3 ms·

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.
  - bryanlarsen 9y ago
    You might be able to make that argument about Manhattan, but LA, SF, DC and suburban NY have lots of under-developed land.
  - bryanlarsen 9y ago
    AFAICT you've got it backwards. City A replaces its existing property tax with an LVT. So whereas previously crappy buildings paid less tax than nice buildings next door, they now pay the same tax. So the tax on nice buildings goes down, making the city more attractive to companies, incenting companies to move to City A and incenting capital to invest in properties in city A.
    - theBuess 9y ago
      Two practical and one theoretical issue with this: - This relies on a city's ability to repeal property tax. - There is a carrying capacity to a city and beyond that lies a housing market crash when supply is in large abundance and there isn't a backlog of buyers. Hurting current property owners even more. I would have to see some more detailed analysis that shows you can simultaneously set this rate at a point low enough to not kill current investors and high enough not create a huge budget hole for the city in question.
  - cryptonector 9y ago
    Those cities have plenty of _under_developed land. Go far enough into the NYC boroughs and you'll find only small buildings. (And even parts of Manhattan have low-rise buildings, though mostly due to the ground below not supporting higher buildings cheaply. Even here an LVT might lead to higher density.) SF is full of small buildings. Ditto LA. As to the dynamic you present, it looks like self-balancing in that there's an implied assumption that people really prefer City A to City B for various reasons (density among them, no doubt). The great thing about all this is that we get to have 50 States, and many more cities altogether, experimenting (or not) with LVT, so we'll actually be able to measure the impact of LVT.
iaw 9y ago
In numerous cities there are foreign investors who buy mansions and let them sit empty as investment properties. You can stroll through these "rich" neighborhoods and see how sparsely populated they are. Investments like that would look a lot less desirable if the land was taxed in the proposed fashion.
- theBuess 9y ago
  It is, its called property tax.
  - damnyou 9y ago
    You can break up American-style property taxes into two components: 1. A tax on the unimproved value of land, also called a land value tax. 2. A tax on improvements (buildings etc). Currently the rate of tax 1 (LVT) is the same as the rate of tax 2. The assertion here is that it would be better for society if tax 1 were higher than tax 2, or even that tax 2 is zero and tax 1 is raised accordingly.
    - strictnein 9y ago
      If thats the case I feel like most of the people supporting this don't live outside of urban settings. Getting rid of #2 would be really harmful and would be an absolute gift to the upper classes. Or, if it didn't cut taxes for the wealthy, it would significantly raise taxes on a lot of the middle class, forcing them out of smaller homes in good school districts.
      - natrius 9y ago
        Housing is a generational issue. There's today's middle class and tomorrow's middle class. Raising taxes on land does not hurt tomorrow's middle class, and it helps them if more homes get built where they want to live. Land is only worth what people are willing to pay for it. Higher taxes mean the price of the land itself must be lower for people to buy it—the taxes don't cause wealthier people to suddenly show up. Today's middle class has lots of political power. Tomorrow's middle class doesn't. We're allowing generations to extract wealth from those who come after them without considering the consequences.

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.
- bryanlarsen 9y ago
  You might be able to make that argument about Manhattan, but LA, SF, DC and suburban NY have lots of under-developed land.
- bryanlarsen 9y ago
  AFAICT you've got it backwards. City A replaces its existing property tax with an LVT. So whereas previously crappy buildings paid less tax than nice buildings next door, they now pay the same tax. So the tax on nice buildings goes down, making the city more attractive to companies, incenting companies to move to City A and incenting capital to invest in properties in city A.
  - theBuess 9y ago
    Two practical and one theoretical issue with this: - This relies on a city's ability to repeal property tax. - There is a carrying capacity to a city and beyond that lies a housing market crash when supply is in large abundance and there isn't a backlog of buyers. Hurting current property owners even more. I would have to see some more detailed analysis that shows you can simultaneously set this rate at a point low enough to not kill current investors and high enough not create a huge budget hole for the city in question.
- cryptonector 9y ago
  Those cities have plenty of _under_developed land. Go far enough into the NYC boroughs and you'll find only small buildings. (And even parts of Manhattan have low-rise buildings, though mostly due to the ground below not supporting higher buildings cheaply. Even here an LVT might lead to higher density.) SF is full of small buildings. Ditto LA. As to the dynamic you present, it looks like self-balancing in that there's an implied assumption that people really prefer City A to City B for various reasons (density among them, no doubt). The great thing about all this is that we get to have 50 States, and many more cities altogether, experimenting (or not) with LVT, so we'll actually be able to measure the impact of LVT.

iaw 9y ago

In numerous cities there are foreign investors who buy mansions and let them sit empty as investment properties. You can stroll through these "rich" neighborhoods and see how sparsely populated they are. Investments like that would look a lot less desirable if the land was taxed in the proposed fashion.

theBuess 9y ago
It is, its called property tax.
- damnyou 9y ago
  You can break up American-style property taxes into two components: 1. A tax on the unimproved value of land, also called a land value tax. 2. A tax on improvements (buildings etc). Currently the rate of tax 1 (LVT) is the same as the rate of tax 2. The assertion here is that it would be better for society if tax 1 were higher than tax 2, or even that tax 2 is zero and tax 1 is raised accordingly.
  - strictnein 9y ago
    If thats the case I feel like most of the people supporting this don't live outside of urban settings. Getting rid of #2 would be really harmful and would be an absolute gift to the upper classes. Or, if it didn't cut taxes for the wealthy, it would significantly raise taxes on a lot of the middle class, forcing them out of smaller homes in good school districts.
    - natrius 9y ago
      Housing is a generational issue. There's today's middle class and tomorrow's middle class. Raising taxes on land does not hurt tomorrow's middle class, and it helps them if more homes get built where they want to live. Land is only worth what people are willing to pay for it. Higher taxes mean the price of the land itself must be lower for people to buy it—the taxes don't cause wealthier people to suddenly show up. Today's middle class has lots of political power. Tomorrow's middle class doesn't. We're allowing generations to extract wealth from those who come after them without considering the consequences.