9 ms·

Faster Growth Begins with a Land Tax in U.S. Cities

54 points by pdog 9y ago

PatientTrades 9y ago
> a land-value tax is an efficient and fair way to take a city that now works only for lucky prosperous landowners And what happens if you cannot afford the land tax? Does your home get taken away? The idea that only rich people own land is baseless. There are many poor people that own moderate/cheap homes on prime real estate in places like LA and San Diego. Most of these homes were built several decades and their property taxes were capped allowing them to stay in their homes. There needs to be a provision that certain individuals can avoid this land tax based on their income otherwise many people will lose their home because they can't pay the tax.
- civilian 9y ago
  I'm excited that you're stumbled into "taxation is theft" :) Yup, taxation is inherently immoral, and they will lock you in a cage if you don't pay. But. As long as we're comfortable taxing people, then why is it unjust to tax in this way? We're taxing in a way that allows the land to be better utilized for _everyone_. Additionally, this person who bought this property decades can probably sell the property for a pretty penny, and move to a cheaper area, and have plenty of cash leftover.
  - jrochkind1 9y ago
    > lock you in a cage if you don't pay. I'm pretty sure you can not actually be imprisoned for failure to pay income taxes. You can be for filing fraudulent tax returns though. You can have the IRS take money from your bank account for not filing taxes though.
  - klipt 9y ago
    > I'm excited that you're stumbled into "taxation is theft" :) Yup, taxation is inherently immoral, and they will lock you in a cage if you don't pay. Okay, let's reframe it this way: the people collectively own all land through a corporation called The Government, where each person of voting age gets one voting share. The Government rents out land to individuals for a fee equal to the Land Value Tax...
- eli_gottlieb 9y ago
  >And what happens if you cannot afford the land tax? Does your home get taken away? There's usually an exemption on some dollar amount of LVT for your primary residence, provided that the municipality can verify it's actually your primary residence.
- EddieRingle 9y ago
  People already pay property taxes on their homes, though. LVT would eliminate taxing the improvements and structures and instead just tax the land itself, so the maximum assessed value would decrease. Additionally, this would ideally be implemented while also eliminating income taxes (and general sales taxes). One of the biggest benefits of this is that we would no longer _need_ to track everyone's income, and could even eliminate vasts amounts of bureaucracy like the IRS and state-level departments.
- damnyou 9y ago
  > There are many poor people that own moderate/cheap homes on prime real estate in places like LA and San Diego. Then they aren't poor.
- jogjayr 9y ago
  > And what happens if you cannot afford the land tax? Does your home get taken away? That can happen with property tax too though. If the land tax goes that high, it means more value could be extracted from that land by building more densely on it. One way this could play out for a cash-poor landowner is to sell the land to a condo developer in exchange for a couple of condos in the new building and payment for temporary housing while construction is going on. I've known this kind of exchange to happen in many Indian cities. It works out very well for both parties.
- to3m 9y ago
  The Poor Widow Bogey: http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.html http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.htm... Land Doesn't Generate Income: http://kaalvtn.blogspot.co.uk/2013/01/c-land-doesnt-generate-income.html http://kaalvtn.blogspot.co.uk/2013/01/c-land-doesnt-generate...
trhway 9y ago
>Therefore, a land-value tax is an efficient and fair way to take a city that now works only for lucky prosperous landowners, and turn it into a place where the working class can afford to make a decent life. basically a mild version of Lenin's "the main issue of revolution is the issue of land". Was very popular at the time.
- trgv 9y ago
  The idea of a land-value tax has plenty of proponents less controversial than Lenin. Invoking Lenin doesn't really serve any purpose in this debate, it's just one rung above pointing your finger and shrieking about "communism" and "preserving judeo-christian civilization."
- not_that_noob 9y ago
  False equivalence - Lenin would have said all land is to be owned by the state. This is arguing for increased taxation of idle assets. Society writ large benefits. Think about the people who can't think of starting a company now because it's too expensive to live here in Silicon Valley. Never mind the teachers and nurses and firefighters who are needed to make for a well-rounded society.
  - freedomben 9y ago
    Why must a company be started in silicon valley? There are other cities and countries with lower cost of living and more of a socio-economic balance. This comment feels californo-centric to me.
  - trhway 9y ago
    >False equivalence - Lenin would have said all land is to be owned by the state. A major point of "Das Kapital" is the extraction of value by property owners due to mere fact of being an owner of that property when somebody else's use of the said property produces the said value. Lenin in the phrase i cited states his view that land is the main domain where conflict of interests between such rent-seeking owners and efficient users of the land leads to and must be addressed by revolution. State ownership of land, by the virtue of outright elimination of rentiers and making everybody a renter from state, is obviously the ultimate approach to whatever issues are [perceived to be] stemming from such rent-seeking. LVT is a mild version of that approach as it doesn't eliminates rentiers, it just makes them into renters of their land from state - "economic rent of land" : https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent
