[1] In practice and as a primary means of property taxation. For example, proponents of wealth taxes talk about Switzerland, but the percentage of wealth that gets taxed there is quite small and nowhere near what proposals for wealth taxes in the US are aiming for. In other words, what's a good country to look at to see LVT used effectively?
Does LVT look at a piece of land's productive value instead (i.e., how much food you could grow on it or how many minerals you could mine out of it)?
Usually the assessment and sale price are not far off.
Georgism[1], which I'm fascinated by. One way to organise it is to ask people how much tax they're willing to pay, from which the land value can be derived (as that's the real point of assessing land value for someone who isn't willing to sell that's the real order of things). However, if someone bids on the land for that price you must sell.
> Are there any good examples of governments that use LVT in practice?
I thought there were only one or two places using LVT but it appears there are quite a few[2], but it's rarely pure LVT.
[1] https://en.wikipedia.org/wiki/Georgism
[2] https://en.wikipedia.org/wiki/Land_value_tax#Implementation
Some people have very strange misconceptions about LVT & Georgism.
The land with the highest value is city land. Most of city land and the buildings on that land are private property so they cannot be auctioned “every year”.
Singapore and Taiwan lease blocks of state-owned land for (high-rise) residence buildings for a duration of 99 years. This land is auctioned to developers, who then build houses and high rises, then sell them to individuals. The land lease ends after 99 years, so the land can be reused. This obviously does not capture the increase in the value of land over 99 years, but the value of land at the time of the sale.
So both states have taxes on land - a property tax in Singapore and a tax on the increment in the value of land in Taiwan, showing that it’s feasible to estimate the value of land and tax that (value of land = total value - value of improvements).
But surely you have improvements on the land and friction from moving...
I like LVTs, but there's some significant devils in the implementation details.
For the improvements on the land bit, you could project at the beginning of the year what you think the land will be worth by the end of the year, due to planned improvements. That locks in the value for the year.
I can see problems with that too, but the real question is would those problems be worse or better than the problems we have now?
If the land is worth $100, and your house is worth $200-- it's worth $300 to you. But a LVT should just be taxing that $100.
So with either kind of improvement the tax can go up, but LVT still encourages development compared to property tax as undeveloped land will still attract a greater proportion of tax than it would under a property tax.
If you set the tax rate by having owners bid a price they're bound to sell their property for... that's going to include improvements like dwellings, since the owner can't take their dwelling with them and doesn't want to just sell the property with their dwelling for the land value alone.
In turn, this fails at setting the rate for a LVT, because it captures the value of improvements like houses in the taxed amount.
Flats in the UK are leasehold, which means you can buy (part of) a property and still not own the land.
It's entirely possible to separate the two.
That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions.
In turn, lots of the benefits of a LVT evaporate if the taxable value (of landowner's eventual rights) is so decorrelated from the present value of land uses.
That's the problem here: valuing the land alone is hard. Separating rights, adding more owners and options and preferences --- doesn't make valuing the land alone easier.
The tenant knows how much value they are getting from being there, at least relatively, because they pay the rent. If you're paying twice as much rent for half the space as your mate, unless there's some reason like being closer to the centre of the city or something, you know you're getting a bad deal.
Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.
Yes, but... As I keep trying to make clear:
* Anyone improving the property requires some kind of protection of this investment, usually in the form of a durable ownership interest or a very long term lease, with a value chosen based on both parties' estimates of the utility of the land over that lease term.
* In turn, the rents that the landlord receives from the property can be not-too-closely related to the present value of the land. They may be higher or lower.
* In turn, the land value tax doesn't succeed in capturing the true market rent of the land when it is based upon bidding by landowners, whether we're dealing with separate owners for improvements or not.
Imagine the case of someone who entered into a long term lease (60 years? 99 years?) in 1975 to build a house surrounded by orchards in San Jose. The real value of land has appreciated >60x over that term. A land value tax would capture a tiny fraction of that value if the landowner was bidding based upon the lease returns + the present value of the land being returned in 40 years.
> Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.
The level of friction is so high that you can't solve this one with bidding; you're going to have to rely upon comparable sales and assessed/appraised values.
It takes two to tango. Perhaps you'd be better off keeping your frustrations to yourself and improving the clarity of your writing.
> The real value of land has appreciated >60x over that term.
What is the "real value"? It's what someone is willing to pay for it. If the returns on the land are not that much, as you contend, then it's not worth >60x what it was. If the property owner has some protection than means they can't be shifted off the land for 99 years, then that land is not worth as much as you contend because it can't be used for something else. If someone else thinks the land is undervalued then they can bid on it and make more money, but they'll have to pay the tax and find a way to extract that value. If the land really is that valuable then the landowner can say so and pay the tax on it now because they think they'll get the return in future.
In short, you're assuming that the "real" value and the actual value are different and erroneously so. This assumption makes the reasoning self-contradictory - the value is determined by people's bids, not some Pythagorean value floating around somewhere waiting to be happened upon by some perfect system.
No, the amount agreed to pay 60 years ago does not necessarily match current market value of the land right.
The amount agreed to pay -now- doesn't necessarily equal market value.
E.g. say I have a piece of land, and I agree to lease building rights on it for 99 years to my buddy (or son, or..) for $1/year. The value anyone is willing to bid on the land should be the NPV of the remaining $99-n plus the NPV of the estimated land value in 99-n years. The tax is nearly completely escaped. All of the land value has been smuggled into the lease right, which isn't taxable.
When there's lots of degenerate cases like this, it become pretty clear the way of assessing LVTs you propose doesn't capture current market values of the land itself, since the value of each piece of land can be artificially impaired or captured by a leaseholder.
Indeed, even in the absence of avoidant lease schemes, the very fact that your scheme encourages capturing a past lease value undoes one of the cited advantages of LVTs: it no logner incents land to quickly turn over to more efficient uses. Instead, the scheme you propose explicitly incentivizes ownership structures that maintain inefficient uses, even worse than the current property tax regime that includes improvements.
a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods
b) As I pointed out at the start, someone else can buy the land at at a very low price.
