Land value taxes are even better. Property taxes provide a disincentive to making the land more productive. A land value tax would incentivize residential landowners to build more units which provides more supply and would lower rents.
The biggest problem (IMO) is that it's not so simple to value land. Where I live, being two blocks over can make a huge difference. It's easy to say "you paid $500k for your house, so we're gonna tax you on $500k". It's much harder to accurately say what someone would have paid for the land were it not developed. I understand the benefits of LVT, but how do you solve this? Are there any good examples of governments that use LVT in practice [1]? What do they do?
[1] In practice and as a primary means of property taxation. For example, proponents of wealth taxes talk about Switzerland, but the percentage of wealth that gets taxed there is quite small and nowhere near what proposals for wealth taxes in the US are aiming for. In other words, what's a good country to look at to see LVT used effectively?
Outside of California "you paid $500k for your house, so we're gonna tax you on $500k" is not how property taxes work. The town/city/county typically does property assessments on regular basis (usually annually). These are based on doing comparisons with like houses in your neighborhood and are equal prone to "2 blocks over is way more desirable".
In the short term, it does. Sale prices are a big factor in property appraisals in every state. In Washington, "I just paid X" or "My neighbor just paid X" is pretty much the only way you can successfully appeal a state appraisal.
Difference without a meaningful distinction. Houses are bought on credit, that credit isn’t approved without an appraisal that supports the price being paid, and that appraisal is done using comps similar to a tax assessment.
Mine does that too, but the process is clearly flawed because you can't buy land for the assessed price, and you can't build a structure on that land for the assessed value.
Just because it’s not possible to separately buy the structure or the land doesn’t mean the numbers are wrong. The point still stands that taxing land disincentivizes nothing while taxing structures discourages building them. Many towns in Pennsylvania had a pretty good track record with this. They implemented a mixed tax system that focused more taxes on land and less on structures because they wanted to make people sitting on empty land and not using it pay more. They also didn’t want to penalize people for upgrading their home. The system was extremely successful in its aims.
It works because they just need to come up with a total value and how it divides between land and house doesn’t matter much. My property taxes also separate out land and it puts the land at like 25% of the total value, but in reality someone would easily pay >50% for my land just to demolish the house and rebuild.
These end up with wildly differing figures. Somehow my purchase price is $772k, my insured price is $225k, my property tax valuation is $302k, and the market price now is either $800k or $1200k, depending on if you're asking to sell it or use it as collateral! Nobody agrees on what property is worth.
Sidenote... you're almost certainly under-insured, especially if you're in California. If a fire sweeps through, you won't be able to rebuild much with $225k. Might want to check that out.
Insured price is based on the structure, not the land. If your house burns down, that's the part they need to spend money replacing. Valuing a structure's replacement cost is (fairly) straightforward based on materials, current labor costs, etc.
And so there is a way to get a reasonable approximation of land value: Subtract the insured value of the improvements (which should be accurate by virtue of being determined by a profitable insurance company in a competitive market) from the appraised property value (which there are generally accepted methods for figuring).
Sort of, but that would give you the "social value" of the land, which it only has because of its present use and its proximity to other land used for specific purposes. E.g., the land under my house is worth $X because it's in a residential area in a major metropolitan area. If I were to build a dense mixed use complex on a large plot of land, I would probably increase the land value (since density would make it a desirable area).
Does LVT look at a piece of land's productive value instead (i.e., how much food you could grow on it or how many minerals you could mine out of it)?
The point of an LVT is to tax all those external factors that increase the value of the land, such as local amenities, zoning, etc. The idea is the only value added by owners of the property was the structure they built, that’s theirs, the rest of the value is in a sense un-earned. Much of it is due to government investment in infrastructure and facilities, for example. Taxing the social value is the intention.
But if a developer builds, say, an airport on some unattractive land outside of a city, they will create most of the value being taxed, right? The same is true to some extent for any structure.
It’s not 100% foolproof but just a rough guide because demolition and waste disposal costs are non-zero. For someone else to use the land my house sits on someone would need to deal with the asbestos likely in various walls. Additionally, things get tricky if the land is found to have historical / archeological relevance which can stop development indefinitely. Commercial developers carry an insurance policy for this I believe.
This happens in California to. When you buy the state still decides the value of the land (else people would do under the table cash deals like they do with cars).
Usually the assessment and sale price are not far off.
The property assessors are either elected or appointed by elected officials. I have yet to see a single property where the tax assessment is remotely close to the asking price. Can you give some zillow/redfin links?
> I understand the benefits of LVT, but how do you solve this?
Georgism[1], which I'm fascinated by. One way to organise it is to ask people how much tax they're willing to pay, from which the land value can be derived (as that's the real point of assessing land value for someone who isn't willing to sell that's the real order of things). However, if someone bids on the land for that price you must sell.
> Are there any good examples of governments that use LVT in practice?
I thought there were only one or two places using LVT but it appears there are quite a few[2], but it's rarely pure LVT.
> One way to organise it is to ask people how much tax they're willing to pay, from which the land value can be derived (as that's the real point of assessing land value for someone who isn't willing to sell that's the real order of things). However, if someone bids on the land for that price you must sell.
Some people have very strange misconceptions about LVT & Georgism.
The land with the highest value is city land. Most of city land and the buildings on that land are private property so they cannot be auctioned “every year”.
Singapore and Taiwan lease blocks of state-owned land for (high-rise) residence buildings for a duration of 99 years. This land is auctioned to developers, who then build houses and high rises, then sell them to individuals. The land lease ends after 99 years, so the land can be reused. This obviously does not capture the increase in the value of land over 99 years, but the value of land at the time of the sale.
So both states have taxes on land - a property tax in Singapore and a tax on the increment in the value of land in Taiwan, showing that it’s feasible to estimate the value of land and tax that (value of land = total value - value of improvements).
I agree, I often think about such things and wonder if they'd work as this hasn't been tried. I'm wary of taking the road to Hell with my "good" intentions/ideas.
For the improvements on the land bit, you could project at the beginning of the year what you think the land will be worth by the end of the year, due to planned improvements. That locks in the value for the year.
I can see problems with that too, but the real question is would those problems be worse or better than the problems we have now?
But the idea with a land value tax is you tax the value of the land, and not any property on it. So it's not just improvements added in a year, but any improvements residing on the property.
If the land is worth $100, and your house is worth $200-- it's worth $300 to you. But a LVT should just be taxing that $100.
There are two kinds of improvements, those of the land itself (like a new road or a water pipe etc) and those like houses or businesses. LVT directly includes the former, as they would be included in anyone's assessment of value (whether that be a government assessor or the owner). However, the value of the land is also indirectly linked to the improvements like houses. If you make a piece of land more productive by building on it then the land itself becomes more valuable, as will nearby land.
