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Detroit wants to be the first big American city to tax land value

economist.com

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Re: Detroit wants to be the first big American city to tax land value

#761

Post by Tiktaalik »

slashdev wrote: post #13
mjamesaustin wrote: post #9

I'm a big proponent of Land Value Tax. In theory it is one of the healthiest forms of taxation since supply is fixed. It encourages efficient use of land and discourages owners from squatting on undeveloped land just to reap value from its location. https://en.wikipedia.org/wiki/Land_value_tax

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

In practice it’s a huge windfall for the very wealthy mansion owning class, as the tax on the improvements of their land (ie. Their mansion) fall to zero.

In order to compensate, tax on land is increased, so the relatively poorer homeowner who owns land with a relatively worthless house sees little benefit but in fact a tax increase, as the taxes that we’re previously being paid by the mansion owners fall onto them.

Re: Detroit wants to be the first big American city to tax land value

#762

Post by cultureswitch »

ajsnigrutin wrote: post #624
nisegami wrote: post #615

Earlier quoted context omitted.

One way you could look at it is that this person's inability to afford the land value tax signals that they are not making effective use of the land and that it would be in society's best interest if the land were to change hands to someone who could use it in a way that lets them afford the taxes on it.

You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not li…

If grandma owns a house in a place where people want to build an apartment block, she's not poor. By definition.

Re: Detroit wants to be the first big American city to tax land value

#763

Post by ajsnigrutin »

diffeomorphism wrote: post #642
ajsnigrutin wrote: post #607

Earlier quoted context omitted.

The problem is, what if it doesn't produce that much? What if it doesn't produce anything? Imagine someone buying a house somewhere cheap. Then some gentrification, a new microsoft campus built nearby, etc., and the price of the house jumps 10x+. You're on a fixed income, and your taxes are now higher then you can afford. If you have multiple houses, sure, tax the second, third, etc. one (evn though the taxes are the…

The 10x seems very unrealistic. But assuming that were the case, the taxes would be the least of your worries because things like supermarkets, electricity, phone, water, heating... would also go up heavily. The more realistic picture is that grandma living alone in a rather large, old house, whose price, heating etc. went up quite drastically. That is already happening, in particular the heating part. Just have a lo…

Not unrealistic at all. After the fall of socialism, we had a law, where current tennats could buy apartments from the government for very very cheap.. we're talking about a mid-range new car prices back then (to avoid having to calculate inflation), and quite a few years after that the prices were very low. If we're talking the attractive parts of the city center, a one bedroom apartment can easily cost 500keur now. For comparison, even ~15-20 years ago, that would cost maybe 100keur (with some inflation until now), especially if it didn't have parking options nearby (but airbnb investors don't really care about that that much, they can rent a parking spot a few 100 meters away in a parking garage.

We had a law, that somehow got repelled by some lobbyist, where all the public money given to help was then taken out of inheritance (so the kids had to either pay it back, or property got sold at an auction, government took the money and the kids got the rest). This would solve the help-money issue.

Re: Detroit wants to be the first big American city to tax land value

#764

Post by dfxm12 »

GenerWork wrote: post #742
dfxm12 wrote: post #734

Earlier quoted context omitted.

Every tax jurisdiction I've lived in has some sort of homestead exemption to protect people from the situation where the taxes in the house they own and live in go up to where they can't afford it.

I see homestead as completely, 100% incompatible with a LVT. Not because there's any law of man or nature that says the 2 can't work together, but because as soon as an area becomes "hot", that land will spike in value and the government will want its revenue to increase, and at that point they'll fight tooth and nail to overturn any homestead protection that exists.

The outcome Detroit wants from this is for the land to be developed. Governments are likely to get directly involved with empty lots, not already developed land. This is also setting aside that kicking pensioners to the streets is generally political suicide, and one of the reasons these homestead exemptions exist in the first place.

Re: Detroit wants to be the first big American city to tax land value

#765

Post by giantg2 »

ndsipa_pomu wrote: post #751
giantg2 wrote: post #739

Earlier quoted context omitted.

"but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential" Empty land isn't using any of those things. Any future improvement would use those things and be taxed accordingly. If you're concerned about infrastructure costs, the. You want to use a per capita tax or the current property tax that taxes the improvements (where people work or live) since they are us…

> Empty land isn't using any of those things It doesn't have to use them to benefit from their proximity. Land in the middle of a barren desert is usually worth far less than a similar piece of land near a populous city.

Sure, your point? The government benefits on the higher sale tax revenue too. It's only a true benefit when something is realized. The densest areas of many cities are seeing decreases in population, so maybe that infrastructure isn't the main driver of value.