theBuess 9y ago
What happens when landlords just pass the cost off to the tenants?
- floatrock 9y ago
  They're incentivized to build taller buildings so they can have more tenants split the cost of the tax, lowering the cost of their building's offering and staying competitive. That's the whole point of the land tax... if you want to plop a single-family home on a given parcel of land, you can if the single family wants to pay for the whole thing. But there's a strong incentive to build taller so more people competitively split the tax.
- rukittenme 9y ago
  LVT can't be passed on to tenants like a tax on a commodity can be. Quoting Henry George: "The way taxes raise prices is by increasing the cost of production and checking supply. But land is not a thing of human production, and taxes upon rent cannot check supply. Therefore, though a tax upon rent compels owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land. On the contrary, by compelling those who hold land for speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land."
- bryanlarsen 9y ago
  That's the point. We want them to do that. That means they have tenants to pass it off to. If they're sitting on undeveloped or underdeveloped land, they have to pay it themselves. The LVT creates incentives for them to develop land and rent out units. And of course the more rental units they are available, the cheaper the units are...
  - theBuess 9y ago
    I feel like there is a dangerous break even here that will only work in cities like NY, LA, SF, and DC. But none of those cities have "un-developed" land ( and they have very little under-developed land ). Take this counter example: City A implements a land tax to "encourage" developers to build units of affordable housing. Developers sitting on under-developed land start building units. Company A employs 10,000 people, most of them in the downtown region of City A. With the new land tax the next lease for Company A is higher enough due to this cost for them to consider a move to City B. City/State B offers them a nice tax break to move their jobs and headquarters and Company A does. Now out of 10,000 jobs, City A has many homes that are now available, units which were under development are no longer needed, prices drop, people can now afford housing but I cant imagine outside investment moving into the city. And this glosses over what happens to the developers, contractors, and others who will now be out of a large chunk of change due to the oversupply of housing and reluctant to re-invest into City A. In the same vein, it would be hard to believe that any company looking for a "cheap" deal would consider City A if it did not already have a large pool of talent. If your a small to mid-size business do you take the risk of higher overhead regardless of property type to move to City A? If your a large company, why would you move your offices there just to pay much higher leasing costs? While you have created more affordable housing, you have also created less desirable living and investment conditions. At the end of the day, a cities desirability is mostly based on its ability to provide capital to its residents.
tabeth 9y ago
This is a nice idea, but I'm skeptical it would ever work for most places, and for the cases it would work, e.g. the cities are already developed enough to warrant its existence -- it will be politically killed. Case A: ------- Undeveloped, small city. LVT kills any incentive for developers to purchase and build. Case B: ------- Developed, large city. LVT hurts existing landowners, they become politically active and shut it down. Also, land is already taxed as a part of property taxes.
- no_protocol 9y ago
  > Case A: ------- Undeveloped, small city. LVT kills any incentive for developers to purchase and build. I'm not sure this is right. There would be an incentive to purchase unused or underused land -- the price will be lower! Relatively high taxes will encourage the landowner to sell the underperforming property rather than hold onto it for years waiting for its value to increase (speculation). There would also be an incentive to build -- the developer can build as extravagantly as he wishes without dramatically increasing taxes. Want to build a giant tower? Tax is almost the same as if you built a parking lot.
  - civilian 9y ago
    Yup! Similarly, in a large developed city, LVT would probably _help_ existing property owners, if their property has a substantial building on it and is collecting good rent. If you own a parking lot or a crummy 2-story retail/2-apt building, then you're gonna have a hard time.
  - tabeth 9y ago
    Given the current zoning laws, LVT would disincentivize as the most profitable options, as you've pointed out, are extremely tall buildings with similarly high construction costs. At least now you could buy a large lot and put, say a laundry building, there. With LVT, assuming minimum lot sizes remains a thing, simply disincentivizes small scale developments which is exactly what a undeveloped small city needs. --- TLDR: large scale development isn't going to happen in a small city, therefore the cost to even develop at all is now increased with LVT as there are minimum lot size requirements per zoning (for things like side walks and parking)
IncRnd 9y ago
What is the methodology that concluded increased land taxes lower land costs?
- jjoonathan 9y ago
  Reducing the attractiveness of land-the-speculation-and-investment-instrument increases the supply of land-for-living.
  - smokeyj 9y ago