> However, if someone bids on the land for that price you must sell.
So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.
Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.
Still, I think this a digression, it's hardly a steel man, which would be more interesting. We may as well say that income tax is rubbish because people can lie to the tax man about their income.
[1] https://resources.realestate.co.jp/buy/leasehold-rights-in-j...
Your source effectively says the opposite-- some leases are limited, but "With an ordinary land lease right, the lease contract period is fixed but in practice can be renewed almost in perpetuity." and "The lease contract period under the Old Land Lease law is fixed, but the lease can be renewed almost in perpetuity."
Even the fixed terms for non-commercial use are generally very long-- "Land leased out to be used for single-family homes and condominiums can be leased out with a fixed-term land lease. The contract period is 50 years or more. "
> So even if you follow that avoidance strategy, I'm going to buy your land on the cheap.
I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.
E.g. say a sane discount rate is 5% per year. Lease is 50 years. Lease payment is $1/year. True value of the underlying land is $500k. Value of land in 50 years is estimated to be $1M. Tax rate 1%.
NPV of the lease payments is $19. NPV of the land is $92,000. I bid $200k and pay $2k in tax (compared to $5k).
Sure, you could bid $200,001 and get the land, to get an asset with a net present value of $92,019. This is not a favorable transaction-- even if there's some building residual value at the end.
In the end, the only way to value the independent value of the land is going to be from some kind of assessment process. A bidding based scheme is not practical: separating the value of the land and building is really hard. (And if we start having people judge whether the pricing of leases, etc, is fair-- that's effectively assessment).
It's saying what is customary and possible. The landlord does not have to renew, I think that is quite clear from what was written in that article.
> Even the fixed terms for non-commercial use are generally very long
Because they have a land tax and a property tax. I didn't suggest to use Japan's law verbatim, nor would I, their system has a lot of unwanted side effects but it does encourage a lot of building.
> I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.
Yes, but you didn't get to sign over that lease because I outbid you and it's now my land and the lease will not go forward because, to quote myself:
> 1 point by brigandish 21 hours ago | parent | context | favorite | on: High property taxes are good
Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because
a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods
b) As I pointed out at the start, someone else can buy the land at at a very low price.
> However, if someone bids on the land for that price you must sell.
So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.
Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.
Your calculations are moot.
The source you provided is clear on this for the non-fixed term variants. Here is another source:
https://resourcehub.bakermckenzie.com/en/resources/global-co...
> What are the usual forms of leases?
> Ordinary leases (with statutory right of renewal except in certain instances)
> Fixed-term leases (with no right of renewal)
Note that you also characterized the law as providing an upper bound on lease terms, when actually it's the opposite:
> such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more
I disagree with most everything you say, and I am not sure further discussion would be productive.
Aside from the minutiae: I do not think there is any reasonable way except assessment to disentangle the value of land and improvements in a way that tracks land value in the short term, which is required for a land value tax to yield its substantial benefits.
> > such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more
I quote from the article I shared with you:
> The initial period is 30 years, regardless of the building structure. The lease can then be renewed for 20 years at the first renewal, then ten years thereafter. This differs from the the Old Land Lease in that under the old law, the initial lease period is different depending on the building structure.
and this for fixed-term ground lease:
> The lease contract period is ten years or more and less than 50 years.
Which means we have two articles that are in disagreement but that is irrelevant because again, I am not proposing to use Japanese law verbatim.
> I disagree with most everything you say, and I am not sure further discussion would be productive.
Yes, constantly defending straw man positions or needing to answer how many angels can dance on a pin is not productive for me either.
> Aside from the minutiae:…
Thanks for selling me all your land and making my descendants incredibly wealthy because you thought it was better to avoid taxes.
Had a good summary of land valuation problems
There is a risk that the government will increase taxes such that people can't declare high land prices, which allows the government to buy up land for cheap. I haven't found a mechanism for that yet.
It'll also allow the government to bully anyone they want by evicting them, even if the price were fair. Local reporter digs up dirt on city council? Well, the city council just reviewed property tax claims, and decided that the reporter's house is "undervalued".
Fight over increased property taxes in Texas becoming political https://www.youtube.com/watch?v=gzUwoFVUc_I
Texas voters to decide on 2 propositions that could impact property taxes https://www.youtube.com/watch?v=Nz67VXkjRfg
It seems like the Texas Homestead Exemption Act is starting to morph into something analogous to Prop 13. Perhaps if there's enough growth in tech jobs (and more billionaires start hiding out there) they'll end up with an income tax like California and New York.
I moved from an ostensibly low tax state, Texas, to one with an income tax but my overall burden for state costs is pretty much the same or slightly lower as property taxes are low and there is no sales tax (8%+ in Texas).
I was paying over $1500 month in property taxes in Houston burbs.
They’ll get you somehow!
It also requires property owners to do EXTENSIVE research and information gathering CONSTANTLY to ensure that the number they put down is reasonable.
Many of them literally can't (ex: my 87 year old Neighbor Phylis doesn't care what her house is worth, because she plans to die in it, and isn't seeking to maximize utility. Instead she wants to pass peacefully in the house she remembers raising her kids in, and has lived in for the last 50 years. She has no car, is in a wheelchair, and uses basically no online services - how is she going to go evaluate the right value for her house?).
---
Basically - this plan sounds great for 5 seconds and then you realize people would literally revolt the second you pass it.
Every year in Chicago.
My house has been, and still is, assessed for 600K over what I paid in Nov. 2021. It had been on the market since 2016, until I bought it. The price I paid is the value of the house.
First assessment appeal denied.
Second appeal lost in the system.
We have to fight against an unfair and arbitrary tax system EVERY year.
Now they are going to index the tax rate to inflation.
Maybe other communities are under-taxed, but mine is not.