So with either kind of improvement the tax can go up, but LVT still encourages development compared to property tax as undeveloped land will still attract a greater proportion of tax than it would under a property tax.
I think you're missing my point. We're in a subthread where you floated the idea of a bidding-based scheme as a way to set LVT land values.
If you set the tax rate by having owners bid a price they're bound to sell their property for... that's going to include improvements like dwellings, since the owner can't take their dwelling with them and doesn't want to just sell the property with their dwelling for the land value alone.
In turn, this fails at setting the rate for a LVT, because it captures the value of improvements like houses in the taxed amount.
In Japan it's reasonably common for someone to own the land while someone else (e.g. a homeowner) owns the buildings on the land and has certain rights to live there that the landlord can't ignore (and hence can't just turf them out suddenly).
Flats in the UK are leasehold, which means you can buy (part of) a property and still not own the land.
It's possible to separate the two, but not in a way that gives a meaningful true market value for land alone in the short term-- rather just values for land in long-term option value after other rights are considered.
That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions.
In turn, lots of the benefits of a LVT evaporate if the taxable value (of landowner's eventual rights) is so decorrelated from the present value of land uses.
That's the problem here: valuing the land alone is hard. Separating rights, adding more owners and options and preferences --- doesn't make valuing the land alone easier.
In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner).
The tenant knows how much value they are getting from being there, at least relatively, because they pay the rent. If you're paying twice as much rent for half the space as your mate, unless there's some reason like being closer to the centre of the city or something, you know you're getting a bad deal.
Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.
> In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner).
Yes, but... As I keep trying to make clear:
* Anyone improving the property requires some kind of protection of this investment, usually in the form of a durable ownership interest or a very long term lease, with a value chosen based on both parties' estimates of the utility of the land over that lease term.
* In turn, the rents that the landlord receives from the property can be not-too-closely related to the present value of the land. They may be higher or lower.
* In turn, the land value tax doesn't succeed in capturing the true market rent of the land when it is based upon bidding by landowners, whether we're dealing with separate owners for improvements or not.
Imagine the case of someone who entered into a long term lease (60 years? 99 years?) in 1975 to build a house surrounded by orchards in San Jose. The real value of land has appreciated >60x over that term. A land value tax would capture a tiny fraction of that value if the landowner was bidding based upon the lease returns + the present value of the land being returned in 40 years.
> Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.
The level of friction is so high that you can't solve this one with bidding; you're going to have to rely upon comparable sales and assessed/appraised values.
It takes two to tango. Perhaps you'd be better off keeping your frustrations to yourself and improving the clarity of your writing.
> The real value of land has appreciated >60x over that term.
What is the "real value"? It's what someone is willing to pay for it. If the returns on the land are not that much, as you contend, then it's not worth >60x what it was. If the property owner has some protection than means they can't be shifted off the land for 99 years, then that land is not worth as much as you contend because it can't be used for something else. If someone else thinks the land is undervalued then they can bid on it and make more money, but they'll have to pay the tax and find a way to extract that value. If the land really is that valuable then the landowner can say so and pay the tax on it now because they think they'll get the return in future.
In short, you're assuming that the "real" value and the actual value are different and erroneously so. This assumption makes the reasoning self-contradictory - the value is determined by people's bids, not some Pythagorean value floating around somewhere waiting to be happened upon by some perfect system.
I'm sorry that I'm frustrated, but the end result doesn't really make sense.
No, the amount agreed to pay 60 years ago does not necessarily match current market value of the land right.
The amount agreed to pay -now- doesn't necessarily equal market value.
E.g. say I have a piece of land, and I agree to lease building rights on it for 99 years to my buddy (or son, or..) for $1/year. The value anyone is willing to bid on the land should be the NPV of the remaining $99-n plus the NPV of the estimated land value in 99-n years. The tax is nearly completely escaped. All of the land value has been smuggled into the lease right, which isn't taxable.
When there's lots of degenerate cases like this, it become pretty clear the way of assessing LVTs you propose doesn't capture current market values of the land itself, since the value of each piece of land can be artificially impaired or captured by a leaseholder.
Indeed, even in the absence of avoidant lease schemes, the very fact that your scheme encourages capturing a past lease value undoes one of the cited advantages of LVTs: it no logner incents land to quickly turn over to more efficient uses. Instead, the scheme you propose explicitly incentivizes ownership structures that maintain inefficient uses, even worse than the current property tax regime that includes improvements.
Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because
a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods
b) As I pointed out at the start, someone else can buy the land at at a very low price.
> However, if someone bids on the land for that price you must sell.
So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.
Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.
Still, I think this a digression, it's hardly a steel man, which would be more interesting. We may as well say that income tax is rubbish because people can lie to the tax man about their income.
> a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods
Your source effectively says the opposite-- some leases are limited, but "With an ordinary land lease right, the lease contract period is fixed but in practice can be renewed almost in perpetuity." and "The lease contract period under the Old Land Lease law is fixed, but the lease can be renewed almost in perpetuity."
Even the fixed terms for non-commercial use are generally very long-- "Land leased out to be used for single-family homes and condominiums can be leased out with a fixed-term land lease. The contract period is 50 years or more. "
> So even if you follow that avoidance strategy, I'm going to buy your land on the cheap.
I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.
E.g. say a sane discount rate is 5% per year. Lease is 50 years. Lease payment is $1/year. True value of the underlying land is $500k. Value of land in 50 years is estimated to be $1M. Tax rate 1%.
NPV of the lease payments is $19. NPV of the land is $92,000. I bid $200k and pay $2k in tax (compared to $5k).
Sure, you could bid $200,001 and get the land, to get an asset with a net present value of $92,019. This is not a favorable transaction-- even if there's some building residual value at the end.
In the end, the only way to value the independent value of the land is going to be from some kind of assessment process. A bidding based scheme is not practical: separating the value of the land and building is really hard. (And if we start having people judge whether the pricing of leases, etc, is fair-- that's effectively assessment).
It's saying what is customary and possible. The landlord does not have to renew, I think that is quite clear from what was written in that article.
> Even the fixed terms for non-commercial use are generally very long
Because they have a land tax and a property tax. I didn't suggest to use Japan's law verbatim, nor would I, their system has a lot of unwanted side effects but it does encourage a lot of building.
> I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.
Yes, but you didn't get to sign over that lease because I outbid you and it's now my land and the lease will not go forward because, to quote myself:
> 1 point by brigandish 21 hours ago | parent | context | favorite | on: High property taxes are good
Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because
a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods
b) As I pointed out at the start, someone else can buy the land at at a very low price.
