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Yes, a well functioning land value tax will drive down land values and make land far more liquid, maximizing the best possible use of a finite resource. There's

Yes, a well functioning land value tax will drive down land values and make land far more liquid, maximizing the best possible use of a finite resource. There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset.

AnthonyMouse 3y ago
> When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset. This kind of comes back to the issue with valuing the land when the government is using it. Suppose they pass a law zoning that piece of land for use as a parking lot. The land value is then only going to reflect its value for use as a parking lot, since the law prohibits it from being used for anything else. Not taking into account zoning would produce a wildly inaccurate assessment of the practical value of the land, but taking it into account means that you're not taking into account the cost of the zoning restriction. And the accounting for that is pretty weird. If you change to relaxed zoning on only a small section of land, the value of that land will be quite high because it's the only place you can build tall buildings. The reduction in regional scarcity from having a tiny number of tall buildings isn't going to outweigh the ability to build 10+ times more housing on those lots in particular. Whereas if you relax zoning over a sufficiently large area then it's the opposite. The increase in permissible density makes land in general less scarce, even in places that allow that higher density, because they're now common. > There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. The thing that worries me is that these are the opposite for the government. Creating artificial scarcity increases their tax revenue and also ingratiates them with local land owners unless the government is capturing all of the value of artificially scarce land. Which is supposed to be the theory with land value tax, but all they have to do is be off by as little as 10% and you're back to landlords lobbying the government for zoning restrictions. And even if they get that right, when the government wants to spend money on things and they only get money when land is artificially scarce, what are they going to do?

AnthonyMouse 3y ago

> When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset. This kind of comes back to the issue with valuing the land when the government is using it. Suppose they pass a law zoning that piece of land for use as a parking lot. The land value is then only going to reflect its value for use as a parking lot, since the law prohibits it from being used for anything else. Not taking into account zoning would produce a wildly inaccurate assessment of the practical value of the land, but taking it into account means that you're not taking into account the cost of the zoning restriction. And the accounting for that is pretty weird. If you change to relaxed zoning on only a small section of land, the value of that land will be quite high because it's the only place you can build tall buildings. The reduction in regional scarcity from having a tiny number of tall buildings isn't going to outweigh the ability to build 10+ times more housing on those lots in particular. Whereas if you relax zoning over a sufficiently large area then it's the opposite. The increase in permissible density makes land in general less scarce, even in places that allow that higher density, because they're now common. > There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. The thing that worries me is that these are the opposite for the government. Creating artificial scarcity increases their tax revenue and also ingratiates them with local land owners unless the government is capturing all of the value of artificially scarce land. Which is supposed to be the theory with land value tax, but all they have to do is be off by as little as 10% and you're back to landlords lobbying the government for zoning restrictions. And even if they get that right, when the government wants to spend money on things and they only get money when land is artificially scarce, what are they going to do?