This is the problem -- who determines how much these things are worth? And if you risk other people pricing you out of property you currently hold a lease for (especially because they think the value is going up because of your investments in it) I can't imagine that would encourage any development at all. This concern is usually addressed by ditching the distorting effects of the periodic auction and of the incentive to try to "steal" capital improvements by abandoning the auction framework and just assessing a yearly property tax proportional to the value of the underlying land were it unimproved. Since ownership and sale of land would still exist in this system, the value of the land for assessing land value tax can be determined by the market value of the land.