> However, if someone bids on the land for that price you must sell.
So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.
Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.
> Ordinary leases (with statutory right of renewal except in certain instances)
> Fixed-term leases (with no right of renewal)
Note that you also characterized the law as providing an upper bound on lease terms, when actually it's the opposite:
> such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more
I disagree with most everything you say, and I am not sure further discussion would be productive.
Aside from the minutiae: I do not think there is any reasonable way except assessment to disentangle the value of land and improvements in a way that tracks land value in the short term, which is required for a land value tax to yield its substantial benefits.
> Note that you also characterized the law as providing an upper bound on lease terms, when actually it's the opposite:
> > such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more
I quote from the article I shared with you:
> The initial period is 30 years, regardless of the building structure. The lease can then be renewed for 20 years at the first renewal, then ten years thereafter. This differs from the the Old Land Lease in that under the old law, the initial lease period is different depending on the building structure.
and this for fixed-term ground lease:
> The lease contract period is ten years or more and less than 50 years.
Which means we have two articles that are in disagreement but that is irrelevant because again, I am not proposing to use Japanese law verbatim.
> I disagree with most everything you say, and I am not sure further discussion would be productive.
Yes, constantly defending straw man positions or needing to answer how many angels can dance on a pin is not productive for me either.
> Aside from the minutiae:…
Thanks for selling me all your land and making my descendants incredibly wealthy because you thought it was better to avoid taxes.
Proposed mechanism: You declare the value of your land, but the government can buy it at the declared price if they want to. This also makes land acquisition for infrastructure straightforward and transparant.
There is a risk that the government will increase taxes such that people can't declare high land prices, which allows the government to buy up land for cheap. I haven't found a mechanism for that yet.
This mechanism would just get gamified. Some oligarch is gonna claim the property is worth nothing, and use their expensive legal team to prevent any attempts to purchase the property.
It'll also allow the government to bully anyone they want by evicting them, even if the price were fair. Local reporter digs up dirt on city council? Well, the city council just reviewed property tax claims, and decided that the reporter's house is "undervalued".
It will be interesting to see if Texas ends up with some sort of Proposition 13 equivalent given property values and property taxes have been increasing a pretty significant rate.
It seems like the Texas Homestead Exemption Act is starting to morph into something analogous to Prop 13. Perhaps if there's enough growth in tech jobs (and more billionaires start hiding out there) they'll end up with an income tax like California and New York.
Having lived in Texas for 20 years I find that hard to foresee as no state income tax is such an often used flex there but stranger shifts have happened.
I moved from an ostensibly low tax state, Texas, to one with an income tax but my overall burden for state costs is pretty much the same or slightly lower as property taxes are low and there is no sales tax (8%+ in Texas).
I was paying over $1500 month in property taxes in Houston burbs.
I looked there and a bunch of the examples show places where it used to be used (which is probably a good indication of how hard it is in practice). The rest have very vague details and none of the examples there really go into any depth on the details of how they value land in practice. So I'm wondering if anyone knows which country has a good model to look further into.
Just let property owners declare a value for their land, and give anyone the right to buy it for 120% of that value at any time, with the existing owner given a grace period where they can restate their estimate.
My strong suspicion is that this will completely fuck over the elderly and marginalized communities.
It also requires property owners to do EXTENSIVE research and information gathering CONSTANTLY to ensure that the number they put down is reasonable.
Many of them literally can't (ex: my 87 year old Neighbor Phylis doesn't care what her house is worth, because she plans to die in it, and isn't seeking to maximize utility. Instead she wants to pass peacefully in the house she remembers raising her kids in, and has lived in for the last 50 years. She has no car, is in a wheelchair, and uses basically no online services - how is she going to go evaluate the right value for her house?).
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Basically - this plan sounds great for 5 seconds and then you realize people would literally revolt the second you pass it.
"It also requires property owners to do EXTENSIVE research and information gathering CONSTANTLY"
Every year in Chicago.
My house has been, and still is, assessed for 600K over what I paid in Nov. 2021. It had been on the market since 2016, until I bought it. The price I paid is the value of the house.
First assessment appeal denied.
Second appeal lost in the system.
We have to fight against an unfair and arbitrary tax system EVERY year.
Now they are going to index the tax rate to inflation.
Maybe other communities are under-taxed, but mine is not.
I’m with you, mring33621. Cook Co. is ridiculous. Bought our home (in 2018) just north of Chicago, out of foreclosure. Taxes jumped far beyond what they’d been trying (and failing) to sell for prior to foreclosure. Similar experience last year with an apartment building being valued at more than twice what I’d paid (in rough condition) in an open, arms length transaction literally months earlier.
AFAICT, hiring an attorney is the way to go. Then you still have to pay, but much less overall. I’m about 80% convinced that the tax assessors are in it with the appeal attorneys to almost literally write themselves checks. Not that such misdeeds would ever occur in Chicago/Cook…
The house was literally for sale to the public since 2016 through end of 2021. If it was worth more than what I paid, someone would have purchased it before I did.
Guaranteeing that people can take up the same space that they did when the population was half its current level is a great way to ensure that future generations have nowhere to live.
The person you're replying to isn't arguing against land value taxes in the abstract, they're arguing against an implementation of LVTs that would force most homeowners to decide between overpaying taxes by a wide margin or suddenly losing their home.
Perhaps I'm not stating the proposal clearly. Nobody would suddenly lose their home. If you understated its value, and someone made an offer, you'd have the opportunity to restate the property's value, keep the home, and pay the appropriate property taxes from then on.
Hypothetically, let's say I owned a modest home. Then, what if a very wealthy person who grew up in that home wanted to buy it for a grand sum of money? In that case, I'd be torn between revaluing my house to a huge amount (that no one except this one person would be willing to pay) and being forced to sell. It's an interesting scenario, because that wealthy person could lower their valuation almost immediately after the sale, since no one else would pay what they paid.
C'mon, even setting aside the fact that the victim here walks away with a giant pile of money, there are countless ways to address this extremely unusual special-case scenario. For instance, you could be free to decline to sell as long as your declared valuation was >= the local neighborhood average.
> C'mon, even setting aside the fact that the victim here walks away with a giant pile of money
Money is a medium of exchange. There are items that are literally not for sale, and the excuse of "but they got money!!!!" is completely unacceptable as a replacement.
How are you going to value the writing on the walls of the home my neighbor from her now-deceased son?
How are you going to value the 6 (six!) graves of the dogs she's buried in her back yard, Each with a custom stone statue.
