8 ms·

Not really stated in the article are three caveats: 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more pro

Not really stated in the article are three caveats: 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends. 2) The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land. A homeowner sitting on a million dollar piece of property in California taxed at ~1% is still unlikely to build an apartment complex if they like their single family home just fine and are making $200k+/year in income. 3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with. Personally, I'd rather see 2nd homes taxed into absolute oblivion, and I say that as someone who was a landlord for several years. Affordable housing to me means "affordable housing you can actually buy" as much as it means "affordable rent". The two do not go hand-in-hand if rental income is incentivized enough that people buy as many properties as they can get loans for (California today).

bombcar 5y ago
The average single-family dwelling landlord is subsidizing someone; rents are usually below actual carrying costs (maintenance, etc) and most landlords would be better off selling. It’s one of the reasons banks and companies aren’t in the single family rental business. The main thing that covers for it is property appreciation - the rent is used to just offset carrying costs while you wait for the property to go up in value.
- mdorazio 5y ago
  I'm strongly going to need a source to back up your claim.
  - bombcar 5y ago
    Find banks or real-estate companies that invest in single family homes for the purpose of renting them. If you can find one, you often find that they'd rather let the property sit empty than renting it. Or just look at the cost of buying a house vs renting a similar house, account for maintenance, and see if the numbers line up.
    - long_time_gone 5y ago
      This isn’t really a source though, it’s requiring the other commenter to prove the point you made. Anecdotally, I know people who buy single family homes and rent them for profit. My 3 bed, 2 bath single-family home has a $3,000/monthly mortgage, I could easily rent it for more than $3,500 (closer to $4,000). Take out 10% for maintenance fees, and I net $200 a month.
      - bombcar 5y ago
        That shows exactly the point, 10% for maintenance isn't enough, doesn't cover taxes, insurance, and other costs, and netting $200/month on a (assumed) $450k+ house isn't great, that's less than the interest earned on a deposit of the same amount. Even if you only count the downpayment, $2400 a year on $90k is a 2.6% return; you therefore are getting the majority of your return from appreciation. To actually make a profit on the rental portion, you need to discount the appreciation. You can do this if you're paying into a mortgage from 20 years ago and renting at todays prices, but that's just ignoring the fact that you could sell the property. The biggest risk that most small landlords don't account for is a bad tenant - they exist and they will quickly eat through your $200/net a month. The final proof is no company anywhere is building single-family rentals. If there was money to be made there, they would; but you need to get to apartments and the cost-savings inherent in them before it makes sense.
        mdorazio 5y ago
        You realize that a mortgage is a loan, right? You’re paying both interest and equity on it over time, which you need to take into account. The longer you pay it, the more of your payments are really going right back into your own pocket. Renters get zero equity in exchange for their rent. And yes, I’ll agree that some portion of the ROI on a house is the expected appreciation, but we’ve setup a system where that’s effectively guaranteed in many locations and simultaneously unavailable to renters. There’s a reason “be a landlord” is now the go-to “get rich” strategy for a large number of people.
        PaulDavisThe1st 5y ago
  - jjav 5y ago
    Try doing the exercise yourself to be convinced. Check out zillow/redfin/etc for properties and then do the planning to buy and rent it. Consider all costs. Look at equivalent rents in that area. Can you make any profit? Probably not. Source: been doing this spreadsheet exercise for more than a decade. Have never found a property I could buy and rent out at a profit.
- fennecfoxen 5y ago
  https://www.wsj.com/articles/built-to-rent-suburbs-are-poised-to-spread-across-the-u-s-11623075610 https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... > Today, built-to-rent homes make up just over 6% of new homes built in the U.S. every year, according to Hunter Housing Economics, a real estate consulting firm, which projects the number of these homes built annually will double by 2024. The country’s largest home builders are planning for that future. Backed by banks and private investment firms, they have already bet billions on the sector, and will put down some $40 billion more during the next 18 months, Brad Hunter, founder of Hunter Housing Economics, projects. Built-to-rent subdivisions have been constructed or are under development in nearly 30 states. Taylor Morrison Home Corp. , Mr. Wood’s development partner and the nation’s fifth-largest builder, has said built-to-rent could soon become 50% of its total business. The company didn’t disclose the current share. > Homeownership is expected to decline over the next two decades—a trend that started with the generation after the baby boomers, according to the Urban Institute, a Washington, D.C., think tank that advocates for homeownership. Prices are rising faster than ever, leaving more people, including those with higher incomes, more likely to rent.
- Cd00d 5y ago
  I thought private equity was going into the single family rental business. In a big way. https://www.nytimes.com/2020/03/04/magazine/wall-street-landlords.html https://www.nytimes.com/2020/03/04/magazine/wall-street-land...
giantg2 5y ago
