High property taxes are good • Hacker News Board

Re: High property taxes are good

#601

Post by brigandish » Fri, Jul 22, 2022, 5:34 AM UTC

mlyle wrote: post #597

brigandish wrote: post #595

Earlier quoted context omitted.

In Japan it's reasonably common for someone to own the land while someone else (e.g. a homeowner) owns the buildings on the land and has certain rights to live there that the landlord can't ignore (and hence can't just turf them out suddenly). Flats in the UK are leasehold, which means you can buy (part of) a property and still not own the land. It's entirely possible to separate the two.

It's possible to separate the two, but not in a way that gives a meaningful true market value for land alone in the short term-- rather just values for land in long-term option value after other rights are considered. That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions. In turn, lots of the benefits of a LVT evaporate if th…

In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner).

The tenant knows how much value they are getting from being there, at least relatively, because they pay the rent. If you're paying twice as much rent for half the space as your mate, unless there's some reason like being closer to the centre of the city or something, you know you're getting a bad deal.

Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.

Re: High property taxes are good

#602

Post by tptacek » Fri, Jul 22, 2022, 6:21 AM UTC

naasking wrote: post #593

tptacek wrote: post #592

Earlier quoted context omitted.

Because it's not a real problem, but rather one you've invented, and in the real world we have the exact opposite problem, of huge swathes of desirable residential land all SFZ'd, so you can't even build town homes on a parcel.

It's amazing you keep saying this when I've said multiple times now that I'm living in exactly that kind of city (a large North American city), and it's not the only one with this exact problem. But sure, keep ignoring the data for your simplistic solution.

I live in Chicago. You can look us up on the Internet. It's pretty big.

Re: High property taxes are good

#603

Post by mlyle » Fri, Jul 22, 2022, 6:41 AM UTC

brigandish wrote: post #601

mlyle wrote: post #597

Earlier quoted context omitted.

It's possible to separate the two, but not in a way that gives a meaningful true market value for land alone in the short term-- rather just values for land in long-term option value after other rights are considered. That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions. In turn, lots of the benefits of a LVT evaporate if th…

In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). The tenant knows how much value they are ge…

> In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner).

Yes, but... As I keep trying to make clear:

* Anyone improving the property requires some kind of protection of this investment, usually in the form of a durable ownership interest or a very long term lease, with a value chosen based on both parties' estimates of the utility of the land over that lease term.

* In turn, the rents that the landlord receives from the property can be not-too-closely related to the present value of the land. They may be higher or lower.

* In turn, the land value tax doesn't succeed in capturing the true market rent of the land when it is based upon bidding by landowners, whether we're dealing with separate owners for improvements or not.

Imagine the case of someone who entered into a long term lease (60 years? 99 years?) in 1975 to build a house surrounded by orchards in San Jose. The real value of land has appreciated >60x over that term. A land value tax would capture a tiny fraction of that value if the landowner was bidding based upon the lease returns + the present value of the land being returned in 40 years.

> Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.

The level of friction is so high that you can't solve this one with bidding; you're going to have to rely upon comparable sales and assessed/appraised values.

Re: High property taxes are good

#604

Post by midoridensha » Fri, Jul 22, 2022, 7:37 AM UTC

jelliclesfarm wrote: post #541

midoridensha wrote: post #498

Earlier quoted context omitted.

What if grandma lives in a city where there's no jobs for me? Asking people to move in with their relatives is not the answer; the answer is very simple: build more housing. Eliminate zoning rules and start replacing older buildings with new, larger and taller buildings.

Why? Why can’t companies create jobs everywhere? Shouldn’t every American city deserve top notch infrastructure that the states only reserves for high density unaffordable cities where jobs are concentrated. Maybe this will force the governments to spend some of our accumulated tax dollars to actually improve public transport and efficiently network cities and towns. Zoning rules exist for a reason. People need infra…

>This is also why all high density cities are all expensive and housing is unaffordable and everything from water to power is expensive and public services are woefully inadequate.

No, they aren't. I live in Tokyo; it's very high-density, quite affordable compared to anything in America, and public services are all excellent. High density is how you get high efficiency.

>Shouldn’t every American city deserve top notch infrastructure that the states only reserves for high density unaffordable cities where jobs are concentrated.

No, because spreading everyone out means your infrastructure cost per capita balloons, and it's unaffordable for the government. If you want "top notch" infrastructure, you need to live near other people, not out in the boonies.

>Zoning rules exist for a reason.

No, they don't: they just make everything far away from everything else and prevent density. Here in Japan, schools, light industrial, residential, and commercial all coexist in mostly the same spaces. So it's not that hard to live within walking distance of work.

Maybe you should try traveling outside America sometime.

Re: High property taxes are good

#605

Post by brigandish » Fri, Jul 22, 2022, 8:57 AM UTC

mlyle wrote: post #603

brigandish wrote: post #601

Earlier quoted context omitted.

In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). The tenant knows how much value they are ge…

> In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). Yes, but... As I keep trying to make clea…

> Yes, but... As I keep trying to make clear:

It takes two to tango. Perhaps you'd be better off keeping your frustrations to yourself and improving the clarity of your writing.

> The real value of land has appreciated >60x over that term.

What is the "real value"? It's what someone is willing to pay for it. If the returns on the land are not that much, as you contend, then it's not worth >60x what it was. If the property owner has some protection than means they can't be shifted off the land for 99 years, then that land is not worth as much as you contend because it can't be used for something else. If someone else thinks the land is undervalued then they can bid on it and make more money, but they'll have to pay the tax and find a way to extract that value. If the land really is that valuable then the landowner can say so and pay the tax on it now because they think they'll get the return in future.