How are you going to value that she's memorized her current home layout, so that large cataract in her right eye doesn't bug her as much when she's in the familiar layout?
How do you value the extra time and expense it would take her to find a new home, given she's wheelchair bound?
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and your "new plan" is devolving into trying to add all sort of extra conditions and rules around this - which gets us right back to: implement this and people will literally try to kill you.
Huh? In the scenario you describe, someone is paying below the neighborhood average in property tax, so someone makes an offer on their property, and they decline by raising their declared valuation to match the neighborhood average. Then they stay in their house and pay their fair share of property tax.
You've never lived in a transitional neighborhood, pretty clearly.
> and they decline by raising their declared valuation to match the neighborhood average.
First - this is not in line with the previous posts. What stops me from simply declaring my value is 0 until someone makes an offer and then suddenly it's the right value. Until next year when it's 0 again because that buyer has gone away. If I only have to declare at time of potential sale, the declaration is useless.
Second - having lived in a transitional neighborhood, if your house is valued at the neighborhood average, it will be bought in 30 seconds, sight unseen, usually by a corporation that plans to rehab it (because it was last updated in the 70s) and then rent it forever.
Basically - money isn't everything, and maximizing utility in a purely capitalistic sense is not a set of values shared by enough people to make this work.
If you limited this to only commercially zoned land, then maybe - but you have a social contract with all those people who bought their houses, and violating that social contract, especially in a way like this, is a recipe for disaster.
I've lived in transitional neighborhoods at several points in my life.
> Until next year when it's 0 again because that buyer has gone away.
Why would the buyer go away? The state itself could maintain offers on any properties lowballing their property taxes. But that wouldn't be necessary, because at any time, there would always be ample interest in purchasing real estate for discount prices. You say this yourself:
> if your house is valued at the neighborhood average, it will be bought in 30 seconds
...but again, it sounds like you misunderstand my proposal. In 30 seconds, someone would offer to buy, and then the current property owner would have the choice of either selling, or keeping their property but raising their property-tax assessment to either that amount, or the local average, whichever is lower.
Ah - now I'm fairly convinced you haven't actually bought real estate.
There is no such thing as a "standing offer" to buy a house. They're a contract with very clear start and end dates (most offers are good for between 72 hours and two weeks).
This is because both parties have to agree at time of exchange on the value of the good, and the person making the offer usually needs to have financing lined up - They literally cannot make an offer that will be good for long periods, because the financier won't agree to that.
As for this...
> ...but again, it sounds like you misunderstand my proposal. In 30 seconds, someone would offer to buy, and then the current property owner would have the choice of either selling, or keeping their property but raising their property-tax assessment to either that amount, or the local average, whichever is lower.
Ok - follow along... now the next offer comes in 2 days later at the current value. The owner STILL has zero desire to sell. What now? Do they get to raise again?
Dude - this whole thing is ending up with more rules and regulations that the current market, which is exactly why pushing this kind of thing simply doesn't work.
In theory you're optimizing land efficiency, but you're fucking with other efficiencies ALL along the chain, and the net result is that people hate you.
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Also - taking you at face value: "raising their property-tax assessment to either that amount, or the local average, whichever is lower."
This is fucking already how taxes work. At least in my area, every house is taxed at the local average (fulton county does average assessed value tax for land). So you're literally gaining nothing for all this additional complexity.
> My strong suspicion is that this will completely fuck over the elderly and marginalized communities.
People who are hoarding a huge house in a desirable area to do nothing but slowly die in need to be fucked over. They're worse than speculators.
> Many of them literally can't (ex: my 87 year old Neighbor Phylis doesn't care what her house is worth, because she plans to die in it, and isn't seeking to maximize utility. Instead she wants to pass peacefully in the house she remembers raising her kids in, and has lived in for the last 50 years. She has no car, is in a wheelchair, and uses basically no online services - how is she going to go evaluate the right value for her house?).
She should quote how much someone would have to pay to make it worth her moving out - that's something she should be able to figure out for herself. If she wouldn't move for less than 3 million, quote it at 3 million.
That sounds awful. Imagine being forced to move every few years or giving people with money that much power over you. Seems crazy that this idea is so popular. I'm guessing the people who like this idea are very young and mobile. Imagine telling grandma she has to move and sell her house and have police show up at the door when she doesn't want to. It's basically the abuses of eminent domain except done privately.
I don't even think the author is fully behind it, seemed more like a thought experiment as a reply to grandparent.
Regarding grandma: I don't want to kick her out of the house. But there is a real issue here: young families can't find affordable places, while old families live in places, that are too big for them because the kids left. If they rent, they also pay significantly less than the younger family, since they are on older contracts. Once new people move in, rent is raised to the new level. The older people don't want to move out, because they would have to pay more for their new, smaller place, than the old, bigger place. Meanwhile the young family also has to finance the pensions for that old family.
Noone is being evil here, but ... it sucks. And every idea to work on it is shut down as being unfair to the people who already own houses. Even building new houses is usually opposed by the people who already have houses in the area. If I never get the chance ever to own one, I don't really feel like I have to protect the interest of house owners.
What if grandma lives in a city where there's no jobs for me? Asking people to move in with their relatives is not the answer; the answer is very simple: build more housing. Eliminate zoning rules and start replacing older buildings with new, larger and taller buildings.
Why? Why can’t companies create jobs everywhere? Shouldn’t every American city deserve top notch infrastructure that the states only reserves for high density unaffordable cities where jobs are concentrated.
Maybe this will force the governments to spend some of our accumulated tax dollars to actually improve public transport and efficiently network cities and towns.
Zoning rules exist for a reason. People need infrastructure and water and services and power grids to live well. High density is not desirable nor will it be affordable. It behooves the govt to encourage high density where there are jobs to create artificial scarcity and inflate housing value.
Because higher the home value, more property tax can be extracted. This is the oldest con in the world. This is also why all high density cities are all expensive and housing is unaffordable and everything from water to power is expensive and public services are woefully inadequate.
>This is also why all high density cities are all expensive and housing is unaffordable and everything from water to power is expensive and public services are woefully inadequate.
No, they aren't. I live in Tokyo; it's very high-density, quite affordable compared to anything in America, and public services are all excellent. High density is how you get high efficiency.
>Shouldn’t every American city deserve top notch infrastructure that the states only reserves for high density unaffordable cities where jobs are concentrated.
No, because spreading everyone out means your infrastructure cost per capita balloons, and it's unaffordable for the government. If you want "top notch" infrastructure, you need to live near other people, not out in the boonies.
>Zoning rules exist for a reason.