    Except you don't know which land should be "for living", and which should be barren swamp land. If this were applied city-wide, there would be many owners of less than developable land getting taxed higher for no reason. If you draw a specific territory of land that should be taxed higher, then you're essentially singling out specific property owners. Might as well use eminent domain at that point. People who come up with these crazy ideas seem to not have a solid grasp of supply and demand. The supply of land is not the problem. The supply of buildings is not the problem. The supply of competent municipalities that can sustain high density living is the problem. The solution to lowering the cost city living is to increase the supply of cities. New ones, without the political baggage we have now. High density, modular, mass produced. If we're not talking about mass production, we're just rearranging deck chairs on the titanic.
  - IncRnd 9y ago
    That's one train of thought, but LVTs are also rarely used. There's a reason for that, too. The view you related may hold where there are caps on rental increases, but why would that hold anywhere else? In other words, what is the mechanism that forces a landlord to absorb the tax increase? If a-particular-piece-of-land is to be transitioned from land-the-speculation-and-investment-instrument to land-for-living, then the increase from taxation will already be included in the base rental rate. Unless, the argument is that everyone is poor, so the landowner will not pass the tax onto renters. But, dependence upon large numbers of poor people is an odd way to structure places for renters to live. Continuing with the same economics as what you posted: once some pieces of land are transitioned to land-for-living, then demand will increase for land-the-speculation-and-investment-instrument. Supply and demand isn't static. It fluctuates. If the true goal is to have a place for people to live, then it is far cheaper for people if the government just rezones the area, assuming their employer didn't just lose a building.
IronWolve 9y ago
Known a few people retired in Seattle, and now their home is worth a million bucks, and gets tax'ed accordingly. This was the problem california had, paid off homes property tax became the same as renting an apartment, driving elderly out, and thus laws had to be passed to protect them. There was a new stop light put in near my work, it cost 750k. For a stop light, the city waited years due to the cost. More expensive since it was on a main road, and part of the cost was flagers and lane reduction. Costs are too expensive, even maintain streets in some areas due to low income homes and less property taxes, and the cure has been roundabouts instead of stop lights (or over passes on urban highways. Its crazy. Don't even get me started on waste of an impact studies for homes but doesn't include roads. And saw another report Vancover homes will be around 2.1 million average by 2030. Crazy.
- TulliusCicero 9y ago
  > This was the problem california had, paid off homes property tax became the same as renting an apartment, driving elderly out, and thus laws had to be passed to protect them. Oh, is that why Prop 13 also applies to commercial property, people who can easily afford the increased property taxes, second homes, and heirs? Prop 13 was a giant mistake. A narrow version to prevent grandma from getting kicked out of her longtime home would be fine, but the real thing is insanely broader than that.
  - JimboOmega 9y ago
    It was absolutely a giant mistake. Part of the original pitch was that landlords would pass the savings on to tenants, which didn't happen for very obvious reasons. I think bringing back any form of property tax is a brilliant idea; it would raise a ton of money for local governments, discourage people from holding empty units, and also help fix the ridiculous reality that building residential units hurts a municipality financially which causes all kinds of stupidity. Take my building; it's owned by some vague partnership, is a 14 story high-rise with 100s of units, and for tax purposes it's worth something like $6M for the entire thing. In downtown San Francisco!
    - 9y ago
seanalltogether 9y ago
Can someone explain how current property taxes don't cover this already? Aren't you taxed relative to the value of the property which is both the land and buildings combined? When my parents owned undeveloped land they still paid taxes. They were still disincentived from holding land indefinitely without using it.
- Simon_says 9y ago
  Property taxes tax the value of land plus buildings. I think the argument is that taxing only the value of the land aligns incentives a bit better, since it encourages the most profitable use of the land.
- o_nate 9y ago
  The problem is if you tax both the land & the buildings, you are discouraging development on the land. A pure land tax avoids that problem. It may be a subtle difference but if you are looking to increase land tax rates above current levels you want to minimize disruption to economic activity.
  - jpao79 9y ago
    On the flip side, a large 20 story building consisting of apartments, office space and retail places way more demand on terms of city services (i.e. police, fire, transportation, education and other social services, etc.) than an empty lot so it seems to make sense to tax both land value and building value as it is currently done in many places (including California).
- ashark 9y ago
  Property taxes also tax improvements to (and structures on) the land itself. Land value tax does not. So, an empty acre of land across the street from Central Park (I know, I know, but pretend it exists) is taxed the same, under an LVT, as that same acre sitting under a big mixed-use apartment/retail building. The building itself isn't taxed (though its presence will likely have a small effect on the overall rate in the area, provided it acts to increase the value of surrounding land).
- 9y ago
jpao79 9y ago
A key component of implementing a land value tax would that it would need to be coupled with reduced zoning restrictions. If a property owner decides to build 20 story apartment next to my property which increases my property value and property taxes, but the council blocks my proposals for apartment development then that seems like it could get unfair pretty quickly.
