It's the land, stupid: How the homebuilder cartel drives high housing prices

> tax the land of lot developers so they don’t hold land off the market.

This is something I dealt with a few years ago. There were a few acreage lots (5-15 acres) my partner and I were considering buying and building a house on, and all of them had been in the $200k range a year or two before but had been bought by land speculators (in some cases by the same person). Prices went from ~$200k to ~$750k, which we weren't interested in.

Most of them sold. One of the larger lots was around $350k and is still for sale, now for almost $2 million.

I don't think developers should be forced to sell land just because I want to buy it, but the taxes they pay on their empty lots is extremely low. I checked on a couple of the ~$750k lots, and the taxes were something like $115 per year. At that rate, it costs the developer/speculator basically nothing to hold onto it while prices rise.

If lots like this were taxed at, say, 20x the current rate for lots that are near areas that are being built up and are ready to be bought, then there would be a stronger incentive for the owners to sell to people who are ready to build and start paying property taxes. It seems like such an increase would benefit everyone except the speculators.

Fun fact: About 89% of Canada's land area (8,886,356 km² or 3,431,041 sq mi) is Crown land: 41% is federal Crown land and 48% is provincial Crown land. The remaining 11% is privately owned. For example, 92% of Quebec, 87% of Ontario, 95% of Newfoundland and Labrador, and 94% of the land in British Columbia are Crown land. So when you “buy” land, you actually become a tenant to the Crown. If you don’t pay the property taxes, “your” property can be registered for sale. The laws around properties in Canada are extremely complicated and stupid. A friend of mine, after building their house and wanting to connect the sewer to the municipal one, was required to pay more than $50k! After 2 years, they ended up having a septic tank instead.

Unfortunately, there’s no hope to fix the housing issue in a democratic way because the majority of the voters are landlords. The only possible solution is like Japan (where houses are depreciated assets) by having centralized control over housing, zoning, permits, and everything to maintain a flat price. Other than that, the future is grim for young people or anyone who doesn’t already own a house. I remember a year ago I saw a mortgage here in Canada of 70 years, so if you bought a house at 30, you will become a Crown tenant by 100!

(1) https://en.m.wikipedia.org/wiki/Crown_land

  Nearly 40% of the United States is public land, supported by taxpayers and managed by federal, state, or local governments. -- https://headwaterseconomics.org/public-lands/protected-lands/public-land-ownership-in-the-us/

Allocating a few more percentage points of that for housing could have a large effect on prices.

Land and homes also make for excellent inflation hedges; thus, property owners become advocates for money printing and suppressed interest rates.

>And I realized that to call these businesses “homebuilders” is misleading. It’s striking how little of their business has to do with, well, building. For instance, here’s D.R. Horton in 2023: “Substantially all of our land development and home construction work is performed by subcontractors.” Here’s Lennar in 2023: “We use independent subcontractors for most aspects of land development and home construction.” I suspect most of the other big guys would say something similar. These aren’t builders, they are financiers that borrow cheaper than real developers and use that cheap credit to speculate in land, hiring contractors to do the work. They are, in other words, middlemen.

This is pretty far out there. They are the general contractor and have substantial value add to the project.

Most of the rest of the article is misunderstandings like that.