No, they don't: they just make everything far away from everything else and prevent density. Here in Japan, schools, light industrial, residential, and commercial all coexist in mostly the same spaces. So it's not that hard to live within walking distance of work.
Maybe you should try traveling outside America sometime.
> Eliminate zoning rules and start replacing older buildings with new, larger and taller buildings.
Right now, NIMBY tries to prevent taller buildings.
A land value tax incentivizes more effective land uses-- as opposed to property taxes that include improvements, which reduce the incentive to build high density.
NIMBYism exists because people value their homes and stability. Any society needs stability to thrive. Without NIMBYs, there would be utter chaos and underfunded overcrowded cities.
Housing shortage is due to unions and govts that refuse to establish public infrastructure for everyone. This is done on purpose to create UTism .. Us VS
Them..between property owners and those who don’t own property. Divide and Rule strategy. It has never failed over centuries.
Most LVT proposals usually make concessions to owner occupied housing e.g. tax rebates if it is owner occupied. A citizen's dividend is also effectively a tax exemption for individuals instead of companies.
Marginally shorter cycles before property becomes more useful in exchange for completely fucking over the elderly, marginalized groups, and those without free capital.
> Marginally shorter cycles before property becomes more useful in exchange for completely fucking over the elderly, marginalized groups, and those without free capital.
As others point out, most LVT schemes have significantly improved treatment for owner-occupied housing.
The big idea here: land value is something that is established publicly and collectively rather than by any individual owner. It makes sense to tax use of this public good to reduce deadweight losses .... instead of primarily taxing improvements which disincents investment and increasing DWL.
A land value tax can be expected to reduce the cost of housing. That is, it incentivizes more effective land uses-- as opposed to property taxes that include improvements, which reduce the incentive to build higher densities.
What about land that already has buildings on it? The buyer can't just take the land without the building. So how do you take the building's value into account?
I don’t think that’s a meaningful difference. It would take an extreme property tax to actually incentivize an empty field over productive use of that space.
It might in theory make a difference when considering replacing a 40 story building with a 42 story one, but in practice you really don’t see that kind of construction project. In that context pushing for larger jumps before replacement might actually be economically and environmentally beneficial.
You might be surprised just how profitable those parking lots can be.
Putting in a 10 to 25+ million dollar multiple level parking garage can pay off, but only if there is enough demand for it and you can get zoning permission.
We aren’t talking multi-level though we are talking about an actual flat parking lot in the middle of a downtown core which is what speculators do and have done in my city while they wait to sell expensive land.
To be more clear. Depending on the location, those flat parking lots can be pulling in 1+ million per year in profit.
That doesn’t mean building a multi level parking garage in that same space is actually a good investment because demand isn’t unlimited. What you see as wasted space can therefore actually be a highly efficient business.
Put another way if building a 5 story building would be obviously more profitable then they would do that but the opportunity costs is now 1+ million per year you aren’t getting from the parking business.
Not clear. Plenty of people will forgo selling land to a developer who wants to build a five story building in order to wait for the premium that comes from the developer who wants to build a 50 story building.
The business has maybe 30 spaces at $20/day. If we assume some people use hourly rates but most use daily lets say each parking space makes $25/day for $750/day. That works out to $273,750 before expenses. To get $1 million you’d need over 100 spaces which is quite a massive plot of land for the downtown core of a city.
~115 parking spaces can fit on a normal 1-acre paved, marked parking lot. You can double that when cars park in long rows at the cost of having attendants.
You can unquestionably have smaller lots, but it’s hardly a massive plot of land.
1-acre is pretty massive for a plot of land in the downtown core of the city. It can fit an entire apartment complex. The sale value is extremely high so the $1 million in revenue isn’t that attractive given the cost of holding the land.
I mean there’s a reason we build buildings, that’s hardly in doubt. The point was simply that even seemingly undeveloped land in or near the urban core can be generating a respectable income stream and then after N years the land has also appreciated. This is especially appealing in the event of a presumably short term glut of residential and or commercial properties/zoning issues.
Also, an acre with parking attendants doubles the number of cars so they could be clearing close to 2 million before expenses, and attendants aren’t that expensive.
It’s far more profitable to charge people 20$ to use 1/300th of an acre for a few hours than to actually do nothing with it. Which means the opportunity cost to build something is higher.
Unless the building is going to clearly be wildly profitable it may be better to stick with a parking lot.
Usefulness comes in many guises. Think of a parking structure as an enzyme to catalyze transactions with people hailing from a further distance away. Without that space, the exchange can't happen.
The drive (no pun intended) here is to make that an unnecessary or at least facilitated through different means.
You want people hailing from further distances via public transit and rail, and you want the majority of the businesses in an area servicing a highly dense, local community that can all walk there within 10-15 minutes.
This enzyme must be removed, the American Urban Body reworked to reject suburban thinking like this.
It’s not just empty fields. It’s also empty buildings. A grocery store sized unit sat vacant in my San Francisco neighborhood for over a decade. Cheap property tax due to Prop 13. Owners wanted to wait for the “right offer” to develop it.
And that’s worse than them just being abandoned how? Nobody else wanted them, nearly anybody could have bought dilapidated houses in poverty stricken neighborhoods extremely cheaply.
Did you mean to post a different source? The one you posted doesn't "show" anything, equivocates on whether LVT actually reduces blight in the few instances where it's been practiced, and makes meaningful suggestions for solutions other than LVT that it indicates have been shown IN PRACTICE to reduce blight (e.g. a land bank).
On the other hand, many of the vacants in Philadelphia are vacant because the owner has fled because the back taxes are more than the building is worth.
Many of the houses abandoned in Detroit were abandoned (and often torched) due to the ridiculously high property taxes and lack of value returned by the city for those taxes.
It's hard to justify telling land owners to pay high property taxes when the city delivered the highest crime rates and worst performing schools in the nation in exchange for those tax dollars.
In Australia at least local government rates are based on "improved property value", i.e. you get taxed more from building a house on your land. It absolutely does lead to land-sitting even in higher density inner-city suburbs.
Taxing improvements is a proxy for progressive taxation. ie. rich should pay more. LVT is effectively a flat tax on acreage normalized by community wealth. To the broad middle class, taxing improvements "feels" more fair.
Land value taxes are not functionally different than just regular property taxes in the places where it matters. In all of the areas that are in the worst of the housing crisis, property value is already dominated by land value; LVT doesn't really change much.
The problem, just like the source says, is that the tax is too low, not mention the absolute disaster that is Prop 13 in California.
The advantages of a land-value tax is the central idea of Georgism/Distributism. There have been some interesting discussions about this on HN. Recently: https://news.ycombinator.com/item?id=29493005
> Land value taxes are even better. Property taxes provide a disincentive to making the land more productive.