"The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land" The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.
- pj_mukh 5y ago
  The reform of zoning laws (atleast in California) is blocked by property owners sitting on low-tax properties. Raising the land value tax would be a surefire way to make the opposition disappear as property owners would have to scramble to make their land more productive.
  - giantg2 5y ago
    Or they'll block land value tax just as they so zoning. But you seem to be agreeing with my point that it inherently is designed to affect choices (eg changing land usage to be more productive).
    - pj_mukh 5y ago
      Yes, LVT solves problems at multiple levels (removes barriers to zoning reforms and incentivizes more productive use of land). It’s also politically difficult to get passed. However, it seems if we were to try to turn the tide on just one policy, it would be LVT, as it solves a lot of other political problems downstream.
- ItsMonkk 5y ago
  The carbon price and dividend shows a great example of how to correctly set incentives. You tax the carbon. That tax money is then put into an account. At the end of the year, every single individual is then given an equal share. The disincentives the use of carbon, while at the same time providing means that a majority of people actually get a net benefit. The land tax should be set so that the price of the house becomes just the price of the house - the cost of the materials and labor. The land value should drop to zero. You then take that money, maybe use some of it for some public goods, might use some of it to get rid of bad taxes like property, income and sales, then give the rest back just as with the carbon tax. The transition needs to be done with care(I heavily like giving everyone tax credits equal to the current value of their land, others like phasing in the tax over decades), but once we are in a land value tax environment everyone will be better off.
twoxproblematic 5y ago
It's insanely perverse that we let companies like Blackrock buy up lots of homes and turn them into rentals.
- epistasis 5y ago
  I don't understand how that's any more perverse than small landlords doing the same thing. What is the perversity argument around rentals? Is it that is a single family home being rented? Is it that it's a private equity company doing the renting? Is it the unique combination? Having had many many bad landlords of single family homes in the past, I'd prefer somebody like Blackrock as a land lord as they are less slokey and more likely to follow the law then a lot of landlords I've been forced to deal with.
Spooky23 5y ago
That’s insane. California needs a constitutional convention that gets rid of the stupid proposition law. Every random suburban town has a market worse than Manhattan because there is a fundamentally inequitable tax system.
legitster 5y ago
2) "Think on the margin" - a LVT might not make Bill Gates turn his mansion into condos, but down the bell curve there are likely plenty of people right on the fence who may be swayed. 3) LVT would (theoretically) equally encourage the development of condos as it would rental units.
inter_netuser 5y ago
>3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing The house you 'own', in fact is nothing more than tenancy. Just a different kind of tenancy. Stop paying property taxes and find out you still have a landlord. I think far bigger issue is how to apply LVT. a cookie-cutter approach is guaranteed to fail. an overly complex system is just another byzantine labyrinth of a tax code that'll be gamed.
apendleton 5y ago
> 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends. This is addressed to some extent, with the argument that zoning reforms are more practical because existing property owners are incentivized to support rather than fight zoning updates that allow more development, so they can fully maximize the ratio of their revenue against the tax. (“It turns NIMBYs into YIMBYs,” she quotes a researcher as saying.)
- jjav 5y ago
  > existing property owners are incentivized to support rather than fight zoning updates that allow more development Regular people who own some land are not going to have the capital or skillset to tear down their house and build a highrise on the plot of land. So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen. Consolidation of all ownership onto a few large players is not a good thing for society.
  - mikem170 5y ago
    > Consolidation of all ownership onto a few large players is not a good thing for society. For the past few decades a large percentage of new housing has been built by large developers who buy cheap land just outside of town, clear cut it, then build a bunch of cheaply made identical houses in complexes with nothing else allowed, leaving behind an HOA to enforce conformity. The laws encourage these large developers, and sprawl. It's too much overhead for an individual or a small developer to build in an established neighborhood, especially if they are not building expensive housing. Even lately hedgefunds and other large investors have been buying up housing at a greater rate, because they know the supply has been restricted by law. They'll squeeze everyone they can for money and lobby to keep their gravy train going.
  - imtringued 5y ago
    >So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen. Now those giant corporations are finally paying their damn taxes.
imtringued 5y ago
> It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with. This is a personal bias because you are trying to prevent other people from making their own decision on how they want to live. An uncharitable interpretation of your comment could be that you are forcing your will upon other people against their will. The fact that an LVT increases personal freedom is usually ignored because personal freedom counts for nothing these days. I find it particularly amusing that we have this group of people called liberals wanting their fake freedom.

