Rents will rise for this reason, and so will the amount an LVT can collect. But this isn't an infinite spiral. There will reach an equilibrium, as there is now, where renters apportion are certain % of their income on valuable locations. Which is collected by the landlord and taxed away by the LVT.
The LVT would not make landlords build denser housing, they have exactly the same incentive anyway. It would how ever reduced vacancy and under occupation among owner occupiers, and would increase the average size of dwellings, even if that meant they were more densely clustered by building upwards.
The day after the BI-increase, the housing supply and demand will be exactly the same, but renters will have a greater capacity to pay. The maximum amount that the market will bear will have risen exactly by the extent of the increase. It is hopelessly optimistic to think that landlords won't increase rents to claim almost all of it.
Until zoning laws permit greater density/supply (building upwards is great but often prohibited by local laws), the situation won't change, and a tax linked to rent will just cause an inflationary spiral.
I won't even go into the difficulties of separating land value from building value, since it's clear that objective land value isn't intended to be a factor in setting the tax level.
Landlords do not currently claim most of peoples disposable incomes. That ratio hasn't, nor would it change because renters get more income via the BI.
Landlords would in fact be keeping a lot less of peoples income once equilibrium has been reached.
There are no difficulties in separating the value of location from that of the buildings. Easy to do. Besides as far as LVT is concerned, its the structure rather than value taxed that is important. But I'd need to write more than I've got time for here to explain why that is.
The percentage of income claimed by landlords will increase slightly ...
before the BI-increase: say $12k rent of $36k income = 33%
after the BI-increase: $17k rent of $41k income = 41%
The only way rents drop is that zoning laws change to allow massive increase in rental space supply, or demand for rental space drops because people are enticed by low rents elsewhere and move. Since zoning laws will change only glacially, if at all, rents less than $(pre-BI rent + new disposal income) will require the Great Universal Basic Income Migration (GUBIM) from urban to exurban and rural areas. The GUBIM is possible, I just think it is vanishingly unlikely.
In the version that I was thinking of, a land value tax would pay for the basic income. If the land value tax provided all of the funds for the basic income, then there would presumably be no excess for landlords to siphon off, except maybe as one region gained in popularity at the expense of another, etc.
The eventual goal would be to have all or almost all income from rents within a country be distributed to the citizenry. Land owners would also receive the income.
A UBI paid out of taxes on produced factors (income,capital) distorts resource allocation, so we all end up poorer.
Rents would go up, but then so would the LVT and then the UBI until an equilibrium point is reached.
In the US, without any other changes to your tax/welfare system the LVT/UBI would result in every man,woman and child getting around $4000 each. That would rise as rents went up.
That would go up even further if other taxes and benefits were reduced.
As I'm sure you've been thinking, it seems important because of the looming threat of human labor becoming an obsolete means for the satisfactory distribution of wealth and necessities throughout society.
Do you have any other thoughts about how to address this problem?
The argument for the LVT/BI is that it is not a benefit or a welfare payment, but should be view as a basic human property right. Without which, we are not free.
The LVT really only means we would all be equal share landlords of the value derived from scarce resources supplied for free by nature/god. Basic Income/Public spending is that equal share.
Without that, humans cannot share this Earth as equals, thus will not have taken the final step from being savages to truly civilized beings.
Yes, it really is that big a deal;)
What's the reasoning that a land value tax could be helpful?
Edit: after some reading, the apparent intent of the land value tax is to encourage landlords to build denser housing to share the burden of the new tax among more renters. But this is like proposing a Slow Driver Tax while ignoring that the speed limit has been set at 15 mph everywhere in the city. Landlords already want to build multiple housing units, but they are prevented by zoning laws. Attempts to change zoning laws are some of the most vicious political battles in existence. Everyone knows that more density/supply is needed to make housing more affordable, but it just hasn't happened (at least in the US).