I could get on board with this if cost to build and demolish were considered. We have a lot of SFHs that don't make sense to turn into town homes yet because the value of the home on property + demolition costs + cost to build new townhomes on property is greater than what those townhomes could sell for.
More to the point, a blind land value tax could create a lot of waste through otherwise unproductive land repurposing (only productive because the tax makes it so).
That seems like the point, though - the land tax makes it so that it is productive to add more density. We want people to demolish that SFH and turn it into a townhome because we need more housing, so that's a feature of the tax, not a bug.
> That seems like the point, though - the land tax makes it so that it is productive to add more density.
It will still force density eventually as the home's structure value depreciates (demo costs are the same no matter how much the home is worth). Any new structures will be pushed into higher value uses.
BUT let's say we instituted a blind land value tax tomorrow: many people would be forced out of their homes AND could not sell the home for what it was worth: a buyer would still have to either live in the house and pay the higher land value tax or tear down the structure and build something more profitable...the haircut they would otherwise have to take in either case would be reflected in just paying less for the house in the first place (assuming they've done their homework).
This could even happen after the land tax is implemented. That the land value rises above the point of its use but below the point of where the land could be re-developed into the higher value use case. Then....you are kind of stuck in a bad spot until your situation changes or you go bankrupt.
We actually already see this in the market: land with a tear down will cost less than land that is completely clear. The costs to develop are just less in the latter case. Also, people are forced by the construction market to settle for less valuable structures on high value land because there is just a shortage of material and talent to redevelop everything that we want redeveloped already.
Jumping straight from one tax regimen to another is a recipe for suffering, sure.
Instead, we might imagine a State shifting from 10% income tax to N% land value tax, by lowering the income tax 1% per year, and raising the LVT 1 * (N/10)% per year, until a decade later, the State's income is land value tax, not income tax.
That should give everyone the opportunity to make plans, and adjust over time.
Isn't that the case already? Property taxes are already weighted between land value and property improvements. But shifting to too much land value, even if done gradually, can lead to unwanted consequences.
It will hit people at the bottom the most, they are most likely to own under value structures, they are least likely to have funds to redevelop, and are least likely to have funds to sit things out until they can sell at a break even point. A land value tax would benefit corporations more, since they can throw up a bunch of luxury apartments to maximize value utilization to pay the land value tax. Corporations would also be able to buy out at a discount individual owners who are squeezed by the tax.
I'm not clear on how land value taxes would incentivize the right kinds of units. For instance, would a land value tax incentivize the creation of tiny bachelor apartments, or larger apartments that families can use? We need incentives for both, and larger units are not very common these days.
Why does tax policy need to directly influence the mix of 1bdr and 3bdr apartments? Renters who need 3bdr apartments have enormous influence over the market already.
If tax policy is not designed with these considerations in mind, then it will incentivize an improper mix and deteriorate the livability of the city. For instance, where I live the city core has been abandoned by families because no family-sized units have been built in something like 40 years. So families move out of the cities and then commute which causes all sorts of traffic problems, wastes their time in these commutes, creates more pollution and carbon emissions, and so on.
Why is that necessarily the case? The market has much better information about the demand for 3bdr apartments than cities and counties do. Mostly we have the opposite problem: top-down policy from local governments impedes the construction of 3bdr apartments.
It's a mistake to assume that builders are responding to demand. All actors in a market have only partial information. To take my city as an example, the housing market started heating up, so builders started constructing condos and tried to pack as many units into their building as possible, thus improving supply. This created a vibrant urban centre for young people who live on their own in modest apartments and drove up demand among that cohort even further, thus incentivising further construction of those same units, creating a self-reinforcing cycle.
But young people aren't the only ones who need to be downtown, as I said, and families were driven out to the suburbs for suitable housing. They have to commute instead, which has caused all sorts of gridlock and the usual problems with urban sprawl.
If the right incentives existed for mixed housing, tax incentives included, then this wouldn't happen, and people of all ages could afford to live closer to where they work, thus alleviating many of those issues and creating more livable cities.
Here in Canada we already do this in one sense by mixing government housing among more affluent neighbourhoods. This has prevented the formation of ghettos, but this same approach hasn't been applied to create an appropriate mix of housing for all different living arrangements.
So given a land value tax incentivises certain kinds of land use, my question is whether it would incentivise using land to make urban centres more livable for all types of people, rather than only certain kinds of people or lifestyles.
The premise of a market is that everybody is acting with partial information, and the market aggregates and allocates over time. I'm no anti-government squish, but there is no evidence, and a lot of countervailing evidence, that local governments can effectively (or even non-harmfully) make policy to influence the housing mix.
When it comes to housing construction and tax incentives, what they need to do is (1) set tax incentives to discourage egregious misuse and encourage density, and (2) get out of the way.
As someone living in the middle of one of these debates right now, the idea that we need to carefully control the mix of 1bdr apartments vs 3bdr apartments is... risible? The frontline of this issue is SFZ, not what kind of apartments we build.
> I'm no anti-government squish, but there is no evidence, and a lot of countervailing evidence, that local governments can effectively (or even non-harmfully) make policy to influence the housing mix.
I disagree. No planning has lead to many ghettos. The planning we've done here has avoided ghettos. I think the data is very clear on that.
> When it comes to housing construction and tax incentives, what they need to do is (1) set tax incentives to discourage egregious misuse and encourage density, and (2) get out of the way.
Except as I've been saying, if you encourage too much density your cities become unlivable for families, and you encourage urban sprawl and all of it's subsequent problems.
> the idea that we need to carefully control the mix of 1bdr apartments vs 3bdr apartments is... risible?
Who said anything about "carefully controlling" anything? Certainly not me.
I see no evidence at all that increased density is a livability problem for families, and plenty of --- in fact, overwhelming --- that inadequate density is a bar for access to communities in the first place. So, no, I reject this argument outright.
The evidence is that people would rather drive 2 hours each way so their family can have less density where they live. They vote with their time and wallet. This isn't some theory, it's true all over the US
They can do that. But people who live 15 minutes from downtown also want to have less density where they live --- most homeowners would! --- and that is a problem.
You just said increased density isn't a problem for families and then describe people wanting less density a problem. If it's a problem for society that families want less density, then it's a problem for families if society want more density.
I don't believe it is a problem, but people can have preferences for things that don't rise to the level of public policy problems, and if they'd prefer to live out in the country, God bless them.
A lack of density closer to cities is a real problem: it makes living close to where you work prohibitively expensive, and promotes sprawl.
