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Valuing Land: The Simplest Viable Method

• twelvechairs 1y ago
  The process is interesting but just to make the point - I often see Americans obsessing over the implementability of land valuation processes as if its entirely new and needs to be invented when other states and countries have established systems that have been working for in many cases over a century. For instance below from Australia https://www.nsw.gov.au/housing-and-construction/land-values-nsw/why-land-values/how-land-valued-nsw https://www.nsw.gov.au/housing-and-construction/land-values-...
  • murderfs 1y ago
    You're aware that you're citing the policies of the province that contains the second most expensive place in the world to own a home, right? Sydney is worse than the Bay Area when adjusted for incomes, and most other cities in Australia are almost as bad.
  • bpt3 1y ago
    Most Americans spend about 0 seconds of their lives thinking about land valuation methods, unless you count complaining about how their property taxes are too high (which is a global phenomenon in my experience). And every municipality in the US is able to assess property currently, though how good of a job they do varies of course. This site, as does reddit and a couple other similar places online, has a very vocal portion of the userbase that spends a significant amount of time obsessing over socialist policies that are wildly unpopular overall and largely impossible to implement at this time. Don't take it as a representation of Americans overall.
• potato3732842 1y ago
  This taxation rant misses the point. What prevents development isn't the prospective taxes. It's all the other regulations that limit what you can do and make what you can more expensive pushing the payoff time out into the realm of "f this I'll buy stocks instead". I think it speaks volumes about the LVT crowd (kind of hard to fault the author personally when he exists in that filter bubble) that the author's entire section on land use restrictions speaks only to deed restrictions and not government imposed ones.
  • aptwebapps 1y ago
    The point of that section was not about the effect of land use restrictions on overall value but on local differences. If you are comparing the value of two different pieces of land with the same land use restrictions then they don't affect the value calculation. Deed restrictions are called out because they can affect the comparative value of two different pieces of land within the same zone.
• YmiYugy 1y ago
  I recognize that this goes a bit against the spirit of the article, but I struggle to even conceptualize what land value means and how it can possibly be independent of its use. Land doesn’t really have inherent value, it comes from what you could do with it, but that depends a on a lot of factors including what it’s currently used for and who owns it. One problem to illustrate is that land value is typically calculated per area, but the value obviously depends on how you subdivide a particular piece of land. If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher, and a developer who manages to buy the whole neighborhood would probably value that even higher
  • petesergeant 1y ago
    > Land doesn’t really have inherent value, it comes from what you could do with it If that's true for land, isn't it true for almost everything? Ultimately you just end up with what other people will consistently pay for it. > If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher This is true of a bag of a single pea from a bag of frozen peas too. I don't think is anything specific to land.
    • thatcat 1y ago
      no one can sell 1 sq ft, they can sell the minimum zoned lot size for which the price would be maximum per sq ft price which would decrease as lot size increased.
  • ipnon 1y ago
    In “Radical Markets” by Posner and Weyl they show that for any plot of land, if you run a continuous auction on it, meaning whoever pays the most tax on it gets to own it immediately, including all assets contained within, then you get both maximum tax revenue and maximum utility.
    • immibis 1y ago
• trhway 1y ago
  >Side-by-side owners of physically/legally identical land will pay the same taxes regardless of what is built on their properties Do we really want this? It is pretty established that higher valued assets incur higher property taxes. Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense. Old beat up Corolla owner to pay the same tax as a Lamborghini owner. (It reeks of perverse socialism - dividing everything, in this case tax burden, equally in the most simplistic way, and not surprisingly that LVT is usually pushed for by leftist "progressives" while there is nothing progressive in it really).
  • dullcrisp 1y ago
    You can fit a bodega inside a skyscraper. The bodega owner wouldn’t be paying the land value tax. But if there were a free-standing bodega on land where you could build a skyscraper, you don’t think it should be taxed the same as a skyscraper?
    • trhway 1y ago
      A skyscraper can be built practically everywhere. Thus the same tax for everybody everywhere. Everybody can hang a Van Gogh painting on their wall, thus every wall to be taxed the same.
      • bpt3 1y ago
        Right. This is one of the many flaws in the LVT. Someone now has to make a subjective decision about the theoretical highest and best use of the land at a given point in time, and the last people I want making that decision are local bureaucrats.
    • RandomLensman 1y ago
      Why would tax forcing towards maximum efficiency or value creation from land use be the right objective?
  • stoneman24 1y ago
    <Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense> I kind of agree, just tax the land as to the utility value of the land (not what is built on it). If you want to tax what’s on the land (or what it’s being used for) then that’s a different tax basis (perhaps more of a wealth tax or social benefit tax) Both a farmer and I have 500 acres (his farm, my golf course). There is a basic land tax perhaps but I might get taxed for the golf course but he might get benefits for the socially beneficial food production.
• oldpersonintx2 1y ago
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• phaser 1y ago
  I think the point of how the city center is totally disconnected from the value of the property is super spot on, for example in my hometown, Santiago de Chile I have seen or it is my impression that although when the city was founded the city center, it had the highest value, and it is where aristocratic families lived today the reality is quite the opposite, the price of the properties has moved even towards the periphery of the city in comunas (boroughs) such as Barnechea and Vitacura and the city center of the city is perceived as a place of low status; On the contrary in the city where I live now, Berlin, the center of the city Mitte is in my perception where the most expensive properties are, so it’s difficult for me, to understand what is the connection between the city center and the value of the properties. In the case of Santiago the neighborhoods that are most appreciated, they are really super far from everything and require a road trip to go to the airport or any other central place, then perhaps I imagine that the value of the land, is very subjective and very based on the culture of the city. Despite the fact that the center of Santiago I find it a beautiful and quite interesting place, it is perceived by being perceived under status in a culture where status is important, that seems to be the most important factor more than any other type of deterministic formula. Perhaps it could also be argued that because the resources received by neighbourhoods in Chile are based on the affluence of their residents, it follows that the comunas with more resources are, of course, more important and appreciated. This is because the people who live there are considered more valuable, even though I may be less important in other ways.
