5 ms·

No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another pl

No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. If there are no places they will go homeless. Since landlords are already charging for this value, an increase of taxes does not increase the rents. > every property owner isn't going to operate at a loss So they will then sell. But who would buy at current prices? The main effect of a change in tax rate is a one-time change in the market price of the property. Someone won't be under water if the property was $1. The market will find a new clearing price. I'm sympathetic to current owners, and this is why I prefer to combine the implementation of the Land Value Tax with a Land Tax credit equal to the existing value of the land to the deed owner. This will allow everyone to be net neutral over the transition period, and would even be net positive as the risk of ones property value dropping in recessions would go away.

ethbr0 4y ago
Well said and interesting. Part of the problem with change is that there are always negative effects somewhere, but the answer should be to address those negative effects... not to postpone change until a mythical no-negative version is found.
- ruined 4y ago
  probably the main negative consequence of any real estate regime change would be the destruction of incredible amounts of (paper) wealth. if you're going to reduce the market price of real estate, you're going to devalue one of the most foundational assets in the economy. but, that's the point. you can't reduce real estate prices without reducing real estate prices.
  - x86x87 4y ago
    Destruction of wealth would be bad since that would impact everyone (homeowner or not). I would opt for wealth transfer. Build more housing! Once the demand decreases the price will decrease. This also solves another fundamental problem: we pretend that there are X houses and X people that need a place to live. In reality there are more people than houses. Way more. Build more houses. Build high density housing. Stop treating housing like some sort of holy grail investment.
carom 4y ago
>No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. Then why are investors a problem?
- ItsMonkk 4y ago
  If investors are investing in apartments for people to live in there is no problem. If investors are investing in land and leaving it empty waiting for the local city to build valuable infrastructure around them before they sell it, that's a major problem. A land value tax will see the former do better and the later to do much worse.
  - x86x87 4y ago
    Do capitalism! No, not like that. As a society we need to decide if we want to have the cake or eat the cake. If I own the land, I own the land. The city has a responsibility to consider this (and many other things) when developing infra. There are a multitude of levers that can be pulled to deincentivize this behavior, but the tragedy is that the people who benefit from it are hand in hand with the people that make and apply the rules.
x86x87 4y ago
> If the rental price of the apartment is above that, they won't pay it and find another place. If there are no places they will go homeless. Since landlords are already charging for this value, an increase of taxes does not increase the rents. Nope. Sorry but that's not how it works. If the landlord has to pay 4x tax they will pass some (all) of that increase to the renter. Also, a 4x increase in tax != 4x increase in rent. So, say the property is worth 1mil$, and you pay 1% tax. That's 10k. You charge 3k rent. The taxman makes the tax 4%, now you have to pay 40k. You decide to pass 30k to the renter. So now they pay 36k+30k rent per year. 4x tax, 2x rent. If a landlord does this, sure. Renters find a new place. No brainer. If all landlords do this, the renters arr fucked. Finding a new place will not save you. In effect you make it way worse on the renters. The solution to the housing crisis is not some trick involving taxes, rent caps, adding more rules etc. The solution is simple: build more housing. That's the only thing that will work and will bring down the pressure. We also need to stop conflating affordable housing with home ownership. If you are having trouble finding a place to rent you can afford there is no way you can buy a house. I feel like the HN bubble w/ our high sky salaries is somewhat disconnected from what the average person can actually do.
- nostrademons 4y ago
  "If the landlord has to pay 4x tax they will pass some (all) of that increase to the renter. Also, a 4x increase in tax != 4x increase in rent." How much of a tax gets passed along to the consumer is modeled in an introductory macroeconomics course. It depends upon the elasticity of supply and demand. A tax falls primarily on the side of the transaction with the lower elasticity, because they are less able to adapt behavior to avoid the tax. https://www.khanacademy.org/economics-finance-domain/microeconomics/elasticity-tutorial/price-elasticity-tutorial/a/elasticity-and-tax-incidence https://www.khanacademy.org/economics-finance-domain/microec... The reason economists like a land-value tax is because the elasticity of supply for land is effectively zero: there is a fixed amount of land, and regardless of what the tax rate is, landowners are either going to seek a return on their ownership or will sell it to someone else who'll get a better return. Elasticity of demand is pretty low too, but it's not zero: people can double up with roommates, move in with families, or become homeowners. So a tax on unimproved land ends up falling almost entirely on the landlord, with relatively little long-term impact on rents. In practice, we're likely to see pretty severe reallocations of land and short-term price dislocations, as existing landowners find that their usage is not productive enough to pay the tax and so they need to sell to new firms who will use the land in different ways. But this is working-as-intended: the goal of an LVT is to incentivize better usage of land through high-density development of desirable parcels, individual homeownership (when density makes sense), and commercial activity.
jjav 4y ago
> Since landlords are already charging for this value, an increase of taxes does not increase the rents. This seems to assume that a rental property is forever a rental property and will continue to be rented at market price no matter what. But that's not true. It's only a rental property if the owner can rent it out and not be losing money. If the conditions change (like taxes on it) so that's it can no longer be profitable, it is taken off the rental market (most likely by selling to someone who wants to live in it). If that's one unit, no problem, the renter can go elsewhere. In the proposal being discussed where all rental units have a 4x tax increase, this applies to all rental units at once. Rent prices go way up and most rental units disappear from the market.
- ItsMonkk 4y ago
  Ah, this is true. Targeting a certain specific thing in a market will cause distortions. This is why I am for the value of all land being taxed. No distortions.

