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Land taxes are far far more difficult to calculate than property taxes. Impossible to do well in some cases. To know what land and the buildings on it are worth

Land taxes are far far more difficult to calculate than property taxes. Impossible to do well in some cases. To know what land and the buildings on it are worth you can look to what people are willing to pay to buy them. There’s no similarly straightforward way to value the separate parts. So you’ll end up with a lot more wasted expert time for a less accurate result.

MrPowers 5y ago
Nah, it's really easy to calculate the value of the land. Once you calculate the value of the land, then it's pretty much applicable to the whole neighborhood too. It's a one-and-done analysis. This isn't my opinion. There's lots of economic research to back this up. EDIT: some support: https://www.progress.org/articles/the-implementation-of-land-value-taxation https://www.progress.org/articles/the-implementation-of-land...
- AnimalMuppet 5y ago
  Some evidence would be more convincing than a glib "nah, I'm right"...
  - deleted 5y ago
    [deleted]
  - epistasis 5y ago
    Oddly enough there was no evidence provided for the original claim, either. This despite there being many sources of this estimattioj laid out directly in the original article. The comment didn't mention why the original articles' various methods do not work.
    - AnimalMuppet 5y ago
      Fair point. But to me, I hold the reply to a higher standard. Why? Because a claim can be interesting (in the HN sense), even without evidence. A "no it's not" is less interesting, even though it's also a claim. Maybe that's just me...
- aeternum 5y ago
  This really doesn't make sense. Views matter for example, land with a blocked view should be worth less than land without the blocked view. Land immediately adjacent to a golf course or park is often valued higher. Land immediately next to railroad tracks or industry, not so much while the discount drops off steeply just a few blocks away. Water rights, drainage, soil quality, contamination, roadway access all matter a great deal for more commercial land.
  - MrPowers 5y ago
    I agree that different factors cause some land to be more valuable than others. I'd argue that the factors you've listed are relatively easy to factor into an appraisal. Property taxes, in comparison, are really hard to compute. Each jurisdiction has different rules. There are different valuation methodologies. If you add a 2 car garage, what the useful life. What depreciation schedule should be used. How should inflation be accounted for. I agree with your comment generally and am not sure what part of the original comment doesn't make sense to you. EDIT: Reread my original comment and see your point now. I phrased the "easy" part too strongly. I mean "easy" in relative terms... compared to what's being done currently, but agree the wording wasn't great.
    - dsizzle 5y ago
      Yeah, and these features are easier to track than the interior of the house. As an aside, I've often been surprised how little some of these features get valued. For instance, I've looked at neighborhoods where one side of the street backs to other houses and the other side backs to parkland. The nicer side is generally more expensive, but it's not a huge effect, and often homes on the bad side go for more money (because of the building itself).
      - gbhn 5y ago
        Ultimately wouldn't these rates be set politically? As in, there'd be one politician who says "raise the tax and do this" and another who says "lower the tax and stop doing that" and voters just pick what they want to happen.
- dsizzle 5y ago
  This quote from your link contradicts a "one-and-done" whole neighborhood analysis: >There would be an annual value assessment for each plot of land It seems the OP has better examples of how it would be done than that link.
- pdonis 5y ago
  > it's really easy to calculate the value of the land. No, it's really easy to wave your hands and come up with a number that you claim is "the value of the land". But since that number is not based on actual sales of the land in question, it's just hand-waving. Not to mention that if you ask five different economists to do the estimating, you'll get more than five different answers. Much of the article that prompted this thread is trying to deal with this problem: there are so many widely varying estimates of land value, and no compelling reason to believe any one more than the others, because none of them are based on actual sales of the land whose value they're trying to estimate.
  - MrPowers 5y ago
    I'm not sure I agree with this: > since that number is not based on actual sales of the land in question, it's just hand-waving Actual land is sold in a lot of markets. That sets a great benchmark for "comparable transaction" types of valuation analyses which tend to be the most reliable. If one acre of land is sold, there is a great baseline for the whole surrounding area. I passed all 3 CFA exams and agree it's not an exact science, but as far a valuation analyses go, this one is pretty easy. Valuing something like intellectual property, goodwill impairment analyses, 409a valuations are much harder.
    - pdonis 5y ago
      > Actual land is sold in a lot of markets. But much more land with improvements on it is also sold, and that's the land that all these hand-waving formulas claim to be determining the "value" of--not the total value of land + improvements, but just the value of the land itself.
      - theluketaylor 5y ago