As the other poster said, the urban sprawl and ridiculous commutes that you see in
every city are overwhelming evidence. The lack of family-suitable housing in urban centres is to blame, and the prioritization along single metrics, like obsessing over "density-only" because it generates more returns on investment, shares a lot of the blame. Density is not the only metric to consider.
No, they're not. Urban sprawl is the result of deficient density. People who want low density can commute. For any fixed population, decreasing density must, obviously, increase commute times and sprawl. This isn't complicated, though appeals to "return on investment" cloud the issue.
Of course, part of the subtext of these discussions is that proponents of SFZ and owner-occupancy tend also to believe that their favorite cities should have controlled population growth. It's just not a good look to say that out loud.
> No, they're not. Urban sprawl is the result of deficient density.
That's one cause. The other cause that you seem to refuse to understand is creating the wrong kind of density. An urban centre full of 1 bedroom apartments is still going to create urban sprawl because families just can't live there, thus driving them out of the city centre even though they still work there. I just don't get why you refuse to understand this very obvious point.
Because it's not a real problem, but rather one you've invented, and in the real world we have the exact opposite problem, of huge swathes of desirable residential land all SFZ'd, so you can't even build town homes on a parcel.
It's amazing you keep saying this when I've said multiple times now that I'm living in exactly that kind of city (a large North American city), and it's not the only one with this exact problem. But sure, keep ignoring the data for your simplistic solution.
I don't think it's housing that's driving families to the suburbs. A normal 2 or 3 bedroom apartment shared by roommates could just as well house a family.
Imho it's more about safety, schools and amenities.
American inner cities have a reputation of being unsafe, both in terms of road safety as well as violent crime.
With schools being locally funded many families choose to move to less diverse and more affluent suburbs for the school district.
Lastly, many places in inner cities don't have parks and playgrounds within walking distance and thus no proper replacement for the suburban backyard.
It seems to me to be the opposite. The mortgage interest tax deduction is a massive regressive government subsidy for homeowners, and penalizes younger people who rent or cannot afford to buy a home.
So I’m curious what suggests to you that renters have political power. To me it seems the opposite - tax policy massively prefers owners over renters.
Renters are overwhelmingly living in properties that have mortgages against them and commercial loans are always deductible. The deduction for mortgages on owner-occupied property serves to put prospective owners (including current renters) on a more equal footing when bidding against landlords for property.
It is an immense giveway to the top income quintiles, which receive between 70-80% of the benefit, and giving "prospective owners" preference over "landlords" practically by definition reduces density and thus affordability.
Again, that is inherently a policy decision that reduces density and affordability; by definition, "landlords" are people that own and operate multi-family dwellings. You could just as easily ask "why not give more of a preference to landlords?"
It's probably useful for you to understand my, uh, priors? about this, which include the fact that I live in an overwhelmingly SFZ community that actively works to prevent the construction of multi-family dwellings, often with appeals to the evil of "landlords".
I'd prefer that an owner-occupant be able to write off the interest on N/N units on a parcel, just the same as a landlord is able to write off the interest on N/N units.
That's true for N=1 (SFR), N=2 (duplex, half-occupied by the owner), N=3 (triple-decker with owner living in one), or N=50.
I agree with you about the mortgage interest deduction. I'm not saying renters have outsized political power; they have, more likely, undersized political power. I'm saying very narrowly that in the market for multifamily building construction, people that need more bedrooms are an important market force, one the market has to pay attention to.
The whole 1bdr vs. 3bdr thing is a total sideshow; the actual issue, again, is SFZ.
It doesn't explicitly say anything no, but what does an LVT entail given how humans tend to value property? For instance, in NYC would it incentivize building a bunch of shoeboxes or actual livable space?
It would incentivize building a comparatively more expensive building that maximizes the developers profit. Whether that means shoeboxes or livable space depends on how much those things cost to build and how much people are willing to pay for them.
If you just want single family homes with a big lawn you probably shouldn’t be living in Manhattan, which is the point of lvt.
> It would incentivize building a comparatively more expensive building that maximizes the developers profit. Whether that means shoeboxes or livable space depends on how much those things cost to build and how much people are willing to pay for them.
Yes, exactly. And my point is that a city shouldn't optimize along one direction like this, because families work in urban centres too. There should be a mix of housing for single people and families in the same urban areas, or you drive the families out of the city and encourage commuting and urban sprawl.
The LVT is meant to stay neutral and let the market figure it out. That would probably mean more density compared to today (where lots of traditional houses take up massive amounts of space while paying artificially low tax), but if people are willing to pay a fair price for a big place then that's what will get built.
What "let the market figure it out" with LVT means is what I'm asking about. As I've explained elsewhere, if that means packing as many tiny units together in an urban core rather than a mix of bachelor pads and family-suitable living spaces, than that drives families out of urban centers and encourages urban sprawl, which creates terrible commutes and traffic and all subsequent problems.
> What "let the market figure it out" with LVT means is what I'm asking about.
Part of the point is to very deliberately say: we don't know, we'll let each neighbourhood build what works for that neighbourhood rather than trying to figure out ahead of time.
> As I've explained elsewhere, if that means packing as many tiny units together in an urban core rather than a mix of bachelor pads and family-suitable living spaces, than that drives families out of urban centers and encourages urban sprawl, which creates terrible commutes and traffic and all subsequent problems.
How do you figure that? For a fixed population, the larger the proportion of workers in the center, the shorter the average commute and the less bad the traffic. So 4 bachelors in the urban core and 1 family in the suburbs is much better than vice versa.
(Now of course what tends to happen is if you make the city better then you attract a bigger population. But that shouldn't be seen as a failure. Fixing traffic or commute times is essentially impossible, because as soon as you add capacity more people will move to the area or commute from further away. But what you can do is, for a given sane commute time, maximise the number of people and jobs within that range)
This could have extremely negative side effects.
A really expensive house on cheap land in some exurb would be comparatively cheap, thus encouraging sprawl.
Old, cheap high density housing in desirable cities would all of a sudden become really expensive, hence massively acceleration gentrification.
It doesn't what? Yes it becomes cheaper per apartment, but as I've explained elsewhere, you don't want an incentive for only one sized apartment because urban centers need a diverse set of living spaces suitable for families and bachelors alike. They all work in the city after all.
Exclusionary zoning exists because of NIMBYism. NIMBYism exists because of the financial incentive to raise land values. That financial incentive exists because of a lack of taxation on land value.
Not sure I agree. Or doesn't fit with my experience/city/state.
All zoning is exclusionary to my knowledge. That's the entire point. It's not necessary but it exists because it exists. And, it's sticky. It was established most likely when the entire city was raw land and undeveloped; so it served as a plan for development. There was no NIMBY because people were building their BY. Because there was a plan, you could decide where you wanted to build that BY.
