4 ms·

In areas of housing shortages, the rent with LVT would be whatever it currently is without LVT. Theoretically, landlords are already extracting the maximum rent

In areas of housing shortages, the rent with LVT would be whatever it currently is without LVT. Theoretically, landlords are already extracting the maximum rent price possible in housing-constrained markets like NYC/SF/etc. What would change is that the land-owner would make less profit. Potentially, a unit which is currently renting for $1100/mo in Manhattan might be assigned an LVT of $1500/mo. In that case, the landowner will lose $400/mo. However, if they stop renting it out, they will lose $1500/mo. The rational thing to do would be to improve the accommodations so that someone would be willing to pay $2000/mo to rent it. Then the landlord would profit on the improvements they made (rather than profit on merely owning high-value land). They would be rewarded for the value they added on top of the land.

davjhan 5y ago
I see. Could it be possible in areas like Detroit where the cost of renovating the house for profitability is just too prohibitively expensive that the house itself just isn't sellable? Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out? Especially if implemented too suddenly?
- runnerup 5y ago
  Ideally in low-value areas like Detroit, the land tax would be low as well. A "negative rent yield" situation should generally "only" occur where, for an extreme example, you could put a skyscraper to house 4,000 people on the land, but instead put a brownstone to house 4. There you might be taxed at the same land rate as the skyscraper next door, if skyscrapers were ubiquitous in that neighborhood. If you were fabulously wealthy, you could choose to maintain your single-family brownstone there and simply pay the millions in annual taxes. The local school district wouldn't notice a difference. But most landowners would decide to partner with a developer and build a skyscraper so that they can earn more than the LVT, which should lower rents for the laborers in that city. > Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out? Especially if implemented too suddenly? Yes. As could large commercial real-estate holders. The reason is simple: if you raise taxes, the resale value of the land will be lower. A graduated implementation could help a bit, but the final "price" will still get instantly priced in with a bit of a time discount. Proponents of Georgian LVT are generally comfortable with lowering the resale prices of real-estate. They may underestimate the degree of the change, or misjudge the wider effects of most properties suddenly being worth less. However, proponents generally don't like the idea of people earning their retirement just by holding land. So the first-order effects on resale prices of land are more of a feature than a bug. I'm not entirely convinced that second- and third- order effects wouldn't be potentially devastating. I believe if the nation had been founded with a Georgian LVT things would have worked out much for the better! But I'm afraid of how much of our economy we have precariously perched on infinitely rising land prices.
lelanthran 5y ago
> In areas of housing shortages, the rent with LVT would be whatever it currently is without LVT. Theoretically, landlords are already extracting the maximum rent price possible in housing-constrained markets like NYC/SF/etc. But that doesn't mean that the maximum rent (whatever the market can bear) will remain the same if all landlords had their costs go up by the same amount at the same time. It could fall as landlords get out of the renting business because the costs are above what the market will bear, but I think that it is equally likely that landlords will first raise the rents to try to stay in business. What makes an area expensive to rent/buy in is not "greedy landlords", it's primarily the fact that the demand is high. Any solution that doesn't involve matching the demand to the supply is bound to fail in the long term. Land may be a scarce resource, but that's only in select places. It might be better to spend the effort making the undesirable places more desirable than by knocking down existing buildings and replacing them with high-density buildings. A non-CBD area that has high-speed internet, quick+cheap public transport to the CBD, electricty and clean water supplies should be fairly desirable to live in. Those who want an address in the middle of the city shouldn't expect to pay the same as those who are prepared to travel to the middle of the city. I don't think that building more housing units in the middle of the city is going to solve the problem of expensive housing in the middle of the city. The middle of the city is always going to be expensive.
- runnerup 5y ago
  > Those who want an address in the middle of the city shouldn't expect to pay the same as those who are prepared to travel to the middle of the city. I don't think that building more housing units in the middle of the city is going to solve the problem of expensive housing in the middle of the city. The middle of the city is always going to be expensive. Indeed. Proponents seem to argue that most of that high rent paid by tenants will be captured by taxes and redistributed. Proponents goal is to make "similar" improvements provide the same net profit across the country, even if the rent for it is $800 in Detroit and $4000 in Manhattan. The taxes would be $300 in Detroit and $3500 in Manhattan. Therefore a developer looking for $500/mo profit could just as easily build in Detroit as in Manhattan. After the demand for housing was satisfied by supply rents would fall, and LVT would fall as well, such that landlords continue making $500/mo profit on each of those identical units. At least, that seems to be the ideal situation presented by proponents as I understand it.

