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Tax the Land

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Re: Tax the Land

#21

Post by giantg2 »

mdorazio wrote: post #9

Not really stated in the article are three caveats: 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends. 2) The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land. A homeowner sitting on a million dollar piece of property in California taxed at ~1% is still unlikely to build an apa…

"The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land"

The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.

Re: Tax the Land

#22

Post by twoxproblematic »

mdorazio wrote: post #9

Not really stated in the article are three caveats: 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends. 2) The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land. A homeowner sitting on a million dollar piece of property in California taxed at ~1% is still unlikely to build an apa…

It's insanely perverse that we let companies like Blackrock buy up lots of homes and turn them into rentals.

Re: Tax the Land

#24

Post by rapind »

refurb wrote: post #11
andrepd wrote: post #7

There is something deeply wrong with the fact that you can buy-to-rent a property and immediately turn up a profit, essentially inserting yourself as a parasitic middleman in the process, providing no service, and extracting an economic rent.

Anyone who has been a landlord can attest "providing no service" isn't true at all.

Subjective. When I used to rent, I never saw my landlord after signing the lease. I was renting a house and taking care of small maintenance issues myself. I'd say it was far less effort to rent to me, then it would have been to live there himself.

Of course there are bad tenants, but I suspect, like most things, we focus on those negatives and ignore all the low maintenance tenants when thinking about it.

Re: Tax the Land

#25

Post by IgorPartola »

refurb wrote: post #11
andrepd wrote: post #7

There is something deeply wrong with the fact that you can buy-to-rent a property and immediately turn up a profit, essentially inserting yourself as a parasitic middleman in the process, providing no service, and extracting an economic rent.

Anyone who has been a landlord can attest "providing no service" isn't true at all.

This.

1. Immediately turn a profit would mean that monthly rent is higher than the cost of the property. This is not a thing. If they person you are replying to means “cash flow positive” then sure in 20-30 years the renter will have paid off the property for the landlord.

2. Renting provides choices. Tenant wants to move across the country or across the street? No problem: ride out your lease and move when ready. If you own the property you need to sell it to move in most cases. Ever try to sell when the market changed and suddenly your property lost 30% in value and you are suddenly underwater? I have. On the other hand if you are renting you can just move on a relatively short timeframe and get the fuck out of dodge no matter where property values are.

3. The responsibility for maintaining the building is on the landlord. Sure, some are bad at this but know your rights and interview your landlords well and it won’t be a problem.

4. Rentals provide inventory. If you don’t have $500,000 saved up for a large single family home in an expensive state (like where I have been stuck for the past decade), what do you do for housing? Mortgage your life away and hope jobs and markets go your way? Or rent for a small premium over a mortgage payment with no money down and a 12 month commitment?

For most people renting is actually a much better choice provided they save the difference between renting and owning the home and invest it wisely. Over a lifetime there are few places in the US where you’d be better off buying instead. NYT had a nice comprehensive calculator to this effect.

Re: Tax the Land

#26

Post by bitshiftfaced »

In my mind, LVT only works properly when you've ripped out every other tax: income, sales, capital, you name it. Absolutely no more friction and warped incentives. Divide the government budget by the weighted land values and tax accordingly. But that could never work in our world. There would be too much temptation to add a small tax here for this other thing, and then it snowballs, and then we're back to where we started but this time LVT plus numerous other taxes.

Re: Tax the Land

#27

Post by pj_mukh »

giantg2 wrote: post #21
mdorazio wrote: post #9

Not really stated in the article are three caveats: 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends. 2) The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land. A homeowner sitting on a million dollar piece of property in California taxed at ~1% is still unlikely to build an apa…

"The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land" The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.

The reform of zoning laws (atleast in California) is blocked by property owners sitting on low-tax properties.

Raising the land value tax would be a surefire way to make the opposition disappear as property owners would have to scramble to make their land more productive.

Re: Tax the Land

#28

Post by [deleted] »

giantg2 wrote: post #13

"The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land." Of course it will distort choices and leave some people worse off. If the author can't see that, then they have…

[deleted]

Re: Tax the Land

#29

Post by trgn »

andrepd wrote: post #7

There is something deeply wrong with the fact that you can buy-to-rent a property and immediately turn up a profit, essentially inserting yourself as a parasitic middleman in the process, providing no service, and extracting an economic rent.

> providing no service

Landlords are not parasites and provide a valuable service.

I think a land tax would be great to curb speculation. Buying property, not providing any service (neither by renting nor capital investment in improvements), and just pocketing the appreciation, I agree, that's parasitic on the community.

FWIW - I don't think a landtax would create a meaningful tilt towards more affordable home ownership, especially single family home ownership, since it's such a poor use of land. Instead, I think it will tilt to more affordable housing in the aggregate. Lower rents, but a lot higher capital improvements in what's now underdeveloped land. More apartment buildings basically. More units, more affordable, closer to amenities, but smaller overall.

> buy-to-rent a property and immediately turn up a profit

That's just never the case (at least, the immediate part of it), maybe only in the most lopsided markets. Buying a property is a huge capital investment, and can take decades to start seeing meaningful ROI. It does create cash flow quickly.

Re: Tax the Land

#30

Post by andrepd »

sokoloff wrote: post #17
andrepd wrote: post #7

There is something deeply wrong with the fact that you can buy-to-rent a property and immediately turn up a profit, essentially inserting yourself as a parasitic middleman in the process, providing no service, and extracting an economic rent.

If that were the case, why would someone else not bid $1 more to buy that house and rent it out? Then someone else would logically be willing to bid $1 more than that, until there was no easy profit left… I think the answer is that much of the landlord’s initial profit is more or less income from working a job (buying, insuring, readying, showing, screening, fixing, collecting, etc) as evidenced by the share that a p…

> If that were the case, why has someone else not bid $1 more to buy that house and rent it out?

Because capital is privatised and scarce, therefore a working-class family wishing to buy a home to live on cannot do so since they're outbid by those with capital. This leaves them with two choices: (1) pay rent to a middleman with capital, who buys the house, or (2) beg a private entity for a capital advance to be repaid with future expected cash flows, i.e. a bank loan.

The fundamental issue was always there, but for a time the house prices where well within what working/middle-class people could afford. Now that capital, incl. behemoth investment funds, have pushed these prices well outside what most people can reasonably afford, it becomes much more visible. It's kinda silly that your take is "well why don't working-class people just bid $1 above Blackrock"?

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