        The local cost of construction per sq ft to replace an improvement is reasonably easy to arrive at. So is the annual cost to maintain an improvement. Then simply subtract from purchase price. The toughest part is making sure the process isn't corrupted and some people get an assessed land value far less or more than it is actually worth. It likely wouldn't work with real estate, but low cost motorsports has a simple solution to this problem. If there is a $1000 limit on the value of the car before all the standard safety additions, then the owner has to accept $1000 from any other competitor for the car. This massively disincentives anyone from undervaluing their race car as it will simply be purchased for way less than it's worth. In real estate this would just result in wealthy people snapping up anything they thought was even slightly undervalued. Maybe value purchases can only happen when challenging a valuation with strong court-backed protection for the owner to ensure the valuation has been applied justly.
TulliusCicero 5y ago
Property taxes are already commonly broken down into the value of the land vs buildings, IIRC.
- entangledqubit 5y ago
  At least for Seattle, the assessor's office has a breakdown but it turns out to be fairly bogus unless there's been a remodel or new building -- resulting in a new assessment. Quite a few cities also seem to have pretty bogus values on the books.
  - skt5 5y ago
    The building value by the county assessor's office is considered a standard for depreciation schedules. While it might not be useful for selling the property or building it - it does have value for accounting purposes.
- dsizzle 5y ago
  FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. That said, it is done for property insurance, so I think your point that it's already done stands.
  - lelanthran 5y ago
    > FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. > > That said, it is done for property insurance, so I think your point that it's already done stands. I dunno how useful that will be - my insurance is based on how much it would cost to rebuild the house if it burned down. This lead to the comedic result that what I paid for the house at the time was about half what the insured value was. My property tax is calculated on the selling price, though.
    - DarylZero 5y ago
      That comedic situation is exactly the reason your insurance works like that. The insurance company knows it's in your interest to burn it down and sell the empty plot so they only insure it in a way that prevents that.
dsizzle 5y ago
Isn't this already done as part of property insurance?
larsiusprime 5y ago
Part III, concerning assessments, will post in a few days. Interested in your thoughts when that one goes up.
ineptech 5y ago
Inaccuracy isn't a very big component of this; assessing the value of land and structures isn't perfect but there's no obvious reason to think we're way better at one or the other. The point of this is that taxing the land only would lead to land being used differently, which would benefit society. Suppose there is a plot of land which (from some omniscient point of view) would offer maximal benefit to society if a four-plex were developed on it. The point of a LVT is that, under a LVT, a four-plex would be developed on it, not because anyone forces it but just because that's what's in the landowner's best interest; whereas under the current system (in which the structure is also taxed) the landowner might find it more profitable to build a duplex instead. The deadweight loss is the loss to society when the landowner builds something that's in their best interests but not society's. That's hard to prove for any specific piece of land, since we don't know what the omniscient-view "right" use of the land is. But if you accept the idea that there is an optimal use, and you you trust the whole idea of free market price discovery, it's reasonable.
- dnautics 5y ago
  Inaccuracy in the end is a HUGE component of this. If you can't have an accurate value for the land, the long-run incentives converge to a system where the land value assessors have a lot of power, and could use that power to screw you over.
- bradleyjg 5y ago
  > but there's no obvious reason to think we're way better at one or the other. There’s a very good reason. Sales of buildings plus land happen all the time, whereas sales of just land are virtually non-existent in a lot of the places with the most valuable property (e.g. Manhattan). Without real sales to tether the analysis you are just guessing.
  - DarylZero 5y ago
    Buildings are demolished in Manhattan on a regular basis, granted not that often. There are real sales of empty plots. Also if you know a building would cost $X to replace, but the plot with it sells for $X+$Y, you have some real information, not just guesses!
ukoki 5y ago
What if you had a system where anyone can bid any amount on any piece of land. Whether the owner refuses the bid or not, the land is now valued at the price of the bid for tax purposes. To avoid frivolous bids, bidders must place funds in escrow before making a bid which is then returned to the bidder if the owner refuses the bid or fails to respond within some number of days. All bids are reported to the public although bidders can be anonymous.
- bradleyjg 5y ago
  Buying land that has buildings on it but not the buildings is an awkward situation that requires a further negotiation of a lease transaction to the building owner. Even if you could set something super complicated up with this bidding system I don’t think it would accurately value what the land would be worth empty.
DarylZero 5y ago
Actually there are empty plots bought and sold all the time.

