Skip to main content
Land is Free
Land is Free

SA84. Happy Nation by Lasse Anderson

Reprinted from “Debt Death and Deadweight” from
Denmark: the constitution of a happy nation Lasse S. Andersen

DENMARK is one of the European nations that can be held up as a
model for others to emulate. It is evident that this small Scandinavian
country has accomplished things that are universally envied. For many
years it has been ranked as one of the happiest places on earth, seconded only
by Norway in 2017. It is the least corrupt country in the world according
to Transparency International. And it has the best quality housing stock in
Europe, measured in terms of living space.
These outcomes are the result of many things, not least the country’s long
and peaceful tradition of compromise and cooperation in parliament. But
it is also to a large extent the result of Denmark’s long history of taxing and
regulating the housing market.
This history begins early in the 19th century when Frederick VI, who ruled
from 1808 to 1839, abolished hereditary servitude and liberated the peasants
from the landlords. This allowed a new class of smallholders to emerge.
And in the same period, a system of land taxation – the so-called hardkorn
tax – was introduced by the liberal-minded landlord and nobleman Count
C.D.F. Reventløw (1748-1827). This tax was basically a tax on the estimated
produce of land and it ensured that a steady revenue flowed from the large
manor houses and rural estates to the crown. As such, however, it was clearly
designed for an agrarian society and it gradually grew insufficient and unfair
as industrialisation and urbanisation progressed during the 19th century.
In 1903, the government abolished the hardkorn tax in favour of a tax on
income and property in general. This government, however, was dominated
by landlords and large farmers who, in effect, tried to shift the tax burden
away from themselves and onto the small farmers, the industrial workers, and
the urban elites. The property tax was particularly hurtful to the small farmers
because it was a tax on buildings as well as land and, naturally, buildings
constituted a higher share of the total value of their small farms. Luckily, the
small farmers were highly organised and educated due to the existence of
rural folk high schools, created by the priest and politician N.F.S. Grundtvig
(1783-1872). A counter-movement quickly took hold in many of these
The small farmers wanted land to be liberated from the entailed estates of
the noble landlords and they wanted to implement a system of land value
taxation which fell equally on all land – urban sites as well as farm land. They
had been inspired by what had happened in the 1880s. That was when a
debate had arisen in Denmark about the merits of the solution proposed by
Henry George, the American social reformer whose book Progress and Poverty
had made it clear that the rent of land was the only ideal and just source of
taxation. A group of folk high school teachers led by Jakob E. Lange heavily
influenced the public debate on the issue of tax reform, and by 1905 they
were represented in parliament by a new political party, the Radical Liberals,
who demanded and quickly achieved the regular revaluation of all land for
the purpose of taxation (Lefman & Lassen 2000).
And so, because people reacted to the shifting of taxes in 1903 and steadily
gained more representation in parliament, the tax system was gradually
improved. In 1916 all the land in Denmark was revalued. In 1919 all entailed
estates were abolished, liberating a lot of idle land to productive use. And
in 1922 and 1926 property taxes were replaced by a general tax on land
values, with the gradual removal of taxes on improvements on the land. Also,
a system of regular revaluation of all sites was initiated; a system which has
continued – in various guises – to this day (Müller & Mǿrch-Lassen 1989).
Denmark was one of the richest countries in the world by 1930, and in
spite of the Great Depression its economy kept growing in strength and
enjoyed a Golden Age in the decades following World War 2. With the
subsequent growth of the welfare state, however, the income tax quickly
became the primary source of public revenue, and the revenue from the land
value tax, which reached its peak in 1960, fell in proportion to the income
tax and, later, also the consumption tax (VAT). In 2015, the revenue from
property taxes accounted for about 4 % of total tax revenue.1
A civilized housing market
Even though revenue from the land value tax generally has declined since
the 1960s, this fiscal policy has nonetheless contributed significantly to
stabilizing the housing market. Along with some key regulations, it has
safeguarded the Danish market from the excesses of property speculation
which distort the London property market. Foreign nationals operating as
The Acts of Parliament
cash-rich speculators can buy and sell houses and apartments in the British
capital purely to make a quick profit. Alternatively, ‘hot’ cash can be invested
in upmarket dwellings (and left empty) as a safe haven for investors who do
not wish to risk their money in the stock markets. This is not permitted with
real estate in Denmark. Section 1(1) of the Acquisition of Real Property Act
stipulates that persons who are not residents of Denmark and have not lived
in the country for a total period of five years previously may only acquire
title to real property after having obtained permission from the Ministry of
Since 1972, because of the fear that Germans would buy all the summer
houses near the beaches, Denmark secured an exemption from EU rules to
protect the ownership of these dwellings. Some cities have (on a dispensation
from the rules) allowed foreigners to buy city houses to be used for vacation
purposes. The owners are, in the main, Norwegian nationals in northern
Jutland. But they have to demonstrate a relationship to Denmark, such as
having a history of vacationing in the area for many years.
Long-term vacancy of properties is discouraged in Denmark. If an owner
moves and does not wish to sell his property, he must rent it out – or at least
try to sell it. If a property is empty for more than six weeks, the owner has to
report to the municipal authority, which then seeks to provide tenants which
the owner has to accept. This is why, in Copenhagen, we would not experience
the situation that existed in London, where 1,652 high-value properties were
vacant for up to two years in the borough where an estimated 80 people
were burnt to death in Grenfell Tower in June 2017. Of the survivors, only
12 households had been re-accommodated a month after the inferno, with
dozens of people living in temporary accommodation. Some of the owners
of the nearby vacant properties included foreign royalty and east European
oligarchs. More than a third of their properties had been vacant for more
than two years (Batty et al 2017).
Because vacant land is subject to the land value tax, property owners in
Denmark have an incentive to ensure that the dwellings are occupied. Urban
sprawl does therefore not blight Danish cities as it does cities in other countries.
And anyone in Denmark can log onto the government’s website and view the
valuation of each site in the country. If the land value tax was returned to its
former glory and levied at a higher rate, the regulations mentioned above,
which limit the liberty of the owners, would be less necessary, but in the
absence of a substantial land value tax, they have proven to be very beneficial
for the housing market.

