5 ms·

Rent is hardly "free money". Businesses and individuals pay rent in lieu of purchasing the property they use outright. There are times when it makes sense to ow

Rent is hardly "free money". Businesses and individuals pay rent in lieu of purchasing the property they use outright. There are times when it makes sense to own your own property and times when it makes sense to rent. If you did away with rent then everyone would be forced to buy property instead—which would be less flexible and not significantly cheaper. (Edit: Fixed typo.)

ethanbond 6y ago
Nobody is proposing doing away with rent. They are proposing to pay landlords for what the landlords provide (some flexibility, maintenance, etc.) and to stop paying them for what they don’t provide (an area worth living in, nearby parks/subways, local job opportunities, restaurants, etc.)
- nybble41 6y ago
  The landlord provides a usable piece of land close to these amenities. They, along with others, contribute to making the area worth living in. They aren't being paid for the use of any nearby amenities, just for having the foresight to develop land in the correct location to synergize with the surrounding improvements. Is choosing the location to build not part of their contribution? And likewise for encouraging the later development of facilities in proximity to their own property? Frankly the idea behind the "unearned benefit" narrative—that a landlord ought to earn the same profit for land in a bad location as for land in a good location—is a bit ridiculous. Attempting to negate the value the owner derives from good placement in the community is counterproductive.
  - ethanbond 6y ago
    No, landlords do not provide land. The land was there long before the landlord and will be there long after the landlord is gone, too. The landlord, as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord, should earn no profit based on that difference, because that difference would exist regardless of who – if anyone – is the landlord. If the landlord makes some particular investment in addition to the "natural" or community-driven component of the land's value, she will keep all of the upside from that investment. To repeat: All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord. That is sufficient incentive for landlords to productively develop on valuable land. More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use). This is of course a behavior you see all over high value areas.
    - nybble41 6y ago
      > No, landlords do not provide land. They provide access to their land, which is the same thing. This debate is not about who (or what) created the physical dirt. It is about the economic value of the property, which only exists as a result of human action. > as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord You misread. The land is known to be good or bad in retrospect. At the time it was developed that classification was only speculative. This particular landlord thought the land would be good and thus worth developing. Others disagreed and didn't bid as highly for it. The landlord is rewarded not for others' efforts but for the fact that they were right when they predicted that this would be a good location for their development. > All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord. To the best approximation either of us will be able to come up with that is 100% of the market value of the land. However, you are speaking in terms of ideals. In practice only the cost of building physical structures on the land will be counted as "improvement". There is no need to guess; this is the legal standard which is already applied in the rare situations where improvements must be valued separately from the land. However, it severely understates the property owners' contributions to the overall value. > More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use). The fact that you fail to see the economic value of speculation is a depressingly common failing among LVT supporters. Putting land to a lower-value use now prevents it from being put to a higher-value use later, which destroys wealth. Speculation holds the land ready for the higher-value use, which is why it is rewarded. Here's a hypothetical example: Say there's a plot of land which could be used for either warehousing or family homes. If you simply put it up for auction right now for a term of perhaps 50 years you'll get $100M from the warehouse representatives or $80M from family home developers. Whichever way you go you'll be locked in to that use for at least 50 years. However, trends show that the warehouse industry is in a decline, whereas demand for family homes in that area will likely increase to $150M within ten years—meaning that if you just take the highest offer now then you will be losing out on $50M of value and those families won't have enough homes. In the best case there will be a significant cost incurred to demolish the warehouses and rebuild. The correct answer here is to speculate based on the trends that a higher-value use will come along and allow only short-term, non-destructive uses of the property in the interim rather than auctioning it off immediately. Or even leave it vacant for a few years if there are no such uses.
