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But they are using land productively as they are making $3100 a month off of a small studio. Also I doubt if raising taxes will result in anything more than the

But they are using land productively as they are making $3100 a month off of a small studio. Also I doubt if raising taxes will result in anything more than them passing that cost on to the renters.

AmVess 6y ago
Raising taxes on the land owner will result in increased rents. Land owners are not in the business of giving money away.
- renewiltord 6y ago
  Land owners are not in the business of giving money away. That's precisely why increased taxes will not result in increased rents. After all, if they could increase rents and the market would clear it when there's a tax, why wouldn't they when there's no tax? They're not selling at cost-plus, they're trying to maximize profit.
  - sokoloff 6y ago
    Because renting in SF trades off in part against buying in SF at the margins (and against renting nearby to SF and against moving out of SF entirely). If buying in SF becomes more expensive due to an LVT, then renting becomes more competitive on the margin. I find it to be strangely magical thinking that land-value-taxes will precisely and surgically extract 100% of their value from landlords with no players in the game altering their behavior in any way that would result in the effects being shared across many participants in the real estate markets in a city.
    - imtringued 6y ago
      The idea behind the LVT is not about making rent cheaper. It's to reward landlords for using land more efficiently. If the land costs a fixed amount you want to build as many units as possible and make each unit as attractive as possible. Compare that to a conventional property tax where you have to pay more tax for each unit of housing you build. You also have to pay property taxes for home improvement meaning old properties won't be renovated ahead of time and therefore won't be rented them out. Instead the house will only be available for sale with the hope that the buyer will renovate the property.
      - Apocryphon 6y ago
        Have LVT proponents ever considered augmenting it with tax credits on the LVT for property improvements? To really hammer home incentives towards development in especially supply-strained markets such as S.F.
        nostrademons 6y ago
        LVT is a tax only on the unimproved value of the land. Property improvements are not covered: the land owner gets to keep (or pass onto the renter) 100% of the value of such improvements. No tax credit is necessary; it's a natural consequence of how the tax is structured.
        Apocryphon 6y ago
        Right, I understand that property improvements aren’t considered in LVT, and are naturally incentivized through the application of the tax. I’m just speculating if specific development-adverse markets could use both LVT, and credits against LVT to really get the pro-development ball rolling. Based on the one prior attempt at LVT in the U.S., landowners don’t seem to understand its intent: https://www.washingtonexaminer.com/the-short-life-of-pennsylvanias-radical-tax-reform/article/2614398 https://www.washingtonexaminer.com/the-short-life-of-pennsyl...
        nostrademons 6y ago
        There's a pretty big risk of market distortions then. I could easily see landowners adding whatever "improvements" the tax credit incentivizes, regardless of whether it benefits the tenant or increases the potential rent charged, and then passing the cost along to the tenant. Also see a booming cottage industry of contractors & paper-pushers to get the tax credit. I do agree that an LVT has psychological issues when proposed to voters. It's a massive change to how we currently do things (that's the point!), and it preferences groups who don't currently have political power (future developers, tenants, future residents) over those who do (land speculators, retirees, existing homeowners). I think the most likely scenario for its adoption is in the aftermath of a cataclysmic war that destroys all the existing infrastructure and redraws political boundaries. Likely one successor polity might try it out (since everything's dead & destroyed anyway), and then their pro-development advantages would draw lots of displaced immigrants to them, and eventually they'd amass more power than their neighbors through that economic dynamism. Much like how the U.S. became the pre-eminent global power through an innovative politico-economic system + immigration friendly policies + near complete genocide of the native population.
    - nostrademons 6y ago
      The point of LVTs is precisely to alter participants' behavior in the market. The value of LVTs is in aligning incentives so that landlords have an incentive to build more housing and use it more efficiently. It makes vacancy & speculation a money-losing endeavor (the same way that inflation makes holding cash a money-losing endeavor), and creates political pressure to repeal zoning laws and create smart public improvements, ones that will increase the value of the land more than their cost. Its value as a revenue source is secondary, and many proponents (of the geolibertarian sort) actually support lower tax receipts and smaller government.
      - SllX 6y ago
        > The point of LVTs is precisely to alter participants' behavior in the market. Maybe this is the point to its proponents. However: > Its value as a revenue source is secondary, and many proponents (of the geolibertarian sort) actually support lower tax receipts and smaller government. Statements like this muddy tax discussions. The primary reason for any tax at all, regardless of type or preference is to raise revenue for government. That fact shouldn’t be lost when discussing which kinds of taxes and what percent to raise them at is discussed, even when optimizing for political outcomes. If the government were raising more tax than it needs for example, tax revenue is too high. If the government is spending more than it is collecting, then tax revenue is too low. Effects on market behavior are always secondary considerations.
        nostrademons 6y ago
        That depends whether you're a politician or an economist. ;-) Through a politician's lens the goal of a tax is to raise revenue for government and tax policy exists to do that efficiently. Through an economist's lens efficient trade and alignment of incentives are fundamental and governments exist only incidentally to ensure those. There are various schools of economics that suggest limiting government's role only to the enforcement of private property rights and kneecapping its ability to do anything else. It's much like how to a physicist, vectors are real objects that live in the abstract concept of a vector space, while to a mathematician vector spaces are fundamental axioms and the existence of vectors is just a consequence that falls out of these axioms.
