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The Threat Coming by Land

• x5n1 11y ago
  Most "land" or real estate is actually held by banks or other financial conglomerates through a proxy called a home "owner".
  • duhast 11y ago
    Banks enjoy a cut from the interest rate but it is also the people who deposited money in those banks who earn money that way. And noone is forced by financial institutions to take 40 years long home loan.
    • Gravityloss 11y ago
      Deciding between buying and renting depends on many things, like the different costs, interest rates, inflation, tenant rights etc.
  • mgraczyk 11y ago
    Traditional mortgages do not transfer any of the externalities mentioned in the article to the banks. The sense in which the banks "own" the property does not detract from the argument.
    • TheSpiceIsLife 11y ago
      Yes, because the mortgagor (banks / etc) don't own the property. They just have a lien on it.
• golemotron 11y ago
  The article doesn't make a convincing case that there's a problem.
• bjackman 11y ago
  Here in the U.K. our right-wing government are planning re-introduce a scheme whereby those in government-owned social housing have the right to buy the property cheaply after a set period. This has always been a very controversial idea: it does increase home-ownership rates fantastically, especially in poor areas, but it also destroys the social housing programme (an attractive outcome to the nasty British right). Rent limits, related to local earnings, are one way to increase home-ownership by making landlording less profitable. Our new opposition leader, Jeremy Corbyn, goes further and suggests we should actually extend this "right-to-buy" idea into the private sector. I only just discovered the idea this morning and I think it's pretty interesting.
  • makomk 11y ago
    They're doing more than that. People in government-owned social housing have had the right to buy the property cheap for about three and a half decades now in the UK, thanks to the previous right-wing government, and it's already destroyed that social housing program. In the long term, most of the houses ended up in the hands of private landlords, including government ministers. Some of them were even bought up directly by investors through agreements that made use of loopholes in the right-to-buy rules The current government is extending this to housing association homes, which are owned and let by private non-government charitable organisations. They're now forced to sell their homes off, and local councils are forced to subsidise this by selling off yet more of their housing stock.
  • TheSpiceIsLife 11y ago
    You say "nasty right" then go on to appear to support the idea of forcing property owners to sell. Nasty left! I'm only half joking. P.J. O'rourke's has a chapter called 'Why I'm Right' in his book 'Don't Vote! It just encourages the Bastards', I found it helped with a similar attitude I used to have.
    • bjackman 11y ago
      I do indeed. We have a problem in this country; there is a shortage of homes, so being a landlord is extremely profitable, so house prices are astronomical and its very difficult to get on the ladder.. leading to all the homes being concentrated in the hands of a few rich people. I want to see that trend reversed and homes distributed more evenly. Still though, it's a pretty extreme manoeuvre, I'd like to read an expert's analysis of the idea.
• pcr0 11y ago
  If the land tax increased, wouldn't the landlords just increase the rent? Thus making life more expensive for non-homeowners? Disregarding what the government does with the extra tax revenue. Feel free to correct me.
  • chvid 11y ago
    According to economic theory they would not as the supply of land is fixed.
    • colomon 11y ago
      How does a fixed supply of land preclude raising the rent?
      • marcosdumay 11y ago
        If the supply is fixed, the price will fluctuate only with demand. (But no, the supply isn't really fixed.)
      • notahacker 11y ago
        The land value taxers' argument generally works the other way round, arguing that the supply of rental properties actually is artificially constrained by landowners, and that tax on the undeveloped value of the land would push landowners into developing and letting property on their land or selling up to developers, implying more price competition in the rentals market and thus less ability to pass on the tax costs to the end occupant. The fixed supply of land is important only inasmuch as it provides a reason why landowners can be pretty confident their land will appreciate in value in the first place (and in some cases, to a sufficient degree to make the additional revenues achievable from development/rentals in the short term appear relatively trivial). Moreover, if land ownership is highly concentrated then releasing very little of that land for rentals and gradually selling off the highest-value parcels probably is the most effective way of maximising the value of one's dynasty's land portfolio. The argument isn't so much that rents would never go up at all as that the effects of more efficient land use and competition in the rentals market mean that individual occupants of the land wouldn't pay the full value of the tax (and would tend to benefit from commensurate rate reductions on other taxes) How well that argument explains or even fits the facts of land ownership varies hugely by geography.
• TheSpiceIsLife 11y ago
  From the article: "When it becomes more important, it also becomes more scarce, and when it becomes more scarce, it puts a brake on growth, just as if oil became more expensive." Oil got more expensive. Did that put a brake on growth? Does it follow that land becoming more expensive will put a brake on growth? Land got more expensive, did that put a brake on growth. I don't mean to sound repetitive, but land has been getting more expensive for the past 300(?) years, and yet here we are. That other thing the article says about land becoming an increasing percent of GDP, does that really mean anything? Are the right metrics being considered and the right data being used to come to the right conclusions? I'm not sure I got the point of the article? Economists know what to do but interest groups get in the way? Does that make any sense? Sounds like the economists models don't match reality then. Economists shouldn't try to predict the future, they do a bad enough job of predicting the past. I'm not really sure what I'm getting at either. I think I'm just disappointed the article ended right when I was getting in to it.