AFAICT, hiring an attorney is the way to go. Then you still have to pay, but much less overall. I’m about 80% convinced that the tax assessors are in it with the appeal attorneys to almost literally write themselves checks. Not that such misdeeds would ever occur in Chicago/Cook…
what you paid for it is irrelevant if people are buying the neighboring places for double or triple the price.
if it's worth so much more than you think, sell it
This is how free markets work.
Guaranteeing that people can take up the same space that they did when the population was half its current level is a great way to ensure that future generations have nowhere to live.
Money is a medium of exchange. There are items that are literally not for sale, and the excuse of "but they got money!!!!" is completely unacceptable as a replacement.
How are you going to value the writing on the walls of the home my neighbor from her now-deceased son?
How are you going to value the 6 (six!) graves of the dogs she's buried in her back yard, Each with a custom stone statue.
How are you going to value that she's memorized her current home layout, so that large cataract in her right eye doesn't bug her as much when she's in the familiar layout?
How do you value the extra time and expense it would take her to find a new home, given she's wheelchair bound?
----
and your "new plan" is devolving into trying to add all sort of extra conditions and rules around this - which gets us right back to: implement this and people will literally try to kill you.
> and they decline by raising their declared valuation to match the neighborhood average.
First - this is not in line with the previous posts. What stops me from simply declaring my value is 0 until someone makes an offer and then suddenly it's the right value. Until next year when it's 0 again because that buyer has gone away. If I only have to declare at time of potential sale, the declaration is useless.
Second - having lived in a transitional neighborhood, if your house is valued at the neighborhood average, it will be bought in 30 seconds, sight unseen, usually by a corporation that plans to rehab it (because it was last updated in the 70s) and then rent it forever.
And that second point isn't a hypothetical, it's literally already happening: https://www.cbs46.com/2022/06/03/its-an-everyday-occurrence-...
Basically - money isn't everything, and maximizing utility in a purely capitalistic sense is not a set of values shared by enough people to make this work.
If you limited this to only commercially zoned land, then maybe - but you have a social contract with all those people who bought their houses, and violating that social contract, especially in a way like this, is a recipe for disaster.
> Until next year when it's 0 again because that buyer has gone away.
Why would the buyer go away? The state itself could maintain offers on any properties lowballing their property taxes. But that wouldn't be necessary, because at any time, there would always be ample interest in purchasing real estate for discount prices. You say this yourself:
> if your house is valued at the neighborhood average, it will be bought in 30 seconds
...but again, it sounds like you misunderstand my proposal. In 30 seconds, someone would offer to buy, and then the current property owner would have the choice of either selling, or keeping their property but raising their property-tax assessment to either that amount, or the local average, whichever is lower.
There is no such thing as a "standing offer" to buy a house. They're a contract with very clear start and end dates (most offers are good for between 72 hours and two weeks).
This is because both parties have to agree at time of exchange on the value of the good, and the person making the offer usually needs to have financing lined up - They literally cannot make an offer that will be good for long periods, because the financier won't agree to that.
As for this...
> ...but again, it sounds like you misunderstand my proposal. In 30 seconds, someone would offer to buy, and then the current property owner would have the choice of either selling, or keeping their property but raising their property-tax assessment to either that amount, or the local average, whichever is lower.
Ok - follow along... now the next offer comes in 2 days later at the current value. The owner STILL has zero desire to sell. What now? Do they get to raise again?
Dude - this whole thing is ending up with more rules and regulations that the current market, which is exactly why pushing this kind of thing simply doesn't work.
In theory you're optimizing land efficiency, but you're fucking with other efficiencies ALL along the chain, and the net result is that people hate you.
----
Also - taking you at face value: "raising their property-tax assessment to either that amount, or the local average, whichever is lower."
This is fucking already how taxes work. At least in my area, every house is taxed at the local average (fulton county does average assessed value tax for land). So you're literally gaining nothing for all this additional complexity.
Also false. Maybe stop with the ad hominems?
> There is no such thing as a "standing offer" to buy a house.
There is in my proposal. Go back and reread it.
> This is fucking already how taxes work.
Not in California.
People will revolt anyway. For instance, in California they revolted when we attempted to remove Prop 13 for businesses.
People who are hoarding a huge house in a desirable area to do nothing but slowly die in need to be fucked over. They're worse than speculators.
> Many of them literally can't (ex: my 87 year old Neighbor Phylis doesn't care what her house is worth, because she plans to die in it, and isn't seeking to maximize utility. Instead she wants to pass peacefully in the house she remembers raising her kids in, and has lived in for the last 50 years. She has no car, is in a wheelchair, and uses basically no online services - how is she going to go evaluate the right value for her house?).
She should quote how much someone would have to pay to make it worth her moving out - that's something she should be able to figure out for herself. If she wouldn't move for less than 3 million, quote it at 3 million.
I don't even think the author is fully behind it, seemed more like a thought experiment as a reply to grandparent.
Regarding grandma: I don't want to kick her out of the house. But there is a real issue here: young families can't find affordable places, while old families live in places, that are too big for them because the kids left. If they rent, they also pay significantly less than the younger family, since they are on older contracts. Once new people move in, rent is raised to the new level. The older people don't want to move out, because they would have to pay more for their new, smaller place, than the old, bigger place. Meanwhile the young family also has to finance the pensions for that old family.
Noone is being evil here, but ... it sucks. And every idea to work on it is shut down as being unfair to the people who already own houses. Even building new houses is usually opposed by the people who already have houses in the area. If I never get the chance ever to own one, I don't really feel like I have to protect the interest of house owners.
Maybe this will force the governments to spend some of our accumulated tax dollars to actually improve public transport and efficiently network cities and towns.
Zoning rules exist for a reason. People need infrastructure and water and services and power grids to live well. High density is not desirable nor will it be affordable. It behooves the govt to encourage high density where there are jobs to create artificial scarcity and inflate housing value.
Because higher the home value, more property tax can be extracted. This is the oldest con in the world. This is also why all high density cities are all expensive and housing is unaffordable and everything from water to power is expensive and public services are woefully inadequate.
