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A comment on Detroit wants to be the first big American city to tax land value. Parent comment

Re:Detroit wants to be the first big American city to tax la... by SoftTalker on Monday October 16, 2023 @10:39PM (#37909848)
And in fact your mortgage would almost certainly be less than the rent for the same property, since the landlord will be using commercial financing which costs more, and will be paying taxes as a non-resident owner, which are higher. The landlord will also need to buy commercial property and liability insurance, which costs more.

Your residential mortgage will be at a lower rate and you will have property tax exemptions if the property is your primary residence and your insurance will be cheaper.

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Re:Detroit wants to be the first big American city to tax la... by eru on Monday October 16, 2023 @10:54PM (#37909963)
Yes.

Well, in the hypothetical system we are discussing there would presumably be no tax exemption for primary residences or other tax differences.

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Re:Detroit wants to be the first big American city to tax la... by jandrewrogers on Tuesday October 17, 2023 @12:44AM (#37910722)
Why do you assume the landlord has a significant mortgage or any mortgage at all? Most landlords have owned the properties for decades. I know quite a few that bought the properties with cash and never had a mortgage.

If you buy a place for $1,000,000 at 7%, you can’t compete with someone that owes $100,000 at 2.5% on the same place, which is often the reality.

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Re:Detroit wants to be the first big American city to tax la... by eru on Tuesday October 17, 2023 @09:45PM (#37923938)
Whether your landlord owns outright or has a mortgage doesn't make much of a difference for this analysis. That's because even if you own outright, you have opportunity costs of capital.

> If you buy a place for $1,000,000 at 7%, you can’t compete with someone that owes $100,000 at 2.5% on the same place, which is often the reality.

Where does that 2.5% come from?

If mortgages cost more than the rental yield, then your landlord should sell the place and use the proceeds to get into the mortgage business. (If not, your landlord is doing the landlording as a charity, because they are leaving money on the table.)

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