  - pydry 6y ago
    >The landlord provides a usable piece of land They neither made the land nor made it valuable, so they're not "providing" it in any meaningful sense. They're relinquishing their state provided entitlement to expel users of the land with state-backed violence. In exchange for resources.
    - JoeAltmaier 6y ago
      Ask an automaker: did they make the iron? No, it was a supernova 1B years ago.
      - pydry 6y ago
        Valuable mining rights should, broadly speaking, follow the same rules as land under georgism. rather than, say, "renting" it from some guy who has land deeds that say "i own this mountain". what turns iron ore into a car is labor, which you should pay the laborer for. that is, unless you think you should have a greater share of mineral rights than somebody else for some reason.
        nybble41 6y ago
        Would you not say that finding the mineral deposit is worth at least some reward, separate from the labor of mining and processing the ore?
pydry 6y ago
>Rent is hardly "free money". What would you call money which accumulates in your bank account which you didn't have to work for? (I could the portion of rent which would be left over after a rentier paying management fees here. Managing a property is work. Owning is not.)
- nybble41 6y ago
  > … which you didn't have to work for? To rent out property you must first own property. To own property you must buy property. Buying property requires resources. Accumulating enough resources to buy property requires a great deal of work, to say nothing of the effort which goes in to deciding which properties to buy or sell or the opportunity cost of deferring consumption. All of that work occurs before the first rent check is paid or any property management fees are accrued (assuming you hired someone else to manage the property). The concept may seem alien to someone accustomed to a weekly or biweekly paycheck from their employer, but in many fields, including investment (in real estate or anything else), the majority of the work occurs long before any income is received. The income is no less earned merely because it does not occur in close proximity to the work.
  - ZeroGravitas 6y ago
    The important parts of the discussion can be seen more clearly if we compare two different landlords rather than landlords vs non-landlords. Then it should become obvious that some part of the profit is due to "work" i.e. investing money in an area by building upgrading, and some part is due to other people doing the same. So in a hot new area, a bunch of people moving in, opening hip restaurants, renovating old buildings, improving parks contributes to the landlords profit, because an empty lots value will rise as well.
    - nybble41 6y ago
      Does the landlord get any credit for encouraging development in the surrounding area? For that matter, these "other people" may even be the same person in some cases, in which case they're both paying for the development and paying extra LVT due to the general rise in property values which they created. Even recognized physical improvements to your own property can cause property values for surrounding empty lots to rise, and you'd be paying LVT on that as well. Let's look at a hypothetical case for a moment. Say I buy some otherwise nice property for cheap because it's in the middle of nowhere and there is no easy way to get to it. Trees, lakes, etc. but no nearby roads. The LVT would be low, right? If you auctioned it off in that state as unimproved property you wouldn't get many takers. But say I build a private road to that area at my own expense, and then rent out the now-accessible land in family-size lots. The land hasn't changed, but its value is much higher now because of something I did. How would the "unimproved" value of those lots be assessed, and who receives the LVT? If the answer to that last question isn't "me" (and it won't be) then someone is receiving an unearned benefit from my work. Even if you think it's somehow "unfair" for property owners to benefit financially from general improvements in their communities, LVT doesn't change the fact that someone is still getting an unearned external benefit. It takes from the property owner without doing much at all to ensure that the LVT goes to the parties actually responsible for the improvement.