    - fragmede 6y ago
      If you think anyone believes LVT will be perfectly 100% efficient, you don't understand how to move markets.
- mywittyname 6y ago
  If the market will bare $3,100 for an apartment, then land lords will only get $3,100 for an apartment, regardless of the taxes owed.
  - sokoloff 6y ago
    If the market will only bear $3100/mo for an apartment today, that's in part because some less desirable apartment is renting for $3000/mo and that might be the case because that landlord can break even on cashflow and bank on the appreciation. Institute an LVT and those competing landlords may become cashflow negative, forcing some of those units off the rental market entirely (typically to sales to owner-occupants, sometimes to landlords with better financing or lower overheads, sometimes to short-term rentals or other higher cashflow uses). An extra $100/mo of LVT may not result in an extra $100/mo of market-clearing rent, but it's far from obvious that it results in $0/mo change. Thought experiment: if the LVT for that unit were $3500/mo, what do you think the offered rent would be? If that's the case for $3500/mo, what part of that doesn't hold for $3000/mo, $1000/mo, $350/mo, or $35/mo?
    - Apocryphon 6y ago
      Wouldn’t the rent be too prohibitively expensive at some point, and the landlord will be forced to shift their strategy for recouping the money lost from LVT from lowering rent, to redeveloping it to be a more effective money maker? Such as by building more units and increasing urban densification.
      - Ekaros 6y ago
        Now what if redevelopment is not possible? Maybe regulation stops it? Actually, if net value of land is negative what will happen to it? That is taxes are more than value and there is no legal way to extract more value...
        kansface 6y ago
        > Actually, if net value of land is negative what will happen to it? You would be describing parts of Detroit wherein land is abandoned and the city limits shrink as the cost of providing services increases.
- eeZah7Ux 6y ago
  Taxing unoccupied homes lower rents, obviously. Also taxing income progressively discourages landlordism. On top of that, taxing income in order to build public public housing lowers rents even more.
  - imtringued 6y ago
    The government could just guarantee housing for a fixed price. That fixed price becomes the upper bound and all private market participants would have to bid lower than this upper bound. This doesn't happen because those who have a political say don't actually want more housing. My proposed idea would force the government to actually solve the problem after all. If there is not enough housing the government would be forced to build it as a last resort and if the government can't do so because of the laws it has enacted then it can change those laws but that's exactly what must be avoided at all costs if you were to ask existing homeowners.
    - epistasis 6y ago
      This is a lot like Singapore's HBD, which builds lots of public housing. And you're right, it's the absolute nightmare of people in SF who say they want non-market housing, precisely because it means new housing and new buildings. However, it's a generally popular idea, that if put to a majority vote could pass. It's individual small groups that would stop it, because city politics are highly undemocratic and controlled by small factions. However, there's hope at the state level to make this possible. I'm hopeful that in the coming legislative session there will be some serious attempts at state-level public housing to alleviate our desperate shortage.
- dredmorbius 6y ago
  False. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Land supply is inelastic
  - claydavisss 6y ago
    Do people on HN ever get sick of making the same pithy comments and then going back to a world that doesn't change? Say LVT twenty times, it changes nothing. There is no LVT. There will be no LVT. You have upvotes and nothing else.
edoceo 6y ago
All costs are eventually paid by the end-consumer
epistasis 6y ago
The $3100 is the result of rent-seeking, not of productive economic activity. SF landlords are leaches on the economic engine and wealth of the city, one of the rare things that both Adam Smith and Karl Marx would agree on. > Also I doubt if raising taxes will result in anything more than them passing that cost on to the renters. Only new buildings in SF pay substantial taxes, and only new buildings have rents that are close to their carrying costs. The landlords that are getting huge property tax subsidies due to Prop 13 are enjoying market rents that are far far above their carrying costs. This is why SF landlords are economic leaches, their profits come from a supply shortage not from productive activity. If they coludn't afford to pay the tax, would rents have dropped? No, they would sell if they couldn't cover their costs with rent. According to pretty much any economic model, the LVT can't be passed on to tenants. Having a hard time finding a concise, and to the point explanation of that, but maybe check out the answer here: https://economics.stackexchange.com/questions/24352/why-cant-the-land-value-tax-in-some-cases-be-passed-on-to-tenants https://economics.stackexchange.com/questions/24352/why-cant...
kelnos 6y ago
When people talk about "using land productively", they aren't talking about a single person's profit. It's more of a "collective productivity". You can only pass on so many costs before demand drops because the price you're asking just isn't feasible. Non-resident landlords in SF, to my knowledge, aren't really anti-development. They recognize that 2x the number of units on the same parcel of land won't cut the per-unit rent in half, so higher density is still a better deal. The problem, from the individual landlord's perspective, is that they can't redevelop their own land without triggering a tax reassessment, which can easily turn any profit into a loss, even after adjusting rent for the newly-developed property. The landlords who are making out like bandits right now are the ones who have owned their properties for decades. I wouldn't buy a duplex or a quad-plex in SF right now with the intention to rent it out; the cost of the property, plus 2020-assessed property taxes, would mean I'd barely break even at market rates (pre-pandemic market rates; current market rates might be a solid operating loss). Large developers that are coming in and wanting to build apartment or condo complexes essentially have to build so-called "luxury units", because the economics won't work out otherwise, when you take into account high initial property taxes and the high, drawn-out cost of just building in SF.
- chii 6y ago
  > plus 2020-assessed property taxes which is why i think property taxes are a stupid form of taxation. The property's income should be what's taxed - not the "value" of the property. And that income should be taxed at the marginal tax rate of the owner.