bombcar 5y ago

The average single-family dwelling landlord is subsidizing someone; rents are usually below actual carrying costs (maintenance, etc) and most landlords would be better off selling. It’s one of the reasons banks and companies aren’t in the single family rental business. The main thing that covers for it is property appreciation - the rent is used to just offset carrying costs while you wait for the property to go up in value.

mdorazio 5y ago
I'm strongly going to need a source to back up your claim.
- bombcar 5y ago
  Find banks or real-estate companies that invest in single family homes for the purpose of renting them. If you can find one, you often find that they'd rather let the property sit empty than renting it. Or just look at the cost of buying a house vs renting a similar house, account for maintenance, and see if the numbers line up.
  - long_time_gone 5y ago
    This isn’t really a source though, it’s requiring the other commenter to prove the point you made. Anecdotally, I know people who buy single family homes and rent them for profit. My 3 bed, 2 bath single-family home has a $3,000/monthly mortgage, I could easily rent it for more than $3,500 (closer to $4,000). Take out 10% for maintenance fees, and I net $200 a month.
    - bombcar 5y ago
      That shows exactly the point, 10% for maintenance isn't enough, doesn't cover taxes, insurance, and other costs, and netting $200/month on a (assumed) $450k+ house isn't great, that's less than the interest earned on a deposit of the same amount. Even if you only count the downpayment, $2400 a year on $90k is a 2.6% return; you therefore are getting the majority of your return from appreciation. To actually make a profit on the rental portion, you need to discount the appreciation. You can do this if you're paying into a mortgage from 20 years ago and renting at todays prices, but that's just ignoring the fact that you could sell the property. The biggest risk that most small landlords don't account for is a bad tenant - they exist and they will quickly eat through your $200/net a month. The final proof is no company anywhere is building single-family rentals. If there was money to be made there, they would; but you need to get to apartments and the cost-savings inherent in them before it makes sense.
      - mdorazio 5y ago
        You realize that a mortgage is a loan, right? You’re paying both interest and equity on it over time, which you need to take into account. The longer you pay it, the more of your payments are really going right back into your own pocket. Renters get zero equity in exchange for their rent. And yes, I’ll agree that some portion of the ROI on a house is the expected appreciation, but we’ve setup a system where that’s effectively guaranteed in many locations and simultaneously unavailable to renters. There’s a reason “be a landlord” is now the go-to “get rich” strategy for a large number of people.
      - PaulDavisThe1st 5y ago
- jjav 5y ago
  Try doing the exercise yourself to be convinced. Check out zillow/redfin/etc for properties and then do the planning to buy and rent it. Consider all costs. Look at equivalent rents in that area. Can you make any profit? Probably not. Source: been doing this spreadsheet exercise for more than a decade. Have never found a property I could buy and rent out at a profit.
fennecfoxen 5y ago
https://www.wsj.com/articles/built-to-rent-suburbs-are-poised-to-spread-across-the-u-s-11623075610 https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... > Today, built-to-rent homes make up just over 6% of new homes built in the U.S. every year, according to Hunter Housing Economics, a real estate consulting firm, which projects the number of these homes built annually will double by 2024. The country’s largest home builders are planning for that future. Backed by banks and private investment firms, they have already bet billions on the sector, and will put down some $40 billion more during the next 18 months, Brad Hunter, founder of Hunter Housing Economics, projects. Built-to-rent subdivisions have been constructed or are under development in nearly 30 states. Taylor Morrison Home Corp. , Mr. Wood’s development partner and the nation’s fifth-largest builder, has said built-to-rent could soon become 50% of its total business. The company didn’t disclose the current share. > Homeownership is expected to decline over the next two decades—a trend that started with the generation after the baby boomers, according to the Urban Institute, a Washington, D.C., think tank that advocates for homeownership. Prices are rising faster than ever, leaving more people, including those with higher incomes, more likely to rent.
Cd00d 5y ago
I thought private equity was going into the single family rental business. In a big way. https://www.nytimes.com/2020/03/04/magazine/wall-street-landlords.html https://www.nytimes.com/2020/03/04/magazine/wall-street-land...

