Rising Rents Are Pushing More Tenants Past the Breaking Point

Allow people to deduct rents paid from their income taxes if they report the location of the property and the identity of the party receiving the payments (in addition to the standard deduction).

Tax income from rents at a higher rate than wage and salary incomes.

The landlords will obviously just raise rents to pay the tax, but this allows you to gather data on who owns/manages all the rental properties, which are the sort of data you need to determine if rents or absentee-landlordism is even a problem anywhere.

In response to the parent, the landlord is not providing housing. The people who live in the housing provide the demand for housing. The home construction industry provide new supply, and owners of existing housing stocks may be enticed to sell once their price point is reached. A landlord that buys a house with the intention to rent to someone else is acting as a middleman. If they did not bid up the price of that particular house, the price might have remained low enough for someone who intended to live in it to buy it.

So what the landlord actually provides is the ability to buy a small interval of living in a home, rather than having to buy all the years of living there--from now until the fall of civilization--all at once. Mortgages are a different sort of middleman. They provide the ability to spread out that payment for all the remaining years over a fixed number of years. But the interest on a home mortgage is mostly just another form of rent-seeking. Without the availability of the mortgages, the houses would have to sell at lower prices, to those who could afford to pay for them.

The problem, if there is one, is not that rent-seekers take rents, but that they do not spend those rents close enough to the people who give them for them to easily earn them back. If you rent out the loft above your garage to a single student, you're likely to spend some of that money at the restaurant where they bus tables part-time. That money circulates back through the local community. If you live in St. Louis and own a 3/2 in Tulsa, maybe the customer support line of the juice press you bought runs its call center out of there. That money leaves faster than it comes back. And if your retirement plan owns part of a REIT that owns rental property all over, and also has a bit invested in Freddie Mac and Fannie Mae, that's basically a diffuse sucking of money out of the entire rest of the country to feed a diffuse scattering of investors that don't necessarily live anywhere near the sources. The circulation loop is totally broken. People stand at the nexus ("Wall Street") and skim off the top, then don't spend that money back into the communities where the rents come from.

This is how an Appalachian ex-miner family can rent a drafty barn with no furniture for $300 a month, and not see any local jobs available to recirculate that money back to them. The owner doesn't live there, or spend money there, or even spare a single thought when their plane flies overhead. The only reason they own the barn is to extract the Social Security Disability money that flies in from Washington, DC, briefly touches earth, and then immediately flies away to a community where people own things for their living.

Something like a Georgist land-value tax does not meaningfully distinguish between a landlord that lives next door and spends all their rent locally and one that lives 12 time zones away and spends it all to people much more distant on the money-circulation graph. Perhaps it would be more appropriate to tax rents based on the distance between the beneficial owner's legal domicile and the property? Composite entities like corporations and partnerships would then have to report their domicile and distance calculations for distributions and dividends though. Seems like a mess for reporting.

Yes, but you need to realize that land plays a crucial role in our environment and rich people are in a better position to utilize resources with attention to environment than poor people. All the zoning laws that make rents high are actually good for environment and help us fight climate change.

> How have all the economists missed this obvious point?

They haven't. That's why taxing land value at a higher rate than property values doesn't have support from mainstream economists.

> Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior.

Murder is a lot easier to identify and prosecute than blighting. We already have laws against blighting. They don't seem to work. Increasing the incentive to blight is unlikely to make blighting less attractive.

> Why would a landlord destroy the value of their own property, harming their own ability to draw rent?

You're missing the point. They wouldn't destroy the value of their property; they'd extract value from the land (and neighboring land) to build up the value of their property. Land-value taxes encourage consolidating wealth in improvements to private property that have zero impact on anybody other than the property owner (or tenant). That's the exact opposite of the desired outcome, because it clearly works against the public benefit.

There are plenty of areas where this already happens, because there's enough of an incentive for property owners to do this even without skewing the tax code specifically to reward them for this behavior.

> That quote is the exact reason that land needs to be taxed at a much higher rate than it's currently taxed. Notice I say "land", so that doesn't include anything built on that land. > > The value of land is directly tied to the desirability of the land around it. Land in Manhattan is more valuable than land in the middle of South Dakota because of all the network effects of other people (and the government) building things in Manhattan.

I'm glad you mentioned Manhattan.

Land-value taxes encourage property owners (or aspiring property owners) to take actions to decrease the value of land, in order to make it cheaper to acquire and maintain (read: pay taxes on) that land. Those actions have significant network effects, much more so than actions that increase (or decrease) property values, by definition: the value of land is more strongly correlated with the value of neighboring land than the values of properties are.

Taken to the extreme, this will cause massively capitalized institutions to blight land - and, in some cases, even buy up land for the specific purpose of blighting it and reducing its value (thereby reducing the value of neighboring land). That results in a massive wealth transfer from the poor and middle class to wealthy institutions - namely banks and universities with large endowments, though sometimes wealthy individuals too.

I'm glad you mentioned Manhattan, because it's one place where this exact practice already happens in a very public and visible way. It happens in Manhattan even without the existence of specific tax incentives to encourage this behavior because the economics of real estate in the area (along with other aspects of real estate acquisition in NYC) make it profitable for institutions like NYU and Columbia to do this[0]. If you started taxing land at a higher value than the property that sits on the land, it would make it lucrative for "smaller" institutions (ie, other well-capitalized institutions) to start doing it as well.

[0] NYU and Columbia are two of the top three holders of real-estate in the city, by value. They have both engaged in this practice in very visible and documented ways.

I think this is "Landlords will pass on all the tax to their tenants": http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-ri...