How Much Money Do Parking Lots Make?
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How Much Money Do Parking Lots Make?
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Re: How Much Money Do Parking Lots Make?
#2At least in California, especially in Los Angeles, it's really important to factor in that parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13).
You buy a parking lot, sit on it as the value of land increases (paying effectively 0% in taxes), then you eventually sell, paying only a capital gains tax (much lower than income).
I only bring up California, because I know it. I'm sure there's similar dodgy tax advantages in other states.
Point being -- taxing land the way we do (especially in California) seems to be problematic.
This is also the reason you see single family homes with front and back yards like 1000 meters away from sky scrapers in Los Angeles and San Jose. Those homes are paying property taxes of like $400 a year, and most of them are being rented out. It's not poor old ladies living in them that don't want to leave the neighborhood they lived their whole lives in, but gentrified under their feet into some urban monster. It's business people arbitraging tax laws.
Re: How Much Money Do Parking Lots Make?
#3How much money does a parking lot impose in external costs upon society?
https://www.streetfilms.org/parking-craters-a-scourge-of-ame...
Re: How Much Money Do Parking Lots Make?
#4At least in California, especially in Los Angeles, it's really important to factor in that parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13). You buy a parking lot, sit on it as the value of land increases (paying effectively 0% in taxes), then you eventually sell, paying only a capital gains tax (much lower than income). I only bring up California…
Thanks for this knowledge. Where can I find more info regarding Prop 13 and the parking lot property taxes? Thank you!
Re: How Much Money Do Parking Lots Make?
#5At least in California, especially in Los Angeles, it's really important to factor in that parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13). You buy a parking lot, sit on it as the value of land increases (paying effectively 0% in taxes), then you eventually sell, paying only a capital gains tax (much lower than income). I only bring up California…
Exactly. Taxing property encourages speculation and under-development.
Showing an alternative, Pennsylvania has several towns and cities with a split-rate tax, which means that there's a higher tax on the assessed land value than on the assessed value of the property. Taking this to an extreme, you can tax only the land value, not the property, providing a very strong incentive to make the best use of desirable land. A split rate tax just lets you turn the dial between typical property taxes and a land tax.
Many arguments in favor of the land value tax are based in concepts of economic rent and fairness. While I'm sympathetic to these arguments, I think the best argument is that it seems to work, both in theory and practice. Places that implement a split rate or land value tax tend to have fewer empty lots, parking lots, single-family homes in the middle of downtown, etc.
And not just that, but typical property taxes provide a disincentive to even improve your own property, since you'll pay more tax. They encourage blight.
It's not just California, it's everywhere. Tax policy isn't the only thing stopping us from avoiding sprawl by "thickening up" valuable areas of towns and cities, but it's a big one. Parking minimums are another, and of course zoning is yet another. All of them are important in terms of making our cities walkable, amenable to public transit, and sustainable environmentally.
*edit -- I should clarify that Prop-13 makes this effect worse in California than many places, though.
Re: How Much Money Do Parking Lots Make?
#6Self-driving cars will render these obsolete
Re: How Much Money Do Parking Lots Make?
#7Self-driving cars will render these obsolete
In 2050, maybe.
Re: How Much Money Do Parking Lots Make?
#8At least in California, especially in Los Angeles, it's really important to factor in that parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13). You buy a parking lot, sit on it as the value of land increases (paying effectively 0% in taxes), then you eventually sell, paying only a capital gains tax (much lower than income). I only bring up California…
> This is also the reason you see single family homes with front and back yards like 1000 meters away from sky scrapers in Los Angeles and San Jose. Those homes are paying property taxes of like $400 a year, and most of them are being rented out. It's not poor old ladies living in them that don't want to leave the neighborhood they lived their whole lives in, but gentrified under their feet into some urban monster. It's business people arbitraging tax laws.
Well, more specifically, if you redevelop the land (say, by putting in apartment building in where there used to be a single-story house), the property tax gets recalculated. So the tax code heavily penalizes redeveloping any property.
Re: How Much Money Do Parking Lots Make?
#9Self-driving cars will render these obsolete
Self-driving cars will make the entire world a parking lot.
Re: How Much Money Do Parking Lots Make?
#10At least in California, especially in Los Angeles, it's really important to factor in that parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13). You buy a parking lot, sit on it as the value of land increases (paying effectively 0% in taxes), then you eventually sell, paying only a capital gains tax (much lower than income). I only bring up California…
Exactly. Taxing property encourages speculation and under-development. Showing an alternative, Pennsylvania has several towns and cities with a split-rate tax, which means that there's a higher tax on the assessed land value than on the assessed value of the property. Taking this to an extreme, you can tax only the land value, not the property, providing a very strong incentive to make the best use of desirable land.…
Under Proposition 13, you are not taxed on the land value or the property value. Instead, you're taxed on the land+property value at the time you bought the property.
If you make a "substantial change" to the property, the tax is reassessed. That's what generates the "empty lots, parking lots, single-family homes in the middle of downtown, etc." -- if you replace your empty lot with a useful building, your property taxes immediately spike.
Extending Prop 13 to cover property redevelopment would do as much to solve the undeveloped-land problem as repealing Prop 13 would. (Obviously, those two policies would differ in other ways.)
I think it's a mistake to focus too heavily on "should we tax land value" vs "should we tax property value". You're correct that taxing property value disincentivizes development, and that is bad. But we're talking here about cases like someone's small personal residence in the middle of downtown San Jose with $4,000,000 of land value and $200,000 of property value. (Numbers completely invented.) If they were taxed on assessed value, land+property, which is the default in most places, that immense land value would quickly make it prohibitive not to redevelop. The tiny property value is a rounding error.