In short, you're assuming that the "real" value and the actual value are different and erroneously so. This assumption makes the reasoning self-contradictory - the value is determined by people's bids, not some Pythagorean value floating around somewhere waiting to be happened upon by some perfect system.

Re: High property taxes are good

#606

Post by cafard » Fri, Jul 22, 2022, 2:16 PM UTC

They are a fine way to build up a solid conservative voting bloc among the elderly. They have property that has appreciated, but their income is well down (usually) from their peak earning years.

Re: High property taxes are good

#607

Post by mlyle » Fri, Jul 22, 2022, 3:49 PM UTC

brigandish wrote: post #605

mlyle wrote: post #603

Earlier quoted context omitted.

> In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). Yes, but... As I keep trying to make clea…

> Yes, but... As I keep trying to make clear: It takes two to tango. Perhaps you'd be better off keeping your frustrations to yourself and improving the clarity of your writing. > The real value of land has appreciated >60x over that term. What is the "real value"? It's what someone is willing to pay for it. If the returns on the land are not that much, as you contend, then it's not worth >60x what it was. If the pro…

I'm sorry that I'm frustrated, but the end result doesn't really make sense.

No, the amount agreed to pay 60 years ago does not necessarily match current market value of the land right.

The amount agreed to pay -now- doesn't necessarily equal market value.

E.g. say I have a piece of land, and I agree to lease building rights on it for 99 years to my buddy (or son, or..) for $1/year. The value anyone is willing to bid on the land should be the NPV of the remaining $99-n plus the NPV of the estimated land value in 99-n years. The tax is nearly completely escaped. All of the land value has been smuggled into the lease right, which isn't taxable.

When there's lots of degenerate cases like this, it become pretty clear the way of assessing LVTs you propose doesn't capture current market values of the land itself, since the value of each piece of land can be artificially impaired or captured by a leaseholder.

Indeed, even in the absence of avoidant lease schemes, the very fact that your scheme encourages capturing a past lease value undoes one of the cited advantages of LVTs: it no logner incents land to quickly turn over to more efficient uses. Instead, the scheme you propose explicitly incentivizes ownership structures that maintain inefficient uses, even worse than the current property tax regime that includes improvements.

Re: High property taxes are good

#608

Post by babypuncher » Fri, Jul 22, 2022, 9:25 PM UTC

dubswithus wrote: post #583

babypuncher wrote: post #482

Earlier quoted context omitted.

The difference is turning a profit was not my primary motivation, owning my primary residence was. If making money was my top priority then there are several other houses I looked at that I would have bought instead.

Imagine someone offered you a house but the agreement was that you could only sell it for what you bought it for. I doubt you would buy it considering there are other options on the market where you could profit in the future. It's 100% speculation. It's part of the package.

I'm not sure what this absurd hypothetical has to do with anything. I do not believe anyone is proposing such a requirement.

Personally I am in favor of systems that discourage speculative investment but encourage homeownership. This can be done without indiscriminately punishing people for realizing gains in the market value of their domicile. One such mechanism could be offering incentives or tax breaks that require the buyer to use the home as their primary residence for a certain amount of time.

I think having the opportunity to own the land you personally live on is a right. Owning land on which others reside but not yourself should be considered a privilege, and privileges always come with strings attached.

Re: High property taxes are good

#609

Post by dredmorbius » Sat, Jul 23, 2022, 5:09 PM UTC

anonymousiam wrote: post #61

btilly wrote: post #27

And, thanks to Proposition 13, California has entirely removed this policy tool from consumer housing. A tremendous amount of our problems, from high rent to gridlock, can be traced back to this decision.

Prop 13 solved two problems at once. It forced a reduction in the out-of-control government spending, and it saved seniors from losing their houses. IMHO the only problem with Prop 13 was the "grandfathering" clause. The cuts should have been perpetual and across the board.

Inexpensive senior housing comes from the same place inexpesive housing for everyone else does: building more housing.

Unlike first-time buyers, though, for whom asset inflation is itself strictly a tax (paid by them, to seniors, but far more so, banks and investors), price inflation of an asset you already hold is free money.

It's highly distortionary.

Re: High property taxes are good

#610

Post by dan-robertson » Sat, Jul 23, 2022, 7:58 PM UTC

dleslie wrote: post #164

tptacek wrote: post #119

High property taxes are clearly not intrinsically good; they're passed on to renters, and so they decrease affordability. Land value taxes sidestep this (increasing density decreases marginal tax burden on tenants), but they're not going to happen. You have to design policy for the world we actually have, not the one you'd prefer to live in. (Property taxes are a real problem where I live; we're an upper-middle-class…

LVTs are a panacea for the concerns paper wealthy. They fear taxes on stock trades, capital gains taxes, and other forms of paper wealth tax; a LVT lets them point at the homes of the masses and say "Look, there is an easy to track and tax asset class, sink your teeth into that and not my stock portfolio or trades."

Financial transaction taxes aren’t really a concern for people who own stocks. Trades used to cost money before the zero-fee brokerages. An FTT will just be like everyone having to pay a slightly higher fee: a little less liquidity, slightly wider spreads, not much cost if your investment strategy is shaped roughly like ‘buy SPY and then do nothing for a long time, then sell some and maybe buy some bonds’.