ethbr0 4y ago

Well said and interesting. Part of the problem with change is that there are always negative effects somewhere, but the answer should be to address those negative effects... not to postpone change until a mythical no-negative version is found.

ruined 4y ago
probably the main negative consequence of any real estate regime change would be the destruction of incredible amounts of (paper) wealth. if you're going to reduce the market price of real estate, you're going to devalue one of the most foundational assets in the economy. but, that's the point. you can't reduce real estate prices without reducing real estate prices.
- x86x87 4y ago
  Destruction of wealth would be bad since that would impact everyone (homeowner or not). I would opt for wealth transfer. Build more housing! Once the demand decreases the price will decrease. This also solves another fundamental problem: we pretend that there are X houses and X people that need a place to live. In reality there are more people than houses. Way more. Build more houses. Build high density housing. Stop treating housing like some sort of holy grail investment.

carom 4y ago

>No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. Then why are investors a problem?

ItsMonkk 4y ago
If investors are investing in apartments for people to live in there is no problem. If investors are investing in land and leaving it empty waiting for the local city to build valuable infrastructure around them before they sell it, that's a major problem. A land value tax will see the former do better and the later to do much worse.
- x86x87 4y ago
  Do capitalism! No, not like that. As a society we need to decide if we want to have the cake or eat the cake. If I own the land, I own the land. The city has a responsibility to consider this (and many other things) when developing infra. There are a multitude of levers that can be pulled to deincentivize this behavior, but the tragedy is that the people who benefit from it are hand in hand with the people that make and apply the rules.

x86x87 4y ago

> If the rental price of the apartment is above that, they won't pay it and find another place. If there are no places they will go homeless. Since landlords are already charging for this value, an increase of taxes does not increase the rents. Nope. Sorry but that's not how it works. If the landlord has to pay 4x tax they will pass some (all) of that increase to the renter. Also, a 4x increase in tax != 4x increase in rent. So, say the property is worth 1mil$, and you pay 1% tax. That's 10k. You charge 3k rent. The taxman makes the tax 4%, now you have to pay 40k. You decide to pass 30k to the renter. So now they pay 36k+30k rent per year. 4x tax, 2x rent. If a landlord does this, sure. Renters find a new place. No brainer. If all landlords do this, the renters arr fucked. Finding a new place will not save you. In effect you make it way worse on the renters. The solution to the housing crisis is not some trick involving taxes, rent caps, adding more rules etc. The solution is simple: build more housing. That's the only thing that will work and will bring down the pressure. We also need to stop conflating affordable housing with home ownership. If you are having trouble finding a place to rent you can afford there is no way you can buy a house. I feel like the HN bubble w/ our high sky salaries is somewhat disconnected from what the average person can actually do.

nostrademons 4y ago
"If the landlord has to pay 4x tax they will pass some (all) of that increase to the renter. Also, a 4x increase in tax != 4x increase in rent." How much of a tax gets passed along to the consumer is modeled in an introductory macroeconomics course. It depends upon the elasticity of supply and demand. A tax falls primarily on the side of the transaction with the lower elasticity, because they are less able to adapt behavior to avoid the tax. https://www.khanacademy.org/economics-finance-domain/microeconomics/elasticity-tutorial/price-elasticity-tutorial/a/elasticity-and-tax-incidence https://www.khanacademy.org/economics-finance-domain/microec... The reason economists like a land-value tax is because the elasticity of supply for land is effectively zero: there is a fixed amount of land, and regardless of what the tax rate is, landowners are either going to seek a return on their ownership or will sell it to someone else who'll get a better return. Elasticity of demand is pretty low too, but it's not zero: people can double up with roommates, move in with families, or become homeowners. So a tax on unimproved land ends up falling almost entirely on the landlord, with relatively little long-term impact on rents. In practice, we're likely to see pretty severe reallocations of land and short-term price dislocations, as existing landowners find that their usage is not productive enough to pay the tax and so they need to sell to new firms who will use the land in different ways. But this is working-as-intended: the goal of an LVT is to incentivize better usage of land through high-density development of desirable parcels, individual homeownership (when density makes sense), and commercial activity.

jjav 4y ago

> Since landlords are already charging for this value, an increase of taxes does not increase the rents. This seems to assume that a rental property is forever a rental property and will continue to be rented at market price no matter what. But that's not true. It's only a rental property if the owner can rent it out and not be losing money. If the conditions change (like taxes on it) so that's it can no longer be profitable, it is taken off the rental market (most likely by selling to someone who wants to live in it). If that's one unit, no problem, the renter can go elsewhere. In the proposal being discussed where all rental units have a 4x tax increase, this applies to all rental units at once. Rent prices go way up and most rental units disappear from the market.

ItsMonkk 4y ago
Ah, this is true. Targeting a certain specific thing in a market will cause distortions. This is why I am for the value of all land being taxed. No distortions.