giantg2 5y ago

"The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land" The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.

pj_mukh 5y ago
The reform of zoning laws (atleast in California) is blocked by property owners sitting on low-tax properties. Raising the land value tax would be a surefire way to make the opposition disappear as property owners would have to scramble to make their land more productive.
- giantg2 5y ago
  Or they'll block land value tax just as they so zoning. But you seem to be agreeing with my point that it inherently is designed to affect choices (eg changing land usage to be more productive).
  - pj_mukh 5y ago
    Yes, LVT solves problems at multiple levels (removes barriers to zoning reforms and incentivizes more productive use of land). It’s also politically difficult to get passed. However, it seems if we were to try to turn the tide on just one policy, it would be LVT, as it solves a lot of other political problems downstream.
ItsMonkk 5y ago
The carbon price and dividend shows a great example of how to correctly set incentives. You tax the carbon. That tax money is then put into an account. At the end of the year, every single individual is then given an equal share. The disincentives the use of carbon, while at the same time providing means that a majority of people actually get a net benefit. The land tax should be set so that the price of the house becomes just the price of the house - the cost of the materials and labor. The land value should drop to zero. You then take that money, maybe use some of it for some public goods, might use some of it to get rid of bad taxes like property, income and sales, then give the rest back just as with the carbon tax. The transition needs to be done with care(I heavily like giving everyone tax credits equal to the current value of their land, others like phasing in the tax over decades), but once we are in a land value tax environment everyone will be better off.

twoxproblematic 5y ago

It's insanely perverse that we let companies like Blackrock buy up lots of homes and turn them into rentals.

epistasis 5y ago
I don't understand how that's any more perverse than small landlords doing the same thing. What is the perversity argument around rentals? Is it that is a single family home being rented? Is it that it's a private equity company doing the renting? Is it the unique combination? Having had many many bad landlords of single family homes in the past, I'd prefer somebody like Blackrock as a land lord as they are less slokey and more likely to follow the law then a lot of landlords I've been forced to deal with.

Spooky23 5y ago

That’s insane. California needs a constitutional convention that gets rid of the stupid proposition law. Every random suburban town has a market worse than Manhattan because there is a fundamentally inequitable tax system.

legitster 5y ago

2) "Think on the margin" - a LVT might not make Bill Gates turn his mansion into condos, but down the bell curve there are likely plenty of people right on the fence who may be swayed. 3) LVT would (theoretically) equally encourage the development of condos as it would rental units.

inter_netuser 5y ago

>3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing The house you 'own', in fact is nothing more than tenancy. Just a different kind of tenancy. Stop paying property taxes and find out you still have a landlord. I think far bigger issue is how to apply LVT. a cookie-cutter approach is guaranteed to fail. an overly complex system is just another byzantine labyrinth of a tax code that'll be gamed.

apendleton 5y ago

> 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends. This is addressed to some extent, with the argument that zoning reforms are more practical because existing property owners are incentivized to support rather than fight zoning updates that allow more development, so they can fully maximize the ratio of their revenue against the tax. (“It turns NIMBYs into YIMBYs,” she quotes a researcher as saying.)

jjav 5y ago
> existing property owners are incentivized to support rather than fight zoning updates that allow more development Regular people who own some land are not going to have the capital or skillset to tear down their house and build a highrise on the plot of land. So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen. Consolidation of all ownership onto a few large players is not a good thing for society.
- mikem170 5y ago
  > Consolidation of all ownership onto a few large players is not a good thing for society. For the past few decades a large percentage of new housing has been built by large developers who buy cheap land just outside of town, clear cut it, then build a bunch of cheaply made identical houses in complexes with nothing else allowed, leaving behind an HOA to enforce conformity. The laws encourage these large developers, and sprawl. It's too much overhead for an individual or a small developer to build in an established neighborhood, especially if they are not building expensive housing. Even lately hedgefunds and other large investors have been buying up housing at a greater rate, because they know the supply has been restricted by law. They'll squeeze everyone they can for money and lobby to keep their gravy train going.
- imtringued 5y ago
  >So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen. Now those giant corporations are finally paying their damn taxes.

imtringued 5y ago

> It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with. This is a personal bias because you are trying to prevent other people from making their own decision on how they want to live. An uncharitable interpretation of your comment could be that you are forcing your will upon other people against their will. The fact that an LVT increases personal freedom is usually ignored because personal freedom counts for nothing these days. I find it particularly amusing that we have this group of people called liberals wanting their fake freedom.