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But if you raise property taxes, then the rental rates must go up, to pay for those taxes. That's one of the problems in many North American cities, where year

by pomian 5y ago

But if you raise property taxes, then the rental rates must go up, to pay for those taxes. That's one of the problems in many North American cities, where yearly rising local city taxes can make housing unaffordable.

luckylion 5y ago
Absolutely, property taxes are pretty much always "passed on" in Germany as well. Berlin still has plenty of rope in business tax though, which is a significant part of local funding in Germany. Their strategy has been to undercut comparable cities by a good margin to attract businesses that might move to Berlin, while at the same time complaining about not having enough tax revenue and needing financial support from both the German federal government and the other German states. But since they benefit from the current setup, there's no incentive for them to change it.
dredmorbius 5y ago
False. Real estate (land) has an inelastic supply. It's not possible to bring more to the market. It is possible to utilise existing real estate more intensively, by building more densely, most often by building up. Each storey added to a building multiplies the available land intensity accordingly. (Modulo a small exception for staircases, elevators, and some building utilities.) If you tax the unimproved value of land, you make lower levels of utilisation comparatively more expensive. Rents cannot increase, as people effectively pay the value gained by holding the property --- in the simple case, earning potential. So higher land value tax -> same rents -> less profit to landlords. Landlords and property holders can increase their returns by adding more units (intensifying land use). Which then increases the housing supply. The counterintuitive result is that housing is something you get more of with higher taxation rates, so long as those apply to the value of the land itself, and not improvements to the property.

by pomian 5y ago

luckylion 5y ago

Absolutely, property taxes are pretty much always "passed on" in Germany as well. Berlin still has plenty of rope in business tax though, which is a significant part of local funding in Germany. Their strategy has been to undercut comparable cities by a good margin to attract businesses that might move to Berlin, while at the same time complaining about not having enough tax revenue and needing financial support from both the German federal government and the other German states. But since they benefit from the current setup, there's no incentive for them to change it.

dredmorbius 5y ago

False. Real estate (land) has an inelastic supply. It's not possible to bring more to the market. It is possible to utilise existing real estate more intensively, by building more densely, most often by building up. Each storey added to a building multiplies the available land intensity accordingly. (Modulo a small exception for staircases, elevators, and some building utilities.) If you tax the unimproved value of land, you make lower levels of utilisation comparatively more expensive. Rents cannot increase, as people effectively pay the value gained by holding the property --- in the simple case, earning potential. So higher land value tax -> same rents -> less profit to landlords. Landlords and property holders can increase their returns by adding more units (intensifying land use). Which then increases the housing supply. The counterintuitive result is that housing is something you get more of with higher taxation rates, so long as those apply to the value of the land itself, and not improvements to the property.