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How is shifting the burden to landlords via moratoria different from shifting the burden to landlords via tax increases? Unless you could forego tax increases b

How is shifting the burden to landlords via moratoria different from shifting the burden to landlords via tax increases? Unless you could forego tax increases by printing more money or by generating more revenues by falling towards the inflection point on the laffer curve.

maest 5y ago
Presumably, it's not just landlords that are shouldering the risk. Also, the US budget is huge and has a lot of buffer room. Worst case you're trading off investing in future development projects with keeping the market stable.
harimau777 5y ago
I could see several possibilities: The effect of a tax increase is more distributed so that it is less likely to be directly passed on to consumers. Increasing taxes shifts the burden more indirectly so it is less likely to be directly passed on to consumers. With rent assistance the landlords continue to receive rent, so it may be easier for them to absorb the costs. Since people receiving rent assistance can keep receiving the assistance if they move to a better deal, competition between landlords is still in place.
pjmorris 5y ago
> How is shifting the burden to landlords via moratoria different from shifting the burden to landlords via tax increases? In the case of a moratorium, the landlord takes an immediate, complete, revenue hit. In the case of tax increases, the landlord pays something extra, spread out over both time and the taxed population. It's like the difference between not getting a paycheck and having your rent go up.
- fennecfoxen 5y ago
  Making landlords take all the risk individually also means that the market will reward those with increased risk tolerance, i.e. small landlords suffer and exit the market in favor of big landlords.
lotsofpulp 5y ago
I know hotels owners that have restricted anyone from staying at the hotel long enough to qualify as a tenant (usually ~30 nights). So due to these moratoria, everyone now has to depart prior to 30 nights and stay somewhere else because otherwise the hotel will literally be unable to remove a non paying and likely even problematic person from their property for the foreseeable future in some states. I saw a video of one guy threatening hotel staff who the cops would not forcibly remove and the courts are not requiring it because it was not deemed threatening enough. He is still in the room months after the incident, not paying, with the individual hotel owners and staff eating the cost.
larsiusprime 5y ago
Who it's shifted on and how it's passed on depends on the kind of tax. If you impose a tax on buildings, that gets shifted onto tenants. If its a tax on land (ie, the rental value of the location), the landlord has to eat it and it gets fully capitalized into the price, which means the landlord can't pass that on to the tenants and it actually brings the price of the land and rents down. There's a long string of empirical studies that back up this finding, the latest being this one out of Denmark: https://www.zbw.eu/econis-archiv/bitstream/11159/1082/1/arbejdspapir_land_tax.pdf https://www.zbw.eu/econis-archiv/bitstream/11159/1082/1/arbe...
- jedimastert 5y ago
  > If you impose a tax on buildings, that gets shifted onto tenants. If its a tax on land (ie, the rental value of the location), the landlord has to eat i I'm not quite sure I understand the difference here, but I may be misunderstanding why a tax on the buildings and a tax on the land is different? Are you saying a tax based on rental prices? Otherwise I would assume any cost to the landlord would eventually get passed on to the tenet, being the source of revenue.
  - larsiusprime 5y ago
    This is a good question! So a standard property tax is a tax on the value of the building and the tax on the land. The landlord has to pay the tax whether they're renting it out or not, but what kind of tax you're assessing affects how much they can charge in rent to their tenant. When you tax something, the cost typically gets "passed on" because you are changing the marginal profitability of that thing, and this causes the supply to decrease, which drives up the price. We can make more buildings. But we can't make more land (locations). So theory has long held that a tax on the value of land (also known as a site value tax) cannot be passed on to tenants, because it's not like someone says "well the cost of holding land went up this week Charlie, better make slightly less land this quarter." Though they can and absolutely do in fact do that with regards to, say, housing construction (and gasoline, and cigarettes, and sirloin steaks, and plush dolls, and anything else you might want to tax). And this is exactly the empirical effect that the referenced research paper (and many more like it) find in practice. If you assign a split-rate property tax which taxes two things: land, and improvements (buildings, essentially) at different rates, and you have a natural experiment where you randomly vary the tax rate on the improvements and the tax rate on the land, you will find that the price of the property goes down proportionately to the tax rate on land (full capitalization of land taxes), but that doesn't happen with the portion of the tax rate that falls on buildings. See this for more on the underlying theory: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr... If you want more sources on the empirical findings I'm happy to provide that to.