No, they aren't. I live in Tokyo; it's very high-density, quite affordable compared to anything in America, and public services are all excellent. High density is how you get high efficiency.
>Shouldn’t every American city deserve top notch infrastructure that the states only reserves for high density unaffordable cities where jobs are concentrated.
No, because spreading everyone out means your infrastructure cost per capita balloons, and it's unaffordable for the government. If you want "top notch" infrastructure, you need to live near other people, not out in the boonies.
>Zoning rules exist for a reason.
No, they don't: they just make everything far away from everything else and prevent density. Here in Japan, schools, light industrial, residential, and commercial all coexist in mostly the same spaces. So it's not that hard to live within walking distance of work.
Maybe you should try traveling outside America sometime.
Right now, NIMBY tries to prevent taller buildings.
A land value tax incentivizes more effective land uses-- as opposed to property taxes that include improvements, which reduce the incentive to build high density.
It's simple: eliminate NIMBYism. It only exists because local governments and laws allow it. Don't do that.
Housing shortage is due to unions and govts that refuse to establish public infrastructure for everyone. This is done on purpose to create UTism .. Us VS Them..between property owners and those who don’t own property. Divide and Rule strategy. It has never failed over centuries.
Marginally shorter cycles before property becomes more useful in exchange for completely fucking over the elderly, marginalized groups, and those without free capital.
It's a bonkers bad idea.
As others point out, most LVT schemes have significantly improved treatment for owner-occupied housing.
The big idea here: land value is something that is established publicly and collectively rather than by any individual owner. It makes sense to tax use of this public good to reduce deadweight losses .... instead of primarily taxing improvements which disincents investment and increasing DWL.
A land value tax can be expected to reduce the cost of housing. That is, it incentivizes more effective land uses-- as opposed to property taxes that include improvements, which reduce the incentive to build higher densities.
It might in theory make a difference when considering replacing a 40 story building with a 42 story one, but in practice you really don’t see that kind of construction project. In that context pushing for larger jumps before replacement might actually be economically and environmentally beneficial.
Low property tax (because it's unimproved) plus real estate speculation.
Putting in a 10 to 25+ million dollar multiple level parking garage can pay off, but only if there is enough demand for it and you can get zoning permission.
That doesn’t mean building a multi level parking garage in that same space is actually a good investment because demand isn’t unlimited. What you see as wasted space can therefore actually be a highly efficient business.
Put another way if building a 5 story building would be obviously more profitable then they would do that but the opportunity costs is now 1+ million per year you aren’t getting from the parking business.
You can unquestionably have smaller lots, but it’s hardly a massive plot of land.
Also, an acre with parking attendants doubles the number of cars so they could be clearing close to 2 million before expenses, and attendants aren’t that expensive.
It’s far more profitable to charge people 20$ to use 1/300th of an acre for a few hours than to actually do nothing with it. Which means the opportunity cost to build something is higher.
Unless the building is going to clearly be wildly profitable it may be better to stick with a parking lot.
Houston.
It's cheaper than an actual building...
> and it does make the land more useful.
...and less useful than one, too.
You want people hailing from further distances via public transit and rail, and you want the majority of the businesses in an area servicing a highly dense, local community that can all walk there within 10-15 minutes.
This enzyme must be removed, the American Urban Body reworked to reject suburban thinking like this.
It has been shown that LVT reduces blight: https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
Did you mean to post a different source? The one you posted doesn't "show" anything, equivocates on whether LVT actually reduces blight in the few instances where it's been practiced, and makes meaningful suggestions for solutions other than LVT that it indicates have been shown IN PRACTICE to reduce blight (e.g. a land bank).
It's hard to justify telling land owners to pay high property taxes when the city delivered the highest crime rates and worst performing schools in the nation in exchange for those tax dollars.
The problem, just like the source says, is that the tax is too low, not mention the absolute disaster that is Prop 13 in California.
I could get on board with this if cost to build and demolish were considered. We have a lot of SFHs that don't make sense to turn into town homes yet because the value of the home on property + demolition costs + cost to build new townhomes on property is greater than what those townhomes could sell for.
More to the point, a blind land value tax could create a lot of waste through otherwise unproductive land repurposing (only productive because the tax makes it so).
It will still force density eventually as the home's structure value depreciates (demo costs are the same no matter how much the home is worth). Any new structures will be pushed into higher value uses.
BUT let's say we instituted a blind land value tax tomorrow: many people would be forced out of their homes AND could not sell the home for what it was worth: a buyer would still have to either live in the house and pay the higher land value tax or tear down the structure and build something more profitable...the haircut they would otherwise have to take in either case would be reflected in just paying less for the house in the first place (assuming they've done their homework).
This could even happen after the land tax is implemented. That the land value rises above the point of its use but below the point of where the land could be re-developed into the higher value use case. Then....you are kind of stuck in a bad spot until your situation changes or you go bankrupt.
We actually already see this in the market: land with a tear down will cost less than land that is completely clear. The costs to develop are just less in the latter case. Also, people are forced by the construction market to settle for less valuable structures on high value land because there is just a shortage of material and talent to redevelop everything that we want redeveloped already.
Instead, we might imagine a State shifting from 10% income tax to N% land value tax, by lowering the income tax 1% per year, and raising the LVT 1 * (N/10)% per year, until a decade later, the State's income is land value tax, not income tax.
That should give everyone the opportunity to make plans, and adjust over time.
But young people aren't the only ones who need to be downtown, as I said, and families were driven out to the suburbs for suitable housing. They have to commute instead, which has caused all sorts of gridlock and the usual problems with urban sprawl.
If the right incentives existed for mixed housing, tax incentives included, then this wouldn't happen, and people of all ages could afford to live closer to where they work, thus alleviating many of those issues and creating more livable cities.
Here in Canada we already do this in one sense by mixing government housing among more affluent neighbourhoods. This has prevented the formation of ghettos, but this same approach hasn't been applied to create an appropriate mix of housing for all different living arrangements.
