Was travelling recently and met a nice person who is living Amsterdam. As usual around me the topic of land value tax (LVT) came up. I didn't know anything about the property tax system for Amsterdam, and they said it was based on a leasehold system. Those have many similarities to land value tax, but Amsterdam also has insane property prices and rent (currently the highest in Europe), so does that mean LVT doesn't work? Not at all. Amsterdam's story actually teaches us exactly why proper LVT matters—and what happens when you get almost everything right but miss one crucial detail.

Usual disclaimer: I'm not a pro in this field, and definitely not about Amsterdam, so there may be mistakes in the following. If anyone has expertise in Amsterdam's erfpacht system and can correct my understanding, please reach out!

1. What is the leasehold system?

Rather than people/buyers/businesses owning the land and property, Amsterdam retains the land ownership, and leases it to people who can then build on it. This is different from Henry George's idea of keeping private property ownership, but charging a land value tax based on the land rent. In practice it can be quite similar, since one is a tax based on the land rent, and the other is actually renting the land.

2. How is the lease price calculated

I'm still researching the exact details of how the calculation works, but based on what I've found so far (drawing a lot from this): For existing buildings, Amsterdam calculates ground value by taking the property's market value (WOZ-waarde) and subtracting the construction costs. This residual method is actually a reasonable way to isolate land value from building value.

But here's where things go wrong: once they arrive at the land value, they don't charge based on plot size. Instead, they charge per square meter of housing area. As the municipality explicitly states, a 20 story building has more livable area than a 4 story building, so land rent for the 20 story building 5x the amount of that of the 4 story building. Since it's not based on plot size, which stays the same regarless of building size, larger buildings pay taxes in proportion to their size. This system has explicity no incentives for denser and more efficient land use, one of the major benefits of Land Value Tax.

Een woonflat van 20 verdiepingen heeft een grotere totale grondwaarde dan een appartementencomplex van 4 verdiepingen. Zelfs als ze op een even groot perceel staan. De grondwaarde berekenen we namelijk per vierkante meter woningoppervlak. En dus niet per vierkante meter perceeloppervlak.

A 20-storey residential block has a higher total land value than a 4-storey apartment complex, even if they are built on plots of equal size. This is because we calculate the land value per square metre of living space, rather than per square metre of plot area.

[source] [Translated with DeepL]

I think this means that if a 500m² plot with 500m² house pays €X, then 500m² plot with 5,000m² apartment building pays €10X, not €X.

Should also say I'm vastly simplfying this analysis, there's also lots of brackets and building types etc, but I wanted to focus in on the most LVT relevant characteristics.

3. So close, yet so far: The tragic history

Amsterdam has nearly everything needed for successful land value capture: administration, valuation systems, appeals processes... even municipal land ownership, which isn't neccessary but probably helps politically since they the city is the land owner. Yet they undermine it all with the per-housing-area calculation, which defeats the density incentive that makes LVT economically powerful. Plus, that livable area requirement creates significant administrative overhead—measuring interior spaces, tracking renovations, defining what counts as "usable area." Plot size, by contrast, is trivially easy to measure and rarely changes.

How did they get so close yet miss this crucial detail? The history suggests good intentions gradually going astray with poor implementation:

• In 1896, Amsterdam's leasehold system was introduced, likely inspired by Henry George's ideas about capturing land value for the community. However, the original system had fixed 50-75 year terms without regular reassessment. This meant the system failed to capture rising land values as the city grew—precisely what it was designed to do.
• When lease terms expired, ground rent suddenly spiked to reflect decades of accumulated value growth, creating high uncertainty at renewal. The system made adjustments based on general inflation, but this rarely captured actual real estate appreciation. Compare this to Kiautschou, a German-administered territory in China that successfully implemented Georgist land value taxation around the same time. There, regular reassessments were built into the system from the start, allowing it to capture land value growth smoothly while still incentivizing development.
• The 2016-2017 reforms (General Conditions for Perpetual Ground Lease 2016, English translation; Algemene Bepalingen voor eeuwigdurende erfpacht 2016 Amsterdam, Dutch original), adopted by Municipal Council on June 22, 2016, attempted to address the spike problem by introducing "perpetual ground lease" (eeuwigdurende erfpacht), allowing residents to lock in rates or buy off the ground rent entirely. This also introduced the "livable area" details.

4. Lessons for Berlin

Amsterdam's system does show that charging for land value doesn't break the housing market. Properties under leasehold sell for 3-6% less than freehold properties—suggesting the land charges do affect prices rather than just being passed through.

For Berlin, Amsterdam offers both inspiration and warning.

The inspiration: Their administraion of complex municipal land ownership shows that land value tax at scale is possible. According to this source, Amsterdam manages 200,000 leasehold contracts covering 80% of the city. The administrative systems work, should be easier for a land value tax system as they would be simpler than a leasehold system.

The warning: Details matter. Amsterdam built an impressive apparatus inspired by Georgist ideas but made two critical errors. By charging per square meter of housing instead of plot size, they eliminated the density incentive—the whole point of LVT. And by failing to regularly reassess land values, they failed to capture speculative gains, creating massive payment spikes when leases finally did renew after 50-75 years.

A proper land value tax based on plot size and location would:

• Capture rising land values for the community
• Create strong incentives for density
• Discourage speculative holding of vacant land
• Use simpler, more transparent calculations

Amsterdam got so close. They proved the administrative side works at scale. Berlin can learn from what they got right—and what they got wrong.