4 ms·

Speculation is less profitable than development. If you're getting speculation it's because the roi vs risk of development isn't justifiable. You can't "tax m

Speculation is less profitable than development. If you're getting speculation it's because the roi vs risk of development isn't justifiable. You can't "tax magic carrot stick <buzzword1>, <buzzword2>, blah, blah, <dogwhistle>" your way around this fundamental economic reality. But you absolutely can screw it up more. Now, in a low regulation environment you probably could just up the taxes and let owners make do. A bunch of random low end income earning crap (storage lots or whatever, heavy on the whatever) will pop up to pay the tax bill. But Baltimore is not that so you'll probably just get the city owning a bunch of that vacant property instead which is a lateral or a step backward due to increased friction of development. Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited. I get that a certain type of people love to screech about tax intake being an unalloyed good here but what's really happening is that the city is amortizing the cost of bulldozing crack dens over time via tax incentive for owners of "teardown" quality structures to take that step (which up's adjacent property values).

matthewdgreen 1y ago
Oh, don't worry, we have some lovely storage facilities here. It's just that there's only so many that you can build. I'm not sure that the city owning a lot of land is actually a bad thing, compared to the current situation where it just sits there and rots. It's not like Baltimore has the best results doing things, but the alternative is clearly very bad.
- nashashmi 1y ago
  Other cities have established chartered “development corporations” to utilize underutilized assets and resources like land and make good uses for them. They have been good for low income housing (often at the expense of lower income housing), low rent commercial spaces, low rent industrial spaces, amusement parks, real estate development, etc. But this is gentrification and if you think it is necessary, then very quickly you will realize it is a problem. It homogenizes neighborhoods to support only a certain class of people while destroying other people.
  - sroussey 1y ago
    Yes, they make it so difficult to develop that you must sell to the city so their development corporation can hand out contracts to city cronies with kickbacks. Tax dollars at work, lol.
triceratops 1y ago
The city doesn't have to own the lots long-term. They could divide them among neighboring lots.
- potato3732842 1y ago
  I challenge you to find me an example of a city making that routine practice in any capacity. That would be a huge administrative PITA, say nothing of the perverse incentive it creates (regardless of if it's a forced sale).
larsiusprime 1y ago
I want to point out that this is not really about revenue generation but about fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed. As for revenue, that's a political decision. The thing is that elected officials control the tax rate, not SDAT. SDAT only values the properties. Rising property values don't have to mean rising taxes, the elected officials can lower the tax rate in response -- this what the term "no new revenue rate" is for. It's also not just about pushing tax burden onto vacant lots. When property A is undervalued relative to property B, property B picks up more of the property taxes. So if a lot of vacant land is undervalued, that means a lot of improved land is paying more taxes proportionately. It seems sub-optimal that property where nobody lives is given a tax subsidy and the difference is realized in rising taxes for everyone else. The main point is that the law requires that everyone be valued at market rate. That should be done first. Then any special case exemptions, write-downs, discounts, and the tax rate itself, should be handled at the political layer, where they are explicit and conscious rather than implicit. We can debate what the relative impact of this is in the big picture, but this seems like something that is worth fixing.
- doctorpangloss 1y ago
  > fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed True but the law can’t bend physics on this: what is fair market value? One interpretation is, whenever FMV appears in policy, something is broken.
  - bandofthehawk 1y ago
    One way to measure fair market value is too look at similar recently sold properties, which they did in the article.
    - doctorpangloss 1y ago
      Ha ha, define similar. Real estate is the quintessential non fungible market. I guess my point is, look deeper than the surface at any aspect of this problem, and discover political decisions pretending to be objective ones.
spaceribs 1y ago
> Speculation is less profitable than development, If you're getting speculation it's because the roi vs risk of development isn't justifiable. Arguably, speculation should always be unprofitable and we should ideally regulate against it in every way, shape and form. I'd ask what purpose does holding onto a unproductive piece of land serve at all to society beyond an easy to grease financial vehicle?
- potato3732842 1y ago
  Ask yourself why and by what/who the incentives of living in society have been so thoroughly perverted that there is demand for "unproductive" (seriously, listen to yourself, this stuff is a liability) land for "finance bullshit magic" reasons? The perversions are what prevent "buy and do something to generate value" from outcompeting "buy and hold".
- FredPret 1y ago
  There's tons of good speculation. Speculators are not buying and selling land, or corn futures, or what have you. They're trading risk. Sell to a speculator and you turn an uncertain future into cash right now. Buy from a speculator and you get to enter the market at the moment of your choice. It unlocks specialization - house builders can focus on building houses, and corn farmers can focus on growing corn. As soon as they're done with a house / harvest, either a consumer or a speculator buys it and they can focus on producing the next house/crop. Without speculators, they'd have to not only do their value-add, they'd also have to predict the market and hope enough customers show up in future. With speculators, this is significantly mitigated.
  - swagasaurus-rex 1y ago
    Buy from a speculator and you get to enter the market at a price of their choice. Vacant land is land that somebody could have built a home or a restaurant or a storefront or an apartment complex on, except it's being hoarded by speculators, who often refuse to sell at a loss.
    - 1y ago
bandofthehawk 1y ago
> Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited. This is interesting, do you have a source for this? Normally the assessors are tasked only with setting a value of a property and not with any type of policy related to rate or discount.

