Construction costs are out of kilter. The fact that run out of essential materials such as gib (I believe Americans call it sheet rock or drywall) means the high prices are not going away.

I would say rental prices most likely have dropped due to the property bubble in Auckland bursting. The bubble was bigger than almost everywhere else, so I could expect rents to drop accordingly.

I really do wish this was not the case, I would love for the problem to be fixed.

Rents are going up slower in Auckland now doesn't mean much, because they already spiked through the roof in far excess of every other region five years ago.

The title is out and out misleading, because Auckland is still the most expensive city to live in (Queenstown isn't a city), and if the best that can be claimed is that rents went up a bit slower than other cities, but the increase began from an already far higher level of rent prices, then has Auckland actually solved the cost of housing?

Any New Zealander can answer that in two to three words. Either, "lol, no", or "lol, fuck no"

Unless by lol, you meant "League of Legends", which would make "lol, fuck no" 5 words, not 3.

That is actually a communist idea: let the government take almost the whole value of a property. The whole point of a land value tax is to take the rent. Funnily enough that leaves a property worth a pittance. Everything I have read about land-value-tax seems to just ignore that glaring problem. PS: I have no love for property investors, they often screw up people’s lives: however blanket tax changes screws over the good as well as the wicked.

Edit: I’m happy to be corrected. Commercial investment property is valued based the return you get from it. If the return drops drastically (the point of a land-value-tax) then the property value drops drastically. Sucks if you retired and invested your life savings into an investment property, only to have all returns taxed away.

Edit 2: discussing property values has become politicalised. Everyone seems to trot out some memetic idea (left example: land-value-tax-for-the-win; right example: state-housing-is-theft-from-productive-members-of-society) but few people seem to actually think through the consequences of an idea.

It is pointless trying to compare a country with population growth against a country (like Japan) where housing availability is increasing due to population decline.

It has not had a decrease in population since 1995 and the latest data point (2020) shows an increase of +3.5% compared to 2015.

You can say the same about Germany (and probably most western countries) - vast rural (or depressed urban) areas are depopulating because people move to Berlin/Munich/Hamburg/Frankfurt/etc. And yet Japan solved affordable housing to a much greater extent than us.

High property prices aren't axiomatically good, if that's what you're going for, and the fact that people spend millions on construction as well suggests that sometimes properties are worth more than their raw land value. People will be able to make a ROI for the actual productive investment in building and maintaining property, even if speculation and economic rent are cut off.

Yes, If something that is untaxed previously is now taxed then it's value will probably go down. There are winners and losers with every tax change.

The rate of a Land Tax is usually proposed to be around 1% of the value of the land. So if you own a $1m block of land in a prime area thats just $10,000/year.

If you have built on the property and are getting a rental of 5%, you are now getting 4%. That is a 20% decrease in property valuation, ignoring expenses (which make the figures much much worse). And the few articles I have read don’t talk about anything nearly as low as 1%. That is why I called it “communist” (I shouldn’t have been so inflammatory), because the government is taking money from a long term investment. Maybe it would be possible to introduce it slowly and fairly, but I can’t see how a government could actually do it and stay elected.

The simple mechanics of “just 1%” are usually just glossed over in the articles I have read.

1% is typically the value most people talk about for a land tax. If anything often it is less. This makes it similar to other property taxes that are already out there.

I have no idea where you live but in many countries it is common for taxes to be introduced, raised and lowered as different political parties get in power.

Also the assumption is that income and other taxes will be reduced as land taxes are introduced to the amount the government makes would be about the same. It would just mean those with property would pay more while those earning wages would pay less.

So you are proposing to increase average taxes by $5000, and you appear to talk about that as though that is some trivial amount the anverage New Zealander can afford. A land tax as you propose is an absolutely massive taxation increase.

Say that a land tax takes 50% of all rental income (a large amount) in New Zealand and puts that into the government - how can you believe that is equitable for renters or owners?

The point of a land tax is to take the land profits from private owners, and put it into government coffers. Note that it doesn’t change the amount that renters pay. You think that it would correct rent prices in New Zealand?

$1 million of land is not extreme wealth - it is only 2 or 3 times an average home. Where do you live that $10000 after tax is not a huge amount of money annually?

So, you have a lot of land with a single family home, but you are taxed for it as if 20-unit apartment building was standing there. Which, in the long run, incentivizes you to sell your home to some developer that would actually build such building.

Now you can discuss if that's fair approach, or just a way to force people out of their homes.

Everything I have read just uses nearby property prices. Very similar to GV valuations as we currently do in New Zealand with our council rates (just use that figure rather than another). As market prices shift, your Capital Value remains relatively constant (maybe inflation less depreciation), and the Land Value shifts to meet market value (usually upwards, whenever your property rating is updated).