ethanbond 6y ago

Nobody is proposing doing away with rent. They are proposing to pay landlords for what the landlords provide (some flexibility, maintenance, etc.) and to stop paying them for what they don’t provide (an area worth living in, nearby parks/subways, local job opportunities, restaurants, etc.)

nybble41 6y ago
The landlord provides a usable piece of land close to these amenities. They, along with others, contribute to making the area worth living in. They aren't being paid for the use of any nearby amenities, just for having the foresight to develop land in the correct location to synergize with the surrounding improvements. Is choosing the location to build not part of their contribution? And likewise for encouraging the later development of facilities in proximity to their own property? Frankly the idea behind the "unearned benefit" narrative—that a landlord ought to earn the same profit for land in a bad location as for land in a good location—is a bit ridiculous. Attempting to negate the value the owner derives from good placement in the community is counterproductive.
- ethanbond 6y ago
  No, landlords do not provide land. The land was there long before the landlord and will be there long after the landlord is gone, too. The landlord, as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord, should earn no profit based on that difference, because that difference would exist regardless of who – if anyone – is the landlord. If the landlord makes some particular investment in addition to the "natural" or community-driven component of the land's value, she will keep all of the upside from that investment. To repeat: All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord. That is sufficient incentive for landlords to productively develop on valuable land. More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use). This is of course a behavior you see all over high value areas.
  - nybble41 6y ago
    > No, landlords do not provide land. They provide access to their land, which is the same thing. This debate is not about who (or what) created the physical dirt. It is about the economic value of the property, which only exists as a result of human action. > as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord You misread. The land is known to be good or bad in retrospect. At the time it was developed that classification was only speculative. This particular landlord thought the land would be good and thus worth developing. Others disagreed and didn't bid as highly for it. The landlord is rewarded not for others' efforts but for the fact that they were right when they predicted that this would be a good location for their development. > All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord. To the best approximation either of us will be able to come up with that is 100% of the market value of the land. However, you are speaking in terms of ideals. In practice only the cost of building physical structures on the land will be counted as "improvement". There is no need to guess; this is the legal standard which is already applied in the rare situations where improvements must be valued separately from the land. However, it severely understates the property owners' contributions to the overall value. > More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use). The fact that you fail to see the economic value of speculation is a depressingly common failing among LVT supporters. Putting land to a lower-value use now prevents it from being put to a higher-value use later, which destroys wealth. Speculation holds the land ready for the higher-value use, which is why it is rewarded. Here's a hypothetical example: Say there's a plot of land which could be used for either warehousing or family homes. If you simply put it up for auction right now for a term of perhaps 50 years you'll get $100M from the warehouse representatives or $80M from family home developers. Whichever way you go you'll be locked in to that use for at least 50 years. However, trends show that the warehouse industry is in a decline, whereas demand for family homes in that area will likely increase to $150M within ten years—meaning that if you just take the highest offer now then you will be losing out on $50M of value and those families won't have enough homes. In the best case there will be a significant cost incurred to demolish the warehouses and rebuild. The correct answer here is to speculate based on the trends that a higher-value use will come along and allow only short-term, non-destructive uses of the property in the interim rather than auctioning it off immediately. Or even leave it vacant for a few years if there are no such uses.
- pydry 6y ago
  >The landlord provides a usable piece of land They neither made the land nor made it valuable, so they're not "providing" it in any meaningful sense. They're relinquishing their state provided entitlement to expel users of the land with state-backed violence. In exchange for resources.
  - JoeAltmaier 6y ago
    Ask an automaker: did they make the iron? No, it was a supernova 1B years ago.
    - pydry 6y ago
      Valuable mining rights should, broadly speaking, follow the same rules as land under georgism. rather than, say, "renting" it from some guy who has land deeds that say "i own this mountain". what turns iron ore into a car is labor, which you should pay the laborer for. that is, unless you think you should have a greater share of mineral rights than somebody else for some reason.
      - nybble41 6y ago
        Would you not say that finding the mineral deposit is worth at least some reward, separate from the labor of mining and processing the ore?

pydry 6y ago

>Rent is hardly "free money". What would you call money which accumulates in your bank account which you didn't have to work for? (I could the portion of rent which would be left over after a rentier paying management fees here. Managing a property is work. Owning is not.)

nybble41 6y ago
> … which you didn't have to work for? To rent out property you must first own property. To own property you must buy property. Buying property requires resources. Accumulating enough resources to buy property requires a great deal of work, to say nothing of the effort which goes in to deciding which properties to buy or sell or the opportunity cost of deferring consumption. All of that work occurs before the first rent check is paid or any property management fees are accrued (assuming you hired someone else to manage the property). The concept may seem alien to someone accustomed to a weekly or biweekly paycheck from their employer, but in many fields, including investment (in real estate or anything else), the majority of the work occurs long before any income is received. The income is no less earned merely because it does not occur in close proximity to the work.
- ZeroGravitas 6y ago
  The important parts of the discussion can be seen more clearly if we compare two different landlords rather than landlords vs non-landlords. Then it should become obvious that some part of the profit is due to "work" i.e. investing money in an area by building upgrading, and some part is due to other people doing the same. So in a hot new area, a bunch of people moving in, opening hip restaurants, renovating old buildings, improving parks contributes to the landlords profit, because an empty lots value will rise as well.
  - nybble41 6y ago
    Does the landlord get any credit for encouraging development in the surrounding area? For that matter, these "other people" may even be the same person in some cases, in which case they're both paying for the development and paying extra LVT due to the general rise in property values which they created. Even recognized physical improvements to your own property can cause property values for surrounding empty lots to rise, and you'd be paying LVT on that as well. Let's look at a hypothetical case for a moment. Say I buy some otherwise nice property for cheap because it's in the middle of nowhere and there is no easy way to get to it. Trees, lakes, etc. but no nearby roads. The LVT would be low, right? If you auctioned it off in that state as unimproved property you wouldn't get many takers. But say I build a private road to that area at my own expense, and then rent out the now-accessible land in family-size lots. The land hasn't changed, but its value is much higher now because of something I did. How would the "unimproved" value of those lots be assessed, and who receives the LVT? If the answer to that last question isn't "me" (and it won't be) then someone is receiving an unearned benefit from my work. Even if you think it's somehow "unfair" for property owners to benefit financially from general improvements in their communities, LVT doesn't change the fact that someone is still getting an unearned external benefit. It takes from the property owner without doing much at all to ensure that the LVT goes to the parties actually responsible for the improvement.