But they are using land productively as they are making $3100 a month off of a small studio. Also I doubt if raising taxes will result in anything more than them passing that cost on to the renters.

AmVess 6y ago

Raising taxes on the land owner will result in increased rents. Land owners are not in the business of giving money away.

renewiltord 6y ago
Land owners are not in the business of giving money away. That's precisely why increased taxes will not result in increased rents. After all, if they could increase rents and the market would clear it when there's a tax, why wouldn't they when there's no tax? They're not selling at cost-plus, they're trying to maximize profit.
- sokoloff 6y ago
  Because renting in SF trades off in part against buying in SF at the margins (and against renting nearby to SF and against moving out of SF entirely). If buying in SF becomes more expensive due to an LVT, then renting becomes more competitive on the margin. I find it to be strangely magical thinking that land-value-taxes will precisely and surgically extract 100% of their value from landlords with no players in the game altering their behavior in any way that would result in the effects being shared across many participants in the real estate markets in a city.
  - imtringued 6y ago
    The idea behind the LVT is not about making rent cheaper. It's to reward landlords for using land more efficiently. If the land costs a fixed amount you want to build as many units as possible and make each unit as attractive as possible. Compare that to a conventional property tax where you have to pay more tax for each unit of housing you build. You also have to pay property taxes for home improvement meaning old properties won't be renovated ahead of time and therefore won't be rented them out. Instead the house will only be available for sale with the hope that the buyer will renovate the property.
    - Apocryphon 6y ago
      Have LVT proponents ever considered augmenting it with tax credits on the LVT for property improvements? To really hammer home incentives towards development in especially supply-strained markets such as S.F.
      - nostrademons 6y ago
        LVT is a tax only on the unimproved value of the land. Property improvements are not covered: the land owner gets to keep (or pass onto the renter) 100% of the value of such improvements. No tax credit is necessary; it's a natural consequence of how the tax is structured.
        Apocryphon 6y ago
        Right, I understand that property improvements aren’t considered in LVT, and are naturally incentivized through the application of the tax. I’m just speculating if specific development-adverse markets could use both LVT, and credits against LVT to really get the pro-development ball rolling. Based on the one prior attempt at LVT in the U.S., landowners don’t seem to understand its intent: https://www.washingtonexaminer.com/the-short-life-of-pennsylvanias-radical-tax-reform/article/2614398 https://www.washingtonexaminer.com/the-short-life-of-pennsyl...
        nostrademons 6y ago
        There's a pretty big risk of market distortions then. I could easily see landowners adding whatever "improvements" the tax credit incentivizes, regardless of whether it benefits the tenant or increases the potential rent charged, and then passing the cost along to the tenant. Also see a booming cottage industry of contractors & paper-pushers to get the tax credit. I do agree that an LVT has psychological issues when proposed to voters. It's a massive change to how we currently do things (that's the point!), and it preferences groups who don't currently have political power (future developers, tenants, future residents) over those who do (land speculators, retirees, existing homeowners). I think the most likely scenario for its adoption is in the aftermath of a cataclysmic war that destroys all the existing infrastructure and redraws political boundaries. Likely one successor polity might try it out (since everything's dead & destroyed anyway), and then their pro-development advantages would draw lots of displaced immigrants to them, and eventually they'd amass more power than their neighbors through that economic dynamism. Much like how the U.S. became the pre-eminent global power through an innovative politico-economic system + immigration friendly policies + near complete genocide of the native population.
  - nostrademons 6y ago
    The point of LVTs is precisely to alter participants' behavior in the market. The value of LVTs is in aligning incentives so that landlords have an incentive to build more housing and use it more efficiently. It makes vacancy & speculation a money-losing endeavor (the same way that inflation makes holding cash a money-losing endeavor), and creates political pressure to repeal zoning laws and create smart public improvements, ones that will increase the value of the land more than their cost. Its value as a revenue source is secondary, and many proponents (of the geolibertarian sort) actually support lower tax receipts and smaller government.
    - SllX 6y ago