somnic 5y ago
Firstly, it wouldn't necessarily shift as much burden onto landlords, depending on the tax. The burden would be spread around all earners if it were an income tax hike, or all consumers for a sales tax or VAT. The extent to which it does affect landlords, rent subsidies would more than compensate. Secondly, how much landlords pay in tax is less relevant than what incentives the policy sets up. On the part of landlords, eviction moratoria incentivise not renting to higher-risk tenants at all. Higher taxes + rent subsidy would have the opposite effect, with more reason to rent to high risk tenants, and renting out properties that might be marginal otherwise. I don't know all the details of this, obviously, but this sort of policy analysis is much more about how it shifts incentives on the margin, rather than who pays more and who pays less.
carom 5y ago
A tax would be evenly distributed among all property owners. An eviction moratorium or rent stabilization places the burden on random individuals to subsidize poor housing policy (restrictive zoning).
cronix 5y ago
For one thing, the tax burden wouldn't be equal to a months rent, and then multiplied by however many months the moratorium lasts. If you were renting out a house for $1,500 a month, and not able to collect rent for over a year, that's over $18,000 including property taxes. That's quite a tax there, only on landlords. Many of whom not only rely on a small bit of income from them, but are also responsible for paying the mortgage. Likely the bulk of that $1,500 is going to a bank, not a landlords pocket. Not all landlords own the building outright. I doubt most do.
gumby 5y ago
Your question shows the limits from reductio analysis. You have to look at it systemically. Shifting the burden to the landlord, especially at a time of transient shock, is not only a direct tax, it's a tax when they may be themselves suffering a revenue shock just as their tenants are. Even replacing a tenant isn't automatic; there are transient costs and it can take time. While subsidizing the tenants takes cash from a large base (including debt, borrowed at a much lower rate than a landlord can get). That's the surface difference. But you may ask "who cares? Why do the landlords a favor?" Well there's a systemic issue in such a shock (think of swimming in the ocean when a wave drops you then lifts you independent of your swimming). Keeping the tenants in situ means the landlords can continue economic activity (doing repairs, buying lunch, going on vacation, etc). The tenants can too -- if nothing else they can look for a job rather than looking for a job AND looking for a place to live. Or they may not have actually lost their job, but just suffered from transient reduced demand (e.g. fewer haircuts) which might end up being complete job loss if they lose housing. Essentially you are preventing a liquidity crisis. And there are second order consequences as well: as the paper shows homelessness increases; this is a general tax on everyone not just in social programs but in all the followon consequences of having a lot of people on the streets. It's the same argument for subsidising farmers, even if most of them these days are big businesses: they suffer a lot of transient economic pressure (busts and booms) but we need a reliable food supply. So we engage in dreadfully wasteful behavior because we've decided it's better to pay that than suffer a food supply shock.
imtringued 5y ago
Because housing is not liquid. Spread risk over as many people as possible and they will just consider it the cost of doing business. If all the risk is unloaded on a few individuals then every participant will have to account for the potential of a 100% loss no matter how unlikely it is.
blitzar 5y ago
Tax is on profits. Revenue is on the gross. Taking someones profits to zero means they 'break even' on their expenses. Taking someones revenue to zero means they have to pay all their costs out of their own pocket. How is firing someone different from them going up a tax bracket?
GuB-42 5y ago
The tax increase can be for the landlords. Maybe a smart thing is to tax vacant housing and use that money to subsidize unpaid rent. The point is to limit the risk for landlords. Maybe they will earn less on good tenants, because of taxes, but they won't hesitate as much before taking "not as good" tenants.