In New Zealand we currently have a partial land-value-tax called rates, although they are usually far below LVT suggested taxation rates. Rates are low, but still a significant drain. Mortgages are also similar to a LVT - your mortgage has to pay the land value - and that is certainly more than suggested LVT. Apparently the point of an LVT is not to get revenues, so I don’t quite understand how that works. A tax that is less than a mortgage already is - hmmmmmm - how can that help?

Ironically house prices are set by people bidding against each other for how big their mortgage can be. The tax won’t shift house prices, just shift money from private equity to government? See: https://news.ycombinator.com/item?id=34097478

The arguments I have read are usually so vague and seem to always miss critical details. I am not a property or economics specialist, yet I see glaring problems and omissions in well received blogs: that doesn’t bode well IMHO.

In developed countries the government takes around 30%-40% of your labor income if you work. In that sense taking 20% of capital income (rent, dividends, capital gains) is still on the low side.

Apparently I just don’t understand what you are saying.

Australia's ACT is in the middle of introducing a land value tax to replace stamp duty over 20 years; it's perhaps not the largest land value tax that could exist but they're ~10 years in and it's having a good effect on increasing home ownership rates and decreasing rents. You can read about it here: https://www.prosper.org.au/campaigns/stamp-duty-to-land-tax/...

  [The ACT Government] also promised that the reforms would be revenue neutral, reassuring residents that this was not a tax grab.

If we had a stamp-tax, then relevant.

In terms of fairness, the reality is that it's actually really fair for those who have owned land for a long time, because they currently benefit disproportionately from land values going up (they don't cause the land values to rise much, but society as a whole does). The current system is grossly unfair for renters, because they contribute to society just like everyone else but don't benefit from land value increases.

Land only goes up in value because of the improvements that society makes around it, which is why land in cities is very expensive. It isn't fair for landowners to benefit from this and renters to not benefit. Of course the biggest beneficiaries of all this are the banks, but most landowners didn't work for the value of their land, so losing the value of their land is fair.

Recent buyers are the most screwed over by land values dropping, because they did work very hard for their deposit and mortgage but then without working less they suddenly lose out a lot.

I'm unsure as to how this would prevent long term planning or investment. A one million dollar piece of land presumably has buildings on it worth at least as much.

If it is bringing in something like $100,000 per year how would a $10,000/year tax completely make it impossible to build or invest.

Land Taxes and Property taxes exist the world over. They rarely prevent development from happening and a pure land tax is designed to encourage development.

Per [1] if you're paying $10000 in tax/yr, being able to invest the same money would take 41 years at 5% interest (long term S&P 500 has been just shy of 10%) to reach $1m, 29 years with 8% interest (compounded annually).

1. https://www.investor.gov/financial-tools-calculators/calcula...

This is why people like Milton Friedman thought it was the least-bad tax, because it doesn't create deadweight loss and instead stimulates productivity.

You can argue about the details, but most proponents of land tax seem happy that we should fuck over many people that have worked and saved, and that they deserve to be fucked over because they are somehow bad people for playing the game by the rules that we have been given.

I don’t disagree with taxes, I just think that suggesting facile solutions is dangerous.

Give me a reference for a land tax policy in New Zealand, that considers how to fairly manage the problem of existing owners, and I am interested. Links to articles that ignore the glaringly obvious issues are pointless.

I don't think that landowners are to blame for the problems we have, but you're not considering that about half of the population of NZ do not own their own home. They are currently being screwed over by the system, and landowners on the other hand are benefiting disproportionately. Resetting the system to be more fair does result in some people losing, yes, but equality tends to feel like oppression when you've been benefiting from inequality.

Of course, most people that would start paying the land value tax would get a reduction in income tax, and would also gain intangible benefits like their children and grandchildren being able to afford to live in the same city as them. Currently the government is stealing away large amounts of the profit of our labour (income tax), so we are reducing "communism" by allowing people to keep more of the fruit of their labour.

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I know it's a fairly extreme analogy and probably invoking Godwin's Law, but slaveholders in the UK and USA made similar arguments about losing their investment when they were just working within the system and slavery was in the process of being abolished. They worked and saved to purchase slaves, and then the government was proposing to simply destroy all that investment by freeing the slaves.

The UK government actually ended up compensating slaveowners for their loss of investment, which I think was wrong even if politically expedient.

The analogy works sufficiently if you can answer two questions: 1) why does land increase in value, and 2) is it fair for tenants to miss out of land value gains but landowners to get land value gains?

I hardly think allowing someone to purchase a portion of the radio spectrum and own it in perpetuity is a good idea. Yet we pretty much do this with land.