- mschuster91 9y ago
  > If a property owner decides to build 20 story apartment next to my property which increases my property value and property taxes I'd bet that if your property has a single-family home on it and someone builds a huge 20-story block next to it, it will kill the value of your property, not rise it - shadow from the building, noise from construction, traffic, kids... IMHO "disruptive" buildings like this should not be allowed without careful thought. In this case, for example, the infrastructure simply might not be there to support a 20-story (or for what its worth even a small 4-story!) building: electricity, telco, water and sewage feeds will need expansion which means months of ripped-open roads, the roads themselves usually won't support the amount of additional cars or public transportation.
- tmnvix 9y ago
  If you were prohibited from building a 20 story apartment block on your land but your neighbour was not, then your land would be worth less and subsequently you would be taxed less.
unabridged 9y ago
I think we should also be looking into progressive property/land taxes. Let's say everyone's first $100-200k in property is untaxed. Or you could make even more brackets. Another problem is super dense developments not paying their fair share. A skyscraper's residents are using way more of the city's resources than the small building next door, but with the same footprint they are paying the city the same amount. I suppose this would have to be fixed with some kind of income tax.
- virmundi 9y ago
  On the skyscrapers, aren’t they using less resources per square foot?
  - AnimalMuppet 9y ago
    Per square foot of land? No, I don't think so. The 50-story building will have more police calls than the 10-story building of the same type. It will use more water and produce more sewage. It will have more cars in and out, which will have a greater impact on the roads. And so on.
    - virmundi 9y ago
      At this point all of the support infrastructure centralized? Police will more efficiently patrol an area. Sewer and water need to go to fewer hookups. As to cars, I guess more opportunities for thoughtful parking design to keep vehicles off the street?
  - unabridged 9y ago
    The land is being used efficiently. But per person they are using nearly the same amount of police, fire, sanitation, roads, schools, ... All of which is currently funded by property tax. I feel the tax burden will end up shifting away from rich people who can afford to live in brand new very tall luxury condos.
    - klipt 9y ago
jrochkind1 9y ago
> The money raised with a land-value tax can be spent building affordable housing for the poor. Presumably rental, not ownership, cause the poor won't be able to pay the land tax! I suppose there could be a homestead and/or income based exemption/reduction.
swendoog 9y ago
Yet another "solution" that focusses on "affordable" housing, not market rate housing. The world needs affordable housing, so don't get me wrong. But what's infuriating is how often the conversation stops there. It's always about building more housing and creating affordability programs for the poor. Meanwhile forgetting that even middle class workers are being priced out of the market! When your middle class can't afford (or can barely afford) the cost of housing, your problem extends beyond just that class. I don't believe in "trickle down" economies, where consolidation of wealth into the hands of a few "lifts everyone up". What I do believe is important - for everyone - is a healthy, educated, middle class. In a way, the health and success of your middle class is like a barometer for the health of your society as a whole. When your middle class cannot afford to buy a home, cannot afford to begin a family, and cannot afford to live at or above the quality of life of the generation before them something is wrong. Yes, we need to help the poor. Yes, we SHOULD have programs for that. But the conversation all too often stops there, and market rates are taken for granted.
AnimalMuppet 9y ago
Many proponents are talking about LVT as if it were certain to work. They can even cite some arguments to explain why it should work. But economics is full of second- and third-order effects. Saying that this will produce faster growth is far more certainty than we have at the moment. The article cites a mixed bag of experience (failure in Altoona, success but then abandoned in Pittsburgh). That's... not very much. It's far too early to talk about this as if the actual effects were certain. (And the article doesn't mention why Pittsburgh abandoned that approach, which I consider to be important data.) The article (and the proponents) talk about LVT as if it were going to be a certain success and an unalloyed benefit. It may in fact be so, but it assumes facts that are not yet in evidence.
jpao79 9y ago
A key point is taxation rules need to put in place a priori of significant development/investments or implemented over an extended phase in timeframes of decades so developers/investors can plan/adapt appropriately. What you don't want to become is city (or county, state or country for that matter) known for changing the rules of the game when its convenient. Investors make what can be transformational improvements to a city. However the payback periods for a building can be on the order of decades (think Salesforce Tower - cost to build $1.1B, Salesforce lease will pay $560M but over 15 years). The developer or investor takes on the risk and will by definition be in the red for the first decade or two (historically a 7% cap rate is expected - which is about a 15 year payback period). And that doesn't even including the planning period before the building gets built. If a city suddenly changes the rules on a populist whim because suddenly the city is popular with the tech industry, future investors will definitely take notice and it will absolutely stifle any future investments in the city.