So given a land value tax incentivises certain kinds of land use, my question is whether it would incentivise using land to make urban centres more livable for all types of people, rather than only certain kinds of people or lifestyles.
When it comes to housing construction and tax incentives, what they need to do is (1) set tax incentives to discourage egregious misuse and encourage density, and (2) get out of the way.
As someone living in the middle of one of these debates right now, the idea that we need to carefully control the mix of 1bdr apartments vs 3bdr apartments is... risible? The frontline of this issue is SFZ, not what kind of apartments we build.
I disagree. No planning has lead to many ghettos. The planning we've done here has avoided ghettos. I think the data is very clear on that.
> When it comes to housing construction and tax incentives, what they need to do is (1) set tax incentives to discourage egregious misuse and encourage density, and (2) get out of the way.
Except as I've been saying, if you encourage too much density your cities become unlivable for families, and you encourage urban sprawl and all of it's subsequent problems.
> the idea that we need to carefully control the mix of 1bdr apartments vs 3bdr apartments is... risible?
Who said anything about "carefully controlling" anything? Certainly not me.
A lack of density closer to cities is a real problem: it makes living close to where you work prohibitively expensive, and promotes sprawl.
Of course, part of the subtext of these discussions is that proponents of SFZ and owner-occupancy tend also to believe that their favorite cities should have controlled population growth. It's just not a good look to say that out loud.
That's one cause. The other cause that you seem to refuse to understand is creating the wrong kind of density. An urban centre full of 1 bedroom apartments is still going to create urban sprawl because families just can't live there, thus driving them out of the city centre even though they still work there. I just don't get why you refuse to understand this very obvious point.
Citation? Where is that? Where I live the planning regime was famously ineffectual in the '50s and '60s, and as a result it's far more livable than big cities that had more planning: https://www.economist.com/special-report/2021/12/07/the-big-...
It seems to me to be the opposite. The mortgage interest tax deduction is a massive regressive government subsidy for homeowners, and penalizes younger people who rent or cannot afford to buy a home.
So I’m curious what suggests to you that renters have political power. To me it seems the opposite - tax policy massively prefers owners over renters.
It's probably useful for you to understand my, uh, priors? about this, which include the fact that I live in an overwhelmingly SFZ community that actively works to prevent the construction of multi-family dwellings, often with appeals to the evil of "landlords".
How zoning should work is an orthogonal question in my view.
That's true for N=1 (SFR), N=2 (duplex, half-occupied by the owner), N=3 (triple-decker with owner living in one), or N=50.
The whole 1bdr vs. 3bdr thing is a total sideshow; the actual issue, again, is SFZ.
If you just want single family homes with a big lawn you probably shouldn’t be living in Manhattan, which is the point of lvt.
Yes, exactly. And my point is that a city shouldn't optimize along one direction like this, because families work in urban centres too. There should be a mix of housing for single people and families in the same urban areas, or you drive the families out of the city and encourage commuting and urban sprawl.
Part of the point is to very deliberately say: we don't know, we'll let each neighbourhood build what works for that neighbourhood rather than trying to figure out ahead of time.
> As I've explained elsewhere, if that means packing as many tiny units together in an urban core rather than a mix of bachelor pads and family-suitable living spaces, than that drives families out of urban centers and encourages urban sprawl, which creates terrible commutes and traffic and all subsequent problems.
How do you figure that? For a fixed population, the larger the proportion of workers in the center, the shorter the average commute and the less bad the traffic. So 4 bachelors in the urban core and 1 family in the suburbs is much better than vice versa.
(Now of course what tends to happen is if you make the city better then you attract a bigger population. But that shouldn't be seen as a failure. Fixing traffic or commute times is essentially impossible, because as soon as you add capacity more people will move to the area or commute from further away. But what you can do is, for a given sane commute time, maximise the number of people and jobs within that range)
Zoning usually dictates what's allowed and is indifferent to tax rates
All zoning is exclusionary to my knowledge. That's the entire point. It's not necessary but it exists because it exists. And, it's sticky. It was established most likely when the entire city was raw land and undeveloped; so it served as a plan for development. There was no NIMBY because people were building their BY. Because there was a plan, you could decide where you wanted to build that BY.
Once you have developed the land, raised family, lived in a house for decade(s), and the city around you develops and changes. Now, your property maybe better utilized as a multifamily complex or a nuclear reactor, or anything really. But, it's your home and you shouldn't be taxed out of it. Rezoning as a process is may difficult and probably should be. There's a lot of stakeholders/neighbors who are impacted by a change. They should have some say. It just so happens that those people who bought a single family house in a single family neighborhood tend to prefer it to stay that way so they get called NIMBY but it's a completely rational perspective to have if you were in their shoes. Thus, an introduction of this tax only serves to displace the current owners who can not afford the new tax bill and does nothing to change the actual zoning. So the result is, richer people with bigger tax-bill budgets move in and your even further into the NIMBYism trap not even realizing you're in a zoning trap.
If you open up the zoning (and perhaps the building restrictions), the best and highest uses can actually prevail.
That's not really true. Zoning was usually set up later. Often the existing buildings wouldn't be permitted by the zoning rules but were "grandfathered in". (If we made this practice illegal and insisted that you have to demolish anything that doesn't fit the new zoning laws, that might be one way to keep zoning laws sane). Even if the final state of those people's buildings is legal, often the process by which they were built wouldn't be.
> Once you have developed the land, raised family, lived in a house for decade(s), and the city around you develops and changes. Now, your property maybe better utilized as a multifamily complex or a nuclear reactor, or anything really. But, it's your home and you shouldn't be taxed out of it. Rezoning as a process is may difficult and probably should be. There's a lot of stakeholders/neighbors who are impacted by a change. They should have some say. It just so happens that those people who bought a single family house in a single family neighborhood tend to prefer it to stay that way so they get called NIMBY but it's a completely rational perspective to have if you were in their shoes.