MrPowers 5y ago

Nah, it's really easy to calculate the value of the land. Once you calculate the value of the land, then it's pretty much applicable to the whole neighborhood too. It's a one-and-done analysis. This isn't my opinion. There's lots of economic research to back this up. EDIT: some support: https://www.progress.org/articles/the-implementation-of-land-value-taxation https://www.progress.org/articles/the-implementation-of-land...

AnimalMuppet 5y ago
Some evidence would be more convincing than a glib "nah, I'm right"...
- deleted 5y ago
  [deleted]
- epistasis 5y ago
  Oddly enough there was no evidence provided for the original claim, either. This despite there being many sources of this estimattioj laid out directly in the original article. The comment didn't mention why the original articles' various methods do not work.
  - AnimalMuppet 5y ago
    Fair point. But to me, I hold the reply to a higher standard. Why? Because a claim can be interesting (in the HN sense), even without evidence. A "no it's not" is less interesting, even though it's also a claim. Maybe that's just me...
aeternum 5y ago
This really doesn't make sense. Views matter for example, land with a blocked view should be worth less than land without the blocked view. Land immediately adjacent to a golf course or park is often valued higher. Land immediately next to railroad tracks or industry, not so much while the discount drops off steeply just a few blocks away. Water rights, drainage, soil quality, contamination, roadway access all matter a great deal for more commercial land.
- MrPowers 5y ago
  I agree that different factors cause some land to be more valuable than others. I'd argue that the factors you've listed are relatively easy to factor into an appraisal. Property taxes, in comparison, are really hard to compute. Each jurisdiction has different rules. There are different valuation methodologies. If you add a 2 car garage, what the useful life. What depreciation schedule should be used. How should inflation be accounted for. I agree with your comment generally and am not sure what part of the original comment doesn't make sense to you. EDIT: Reread my original comment and see your point now. I phrased the "easy" part too strongly. I mean "easy" in relative terms... compared to what's being done currently, but agree the wording wasn't great.
  - dsizzle 5y ago
    Yeah, and these features are easier to track than the interior of the house. As an aside, I've often been surprised how little some of these features get valued. For instance, I've looked at neighborhoods where one side of the street backs to other houses and the other side backs to parkland. The nicer side is generally more expensive, but it's not a huge effect, and often homes on the bad side go for more money (because of the building itself).
    - gbhn 5y ago
      Ultimately wouldn't these rates be set politically? As in, there'd be one politician who says "raise the tax and do this" and another who says "lower the tax and stop doing that" and voters just pick what they want to happen.
dsizzle 5y ago
This quote from your link contradicts a "one-and-done" whole neighborhood analysis: >There would be an annual value assessment for each plot of land It seems the OP has better examples of how it would be done than that link.
pdonis 5y ago
> it's really easy to calculate the value of the land. No, it's really easy to wave your hands and come up with a number that you claim is "the value of the land". But since that number is not based on actual sales of the land in question, it's just hand-waving. Not to mention that if you ask five different economists to do the estimating, you'll get more than five different answers. Much of the article that prompted this thread is trying to deal with this problem: there are so many widely varying estimates of land value, and no compelling reason to believe any one more than the others, because none of them are based on actual sales of the land whose value they're trying to estimate.
- MrPowers 5y ago
  I'm not sure I agree with this: > since that number is not based on actual sales of the land in question, it's just hand-waving Actual land is sold in a lot of markets. That sets a great benchmark for "comparable transaction" types of valuation analyses which tend to be the most reliable. If one acre of land is sold, there is a great baseline for the whole surrounding area. I passed all 3 CFA exams and agree it's not an exact science, but as far a valuation analyses go, this one is pretty easy. Valuing something like intellectual property, goodwill impairment analyses, 409a valuations are much harder.
  - pdonis 5y ago
    > Actual land is sold in a lot of markets. But much more land with improvements on it is also sold, and that's the land that all these hand-waving formulas claim to be determining the "value" of--not the total value of land + improvements, but just the value of the land itself.
    - theluketaylor 5y ago
      The local cost of construction per sq ft to replace an improvement is reasonably easy to arrive at. So is the annual cost to maintain an improvement. Then simply subtract from purchase price. The toughest part is making sure the process isn't corrupted and some people get an assessed land value far less or more than it is actually worth. It likely wouldn't work with real estate, but low cost motorsports has a simple solution to this problem. If there is a $1000 limit on the value of the car before all the standard safety additions, then the owner has to accept $1000 from any other competitor for the car. This massively disincentives anyone from undervaluing their race car as it will simply be purchased for way less than it's worth. In real estate this would just result in wealthy people snapping up anything they thought was even slightly undervalued. Maybe value purchases can only happen when challenging a valuation with strong court-backed protection for the owner to ensure the valuation has been applied justly.