54 points by pdog 9y ago

> a land-value tax is an efficient and fair way to take a city that now works only for lucky prosperous landowners And what happens if you cannot afford the land tax? Does your home get taken away? The idea that only rich people own land is baseless. There are many poor people that own moderate/cheap homes on prime real estate in places like LA and San Diego. Most of these homes were built several decades and their property taxes were capped allowing them to stay in their homes. There needs to be a provision that certain individuals can avoid this land tax based on their income otherwise many people will lose their home because they can't pay the tax.

civilian 9y ago
I'm excited that you're stumbled into "taxation is theft" :) Yup, taxation is inherently immoral, and they will lock you in a cage if you don't pay. But. As long as we're comfortable taxing people, then why is it unjust to tax in this way? We're taxing in a way that allows the land to be better utilized for _everyone_. Additionally, this person who bought this property decades can probably sell the property for a pretty penny, and move to a cheaper area, and have plenty of cash leftover.
- jrochkind1 9y ago
  > lock you in a cage if you don't pay. I'm pretty sure you can not actually be imprisoned for failure to pay income taxes. You can be for filing fraudulent tax returns though. You can have the IRS take money from your bank account for not filing taxes though.
- klipt 9y ago
  > I'm excited that you're stumbled into "taxation is theft" :) Yup, taxation is inherently immoral, and they will lock you in a cage if you don't pay. Okay, let's reframe it this way: the people collectively own all land through a corporation called The Government, where each person of voting age gets one voting share. The Government rents out land to individuals for a fee equal to the Land Value Tax...
eli_gottlieb 9y ago
>And what happens if you cannot afford the land tax? Does your home get taken away? There's usually an exemption on some dollar amount of LVT for your primary residence, provided that the municipality can verify it's actually your primary residence.
EddieRingle 9y ago
People already pay property taxes on their homes, though. LVT would eliminate taxing the improvements and structures and instead just tax the land itself, so the maximum assessed value would decrease. Additionally, this would ideally be implemented while also eliminating income taxes (and general sales taxes). One of the biggest benefits of this is that we would no longer _need_ to track everyone's income, and could even eliminate vasts amounts of bureaucracy like the IRS and state-level departments.
damnyou 9y ago
> There are many poor people that own moderate/cheap homes on prime real estate in places like LA and San Diego. Then they aren't poor.
jogjayr 9y ago
> And what happens if you cannot afford the land tax? Does your home get taken away? That can happen with property tax too though. If the land tax goes that high, it means more value could be extracted from that land by building more densely on it. One way this could play out for a cash-poor landowner is to sell the land to a condo developer in exchange for a couple of condos in the new building and payment for temporary housing while construction is going on. I've known this kind of exchange to happen in many Indian cities. It works out very well for both parties.
to3m 9y ago
The Poor Widow Bogey: http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.html http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.htm... Land Doesn't Generate Income: http://kaalvtn.blogspot.co.uk/2013/01/c-land-doesnt-generate-income.html http://kaalvtn.blogspot.co.uk/2013/01/c-land-doesnt-generate...

trhway 9y ago

>Therefore, a land-value tax is an efficient and fair way to take a city that now works only for lucky prosperous landowners, and turn it into a place where the working class can afford to make a decent life. basically a mild version of Lenin's "the main issue of revolution is the issue of land". Was very popular at the time.

trgv 9y ago
The idea of a land-value tax has plenty of proponents less controversial than Lenin. Invoking Lenin doesn't really serve any purpose in this debate, it's just one rung above pointing your finger and shrieking about "communism" and "preserving judeo-christian civilization."
not_that_noob 9y ago
False equivalence - Lenin would have said all land is to be owned by the state. This is arguing for increased taxation of idle assets. Society writ large benefits. Think about the people who can't think of starting a company now because it's too expensive to live here in Silicon Valley. Never mind the teachers and nurses and firefighters who are needed to make for a well-rounded society.
- freedomben 9y ago
  Why must a company be started in silicon valley? There are other cities and countries with lower cost of living and more of a socio-economic balance. This comment feels californo-centric to me.
- trhway 9y ago
  >False equivalence - Lenin would have said all land is to be owned by the state. A major point of "Das Kapital" is the extraction of value by property owners due to mere fact of being an owner of that property when somebody else's use of the said property produces the said value. Lenin in the phrase i cited states his view that land is the main domain where conflict of interests between such rent-seeking owners and efficient users of the land leads to and must be addressed by revolution. State ownership of land, by the virtue of outright elimination of rentiers and making everybody a renter from state, is obviously the ultimate approach to whatever issues are [perceived to be] stemming from such rent-seeking. LVT is a mild version of that approach as it doesn't eliminates rentiers, it just makes them into renters of their land from state - "economic rent of land" : https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent

theBuess 9y ago

What happens when landlords just pass the cost off to the tenants?