davjhan 5y ago

I see. Could it be possible in areas like Detroit where the cost of renovating the house for profitability is just too prohibitively expensive that the house itself just isn't sellable? Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out? Especially if implemented too suddenly?

runnerup 5y ago
Ideally in low-value areas like Detroit, the land tax would be low as well. A "negative rent yield" situation should generally "only" occur where, for an extreme example, you could put a skyscraper to house 4,000 people on the land, but instead put a brownstone to house 4. There you might be taxed at the same land rate as the skyscraper next door, if skyscrapers were ubiquitous in that neighborhood. If you were fabulously wealthy, you could choose to maintain your single-family brownstone there and simply pay the millions in annual taxes. The local school district wouldn't notice a difference. But most landowners would decide to partner with a developer and build a skyscraper so that they can earn more than the LVT, which should lower rents for the laborers in that city. > Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out? Especially if implemented too suddenly? Yes. As could large commercial real-estate holders. The reason is simple: if you raise taxes, the resale value of the land will be lower. A graduated implementation could help a bit, but the final "price" will still get instantly priced in with a bit of a time discount. Proponents of Georgian LVT are generally comfortable with lowering the resale prices of real-estate. They may underestimate the degree of the change, or misjudge the wider effects of most properties suddenly being worth less. However, proponents generally don't like the idea of people earning their retirement just by holding land. So the first-order effects on resale prices of land are more of a feature than a bug. I'm not entirely convinced that second- and third- order effects wouldn't be potentially devastating. I believe if the nation had been founded with a Georgian LVT things would have worked out much for the better! But I'm afraid of how much of our economy we have precariously perched on infinitely rising land prices.

lelanthran 5y ago

> In areas of housing shortages, the rent with LVT would be whatever it currently is without LVT. Theoretically, landlords are already extracting the maximum rent price possible in housing-constrained markets like NYC/SF/etc. But that doesn't mean that the maximum rent (whatever the market can bear) will remain the same if all landlords had their costs go up by the same amount at the same time. It could fall as landlords get out of the renting business because the costs are above what the market will bear, but I think that it is equally likely that landlords will first raise the rents to try to stay in business. What makes an area expensive to rent/buy in is not "greedy landlords", it's primarily the fact that the demand is high. Any solution that doesn't involve matching the demand to the supply is bound to fail in the long term. Land may be a scarce resource, but that's only in select places. It might be better to spend the effort making the undesirable places more desirable than by knocking down existing buildings and replacing them with high-density buildings. A non-CBD area that has high-speed internet, quick+cheap public transport to the CBD, electricty and clean water supplies should be fairly desirable to live in. Those who want an address in the middle of the city shouldn't expect to pay the same as those who are prepared to travel to the middle of the city. I don't think that building more housing units in the middle of the city is going to solve the problem of expensive housing in the middle of the city. The middle of the city is always going to be expensive.

runnerup 5y ago
> Those who want an address in the middle of the city shouldn't expect to pay the same as those who are prepared to travel to the middle of the city. I don't think that building more housing units in the middle of the city is going to solve the problem of expensive housing in the middle of the city. The middle of the city is always going to be expensive. Indeed. Proponents seem to argue that most of that high rent paid by tenants will be captured by taxes and redistributed. Proponents goal is to make "similar" improvements provide the same net profit across the country, even if the rent for it is $800 in Detroit and $4000 in Manhattan. The taxes would be $300 in Detroit and $3500 in Manhattan. Therefore a developer looking for $500/mo profit could just as easily build in Detroit as in Manhattan. After the demand for housing was satisfied by supply rents would fall, and LVT would fall as well, such that landlords continue making $500/mo profit on each of those identical units. At least, that seems to be the ideal situation presented by proponents as I understand it.