maest 5y ago

Presumably, it's not just landlords that are shouldering the risk. Also, the US budget is huge and has a lot of buffer room. Worst case you're trading off investing in future development projects with keeping the market stable.

harimau777 5y ago

I could see several possibilities: The effect of a tax increase is more distributed so that it is less likely to be directly passed on to consumers. Increasing taxes shifts the burden more indirectly so it is less likely to be directly passed on to consumers. With rent assistance the landlords continue to receive rent, so it may be easier for them to absorb the costs. Since people receiving rent assistance can keep receiving the assistance if they move to a better deal, competition between landlords is still in place.

pjmorris 5y ago

> How is shifting the burden to landlords via moratoria different from shifting the burden to landlords via tax increases? In the case of a moratorium, the landlord takes an immediate, complete, revenue hit. In the case of tax increases, the landlord pays something extra, spread out over both time and the taxed population. It's like the difference between not getting a paycheck and having your rent go up.

fennecfoxen 5y ago
Making landlords take all the risk individually also means that the market will reward those with increased risk tolerance, i.e. small landlords suffer and exit the market in favor of big landlords.

lotsofpulp 5y ago

I know hotels owners that have restricted anyone from staying at the hotel long enough to qualify as a tenant (usually ~30 nights). So due to these moratoria, everyone now has to depart prior to 30 nights and stay somewhere else because otherwise the hotel will literally be unable to remove a non paying and likely even problematic person from their property for the foreseeable future in some states. I saw a video of one guy threatening hotel staff who the cops would not forcibly remove and the courts are not requiring it because it was not deemed threatening enough. He is still in the room months after the incident, not paying, with the individual hotel owners and staff eating the cost.

larsiusprime 5y ago

Who it's shifted on and how it's passed on depends on the kind of tax. If you impose a tax on buildings, that gets shifted onto tenants. If its a tax on land (ie, the rental value of the location), the landlord has to eat it and it gets fully capitalized into the price, which means the landlord can't pass that on to the tenants and it actually brings the price of the land and rents down. There's a long string of empirical studies that back up this finding, the latest being this one out of Denmark: https://www.zbw.eu/econis-archiv/bitstream/11159/1082/1/arbejdspapir_land_tax.pdf https://www.zbw.eu/econis-archiv/bitstream/11159/1082/1/arbe...

jedimastert 5y ago
> If you impose a tax on buildings, that gets shifted onto tenants. If its a tax on land (ie, the rental value of the location), the landlord has to eat i I'm not quite sure I understand the difference here, but I may be misunderstanding why a tax on the buildings and a tax on the land is different? Are you saying a tax based on rental prices? Otherwise I would assume any cost to the landlord would eventually get passed on to the tenet, being the source of revenue.
- larsiusprime 5y ago
  This is a good question! So a standard property tax is a tax on the value of the building and the tax on the land. The landlord has to pay the tax whether they're renting it out or not, but what kind of tax you're assessing affects how much they can charge in rent to their tenant. When you tax something, the cost typically gets "passed on" because you are changing the marginal profitability of that thing, and this causes the supply to decrease, which drives up the price. We can make more buildings. But we can't make more land (locations). So theory has long held that a tax on the value of land (also known as a site value tax) cannot be passed on to tenants, because it's not like someone says "well the cost of holding land went up this week Charlie, better make slightly less land this quarter." Though they can and absolutely do in fact do that with regards to, say, housing construction (and gasoline, and cigarettes, and sirloin steaks, and plush dolls, and anything else you might want to tax). And this is exactly the empirical effect that the referenced research paper (and many more like it) find in practice. If you assign a split-rate property tax which taxes two things: land, and improvements (buildings, essentially) at different rates, and you have a natural experiment where you randomly vary the tax rate on the improvements and the tax rate on the land, you will find that the price of the property goes down proportionately to the tax rate on land (full capitalization of land taxes), but that doesn't happen with the portion of the tax rate that falls on buildings. See this for more on the underlying theory: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr... If you want more sources on the empirical findings I'm happy to provide that to.