Guess they should've had the foresight to get born earlier? It seems absurdly unfair to say that zoning set up for a population that was half the size should bind the current generation. I get that it's individually rational to want to pull the ladder up behind you, but it's disgusting. (And for the "people shouldn't be forced out of their home" crowd: my generation gets forced out of our homes every 2-3 years because we can't afford to own and have to rent. So I won't shed any tears for boomers getting forced out of their home once in several decades)
Plus, here in the US the vast majority of land ownership entailed forcing native peoples out of their homes.
No disagreement there, I'm no expert but think it just wasn't as formal as we current have it. But informally it still roughly matches how we currently do it (residential areas, commercial area, industrial areas, etc). Building codes, technologies, materials, etc change much more frequently which is a bigger reason that old buildings wouldn't exist today. I happen to reside in a part of the US that has seen massive sprawl and growth in just the past ~50-70 years, so it's been mostly planned. I can currently see how the next generation of exurbs will be developed and I think it's been that way for at least 30 years.
> Guess they should've had the foresight to get born earlier? It seems absurdly unfair to say that zoning set up for a population that was half the size should bind the current generation. I get that it's individually rational to want to pull the ladder up behind you, but it's disgusting. (And for the "people shouldn't be forced out of their home" crowd: my generation gets forced out of our homes every 2-3 years because we can't afford to own and have to rent. So I won't shed any tears for boomers getting forced out of their home once in several decades)
Are we out of land in the US? (I'm assuming you're in US). Why do you need that specific piece of land that the person you are displacing already owns? Job/commute, convenience, etc are unacceptable answers in my book. Employers can and should be dispersing, you're likely broadly employable and could find work elsewhere. They could put their office elsewhere. But you're choosing to live in an area that you can't afford to own (and they're choosing to office out of a location that their employees can't live in). Ignoring those or pushing them on the current land owners makes no sense. Curious if you have any evidence that rents are not market driven? It's my opinion your generation is forcing each other's rents up by refusing to move to a more affordable location. When a boomer bought that house, decades ago, it probably wasn't as desirable of a location as it is today. I happen to believe you are more in control of the entire situation than you care to admit but would rather stay put and blame the boomers or change the rules because you don't like the cards you were dealt. The "shed no tears" thing goes both ways, but they did get there first and they do already own their house, so it's an uphill battle for you.
There's a huge difference between a "residential area" and an area where it's literally illegal to build anything except houses and parking lots. It's not a case of just formalising what already existed, when you make the bodegas and offices and light workshops illegal you turn it from a residential neighbourhood into a soulless dormitory.
> Are we out of land in the US? (I'm assuming you're in US). Why do you need that specific piece of land that the person you are displacing already owns? Job/commute, convenience, etc are unacceptable answers in my book. Employers can and should be dispersing, you're likely broadly employable and could find work elsewhere. They could put their office elsewhere. But you're choosing to live in an area that you can't afford to own (and they're choosing to office out of a location that their employees can't live in). Ignoring those or pushing them on the current land owners makes no sense.
(I'm actually not in the US, but HN being HN I pretty much have to comment from a US perspective).
Agglomeration has huge benefits, that's why we have towns and cities in the first place. The current landowners almost certainly moved to somewhere that was previously less dense and made it more dense by moving there, no doubt chainging the character of the place in the process, so I don't think it's fair for them to complain about the next generation doing the same thing.
And if I tried to start my own new city in the middle of nowhere the exact same thing would happen: the first group of people move in, the city (maybe more like a small town to start with) becomes a pleasant place to live with jobs available, more people want to move in, but now there's enough people living there to NIMBY-block any density increase. If we tried to set a schedule at the start where we'd gradually densify the zoning? San Francisco already has a law like that on the books, they just ignore it.
> Curious if you have any evidence that rents are not market driven?
Zoning is a huge market distortion. It's essentially illegal to build anything in SF (over half the homes in San Francisco would be illegal to build today), and don't get me started on artificially low property taxes. So the rents are "market driven" in the sense of supply/demand, but that supply is being artificially choked off.
> I happen to believe you are more in control of the entire situation than you care to admit but would rather stay put and blame the boomers or change the rules because you don't like the cards you were dealt.
I mean sure, I can choose to live somewhere worse and commute for longer or take a worse job, while the boomer lounges about on my tax dime. But the fundamental injustice is very real.
> The "shed no tears" thing goes both ways, but they did get there first and they do already own their house, so it's an uphill battle for you.
They've created a de facto rotten borough by pricing everyone else out. But when democracy stops working the issues don't go away, people just find more direct ways to express them.
Japanese-style inclusionary zoning splits the difference nicely between making sure people don't live next to loud, potentially dangerous industry and allowing lots of mixed-use, human scale developments of varying density.
http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
Japan home ownership: 61%
Yet there is such a housing crisis in the states due to the "zoning" bogeyman
A mortgage acts like this too and if the tax was insignificant by comparison it would seem so fair but at least a mortgage can eventually be paid off in full. Then the bank no longer has an interest but the taxman never stops.
Taxes always go up but economic fortunes do not, when these become out-of-phase the original purpose is fulfilled.
This is what makes people demolish perfectly good buildings to reduce the taxable value of their property while they try to hold on to the land during a downturn.
Mortgages don't make people act like this.
For the greatest prosperity of the average citizens in a sustainable system, you tax nothing but commerce.
The purpose of taxing the income or property of average citizens is to repress opportunity for the majority.
This is by design.
We pay high property taxes (which are split value taxes, by the way) relative to other rural areas in the region. That is, we are taxed for the virtue of owning relatively large plots of land (for our area) that come with the protections afforded by the zoning laws--even though our sparsely-developed properties and the characteristics thereof provide benefit to all in our area, including city dwellers (e.g. readily available and clean drinking water, maintaining a healthy ecosystem), for which a value could be assessed that would result in lowering our taxes.
That said, I purchased the property specifically for the Resource Conservation zoning protections, as did my neighbors--and we'd have the zoning laws set no other way regardless of the cost of doing so.