  • ubernostrum 11y ago
    Oil got more expensive. Did that put a brake on growth? Have you paid much attention to what happened to Western economies following the 1973 OPEC embargo?
• aaron695 11y ago
  Given such a ridiculous premise they need to back their theory up with data. We are living denser than we ever have, and getting denser but somehow that's going to just stop because land owners will do what and why? Stop building up? Stop subdividing? Because why? they hate money?
  • ZeroGravitas 11y ago
    Building up isn't affected by a land value tax, since the tax value is on the unimproved land. If anything it encourages building up. One negative outcome, in the absence of a land value tax, is empty lots. Leaving a lot derelict may be the wisest option for those that don't hate money, as it can be held as an investment and quickly sold after it appreciates in value. No building to demolish, or tenants to evict. Of course in the meantime it's just a placeholder in the middle of a bustling city that's looking for new houses and/or commercial property. With the land value tax they'd need to pay more to keep it empty as the area became more desirable, encouraging them to use it for some purpose or sell it to someone who intends to use it.
• kephra 11y ago
  it starts promising with: > Landlords are eating the world. but it then falls short, by only pointing to the tip of the iceberg, the rising prices in city centers. But the problem is much bigger in the rural, in 2nd and 3rd world, where former small farms are replaced by big agriculture corporations. > To understand why, we have to look at the reasons land has value in the first place. And he totally fails here. He fails to explain, that land ownership depends on the state monopoly on use of force, and legalization of murder, rape and genocide during the time the state acquired the land. He fails to explain that money equals debt, debt is often preferring land as security, and therefore land prices are doomed to rise globally. I do not expect a Marxist analysis in Economist, but I would at least expect some in deep comparison of how different countries cope with this problem. Point to massive buyout of agricultural land in eastern Europe, point to the housing bubble in Spain, point to how Hartz IV stabilized the German housing market, ... but this article is only pointing to the iceberg in front of the unsinkable.
• huuu 11y ago
  Land should be from the country not owned by a private entity. This fixes a lot of issues.
  • mikerichards 11y ago
    Despite overwhelming evidence of such failed policies in the past and the "let's try failure again" crowd, you probably don't even like the reality of your suggested policy. You end up with a small group of people owning everything. It's like what the left complains about now with wealth inequality, but orders of magnitude worse. I wish you would think these things threw.
• gaius 11y ago
  Essentially, a Land Value Tax is a property levy with exemptions for development. So let's say you buy a house, not because you are a speculator, but because you want a home. You live there for 50 years, raise your family there, and are enjoying your retirement. Someone over that time period, your property happens to become more valuable, as say a city expands. Then along come some carpetbagger in a shiny suit and says, your home is not a "productive" use of this land, and he's going to tax you more than your pension is worth if you want to stay there, you should make room for his new development of "executive apartments" or whatever. No normal person would think that is just or right.
  • jacobolus 11y ago
    This scenario of yours is used to justify policies such as California’s Prop 13. But realistically, the primary beneficiaries aren’t retired middle-class homeowners on fixed incomes, but large corporations who own commercial property that now have their property taxes permanently frozen at 1970s levels, costing local governments huge amounts of money and encouraging poor land uses.
    • shaftoe 11y ago
      I love when people pretend that money not taken in in taxes is lost money, as if the government has default claim to it and is missing out by not confiscating it.
      • jacobolus 11y ago
        In this case, the losers are local roads, public transit, public utilities, schools, police and fire departments, social services, emergency management, parks, libraries, museums, street sweeping, garbage collection, food inspectors, building inspectors, city planning, other city hall offices, election infrastructure, etc. Or, at the county level, judges and court officials, district attorneys, public defenders, the county sheriff’s office, county fire department, animal control, emergency rooms, county parks, public health officials, etc.
• narrator 11y ago
  The reason land is so valuable is that when new money is created in our financial system it is created as loans. Naturally, banks want to lend against valuable collateral, which is primarily represented by property and large businesses, thus the new money goes to holder of land and large business first and then slowly spreads out to the rest of the economy. This time lag in the distribution of money and that there is a smaller class of land and business owners is the main source of inequality. This is one of the main criticisms that Hayek and Von Mises have of Keynesianism: that "raising aggregate demand" via monetary policy does not raise prices evenly but instead tends to create asset bubbles because the new money enters the system through loans against assets.