  • philipallstar 1y ago
    > This is because the people who live there are considered more valuable I doubt the people are considered more valuable. Different locations become more or less desirable for any number of reasons. Competition will drive up prices for the more desirable locations, which will mean people with more to spend will get them.
• HPsquared 1y ago
  Any kind of "theoretical valuation for tax purposes" is just fundamentally going to be flawed. They're mixing one concept of value - market price - with an artificial concept they use to try and guess what the market price ought to be, but without any buyers or sellers involved. Valuing assets is a hard problem, it's why we have such a giant financial sector.
  • nlittlepoole 1y ago
    Yeah exactly. Wouldn't it be easier to make it self reported but use a mechanism to incentivize accurate market prices. Like enforce that the owner can't sell for more than x% the reported amount and rents are capped based on the reported amount. Use of the property as collateral has to match the reported value. You can only be insured for value up to that reported number. Lots of things the state can do to create that incentive.
• djoldman 1y ago
  The goal of an assessor's office is to set the value of property to it's fair market value - the price it would command if sold fairly on that day. It's not appropriate for an assessor's office to further a goal other than the above, particularly a public policy that tries to increase or decrease taxes based on a property's characteristics like how much land it contains or how many stories it has. That's for the legislative body. If you want to create (dis)incentives for types of property, you do it AFTER fairly valuing property. TFA conflates the two ideas.
  • bpt3 1y ago
    That's because, like most progressives, the author sees land use planning and policy as a tool for social justice because they see everything as a tool for social justice. I would argue (not with you, as I think you and I agree) that most people do not agree with the author, and just want to see an assessment that reflects the market rate for their property (which is extremely simple to determine in the vast majority of cases) and a tax rate that results in adequate funding for government services when applied to assessed property in the jurisdiction. Obviously the definition of "adequate funding for government services" is highly subjective, which is where the political debates lie.
    • kiba 1y ago
      Who to tax and how much is very much a political choice and how accurate assessment are very much political choices. You cannot pretend taxation policy is somehow a neutral proposition. Indeed, bad or good taxation policy have very real economic effect and impact on government finance. If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax. Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
      • mothballed 1y ago
        The genius of georgism is it's just land communism where the government charges you rent for the land, disguised as a tax. But don't take it from me, read George himself: [LVT would] “accomplish the same thing [as land nationalization] in a simpler, easier, and quieter way." [] Of course George plays a little slight of hand game where he uses "tax" and capitalist mechanisms and only defends communism for land, which enables a lot of his supporter's arguments to play make believe about what it is. But George betrays this secret to those who actually reads his books. Beyond that, there's serious inefficiencies in Georgism - No incentive for efficient allocation of land (price is zero) - The incredibly important role of land speculators, who help assign time preference to land by delaying its introduction in the market to when its value can be better captured, is basically destroyed - People will all grab the "best" land as fast as they can with allocation basically left to favoritism or queueing - Undeveloped land value can be impossible to separate from improvements [] Henry George, Progress and Poverty p. 404.
• bpt3 1y ago
  LVT advocates just don't get it. The author lists out 4 testable statements that a property tax should meet (which are valid IMO), yet doesn't recognize that an LVT fails to meet them! There is an inherent relationship between what is built on a parcel and its surrounding parcels and the desirability (which greatly influences the value) of that parcel. That relationship makes an LVT fundamentally untenable. On top of that, people with expensive improvements to their parcel should pay more in property tax, as at least some of that tax goes to fund what is effectively insurance for your improvements (emergency services at a minimum, and you could argue that high quality local government services in general are a form of insurance for the value of those assets).
• marksbrown 1y ago
  The 'simplest' method is to allow landowners to declare the value of the land they own. Tax based on this value and let governments buy at the stated land value. Everything else is fluff.
  • RandomLensman 1y ago
    Why are generally forced land sales to the government a desirable thing?
    • marksbrown 1y ago
      In the UK we allow it for various national infrastructure projects. This approach would allow for far better estimates of costs.
  • paulryanrogers 1y ago
    Won't that lead to suspiciously low valuations, very strong eminent domain laws, and a black market of sales at higher than valued prices?
    • AnimalMuppet 1y ago
      "Government can buy it at the stated value" does not lead to very low valuations, no.
  • greyface- 1y ago
    Only allowing government repurchase makes the system vulnerable to corruption - make a backroom deal with a government official and extract a promise not to buy, then declare at $1. A system where anyone can purchase the property at the declared value is more robust. https://en.wikipedia.org/wiki/Harberger_Tax https://en.wikipedia.org/wiki/Harberger_Tax
  • mothballed 1y ago
    Even simpler is to not have property taxes and forget the rigmarole of assessing or self-assessing values.
• lifeisstillgood 1y ago
  I always assumed something like PageRank would be a good proxy for value - how closely linked your acre of land is to other square acres of land that other people think are valuable - the simple version just measures road or rail access but the more sophisticated would measure journeys between, or tonnage or value of goods travelling etc. I think