somnic 5y ago

Firstly, it wouldn't necessarily shift as much burden onto landlords, depending on the tax. The burden would be spread around all earners if it were an income tax hike, or all consumers for a sales tax or VAT. The extent to which it does affect landlords, rent subsidies would more than compensate. Secondly, how much landlords pay in tax is less relevant than what incentives the policy sets up. On the part of landlords, eviction moratoria incentivise not renting to higher-risk tenants at all. Higher taxes + rent subsidy would have the opposite effect, with more reason to rent to high risk tenants, and renting out properties that might be marginal otherwise. I don't know all the details of this, obviously, but this sort of policy analysis is much more about how it shifts incentives on the margin, rather than who pays more and who pays less.

carom 5y ago

A tax would be evenly distributed among all property owners. An eviction moratorium or rent stabilization places the burden on random individuals to subsidize poor housing policy (restrictive zoning).

cronix 5y ago

For one thing, the tax burden wouldn't be equal to a months rent, and then multiplied by however many months the moratorium lasts. If you were renting out a house for $1,500 a month, and not able to collect rent for over a year, that's over $18,000 including property taxes. That's quite a tax there, only on landlords. Many of whom not only rely on a small bit of income from them, but are also responsible for paying the mortgage. Likely the bulk of that $1,500 is going to a bank, not a landlords pocket. Not all landlords own the building outright. I doubt most do.

gumby 5y ago

Your question shows the limits from reductio analysis. You have to look at it systemically. Shifting the burden to the landlord, especially at a time of transient shock, is not only a direct tax, it's a tax when they may be themselves suffering a revenue shock just as their tenants are. Even replacing a tenant isn't automatic; there are transient costs and it can take time. While subsidizing the tenants takes cash from a large base (including debt, borrowed at a much lower rate than a landlord can get). That's the surface difference. But you may ask "who cares? Why do the landlords a favor?" Well there's a systemic issue in such a shock (think of swimming in the ocean when a wave drops you then lifts you independent of your swimming). Keeping the tenants in situ means the landlords can continue economic activity (doing repairs, buying lunch, going on vacation, etc). The tenants can too -- if nothing else they can look for a job rather than looking for a job AND looking for a place to live. Or they may not have actually lost their job, but just suffered from transient reduced demand (e.g. fewer haircuts) which might end up being complete job loss if they lose housing. Essentially you are preventing a liquidity crisis. And there are second order consequences as well: as the paper shows homelessness increases; this is a general tax on everyone not just in social programs but in all the followon consequences of having a lot of people on the streets. It's the same argument for subsidising farmers, even if most of them these days are big businesses: they suffer a lot of transient economic pressure (busts and booms) but we need a reliable food supply. So we engage in dreadfully wasteful behavior because we've decided it's better to pay that than suffer a food supply shock.

imtringued 5y ago

Because housing is not liquid. Spread risk over as many people as possible and they will just consider it the cost of doing business. If all the risk is unloaded on a few individuals then every participant will have to account for the potential of a 100% loss no matter how unlikely it is.

blitzar 5y ago

Tax is on profits. Revenue is on the gross. Taking someones profits to zero means they 'break even' on their expenses. Taking someones revenue to zero means they have to pay all their costs out of their own pocket. How is firing someone different from them going up a tax bracket?

GuB-42 5y ago

The tax increase can be for the landlords. Maybe a smart thing is to tax vacant housing and use that money to subsidize unpaid rent. The point is to limit the risk for landlords. Maybe they will earn less on good tenants, because of taxes, but they won't hesitate as much before taking "not as good" tenants.