floatrock 9y ago
They're incentivized to build taller buildings so they can have more tenants split the cost of the tax, lowering the cost of their building's offering and staying competitive. That's the whole point of the land tax... if you want to plop a single-family home on a given parcel of land, you can if the single family wants to pay for the whole thing. But there's a strong incentive to build taller so more people competitively split the tax.
rukittenme 9y ago
LVT can't be passed on to tenants like a tax on a commodity can be. Quoting Henry George: "The way taxes raise prices is by increasing the cost of production and checking supply. But land is not a thing of human production, and taxes upon rent cannot check supply. Therefore, though a tax upon rent compels owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land. On the contrary, by compelling those who hold land for speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land."
bryanlarsen 9y ago
That's the point. We want them to do that. That means they have tenants to pass it off to. If they're sitting on undeveloped or underdeveloped land, they have to pay it themselves. The LVT creates incentives for them to develop land and rent out units. And of course the more rental units they are available, the cheaper the units are...
- theBuess 9y ago
  I feel like there is a dangerous break even here that will only work in cities like NY, LA, SF, and DC. But none of those cities have "un-developed" land ( and they have very little under-developed land ). Take this counter example: City A implements a land tax to "encourage" developers to build units of affordable housing. Developers sitting on under-developed land start building units. Company A employs 10,000 people, most of them in the downtown region of City A. With the new land tax the next lease for Company A is higher enough due to this cost for them to consider a move to City B. City/State B offers them a nice tax break to move their jobs and headquarters and Company A does. Now out of 10,000 jobs, City A has many homes that are now available, units which were under development are no longer needed, prices drop, people can now afford housing but I cant imagine outside investment moving into the city. And this glosses over what happens to the developers, contractors, and others who will now be out of a large chunk of change due to the oversupply of housing and reluctant to re-invest into City A. In the same vein, it would be hard to believe that any company looking for a "cheap" deal would consider City A if it did not already have a large pool of talent. If your a small to mid-size business do you take the risk of higher overhead regardless of property type to move to City A? If your a large company, why would you move your offices there just to pay much higher leasing costs? While you have created more affordable housing, you have also created less desirable living and investment conditions. At the end of the day, a cities desirability is mostly based on its ability to provide capital to its residents.

tabeth 9y ago

This is a nice idea, but I'm skeptical it would ever work for most places, and for the cases it would work, e.g. the cities are already developed enough to warrant its existence -- it will be politically killed. Case A: ------- Undeveloped, small city. LVT kills any incentive for developers to purchase and build. Case B: ------- Developed, large city. LVT hurts existing landowners, they become politically active and shut it down. Also, land is already taxed as a part of property taxes.

no_protocol 9y ago
> Case A: ------- Undeveloped, small city. LVT kills any incentive for developers to purchase and build. I'm not sure this is right. There would be an incentive to purchase unused or underused land -- the price will be lower! Relatively high taxes will encourage the landowner to sell the underperforming property rather than hold onto it for years waiting for its value to increase (speculation). There would also be an incentive to build -- the developer can build as extravagantly as he wishes without dramatically increasing taxes. Want to build a giant tower? Tax is almost the same as if you built a parking lot.
- civilian 9y ago
  Yup! Similarly, in a large developed city, LVT would probably _help_ existing property owners, if their property has a substantial building on it and is collecting good rent. If you own a parking lot or a crummy 2-story retail/2-apt building, then you're gonna have a hard time.
- tabeth 9y ago
  Given the current zoning laws, LVT would disincentivize as the most profitable options, as you've pointed out, are extremely tall buildings with similarly high construction costs. At least now you could buy a large lot and put, say a laundry building, there. With LVT, assuming minimum lot sizes remains a thing, simply disincentivizes small scale developments which is exactly what a undeveloped small city needs. --- TLDR: large scale development isn't going to happen in a small city, therefore the cost to even develop at all is now increased with LVT as there are minimum lot size requirements per zoning (for things like side walks and parking)

IncRnd 9y ago

What is the methodology that concluded increased land taxes lower land costs?