  • deleted 11y ago
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• tinco 11y ago
  The article is a bit strange. In my opinion it accurately describes a problem, but then totally fumbles on the reason and the solutions. The real reasons are described by narrator and kephra in this comment thread. They've got to do with how land is scarce and getting scarcer, and how banks leverage the demand almost without risk and in perpetuity. If you don't really get the economics of it, it comes down to this: property owners negotiate with you one (important) aspect of your life (where/how you live) for a percentage of all income you ever make. Imagine the scale of that nationally, it's really not surprising to learn that property is the largest share of income for capital. I've been thinking about this reason a lot since I've started reading Piketty and perhaps more so now I'm looking to buy a house in one of those super scarce places. An interesting point Piketty makes at some point that this form of capitalism is fundamentally un-American, or at least, against the idea of the U.S. in its forming years, but you'll have to read the book for that. I promise you he's not a socialist ;) The solution that came to me, even though it would screw me if it were implemented, is capping mortgages even stronger. In the Netherlands we are moving to a 100% home value cap in the coming few years, and gave them a max duration of 30 years, that fixes one side of it. But it should also enforce lower limits on mortgage relative to salary. Perhaps those values are already closer to what's right in The Netherlands than they are elsewhere. In Amsterdam you pay 220k for a small 2-bedroom apartment or small house on the edges, which costs you about 35% of your income (if you maxed out). Those regulations give way to another problem though, and that's rent. They definitely should be regulated the same way. At the moment that same apartment in Amsterdam rents for about 1300, almost twice to what a mortgage would cost. And I know for a fact that people who aren't allowed the mortgage do rent those places instead, that's just draining capital. Maybe some (amateur) economist can poke a hole in my plan (reduce mortgages and rents through regulations). I have a feeling there is a right level of regulation that will make mortgages comfortably profitable for banks without it squandering the publics spending power.
• jgalt212 11y ago
  The simplest way to counter this problem is for the Fed to raise rates this week.
• massysett 11y ago
  Unconvincing. So the explosion in modern communication technology and advanced worldwide transportation has led to this? Many jobs are now shipped round the world. Xrays are read overseas. iPhone parts are procured from multiple nations. People work from home--some teams of software developers are scattered over thousands of miles. Meanwhile, there is a growing prospect of transportation becoming even cheaper and more efficient. We've already seen this for goods--containerized shipping was a revolution. Now the Uber-like services and driverless cars hold potential to remake cities. A piece like this needs a rebuttal--or at least a mere mention!--of these developments. Instead the reader is left to figure out how innovations like a video phone in everyone's pocket and worldwide next day shipping have had the exact opposite effect that one would expect?
  • muraiki 11y ago
    Of the few hundred people I know, who work across many industries including health care, automotive and aerospace engineering, and software development, I can think of 3 who are able to work from home full time. What you experience in your particular area might not be the norm in another part of the world (or even just the US).
    • massysett 11y ago
      Just because they are not able to work from home does not mean that technology has not affected their work. More importantly for the purposes of this article, technology may still affect the importance of proximity in land uses. A call center worker may not be able to work at home. But thanks to cheap communications the job can be moved overseas, thus reducing the value of land in rich countries. A health care worker may not be able to work at home. But if someone overseas can read the x-rays, there's less need for land in the rich country. Moreover you say you know only three who can work from home full time. Others may be able to work from home part time, which gives them freedom to live farther from work and commute. These are obvious arguments in an age of blanket 4G coverage but this piece doesn't even address them.
  • notahacker 11y ago
    When it comes to the advances in modern communication technology, more money is thrown at building it in one mid-sized, low-rise and incredibly expensive US city than in most of the rest of the industrialised world put together. When even the people trying to "disrupt" traditional bricks and mortar business and supply chains see "miles from Sand Hill Road" as a major factor in their startup's potential to raise revenue and exit, it's hardly surprising that the effects of technological progress haven't been sufficient to counteract the effect of massive population and income increases on the value of an essentially fixed supply of land. Given the weight of evidence of what actually happens to land prices over time, I think the burden of proof is very much on the futurists to make the argument that people owning land where globalised world business is increasingly centred aren't going to continue to cream off significant percentages of productivity increases they generally haven't contributed to.
• andybak 11y ago
  Surely this is something that should unite both ends of the political spectrum? For the right - it's about improving market efficiency and rewarding economically useful behaviour over 'rent seeking'. For the left - it's about social justice and avoiding yet another way for wealth to accumulate wealth.
• oldpond 11y ago
  LMAO! I love how Bloomberg (voice of the financial sector) stirs up shit and then suggests that taxation is the solution. This is great propaganda at work here, so study it well. They want desperately to steer the world away from financial sector reform (debt amnesty, bank regulation, prohibition of currency speculation, etc.) and blame it all on the government. Why? Because the US government is leading criminal proceedings against the leaders of the financial sector for their crimes during the collapse of the financial sector in 2008. http://www.bloomberg.com/news/articles/2014-11-03/jpmorgan-faces-u-s-criminal-probe-into-foreign-exchange-trading http://www.bloomberg.com/news/articles/2014-11-03/jpmorgan-f...
  • 1971genocide 11y ago
    Yeah, Bloomberg View has no idea how real people in real world live and work. I remember reading an article a few weeks ago with the premises that income - equality is okay because we have these superman productive individuals. They also love china/japan/asia bashing which is okay but after a while it gets old. I still read it the same way I find fox news to be interesting.