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Housing can’t be both affordable and a good investment. The price of a home should therefore equal its replacement cost. If the market value of the home with th

Housing can’t be both affordable and a good investment. The price of a home should therefore equal its replacement cost. If the market value of the home with the land is $1 million, but the cost to build the home is $200k, raise taxes on the land until the new market value is $200k. Tada, Land Value Tax. Why am I mentioning LVT in a Universal Basic Income thread? What should we do with the money we earn through a LVT? Give it away through UBI. Win-win. If you want to start with a smaller LVT and work your way up to equalization over a period of 20 years, that's fine.

nemo44x 5y ago
No matter what you’ll run into a situation where more people want to live in a place than there is space. So an auction must take place. If you raise the property taxes you aren’t making it more inclusive but really more exclusive. The person hurt by this is the person holding the land when the tax change goes into effect. In most markets the cost of a home is a factor of interest rates, property taxes, and what’s “left over” - meaning what people are willing to pay each month. When interest rates and/or taxes go up then the “left over” part gets smaller. The banks and government get the bigger slice of the pie. But as interest rates have fallen and property taxes staying steady then the “left over” part is larger and this benefits the property owner. This is good. Inflation adjusted the cost of owning a home is the same as it was 30 years ago in most markets. Interest rates have fallen massively in that time. Some markets (like major cities) have become more competitive though.
- hhjinks 5y ago
  "There isn't enough space anyway" is not an argument for letting housing prices run rampant. With our current trajectory, housing is going to create a new class system, in which people with housing can afford housing, and those without are left with no alternative but to rent for life. Saying "this is good" to such a future is sick.
  - emteycz 5y ago
    New cities should be built, like they do in China.
greenwich26 5y ago
>Housing can’t be both affordable and a good investment. The price of a home should therefore equal its replacement cost. I read this as "not (A and B), therefore C", where A, B, and C are logically independent propositions, and not (A and B) is unproven and highly doubtful. Your argument is missing a few steps there.
- Pfhreak 5y ago
  Not (A and B) seems obvious to me. If something is a good investment vehicle, it's going to be purchased by speculators. If speculators are competing over a finite resource, the price of the resource will rise above the current utility value of that resource. Speculators have more available capital than an ordinary/median person. Housing is more affordable the lower its price. It's unreasonable to price housing below the cost to manufacture that housing. (I disagree with this assertion, but it's implied in the parent comment.) Therefore, housing is most affordable when closest to the replacement cost. If a house will never sell for greater than the replacement cost, then it is no longer a good investment. If speculators can push housing above the minimum cost, it is no longer maximally affordable. Therefore not (A and B).
emteycz 5y ago
Unless... The value of the land becomes taxes+land+house. Happens in high demand areas normally.
jxidjhdhdhdhfhf 5y ago
I don't quite understand. The land reduces in price because of LVT, requiring a smaller mortgage. But wouldn't we expect the smaller mortgage + LVT to be equal to the old higher priced mortgage? After all the intrinsic value associated with owning the property hasn't changed. My point is how is a buyer better off under this scenario if they would have to pay the same amount per year in order to have a home? In fact they'd be worse off because a mortgage can be paid off but a LVT cannot. And wouldn't the LVT collapsing housing prices massively reduce the net worth of homeowners? Usually a home is the largest store of net worth that people have.
- ItsMonkk 5y ago
  Right, so you are looking at the pie and seeing a redistribution, and going "this is all equal". The key you are missing is that this fixes the incentives. Currently NIMBY's(No in my back yard) say no to new housing so that their home prices appreciate in values. Currently companies buy empty lots and leave them empty for 30 years. What happens when you have a UBI funded through a LVT? Well, exclusivity drives market values up which drives taxes up. As a result of a LVT you will end up having YIMBY's making sure that there is enough housing in the area, and LVT naturally favors dense apartments over single family homes. That will drive the market price down, and as the market price drops the tax will drop in response to keep the market cost at replacement cost. The pie gets bigger.
  - jxidjhdhdhdhfhf 5y ago
    Yeah I'm not quite seeing how the pie gets bigger. You have a UBI at the cost of massive wealth destruction in the housing market. How does LVT favor dense housing? And why would people be building more now that they don't expect the price of homes to ever increase? I'm not seeing how the scenario you've outlined is the most likely to happen.
    - zozbot234 5y ago
      It's not wealth destruction, it's deflating paper wealth that's held at the expense of one's surrounding community. Your built structure will still be as valuable as it was, and quite possibly more.