TulliusCicero 5y ago

Property taxes are already commonly broken down into the value of the land vs buildings, IIRC.

entangledqubit 5y ago
At least for Seattle, the assessor's office has a breakdown but it turns out to be fairly bogus unless there's been a remodel or new building -- resulting in a new assessment. Quite a few cities also seem to have pretty bogus values on the books.
- skt5 5y ago
  The building value by the county assessor's office is considered a standard for depreciation schedules. While it might not be useful for selling the property or building it - it does have value for accounting purposes.
dsizzle 5y ago
FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. That said, it is done for property insurance, so I think your point that it's already done stands.
- lelanthran 5y ago
  > FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. > > That said, it is done for property insurance, so I think your point that it's already done stands. I dunno how useful that will be - my insurance is based on how much it would cost to rebuild the house if it burned down. This lead to the comedic result that what I paid for the house at the time was about half what the insured value was. My property tax is calculated on the selling price, though.
  - DarylZero 5y ago
    That comedic situation is exactly the reason your insurance works like that. The insurance company knows it's in your interest to burn it down and sell the empty plot so they only insure it in a way that prevents that.

dsizzle 5y ago

Isn't this already done as part of property insurance?

larsiusprime 5y ago

Part III, concerning assessments, will post in a few days. Interested in your thoughts when that one goes up.

ineptech 5y ago

Inaccuracy isn't a very big component of this; assessing the value of land and structures isn't perfect but there's no obvious reason to think we're way better at one or the other. The point of this is that taxing the land only would lead to land being used differently, which would benefit society. Suppose there is a plot of land which (from some omniscient point of view) would offer maximal benefit to society if a four-plex were developed on it. The point of a LVT is that, under a LVT, a four-plex would be developed on it, not because anyone forces it but just because that's what's in the landowner's best interest; whereas under the current system (in which the structure is also taxed) the landowner might find it more profitable to build a duplex instead. The deadweight loss is the loss to society when the landowner builds something that's in their best interests but not society's. That's hard to prove for any specific piece of land, since we don't know what the omniscient-view "right" use of the land is. But if you accept the idea that there is an optimal use, and you you trust the whole idea of free market price discovery, it's reasonable.

dnautics 5y ago
Inaccuracy in the end is a HUGE component of this. If you can't have an accurate value for the land, the long-run incentives converge to a system where the land value assessors have a lot of power, and could use that power to screw you over.
bradleyjg 5y ago
> but there's no obvious reason to think we're way better at one or the other. There’s a very good reason. Sales of buildings plus land happen all the time, whereas sales of just land are virtually non-existent in a lot of the places with the most valuable property (e.g. Manhattan). Without real sales to tether the analysis you are just guessing.
- DarylZero 5y ago
  Buildings are demolished in Manhattan on a regular basis, granted not that often. There are real sales of empty plots. Also if you know a building would cost $X to replace, but the plot with it sells for $X+$Y, you have some real information, not just guesses!

ukoki 5y ago

What if you had a system where anyone can bid any amount on any piece of land. Whether the owner refuses the bid or not, the land is now valued at the price of the bid for tax purposes. To avoid frivolous bids, bidders must place funds in escrow before making a bid which is then returned to the bidder if the owner refuses the bid or fails to respond within some number of days. All bids are reported to the public although bidders can be anonymous.

bradleyjg 5y ago
Buying land that has buildings on it but not the buildings is an awkward situation that requires a further negotiation of a lease transaction to the building owner. Even if you could set something super complicated up with this bidding system I don’t think it would accurately value what the land would be worth empty.

DarylZero 5y ago

Actually there are empty plots bought and sold all the time.