matthewdgreen 1y ago

Oh, don't worry, we have some lovely storage facilities here. It's just that there's only so many that you can build. I'm not sure that the city owning a lot of land is actually a bad thing, compared to the current situation where it just sits there and rots. It's not like Baltimore has the best results doing things, but the alternative is clearly very bad.

nashashmi 1y ago
Other cities have established chartered “development corporations” to utilize underutilized assets and resources like land and make good uses for them. They have been good for low income housing (often at the expense of lower income housing), low rent commercial spaces, low rent industrial spaces, amusement parks, real estate development, etc. But this is gentrification and if you think it is necessary, then very quickly you will realize it is a problem. It homogenizes neighborhoods to support only a certain class of people while destroying other people.
- sroussey 1y ago
  Yes, they make it so difficult to develop that you must sell to the city so their development corporation can hand out contracts to city cronies with kickbacks. Tax dollars at work, lol.

triceratops 1y ago

The city doesn't have to own the lots long-term. They could divide them among neighboring lots.

potato3732842 1y ago
I challenge you to find me an example of a city making that routine practice in any capacity. That would be a huge administrative PITA, say nothing of the perverse incentive it creates (regardless of if it's a forced sale).

larsiusprime 1y ago

I want to point out that this is not really about revenue generation but about fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed. As for revenue, that's a political decision. The thing is that elected officials control the tax rate, not SDAT. SDAT only values the properties. Rising property values don't have to mean rising taxes, the elected officials can lower the tax rate in response -- this what the term "no new revenue rate" is for. It's also not just about pushing tax burden onto vacant lots. When property A is undervalued relative to property B, property B picks up more of the property taxes. So if a lot of vacant land is undervalued, that means a lot of improved land is paying more taxes proportionately. It seems sub-optimal that property where nobody lives is given a tax subsidy and the difference is realized in rising taxes for everyone else. The main point is that the law requires that everyone be valued at market rate. That should be done first. Then any special case exemptions, write-downs, discounts, and the tax rate itself, should be handled at the political layer, where they are explicit and conscious rather than implicit. We can debate what the relative impact of this is in the big picture, but this seems like something that is worth fixing.

doctorpangloss 1y ago
> fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed True but the law can’t bend physics on this: what is fair market value? One interpretation is, whenever FMV appears in policy, something is broken.
- bandofthehawk 1y ago
  One way to measure fair market value is too look at similar recently sold properties, which they did in the article.
  - doctorpangloss 1y ago
    Ha ha, define similar. Real estate is the quintessential non fungible market. I guess my point is, look deeper than the surface at any aspect of this problem, and discover political decisions pretending to be objective ones.

spaceribs 1y ago

> Speculation is less profitable than development, If you're getting speculation it's because the roi vs risk of development isn't justifiable. Arguably, speculation should always be unprofitable and we should ideally regulate against it in every way, shape and form. I'd ask what purpose does holding onto a unproductive piece of land serve at all to society beyond an easy to grease financial vehicle?

potato3732842 1y ago
Ask yourself why and by what/who the incentives of living in society have been so thoroughly perverted that there is demand for "unproductive" (seriously, listen to yourself, this stuff is a liability) land for "finance bullshit magic" reasons? The perversions are what prevent "buy and do something to generate value" from outcompeting "buy and hold".
FredPret 1y ago
There's tons of good speculation. Speculators are not buying and selling land, or corn futures, or what have you. They're trading risk. Sell to a speculator and you turn an uncertain future into cash right now. Buy from a speculator and you get to enter the market at the moment of your choice. It unlocks specialization - house builders can focus on building houses, and corn farmers can focus on growing corn. As soon as they're done with a house / harvest, either a consumer or a speculator buys it and they can focus on producing the next house/crop. Without speculators, they'd have to not only do their value-add, they'd also have to predict the market and hope enough customers show up in future. With speculators, this is significantly mitigated.
- swagasaurus-rex 1y ago
  Buy from a speculator and you get to enter the market at a price of their choice. Vacant land is land that somebody could have built a home or a restaurant or a storefront or an apartment complex on, except it's being hoarded by speculators, who often refuse to sell at a loss.
  - 1y ago

bandofthehawk 1y ago

> Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited. This is interesting, do you have a source for this? Normally the assessors are tasked only with setting a value of a property and not with any type of policy related to rate or discount.