nemo44x 5y ago

No matter what you’ll run into a situation where more people want to live in a place than there is space. So an auction must take place. If you raise the property taxes you aren’t making it more inclusive but really more exclusive. The person hurt by this is the person holding the land when the tax change goes into effect. In most markets the cost of a home is a factor of interest rates, property taxes, and what’s “left over” - meaning what people are willing to pay each month. When interest rates and/or taxes go up then the “left over” part gets smaller. The banks and government get the bigger slice of the pie. But as interest rates have fallen and property taxes staying steady then the “left over” part is larger and this benefits the property owner. This is good. Inflation adjusted the cost of owning a home is the same as it was 30 years ago in most markets. Interest rates have fallen massively in that time. Some markets (like major cities) have become more competitive though.

hhjinks 5y ago
"There isn't enough space anyway" is not an argument for letting housing prices run rampant. With our current trajectory, housing is going to create a new class system, in which people with housing can afford housing, and those without are left with no alternative but to rent for life. Saying "this is good" to such a future is sick.
- emteycz 5y ago
  New cities should be built, like they do in China.

greenwich26 5y ago

>Housing can’t be both affordable and a good investment. The price of a home should therefore equal its replacement cost. I read this as "not (A and B), therefore C", where A, B, and C are logically independent propositions, and not (A and B) is unproven and highly doubtful. Your argument is missing a few steps there.

Pfhreak 5y ago
Not (A and B) seems obvious to me. If something is a good investment vehicle, it's going to be purchased by speculators. If speculators are competing over a finite resource, the price of the resource will rise above the current utility value of that resource. Speculators have more available capital than an ordinary/median person. Housing is more affordable the lower its price. It's unreasonable to price housing below the cost to manufacture that housing. (I disagree with this assertion, but it's implied in the parent comment.) Therefore, housing is most affordable when closest to the replacement cost. If a house will never sell for greater than the replacement cost, then it is no longer a good investment. If speculators can push housing above the minimum cost, it is no longer maximally affordable. Therefore not (A and B).

emteycz 5y ago

Unless... The value of the land becomes taxes+land+house. Happens in high demand areas normally.

jxidjhdhdhdhfhf 5y ago

I don't quite understand. The land reduces in price because of LVT, requiring a smaller mortgage. But wouldn't we expect the smaller mortgage + LVT to be equal to the old higher priced mortgage? After all the intrinsic value associated with owning the property hasn't changed. My point is how is a buyer better off under this scenario if they would have to pay the same amount per year in order to have a home? In fact they'd be worse off because a mortgage can be paid off but a LVT cannot. And wouldn't the LVT collapsing housing prices massively reduce the net worth of homeowners? Usually a home is the largest store of net worth that people have.

ItsMonkk 5y ago
Right, so you are looking at the pie and seeing a redistribution, and going "this is all equal". The key you are missing is that this fixes the incentives. Currently NIMBY's(No in my back yard) say no to new housing so that their home prices appreciate in values. Currently companies buy empty lots and leave them empty for 30 years. What happens when you have a UBI funded through a LVT? Well, exclusivity drives market values up which drives taxes up. As a result of a LVT you will end up having YIMBY's making sure that there is enough housing in the area, and LVT naturally favors dense apartments over single family homes. That will drive the market price down, and as the market price drops the tax will drop in response to keep the market cost at replacement cost. The pie gets bigger.
- jxidjhdhdhdhfhf 5y ago
  Yeah I'm not quite seeing how the pie gets bigger. You have a UBI at the cost of massive wealth destruction in the housing market. How does LVT favor dense housing? And why would people be building more now that they don't expect the price of homes to ever increase? I'm not seeing how the scenario you've outlined is the most likely to happen.
  - zozbot234 5y ago
    It's not wealth destruction, it's deflating paper wealth that's held at the expense of one's surrounding community. Your built structure will still be as valuable as it was, and quite possibly more.