jjoonathan 9y ago
Reducing the attractiveness of land-the-speculation-and-investment-instrument increases the supply of land-for-living.
- smokeyj 9y ago
  Except you don't know which land should be "for living", and which should be barren swamp land. If this were applied city-wide, there would be many owners of less than developable land getting taxed higher for no reason. If you draw a specific territory of land that should be taxed higher, then you're essentially singling out specific property owners. Might as well use eminent domain at that point. People who come up with these crazy ideas seem to not have a solid grasp of supply and demand. The supply of land is not the problem. The supply of buildings is not the problem. The supply of competent municipalities that can sustain high density living is the problem. The solution to lowering the cost city living is to increase the supply of cities. New ones, without the political baggage we have now. High density, modular, mass produced. If we're not talking about mass production, we're just rearranging deck chairs on the titanic.
- IncRnd 9y ago
  That's one train of thought, but LVTs are also rarely used. There's a reason for that, too. The view you related may hold where there are caps on rental increases, but why would that hold anywhere else? In other words, what is the mechanism that forces a landlord to absorb the tax increase? If a-particular-piece-of-land is to be transitioned from land-the-speculation-and-investment-instrument to land-for-living, then the increase from taxation will already be included in the base rental rate. Unless, the argument is that everyone is poor, so the landowner will not pass the tax onto renters. But, dependence upon large numbers of poor people is an odd way to structure places for renters to live. Continuing with the same economics as what you posted: once some pieces of land are transitioned to land-for-living, then demand will increase for land-the-speculation-and-investment-instrument. Supply and demand isn't static. It fluctuates. If the true goal is to have a place for people to live, then it is far cheaper for people if the government just rezones the area, assuming their employer didn't just lose a building.

IronWolve 9y ago

Known a few people retired in Seattle, and now their home is worth a million bucks, and gets tax'ed accordingly. This was the problem california had, paid off homes property tax became the same as renting an apartment, driving elderly out, and thus laws had to be passed to protect them. There was a new stop light put in near my work, it cost 750k. For a stop light, the city waited years due to the cost. More expensive since it was on a main road, and part of the cost was flagers and lane reduction. Costs are too expensive, even maintain streets in some areas due to low income homes and less property taxes, and the cure has been roundabouts instead of stop lights (or over passes on urban highways. Its crazy. Don't even get me started on waste of an impact studies for homes but doesn't include roads. And saw another report Vancover homes will be around 2.1 million average by 2030. Crazy.

TulliusCicero 9y ago
> This was the problem california had, paid off homes property tax became the same as renting an apartment, driving elderly out, and thus laws had to be passed to protect them. Oh, is that why Prop 13 also applies to commercial property, people who can easily afford the increased property taxes, second homes, and heirs? Prop 13 was a giant mistake. A narrow version to prevent grandma from getting kicked out of her longtime home would be fine, but the real thing is insanely broader than that.
- JimboOmega 9y ago
  It was absolutely a giant mistake. Part of the original pitch was that landlords would pass the savings on to tenants, which didn't happen for very obvious reasons. I think bringing back any form of property tax is a brilliant idea; it would raise a ton of money for local governments, discourage people from holding empty units, and also help fix the ridiculous reality that building residential units hurts a municipality financially which causes all kinds of stupidity. Take my building; it's owned by some vague partnership, is a 14 story high-rise with 100s of units, and for tax purposes it's worth something like $6M for the entire thing. In downtown San Francisco!
  - 9y ago

seanalltogether 9y ago

Can someone explain how current property taxes don't cover this already? Aren't you taxed relative to the value of the property which is both the land and buildings combined? When my parents owned undeveloped land they still paid taxes. They were still disincentived from holding land indefinitely without using it.

Simon_says 9y ago
Property taxes tax the value of land plus buildings. I think the argument is that taxing only the value of the land aligns incentives a bit better, since it encourages the most profitable use of the land.
o_nate 9y ago
The problem is if you tax both the land & the buildings, you are discouraging development on the land. A pure land tax avoids that problem. It may be a subtle difference but if you are looking to increase land tax rates above current levels you want to minimize disruption to economic activity.
- jpao79 9y ago
  On the flip side, a large 20 story building consisting of apartments, office space and retail places way more demand on terms of city services (i.e. police, fire, transportation, education and other social services, etc.) than an empty lot so it seems to make sense to tax both land value and building value as it is currently done in many places (including California).
ashark 9y ago
Property taxes also tax improvements to (and structures on) the land itself. Land value tax does not. So, an empty acre of land across the street from Central Park (I know, I know, but pretend it exists) is taxed the same, under an LVT, as that same acre sitting under a big mixed-use apartment/retail building. The building itself isn't taxed (though its presence will likely have a small effect on the overall rate in the area, provided it acts to increase the value of surrounding land).
9y ago

jpao79 9y ago

A key component of implementing a land value tax would that it would need to be coupled with reduced zoning restrictions. If a property owner decides to build 20 story apartment next to my property which increases my property value and property taxes, but the council blocks my proposals for apartment development then that seems like it could get unfair pretty quickly.

