While striving to enhance economic growth in Detroit during the late 2010s, Nick Allen encountered a significant challenge.
The municipality was aiming to encourage more investments following a long history of industrial migration to suburban areas and other states. Relying increasingly on property taxes for funding, the city was negotiating personalized tax arrangements with potential businesses. This situation is not exclusive to Detroit, but such agreements entail lengthy approval processes that hinder investment choices and render smaller projects impractical.
Additionally, despite cultivating small areas of growth, these personalized tax breaks failed to alter the city’s overall fiscal framework. They also tended to benefit those with the influence and resources to navigate the system for concessions.
“The last thing you want to do with taxes is create very specific, highly procedural methods of adjusting the burdens,” Allen states, now a doctoral candidate in MIT’s Department of Urban Studies and Planning (DUSP). “You need a straightforward process that aligns with people’s perceptions of fairness.”
After commencing his PhD program at MIT, Allen continued to explore urban fiscal policy. Together with a cohort of scholars, he has generated research papers advocating for a land-value tax—a consistent tax rate on land that, alongside decreased property taxes, could increase local revenue by stimulating greater city-wide investment while alleviating tax burdens on residents and businesses. Moreover, it could potentially diminish foreclosures.
In recent years, this notion has gained traction in urban policy discussions. The mayor of Detroit has backed the concept. The New York Times has reported on the endeavors of Allen and his associates. The land-value tax is presently a credible policy alternative.
It’s uncommon for a graduate student to have their work integrated into a major policy discussion. However, Allen is an exceptional student. At MIT, he has not only conducted impactful research in his area but has also engaged significantly in campus-related work with considerable influence. Allen has participated in task forces evaluating student stipend policies, expanding campus housing, and brainstorming dining program reforms.
For these contributions, Allen was awarded the Karl Taylor Compton Prize in May, MIT’s top honor for students. At the event, MIT Chancellor Melissa Nobles noted that Allen’s efforts enabled Institute stakeholders to “fully comprehend intricate issues, guaranteeing that his suggestions are not only well-informed but also practical and effective.”
Aiming to Restore Growth
Allen hails from Minnesota, having earned his BA from Yale University. In 2015, he began graduate studies at MIT, obtaining his master’s in city planning from DUSP in 2017. During this time, Allen contributed to the Malaysia Sustainable Cities Project led by Professor Lawrence Susskind. At one stage, he spent several months in a small Malaysian village investigating the impacts of coastal development on local fishing and agriculture.
Though Malaysia differs from Michigan, the issues Allen faced in Asia mirrored those he sought to continue exploring in the U.S.: discovering methods to finance development.
“My primary interests revolve around real estate, the physical environment, and the fiscal policy questions regarding how it is all financed and what the responsibilities of the state and private markets are,” Allen explains. “That led me to Detroit.”
Specifically, this brought him to the Detroit Economic Growth Corporation, a city-sanctioned development organization that aids in fostering new investments. There, Allen began to confront the revenue challenges facing the city. Once celebrated as the wealthiest city in America, Detroit has witnessed extensive property vacancies and has increased property taxes on existing buildings to offset losses. These elevated rates have discouraged further investments and construction efforts.
Indeed, the difficulties confronted by Detroit are rooted in far more than tax policy and pertain to numerous macroeconomic social factors, including suburban exodus, the relocation of manufacturing to states with nonunion labor, and much more. However, altering tax policy can serve as a lever for response.
“It’s challenging to determine how to reinvigorate growth in a place that has been depleted by its losses,” Allen notes.
Assigned with underwriting real estate projects, Allen began documenting the issues stemming from Detroit’s dependence on property taxes and sought insights from previous economic studies on optimal tax policy for alternatives.
“There’s a strong empiricism where you start by questioning why we have a system that nobody would select,” Allen states. “There were two aspects to this for me. One was the initial challenge of making individual projects feasible, from affordable housing to large industrial facilities, in tandem with the wave of tax foreclosures that arose in the city.”
Engineering, But for Policy
After two years in Detroit, Allen returned to MIT, this time as a doctoral scholar in DUSP with a research agenda centered around the issues he previously engaged with. In his pursuit, Allen has collaborated closely with John E. Anderson, an economist at the University of Nebraska at Lincoln. With a national team of economists gathered by the Lincoln Institute of Land Policy, they aimed to tackle the city’s queries concerning property tax reform.
One of their papers employed current data to demonstrate that a land-value tax has the potential to lower tax-related foreclosures in the city. Two additional studies examine the application of the tax in specific areas of Pennsylvania, one of the few states where it has been implemented. There, researchers concluded that the land-value tax fosters greater business development and increases property values.
“What we observed overall, analyzing past tax reductions in Detroit and other cities, is that diminishing the rate at which individuals in severe tax distress encounter foreclosure greatly impacts the situation,” Allen affirms. “This has a positive effect on allowing businesses to reinvest in properties. We are witnessing a notable increase in the attraction of investments.
And it benefits from being a rule-based system.”
Those empirical findings, he adds, reaffirmed the notion that a policy change could stimulate growth in Detroit.
“That truly validated the intuition we were pursuing,” Allen reflects.
The extensive attention the policy proposal has received was somewhat unexpected. The tax has not yet been put into effect in Detroit, although it has been a significant topic in civic discussions there. Allen has been approached to advise on tax policy by officials in several major cities and remains optimistic that the concept will continue to gain momentum.
Meanwhile, at MIT, Allen has one more year left in his doctoral program. In addition to his academic research, he has actively engaged in Institute affairs, assisting in reshaping graduate school policies across multiple areas.
For example, Allen was a member of the Graduate Housing Working Group, whose initiatives contributed to MIT’s construction of Graduate Junction, a new housing facility for 675 graduate students on Vassar Street in Cambridge, Massachusetts. The name also refers to the nearby Grand Junction rail line; the complex officially opened in 2024.
“Innovative environments struggle to build housing quickly enough,” Allen remarked at the time Graduate Junction opened, while also pointing out that “new housing for students alleviates price pressure on the broader Cambridge community.”
Reflecting on it now, he adds, “Perhaps to many, graduate housing policy seems unexciting, but to me, these questions are highly engaging.”
Ultimately, Allen suggests that the intellectual challenges in both realms can be quite analogous, whether he is addressing urban policy challenges or enhancements for the campus.
“The reason I believe planning aligns so effectively here at MIT is that much of what I do resembles policy engineering,” Allen explains. “It’s crucial to grasp system limitations and seriously contemplate finding solutions designed for purpose. That’s why I’ve felt a sense of belonging here at MIT, working on these external public policy concerns and initiatives for the Institute. One must carefully consider what individuals express about the constraints they experience in their lives.”