Introducing a tax that crashes property prices is what I disagree with - most proponents of land tax seem to be happy with the government just appropriating the land value (literally - because taking the interest payment IS similar to taking the principal).

Edit: If you own an annuity like a bond that pays a coupon amount every period for infinity with no maturity value, that bond has a fixed current value fn(inflation, risk, time). If the government takes 100% of the coupon, then the bond has zero value. A land value tax would severely reprice property (that’s the purpose), by the government “taking” the coupon.

Perhaps a tax can be introduced just covering the capital gains over time or some other fairish scheme (although even that is just taxing on inflation).

And yet NIMBYs introducing laws to accumulate wealth in property at the expense of non property owners was another interference in the market that this is balancing out.

Creating situations so bad that legislation is introduced to reduce the gains is a risk people take when they try to take advantage of horrible systems.

I think the core of your argument distills down to “tax them”.

Maybe you get an inheritance, or a job at Google, or win the lottery, but at some point “them” most likely becomes you.

I am middle aged and I bought my first home a few years ago. I have wealthy friends and I have poor friends. Real estate is fucked, and I would love to see solutions to make homes affordable for everybody. I don’t appreciate the commonly regurgitated one-eyed political arguments.

As an example, let’s take a homeowner who rents their old house to someone when they purchase a second home. The question is, what value are they providing to the renter to justify the huge cost? The rent payment must cover the mortgage payment and maintenance or else the landlord would be loosing money. The landlord essentially ends up with a free house, while the renter ends up loosing many tens or hundreds of thousands of dollars, and at the end of the lease, they have nothing.

The only value the landlord provided was happening to own an asset that’s in huge demand. If that asset was abundant, the renter would very likely be able to buy their own and be much better off.

Rent-seeking behavior (which is drastically incentivized when houses are such a valuable asset) is pretty much only a negative for society for two reasons:

1. It makes many people poorer without any equity to show for their huge financial commitment.

2. It makes housing more expensive, which also makes people poorer.

3. A poorer society means people have less money to spend on products that someone actually put in work/effort to produce.

The basic idea is that a landlord is generally not producing a product or putting in any meaningful effort. (The actual work is contracted out and paid for by rent.) They’re just profiting off of an asset they got lucky / rich enough to own —- which by itself isn’t that much of a problem, except housing is a basic human necessity/right.

So why shouldn’t society be profiting off of the asset’s (land’s) value?

But this line of thinking means you have to turn off that “capitalist greed” mindset that everyone gets by default.

Um, a place to live? That’s something that obviously has huge value to people.

I rented 5 different places for a cumulative ~12 years post-college and each of them were in circumstances where I didn’t want the commitment and hassles of property ownership. One place I lived for 6 years a knowingly and happily paid more than the investor’s mortgage for that time. (He is a real estate agent/investor and we talked several times about the topic.) He got economic benefit; I got shelter without a long commitment and without tying up much money up-front.

If I need two years’ worth of shelter, it’s convenient to be able to buy that amount rather than buying a property that yields an infinite series of it and selling that two years later.

Seriously? They took on the risk of a mortgage for the house! They have to service that debt for decades. Renters can go wherever they want.

Imagine a world with no landlords…now you have to purchase a property to not be homeless.

I have heard it said “rotten houses filled with rotten people”: wooden houses with zero maintenance left to rot by investors waiting for market to improve so they can make a profit, terrible houses results in desperate people renting, resulting in a broken society. I don’t blame poor people, but there are definite problems that they come with.

Same problem with Brighton Mall (majority owned by two wealthy Christchurch families) that have zero incentive to invest their own money and every incentive to get local government to develop the area. If shops in Brighton Mall were owned by individuals, I suspect it would be a pretty nice place (not a wasteland).

If more homes in Brighton were owned by individuals, they spend time and money to make them better, and they have incentives to create a common community for themselves.

My point is not “capitalist greed”, it is that taking an individuals lifetime savings away from them is very bad I think.

Meanwhile be very careful buying anything in Brighton within the 1:50 year floodzone which is a huge percentage of the homes (And beware in much of Christchurch). You think your odds are okay, but sea level rise means the risk increases over 20 years, and the sum of the risk ends up very freaking high over decades.

If there is flooding, it will be like the earthquake. Prices will drop drastically within whole suburbs, houses will become uninsurable, and as-is prices will occur. Some suburbs will become very undesirable, which will have severe negative value. If you have a mortgage, you can lose all your money due to gearing.

Meanwhile over time insurance premiums are going sky-high - mine went up 33% last year and I’m on a higher part!

Don’t buy in floodzone areas.

I am going to buy a bare property on the hills to hedge my potential losses since I can’t insure against sea level rise. If there is sea level rise, my property will decrease in value, but hopefully that is offset by an increase in value of a hillside property.