      > The point of LVTs is precisely to alter participants' behavior in the market. Maybe this is the point to its proponents. However: > Its value as a revenue source is secondary, and many proponents (of the geolibertarian sort) actually support lower tax receipts and smaller government. Statements like this muddy tax discussions. The primary reason for any tax at all, regardless of type or preference is to raise revenue for government. That fact shouldn’t be lost when discussing which kinds of taxes and what percent to raise them at is discussed, even when optimizing for political outcomes. If the government were raising more tax than it needs for example, tax revenue is too high. If the government is spending more than it is collecting, then tax revenue is too low. Effects on market behavior are always secondary considerations.
      - nostrademons 6y ago
        That depends whether you're a politician or an economist. ;-) Through a politician's lens the goal of a tax is to raise revenue for government and tax policy exists to do that efficiently. Through an economist's lens efficient trade and alignment of incentives are fundamental and governments exist only incidentally to ensure those. There are various schools of economics that suggest limiting government's role only to the enforcement of private property rights and kneecapping its ability to do anything else. It's much like how to a physicist, vectors are real objects that live in the abstract concept of a vector space, while to a mathematician vector spaces are fundamental axioms and the existence of vectors is just a consequence that falls out of these axioms.
  - fragmede 6y ago
    If you think anyone believes LVT will be perfectly 100% efficient, you don't understand how to move markets.
mywittyname 6y ago
If the market will bare $3,100 for an apartment, then land lords will only get $3,100 for an apartment, regardless of the taxes owed.
- sokoloff 6y ago
  If the market will only bear $3100/mo for an apartment today, that's in part because some less desirable apartment is renting for $3000/mo and that might be the case because that landlord can break even on cashflow and bank on the appreciation. Institute an LVT and those competing landlords may become cashflow negative, forcing some of those units off the rental market entirely (typically to sales to owner-occupants, sometimes to landlords with better financing or lower overheads, sometimes to short-term rentals or other higher cashflow uses). An extra $100/mo of LVT may not result in an extra $100/mo of market-clearing rent, but it's far from obvious that it results in $0/mo change. Thought experiment: if the LVT for that unit were $3500/mo, what do you think the offered rent would be? If that's the case for $3500/mo, what part of that doesn't hold for $3000/mo, $1000/mo, $350/mo, or $35/mo?
  - Apocryphon 6y ago
    Wouldn’t the rent be too prohibitively expensive at some point, and the landlord will be forced to shift their strategy for recouping the money lost from LVT from lowering rent, to redeveloping it to be a more effective money maker? Such as by building more units and increasing urban densification.
    - Ekaros 6y ago
      Now what if redevelopment is not possible? Maybe regulation stops it? Actually, if net value of land is negative what will happen to it? That is taxes are more than value and there is no legal way to extract more value...
      - kansface 6y ago
        > Actually, if net value of land is negative what will happen to it? You would be describing parts of Detroit wherein land is abandoned and the city limits shrink as the cost of providing services increases.
eeZah7Ux 6y ago
Taxing unoccupied homes lower rents, obviously. Also taxing income progressively discourages landlordism. On top of that, taxing income in order to build public public housing lowers rents even more.
- imtringued 6y ago
  The government could just guarantee housing for a fixed price. That fixed price becomes the upper bound and all private market participants would have to bid lower than this upper bound. This doesn't happen because those who have a political say don't actually want more housing. My proposed idea would force the government to actually solve the problem after all. If there is not enough housing the government would be forced to build it as a last resort and if the government can't do so because of the laws it has enacted then it can change those laws but that's exactly what must be avoided at all costs if you were to ask existing homeowners.
  - epistasis 6y ago
    This is a lot like Singapore's HBD, which builds lots of public housing. And you're right, it's the absolute nightmare of people in SF who say they want non-market housing, precisely because it means new housing and new buildings. However, it's a generally popular idea, that if put to a majority vote could pass. It's individual small groups that would stop it, because city politics are highly undemocratic and controlled by small factions. However, there's hope at the state level to make this possible. I'm hopeful that in the coming legislative session there will be some serious attempts at state-level public housing to alleviate our desperate shortage.
dredmorbius 6y ago
False. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Land supply is inelastic
- claydavisss 6y ago
  Do people on HN ever get sick of making the same pithy comments and then going back to a world that doesn't change? Say LVT twenty times, it changes nothing. There is no LVT. There will be no LVT. You have upvotes and nothing else.