mschuster91 9y ago
> If a property owner decides to build 20 story apartment next to my property which increases my property value and property taxes I'd bet that if your property has a single-family home on it and someone builds a huge 20-story block next to it, it will kill the value of your property, not rise it - shadow from the building, noise from construction, traffic, kids... IMHO "disruptive" buildings like this should not be allowed without careful thought. In this case, for example, the infrastructure simply might not be there to support a 20-story (or for what its worth even a small 4-story!) building: electricity, telco, water and sewage feeds will need expansion which means months of ripped-open roads, the roads themselves usually won't support the amount of additional cars or public transportation.
tmnvix 9y ago
If you were prohibited from building a 20 story apartment block on your land but your neighbour was not, then your land would be worth less and subsequently you would be taxed less.

unabridged 9y ago

I think we should also be looking into progressive property/land taxes. Let's say everyone's first $100-200k in property is untaxed. Or you could make even more brackets. Another problem is super dense developments not paying their fair share. A skyscraper's residents are using way more of the city's resources than the small building next door, but with the same footprint they are paying the city the same amount. I suppose this would have to be fixed with some kind of income tax.

virmundi 9y ago
On the skyscrapers, aren’t they using less resources per square foot?
- AnimalMuppet 9y ago
  Per square foot of land? No, I don't think so. The 50-story building will have more police calls than the 10-story building of the same type. It will use more water and produce more sewage. It will have more cars in and out, which will have a greater impact on the roads. And so on.
  - virmundi 9y ago
    At this point all of the support infrastructure centralized? Police will more efficiently patrol an area. Sewer and water need to go to fewer hookups. As to cars, I guess more opportunities for thoughtful parking design to keep vehicles off the street?
- unabridged 9y ago
  The land is being used efficiently. But per person they are using nearly the same amount of police, fire, sanitation, roads, schools, ... All of which is currently funded by property tax. I feel the tax burden will end up shifting away from rich people who can afford to live in brand new very tall luxury condos.
  - klipt 9y ago

jrochkind1 9y ago

> The money raised with a land-value tax can be spent building affordable housing for the poor. Presumably rental, not ownership, cause the poor won't be able to pay the land tax! I suppose there could be a homestead and/or income based exemption/reduction.

swendoog 9y ago

Yet another "solution" that focusses on "affordable" housing, not market rate housing. The world needs affordable housing, so don't get me wrong. But what's infuriating is how often the conversation stops there. It's always about building more housing and creating affordability programs for the poor. Meanwhile forgetting that even middle class workers are being priced out of the market! When your middle class can't afford (or can barely afford) the cost of housing, your problem extends beyond just that class. I don't believe in "trickle down" economies, where consolidation of wealth into the hands of a few "lifts everyone up". What I do believe is important - for everyone - is a healthy, educated, middle class. In a way, the health and success of your middle class is like a barometer for the health of your society as a whole. When your middle class cannot afford to buy a home, cannot afford to begin a family, and cannot afford to live at or above the quality of life of the generation before them something is wrong. Yes, we need to help the poor. Yes, we SHOULD have programs for that. But the conversation all too often stops there, and market rates are taken for granted.

AnimalMuppet 9y ago

Many proponents are talking about LVT as if it were certain to work. They can even cite some arguments to explain why it should work. But economics is full of second- and third-order effects. Saying that this will produce faster growth is far more certainty than we have at the moment. The article cites a mixed bag of experience (failure in Altoona, success but then abandoned in Pittsburgh). That's... not very much. It's far too early to talk about this as if the actual effects were certain. (And the article doesn't mention why Pittsburgh abandoned that approach, which I consider to be important data.) The article (and the proponents) talk about LVT as if it were going to be a certain success and an unalloyed benefit. It may in fact be so, but it assumes facts that are not yet in evidence.

jpao79 9y ago

A key point is taxation rules need to put in place a priori of significant development/investments or implemented over an extended phase in timeframes of decades so developers/investors can plan/adapt appropriately. What you don't want to become is city (or county, state or country for that matter) known for changing the rules of the game when its convenient. Investors make what can be transformational improvements to a city. However the payback periods for a building can be on the order of decades (think Salesforce Tower - cost to build $1.1B, Salesforce lease will pay $560M but over 15 years). The developer or investor takes on the risk and will by definition be in the red for the first decade or two (historically a 7% cap rate is expected - which is about a 15 year payback period). And that doesn't even including the planning period before the building gets built. If a city suddenly changes the rules on a populist whim because suddenly the city is popular with the tech industry, future investors will definitely take notice and it will absolutely stifle any future investments in the city.