Re: Detroit wants to be the first big American city to tax land value

#766

Post by ajsnigrutin »

cultureswitch wrote: post #762
ajsnigrutin wrote: post #624

Earlier quoted context omitted.

You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not li…

If grandma owns a house in a place where people want to build an apartment block, she's not poor. By definition.

In my country, the apartment block is already there, but the previously shitty apartment (noise, no easy parking) just became expensive because of stuff like airbnb and speculative investmnts.

Re: Detroit wants to be the first big American city to tax land value

#767

Post by screye »

Draiken wrote: post #748
screye wrote: post #736

Earlier quoted context omitted.

> I guess you could try to argue that but I still feel like that's going to hurt folks. Imagine a scenario where I live somewhere for decades. Suddenly there's a new subway or some other factor that increases the value of the land enough that I can't pay for it. I can imagine it. That is exactly what happened to my neighborhood in India. Small residential condo community where Dad and I grew up. Everyone knows everyo…

That's very interesting. Never heard of this! Who offers these deals? Is it the government or private corporations? I'm struggling to see how one profits from this (which is normally the only reason companies do anything) so I'm very curious. This really does sound like a win/win situation if it's like you described it! Here I only hear/read stories about people losing their homes without any other option other than…

Private builders.

The 5 floor condo gets converted into a 30 floor tower. The residents gets 2x space and the first 10-ish floors. The rest goes to the private builder to sell to whoever they want as profits. It often involves demolition of 3-4 buildings into 1 large building. So a lot of wasted space also gets brought into building floorspace.

Re: Detroit wants to be the first big American city to tax land value

#768

Post by ajsnigrutin »

screye wrote: post #644
ajsnigrutin wrote: post #624

Earlier quoted context omitted.

You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not li…

Land value tax often goes hand in hand with lax zoning. In your example, if the grandma's house went from 200k to a 1million, then she isn't poor anymore. She is very rich. She doesn't have to leave the neighborhood. She can give her house away for redevelopment into a condo. Get the nice penthouse flat and a pretty penny on the same land. Now, she has enough liquidity to pay the land value tax, which is also lower p…

In my country, a previously ~100k condo apartment now costs 500k+... sometimes even less than that before (city center, no easy parking, lots of noise) and more now (airbnb).

Re: Detroit wants to be the first big American city to tax land value

#769

Post by lesuorac »

briHass wrote: post #452
telotortium wrote: post #427

Earlier quoted context omitted.

One thing I think Strong Towns would do better to emphasize is that their argument that suburbs are financially unsustainable applies more to those suburbs of struggling towns or small cities. I don't believe suburbs of large, economically healthy cities are running into unsustainable infrastructure costs nearly as much. They may run into funding difficulties if the suburb becomes an undesirable area, or if the pensi…

Exactly. ST seems to want to conflate areas that would probably be considered 'rural' with actual suburbs of large metro areas. Look at some of the towns mentioned in their 'suburbs bad' articles and you'll note they are usually quite far from a city, and usually that city is 2nd or 3rd tier (and likely facing its own financial issues.) If anything, many of these rural/exurb communities are already at the minimum pop…

> [1] The Lafayette metropolitan area was Louisiana's third largest metropolitan statistical area with a population of 478,384 at the 2020 census.

I haven't really looked at Lafayette so it might count as rural but if the 3rd largest metro area of a state is the size ST says is unsustainable [2] then that bodes pretty poorly for all but 2 of it's metro areas.

I bet a lot of say New Jersey is close enough to either Philly or NYC to avoid being "3rd tier" but there's a whole lot of the country that isn't near a top-10 metro area.

[1]: https://en.wikipedia.org/wiki/Lafayette,_Louisiana

[2]: https://www.strongtowns.org/journal/2020/4/27/this-is-the-en...

Re: Detroit wants to be the first big American city to tax land value

#770

Post by cultureswitch »

jjav wrote: post #533
kaibee wrote: post #332

Earlier quoted context omitted.

> They should implement a blight tax or a vacant land tax instead. A land value tax is a much more elegant solution. For one, it doesn't introduce the problem of needing to define 'vacant land'. Is a parking lot vacant land? etc

> For one, it doesn't introduce the problem of needing to define 'vacant land'. But it introduces, unless I'm completely misunderstanding, the need to establish a theoretical value for a plot of land that's unrelated to any sale or use value we can objectively measure today. At best, it seems the assesment will be very wrong often. At worst, it'll be a political tool for local government to drive out whoever they wan…

Assessing the value of unimproved land is much easier than assessing built structures.
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