edoceo 6y ago

All costs are eventually paid by the end-consumer

epistasis 6y ago

The $3100 is the result of rent-seeking, not of productive economic activity. SF landlords are leaches on the economic engine and wealth of the city, one of the rare things that both Adam Smith and Karl Marx would agree on. > Also I doubt if raising taxes will result in anything more than them passing that cost on to the renters. Only new buildings in SF pay substantial taxes, and only new buildings have rents that are close to their carrying costs. The landlords that are getting huge property tax subsidies due to Prop 13 are enjoying market rents that are far far above their carrying costs. This is why SF landlords are economic leaches, their profits come from a supply shortage not from productive activity. If they coludn't afford to pay the tax, would rents have dropped? No, they would sell if they couldn't cover their costs with rent. According to pretty much any economic model, the LVT can't be passed on to tenants. Having a hard time finding a concise, and to the point explanation of that, but maybe check out the answer here: https://economics.stackexchange.com/questions/24352/why-cant-the-land-value-tax-in-some-cases-be-passed-on-to-tenants https://economics.stackexchange.com/questions/24352/why-cant...

kelnos 6y ago

When people talk about "using land productively", they aren't talking about a single person's profit. It's more of a "collective productivity". You can only pass on so many costs before demand drops because the price you're asking just isn't feasible. Non-resident landlords in SF, to my knowledge, aren't really anti-development. They recognize that 2x the number of units on the same parcel of land won't cut the per-unit rent in half, so higher density is still a better deal. The problem, from the individual landlord's perspective, is that they can't redevelop their own land without triggering a tax reassessment, which can easily turn any profit into a loss, even after adjusting rent for the newly-developed property. The landlords who are making out like bandits right now are the ones who have owned their properties for decades. I wouldn't buy a duplex or a quad-plex in SF right now with the intention to rent it out; the cost of the property, plus 2020-assessed property taxes, would mean I'd barely break even at market rates (pre-pandemic market rates; current market rates might be a solid operating loss). Large developers that are coming in and wanting to build apartment or condo complexes essentially have to build so-called "luxury units", because the economics won't work out otherwise, when you take into account high initial property taxes and the high, drawn-out cost of just building in SF.

chii 6y ago
> plus 2020-assessed property taxes which is why i think property taxes are a stupid form of taxation. The property's income should be what's taxed - not the "value" of the property. And that income should be taxed at the marginal tax rate of the owner.