Trying to jam more people into the same finite amount of space is not a sustainable solution (here's looking at you, Bay Area). A byproduct of the recent pandemic was that a significant number of people beta tested relying on technology to get their job done independent of where they were physically located. I would argue it generally worked quite well (though not in all cases).
Though a more ambitious plan than merely increasing taxes and hoping that more housing is developed, why not incentivize people to move to less populated area with the intent of promoting a more-even distribution of population density over time; incentivize medium and large businesses to either permit remote work or establish and maintain local/regional offices if remote work is not conducive to their lines of business or their corporate culture; and fund timely development of new and improvement of existing infrastructure that would make previous two goals achievable?
USA has about 2.5 billion acres. 1/4 acre per person in an average area tax free is reasonable.
Electricity and gas and internet are private companies using an easement.
Police and fire can easily be funded by sales tax, just like the public transit. Alternatively, land owners can voluntarily pay yearly for police and fire, or opt-out just like people are not forced by government to buy homeowner insurance.
Maybe look into the lot lines and confirm if they extend through the 'road'. Then go to county clerk and recorder and find what easements were filed there. Lots of misunderstanding about this, even in local government.
Have those laws been tested? Published appellate cases specific to the law may be very interesting. An encumberance or taking requires compensation. Also, be careful to not use motor vehicle laws and words like 'drive', as you can do what you want on private property. My child was practicing use of movement via a personal conveyance when 11 years old, in what looks like a car on what looks like a road.
Incorporate a town and do what you want. After incorporating, set up contract to pay county to do maintenance until the town has time to bid it out.
Curious thing here is that with the limited ability of the town to meddle, town council election is occasionally cancelled because it is not contested. There is little to fight over, so not a lot of grift or power.
Am west of Mississippi river.
If there aren't cubs around, you yell, clap and raise your arms. It'll run in a heartbeat. If there are cubs around, you back away slowly- running will just make it chase you. If it follows, stop moving.
and then what!?
Realistically, it is a game of chicken. If you stop, you're signaling to the bear that you aren't intimidated. As long as it has an escape route, it'll back down.
Edit: not to mention that VAT and sales taxes are considered regressive taxes that disproportionately burden the less wealthy. I would much quicker remove VAT than property taxes.
For the same reason that I'm planning my retirement without social security. Politicians can't be trusted long term. They'll write laws to allow them to use funds that were previously protected.
For state an local governments this is mostly true but even there the federal government helps out.
What you want is for the wealthy to pay for the poor and old and those without much wealth or income.
You're still giving the "it's property" framing waaay more credit than it's due. Remember, granting someone exclusivity to a contested resource means preventing other people who would like to use the resource from using the resource. It's entirely reasonable for those people, represented in aggregate by the government, to ask for compensation in return, even if the government provided the landowner no additional services beyond the exclusivity.
The entire concept of "owning" land is just a hustle to argue against paying taxes on it.
The details need to be hashed out. I'm not convinced that 99 years is right, it's long enough to ignore and then pretend to be surprised when it comes up for renewal. Perhaps 35 years and no termination clauses, to make it easier to plan around? It would allow one house for having children and one house for retirement. The improvements mechanism would likewise need iteration.
I am interested to see how the various global experiments in these directions will pan out, though it looks like right now the market is betting that the 99 year leases will turn into perpetual ownership. That's unfortunate, because perpetual ownership is directly responsible for most of the largest perverse incentive problems in the real estate industry, not to mention ongoing gigantic deadweight loss.
I don't see how that's relevant, not all land is equally well suited for housing, especially among the elderly who are likely to need some sort of living assistance and regular access to healthcare.
property taxes are terrible for old people. you should be able to buy a reasonable amount of land tax free.
I think something like California's Prop 13 that puts a cap on property tax increases is a better idea -- but it should only apply to owner occupied primary residences, not second homes or investment properties.
Prop 13 is one of the worst ideas in taxation ever. It would be better just to let the aged and disabled freely defer property taxes beyond a certain, income-based level (and maybe also to let other people do the same with certain limits on total deferred amount relative to assessed value for time-unlimited deferrals, and total time for value-unlimited deferrals.)
Prop 13 is just a handout, it could disappear overnight and grandma wouldn't have to pay a dime.
Roughly, yes (it's not exactly what I am describing, but pretty close); I’m saying if you are looking for a model to stop that problem elsewhere that has neither, copying Prop 13 (or even just the assessment increase limit, even if applied only to owner occupied primary residence) isn't the thing you should reach for.
Of course nowadays it's easier to hire behind grandma than it is to defund school buses.
Most old do not live in assisted care. ANd healthcare is independent of land ownership.
CA is extremely screwed up on how it taxes. I used to live in Cupertino where some people were paying taxes on 2 million dollar lots valued at 100k.
Most old do not live in assisted care. And healthcare is independent of land ownership.
I didn't say "assisted care" my father lived almost his entire life on his own, but still had assistance from his children and occasionally a home healthcare worker - this is a lot harder to do if his allocated tax-free plot of land is 100 miles from family or healthcare services. Healthcare is independent of land ownership, but isn't independent of location - after one medication change, he had to go back to the doctor daily for monitoring for a couple weeks, then weekly after that for 6 months. How would he do that it it was a 4 hour round trip to the nearest healthcare facility?
The more reasonable approach to this would be discounts for the primary residence, and possibly discounts for populated units, depending on if you are targeting home owners / overall population and housing cost.
Quarter acre per family might make sense across the US as a whole with large swathes of empty land across the middle, but it makes no sense if you look at the average individual given the percentage of the country living in urban areas.
A fixed mille-rate results in taxes going up as value goes up. This might be difficult to plan for and manage. However, many cities will simply put a lien on the property and collect when the property is sold/transferred/person dies.
However, this isn't necessarily how things need to be done. In New Zealand, the mille-rate is set to clear the budget. That way, the mille-rate changes with the city's budget, not valuations.
If the city wants to do more, they put it into the budget and say "do you want to pay for it?". Then the mille-rate is changed and everyone's taxes change.