Cheers

> But this line of thinking means you have to turn off that “capitalist greed” mindset that everyone gets by default.

That sounds idealistic. Society won't be benefitting from a LVT. The ones who benefit are the rich outsiders who can now push out longtime residents from an area so they can take over and build some highrises for profit. So capitalist greed at its finest.

wtf I suddenly love communist ideas (is it really tho?)

He used the example of the newly developed Dreamworld out in Dripping Springs outside of Austin. Its construction led to a rise in property value because it made Dripping Springs a more appealing place to visit and live. So in theory an LVT could disincentive development of underutilized land because improvements would be “punished” with more taxation.

The dynamic plays out differently in area with a higher population density.

Tangential, I would like more legislation written around population density. It means the same general policies can be put in place but in a way that smoothly scales… LVT is one example. Gun control is another… firing a weapon out your front door in a densely populated neighborhood is much different than firing a weapon out your front door at the end of a long dirt road.

Tax laws have also changed considerably also since then to make legal vehicles like trusts very advantageous for owning property.

Finally, in the same era the central government and local governments were big landlords with the majority of the market between them.

Consider an area with 100 equal sized lots all with the same land value, and each with a one family home on it, with all the families about the same size. The area uses a property tax that is based on the value of the property including land and buildings.

That area needs roads, water, sewer, trash collection, electricity, schools, parks, and emergency services sufficient for 100 families. Each family pays approximately an equal share of that via their property taxes.

Now 10 of those lots have their single family houses replaced with 100 family apartment buildings. The area now has 1090 families instead of 100 families, and needs to greatly expand infrastructure.

Under the property tax the owners of the 10 lots with apartment buildings pay a much greater share of that expanded cost than do the owners of the lots with single family homes, which presumably gets reflected in the rents of those 1000 apartments.

It probably won't end up with each of the 1090 families in the area paying an equal share of the area's infrastructure. I expect the share for the apartment families will be less, but not massively less.

Compare to a land value tax. If the tax is just based on the land value won't each of the 100 lots pay the same amount? To pay for the need for 10x as much infrastructure the tax rate will have to up by a factor of 10. The result is that families in the single family homes will be paying per family about 100x as much for the same infrastructure services as those who live in the apartments.

And if some people build even bigger apartments, those tenants will be paying less for the same infrastructure than the people in the smaller apartments.

What is the justification for different families having to pay such different amounts for the same infrastructure just because some live in denser housing?

1) Most (that I have heard of) plans for Land Value Tax do still include a smaller portion of property taxes. This does not completely solve the problem you pose but does ameliorate it a little.

2) Some of those infrastructure things are paid for via utility payments on utilities used. The 100 families in the apartment building will use much more water than a single family home. Some part of that money should be budgeted and used for improving the utilities available. That doesn't account for things like parks, fire department, etc. but does take up some of the slack.

3) lastly and most importantly those homes will be paying more than their fair share on purpose! If they live in a neighborhood where it is economical to build 100 unit apartment buildings then a lot with just a single-family home is being wildly underutilized. The higher tax costs will encourage owners to redevelop those properties into apartments or other higher value uses to make efficient use of that land. This is the entire point of Land Value Tax! It makes it in the interest of land owners to upgrade and improve their property (whereas traditional property taxes have a negative incentive because building a new building will increase your taxes).

edit: formatting

The other reality is that the single family homes in the area which just got a massive boost in infrastructure spending are benefiting from those improvements disproportionately; their land could be providing access for 100 families to those services but instead are only allowing access for 1 family. Their land value will have skyrocketed hugely because of the improvements around them, so they should pay the tax to return to society the land value they gained.

If it doesn't make fiscal sense for them to pay that tax, then they can sell their now hugely expensive piece of land for a tidy profit and live somewhere it makes more sense for them to be, allowing their land to be developed into a 100-family apartment.

Because this premise is wrong:

> If the tax is just based on the land value won't each of the 100 lots pay the same amount? To pay for the need for 10x as much infrastructure the tax rate will have to up by a factor of 10. The result is that families in the single family homes will be paying per family about 100x as much for the same infrastructure services as those who live in the apartments.

Energy = force * distance = mass * acceleration * distance. People in single family homes on their own quarter acre lot will use a lot more infrastructure than people in apartments, simply because less dense living requires mass to travel much farther.

Namely, single family lots make public transit not viable (simply because individual cars are more convenient and so people will prefer and politically support car infrastructure). And the knock on effects leader to ever more consumption of infrastructure, such as more roads, more parking lots, bigger lots (since driving makes traveling those distances easier), which then leads back to more infrastructure to push more mass more distance.