Politics and property owners
Almost all politicians in Denmark are reluctant to go against the interests
of the county’s many home owners. In the autumn of 2016, however, the
level of anxiety among politicians reached a high-water mark when a new
and improved system of land and property valuation was presented for
implementation by the Ministry of Taxation. It was estimated that the new
system, because of its accuracy, would cause taxes – especially the land value
tax – to spike in the large metropolitan areas, which had been substantially
undervalued for decades. For this reason, mainstream politicians quickly
initiated talks about how to protect property owners from future tax increases.
The result of these negotiations was a broad settlement about property
taxation that heavily favours the current home owners.
The present minority government is composed of three political parties:
the center-right Venstre, the Conservative and the Liberal Alliance parties.
The latter two wanted to abolish the land value tax completely (claiming that
they saw no justification for this method of raising revenue). All three parties
shared the desire to render the property tax less progressive, but they were
opposed in this by a majority composed of the other six parties in parliament.
And so, on May 2, 2017, the Danish government concluded a settlement on
property taxation with three of the opposition parties. Thus, six parties out
of nine represented in parliament supported a settlement that was intended
to ensure that the new and improved system of valuation (which would come
into operation in 2018/2019) did not generate a higher total revenue from
property taxation. This, however, was only the latest in a line of political
initiatives that were supposed to stabilize the property market and prevent
property taxes from rising exorbitantly.
In 2002, the center-right government tied the estate tax to the then
nominal value of property.
In 2003, an artificial ceiling on the land value tax was imposed. The
change permitted an annual increase of no more than 7% on land
values, which meant that the land value tax in most cities lagged
behind the actual development of the housing market. Because of
this artificial ceiling in particular, 90% of all land was not taxed on
the basis of its market value in 2014.
The coalition government’s settlement abolishes these defects. But the price
of returning to the status quo ante is extremely high. To safeguard property
owners from higher taxation, the rate of taxation will fall dramatically. The
floor beneath the land value tax, which has hitherto been at 1.6% of the
assessed value, is abolished, and the previous maximum of 3.4% was reduced
to 3%. Municipalities have been instructed to lower the tax rate if their
expected total revenue from property taxes exceed the revenue they collected
before the implementation of the new system of valuation.
Furthermore, current owners will receive a permanent tax deduction
equivalent to the nominal difference between new and old taxation. If the
value of their land/property increases, they will be taxed fully on the margin,
but the fact that the deduction is permanent means that they will be undercharged for as long as they remain in their homes. Payment of increased taxes
may be deferred, becoming a form of mortgage: a debt to the government
which can be discharged from the proceeds when the property is sold. The
debt is interest-free for increases 2017–2020, after which interest will be
payable. But home owners can opt out of this scheme after 2020 and pay the
increased taxes. Why make a charge simple when you can make it complicated –
and at a later date, using the complication as an excuse for abolishing it!
The outcome of these initiatives means that the settlement will result in
a very unequal taxation of land values between regions as well as between
neighbours. Because the old valuation system, as well as the artificial
limitations on property taxes, favours the large cities at the expense of the
more rural locations, the largest deductions and the largest lowering of
rates will occur in the municipalities of the largest cities. Copenhagen, in
particular, is favoured over the other cities of Denmark.
We may suspect that the measures taken to curb the taxation of land
and property are based on political fear of property owners. Commentators
suggest that the possibility of repeal and reform is minuscule. But if this bias
in fiscal policy does persist, it entails the risk of jeopardising a key building
block of the social solidarity which has characterized Danish society for more
than a century.
Batty, David, et al (2017), “Revealed: tycoons who own 1,652 empty homes
in the Grenfell area”, The Guardian, August 2.
Müller, Anders & Mǿrch-Lassen, Gregers (1989), “Land Valuation and Fiscal
Policy in Denmark”, in Ronald Banks, Costing the Earth, London: ShepheardWalwyn
Lefmann, Ole, & Larsen, Karsten K. (2000), “Denmark”, in R.V. Andelson, LandValue Taxation Around the World, 3rd edn., Oxford: Blackwell.
Debt Death and Deadweight


Land Value Tax Links

The Tax Burden

Article List