If your house changes value, your taxes don't change! Unless your neighborhood changes its relative valuation, then it might go up or down.
They mostly cater to the existing residents that own homes and partake in municipal voting.
They'll stop creating new housing developments and put massive permitting fees on proposals for new construction.
The entire goal should be to encourage residents to partake in municipal voting. That's everyone's responsibility as citizens.
In fact, my current area (Cobb county, GA) nimbys keep trying to block assisted living residences. The argument is that old people move in, don’t pay into local funds, but the burden is hoisted on other younger families instead.
The lack of property/land value taxes hurts anyone who isn't retired. I care much more about poor young people who get priced out of moving to a better job in the city than an old person who is "forced" to sell their multi-million dollar single family home. If an old person insists on living in a place where they can't afford property taxes, there are plenty of people willing to pay their property taxes until they pass in exchange for a stake in equity of their home.
When LVT is used to fund UBI, that ability is automatic: the "break even" point (where your taxes minus dividends are zero) would represent you owning a "reasonable amount of land" (as measured by value). If you own more than that, you pay for it; if you own less than that, you're paid for it.
A quarter acre in Palo Alto, though?
Examples are California Tax Postponement Program and New Jersey senior freeze.
Land value tax incentivises turning a single-family home into a multi-unit building. Property tax explicitly discourages that.
The only way to avoid it is to move to areas where land is valueless.
Why does a tailor on Saville Row in London charge $10k while the tailor in southern Italy charge $1k for a bespoke suit?
Land values and land rents: https://twitter.com/dieworkwear/status/1549648048426344448?s...
Lot more steps. Developing a property is risky. The double whammy of eating the development cost in addition to increased property tax bill dissuades homeowners from taking the risk. (Yes, theoretically, prices should go down as easily as they go up. In reality, obviously, no, no city does that.)
By the time your land value has increased, you’ve already made money. (Or ridden on your neighbours’ investments.)
One taxes the land and the building(s) on it. The other only taxes the former.
In practice, this means that while property taxes and land value taxes both penalize speculation, LVTs more precisely do so, without the side effect property taxes have of penalizing construction.
> However better-looking homes are then a signal that drive up demand for (and therefore price of) land so ultimately it seems LVT does punish improvements if only indirectly.
Even assuming that effect does happen, it'd be considerably worse under a property tax.
So your answer is to dismiss my position without evidence? Your point that property tax is worse than LVT isn't justified by your claim. If land values are determined by government assessment like property values are, then you're still paying property tax, albeit with an obfuscated input for improvement in the calculation which may be higher or lower or just the same as a regular property tax.
My evidence is your evidence. If you're arguing that a parcel of land increases in value due to the existence of improvements on neighboring parcels, then so, too, would improvements on the parcel in question be more valuable (since they're already built in a desirable location). Hence: the impact for land tax + improvement tax would be worse under your premise than the impact for land tax alone.
In reality, the "niceness" of surrounding homes is hardly a factor; proximity to economic centers (be it directly or by proximity to rapid transit) is typically one of the two primary drivers of land values (the other being geography).
> In reality, the niceness of surrounding homes is hardly a factor; proximity to economic centers (be it directly or by proximity to rapid transit) ...
Homes can be valuable precisely because they're located away from economic centers. That too is geography in action. And if COVID telecommuting is an indication of market preferences, home-owning adults prefer small, out-of-the-way towns with plenty of space, low property taxes, and good internet connections. So I'd hardly think that proximity to economic centers (usually cities) is as relevant it used to be.
No, because that's already subtracted out of the total property value to produce the land value.
> And if COVID telecommuting is an indication of market preferences, home-owning adults prefer small, out-of-the-way towns with plenty of space, low property taxes, and good internet connections.
The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value.
On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals.
> The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value.
Lower cost is not necessarily lower value. It's possible for areas out of the way to cost more, even if they start cheap, simply due to a short-term spurt of high demand. There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit there despite the city being the automotive capital of the United States where one had historically seen the opposite trend.
...which is already subtracted out along with the rest of the improvements' contribution to land values. You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both ways (i.e. overestimating improvement value instead of underestimating it).
> Lower cost is not necessarily lower value.
Land cost is land rental value times some amount of time (usually based on the expected cap rate).
> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit
Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?
I did allude to that in a previous comment regarding the "propping up "and "weighing down" of values
> Lower cost is not necessarily lower value. Land cost is land rental value times some amount of time (usually based on the expected cap rate).
Cap rate/land rental value is difficult to assess on land
> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?
I'll admit that I don't have the exact values under the constraints you've listed. And given different geographies, that's going to be difficult to accomplish. However, there have been several reports of prices in Idaho increasing due to now-former residents of the Bay Area fleeing into state and buying up land and houses.
https://www.krem.com/amp/article/news/local/out-of-state-hom...
Edit: As a weird example, subtracting what it would cost to build my California house from its current market value gives a value for the lot far lower than the actual market price of an empty lot in this location. This isn't just due to the depreciation of the construction (2012) but to market inefficiencies. It's actually the norm in our town. Only developers with economies of scale can really afford to build here, modulo a few wealthy families who are building their dream home without concern for ROI.
is routinely done in countries in which variants of land value tax are implemented.
Retrofitting or tearing down a house in California is expensive. Particularly if it's an old house where there could be e.g. lead or asbestos. Clean lots (presuming it wasn't previously a laundromat) command a value from the baggage they clearly don't bring.
Lots of people want to design their own homes. For them, paying up for an empty lot is worth it. Put another way: those buying empty lots are developers or rich. With rates rising, the latter set marginal pricing in desirable places.
So no, there is no teardown required. But a teardown is desirable to some people. They bid up empty lots. Hence the deviance you notice, which is well documented in other places rich people like building designer homes. (Hamptons, Jackson Hole, et cetera.)
I mentioned the custom home premium upthread. It's not the cause of the deviance either.
Isn't that like saying income tax disincentives people from making more money.