Once you have developed the land, raised family, lived in a house for decade(s), and the city around you develops and changes. Now, your property maybe better utilized as a multifamily complex or a nuclear reactor, or anything really. But, it's your home and you shouldn't be taxed out of it. Rezoning as a process is may difficult and probably should be. There's a lot of stakeholders/neighbors who are impacted by a change. They should have some say. It just so happens that those people who bought a single family house in a single family neighborhood tend to prefer it to stay that way so they get called NIMBY but it's a completely rational perspective to have if you were in their shoes. Thus, an introduction of this tax only serves to displace the current owners who can not afford the new tax bill and does nothing to change the actual zoning. So the result is, richer people with bigger tax-bill budgets move in and your even further into the NIMBYism trap not even realizing you're in a zoning trap.
If you open up the zoning (and perhaps the building restrictions), the best and highest uses can actually prevail.
> It was established most likely when the entire city was raw land and undeveloped; so it served as a plan for development. There was no NIMBY because people were building their BY. Because there was a plan, you could decide where you wanted to build that BY.
That's not really true. Zoning was usually set up later. Often the existing buildings wouldn't be permitted by the zoning rules but were "grandfathered in". (If we made this practice illegal and insisted that you have to demolish anything that doesn't fit the new zoning laws, that might be one way to keep zoning laws sane). Even if the final state of those people's buildings is legal, often the process by which they were built wouldn't be.
> Once you have developed the land, raised family, lived in a house for decade(s), and the city around you develops and changes. Now, your property maybe better utilized as a multifamily complex or a nuclear reactor, or anything really. But, it's your home and you shouldn't be taxed out of it. Rezoning as a process is may difficult and probably should be. There's a lot of stakeholders/neighbors who are impacted by a change. They should have some say. It just so happens that those people who bought a single family house in a single family neighborhood tend to prefer it to stay that way so they get called NIMBY but it's a completely rational perspective to have if you were in their shoes.
Guess they should've had the foresight to get born earlier? It seems absurdly unfair to say that zoning set up for a population that was half the size should bind the current generation. I get that it's individually rational to want to pull the ladder up behind you, but it's disgusting. (And for the "people shouldn't be forced out of their home" crowd: my generation gets forced out of our homes every 2-3 years because we can't afford to own and have to rent. So I won't shed any tears for boomers getting forced out of their home once in several decades)
> And for the "people shouldn't be forced out of their home" crowd: my generation gets forced out of our homes every 2-3 years because we can't afford to own and have to rent. So I won't shed any tears for boomers getting forced out of their home once in several decades
Plus, here in the US the vast majority of land ownership entailed forcing native peoples out of their homes.
>That's not really true. Zoning was usually set up later. Often the existing buildings wouldn't be permitted by the zoning rules but were "grandfathered in". (If we made this practice illegal and insisted that you have to demolish anything that doesn't fit the new zoning laws, that might be one way to keep zoning laws sane). Even if the final state of those people's buildings is legal, often the process by which they were built wouldn't be.
No disagreement there, I'm no expert but think it just wasn't as formal as we current have it. But informally it still roughly matches how we currently do it (residential areas, commercial area, industrial areas, etc). Building codes, technologies, materials, etc change much more frequently which is a bigger reason that old buildings wouldn't exist today. I happen to reside in a part of the US that has seen massive sprawl and growth in just the past ~50-70 years, so it's been mostly planned. I can currently see how the next generation of exurbs will be developed and I think it's been that way for at least 30 years.
> Guess they should've had the foresight to get born earlier? It seems absurdly unfair to say that zoning set up for a population that was half the size should bind the current generation. I get that it's individually rational to want to pull the ladder up behind you, but it's disgusting. (And for the "people shouldn't be forced out of their home" crowd: my generation gets forced out of our homes every 2-3 years because we can't afford to own and have to rent. So I won't shed any tears for boomers getting forced out of their home once in several decades)
Are we out of land in the US? (I'm assuming you're in US). Why do you need that specific piece of land that the person you are displacing already owns? Job/commute, convenience, etc are unacceptable answers in my book. Employers can and should be dispersing, you're likely broadly employable and could find work elsewhere. They could put their office elsewhere. But you're choosing to live in an area that you can't afford to own (and they're choosing to office out of a location that their employees can't live in). Ignoring those or pushing them on the current land owners makes no sense. Curious if you have any evidence that rents are not market driven? It's my opinion your generation is forcing each other's rents up by refusing to move to a more affordable location. When a boomer bought that house, decades ago, it probably wasn't as desirable of a location as it is today. I happen to believe you are more in control of the entire situation than you care to admit but would rather stay put and blame the boomers or change the rules because you don't like the cards you were dealt. The "shed no tears" thing goes both ways, but they did get there first and they do already own their house, so it's an uphill battle for you.
> I'm no expert but think it just wasn't as formal as we current have it. But informally it still roughly matches how we currently do it (residential areas, commercial area, industrial areas, etc).
There's a huge difference between a "residential area" and an area where it's literally illegal to build anything except houses and parking lots. It's not a case of just formalising what already existed, when you make the bodegas and offices and light workshops illegal you turn it from a residential neighbourhood into a soulless dormitory.
> Are we out of land in the US? (I'm assuming you're in US). Why do you need that specific piece of land that the person you are displacing already owns? Job/commute, convenience, etc are unacceptable answers in my book. Employers can and should be dispersing, you're likely broadly employable and could find work elsewhere. They could put their office elsewhere. But you're choosing to live in an area that you can't afford to own (and they're choosing to office out of a location that their employees can't live in). Ignoring those or pushing them on the current land owners makes no sense.
(I'm actually not in the US, but HN being HN I pretty much have to comment from a US perspective).
Agglomeration has huge benefits, that's why we have towns and cities in the first place. The current landowners almost certainly moved to somewhere that was previously less dense and made it more dense by moving there, no doubt chainging the character of the place in the process, so I don't think it's fair for them to complain about the next generation doing the same thing.
And if I tried to start my own new city in the middle of nowhere the exact same thing would happen: the first group of people move in, the city (maybe more like a small town to start with) becomes a pleasant place to live with jobs available, more people want to move in, but now there's enough people living there to NIMBY-block any density increase. If we tried to set a schedule at the start where we'd gradually densify the zoning? San Francisco already has a law like that on the books, they just ignore it.
> Curious if you have any evidence that rents are not market driven?
Zoning is a huge market distortion. It's essentially illegal to build anything in SF (over half the homes in San Francisco would be illegal to build today), and don't get me started on artificially low property taxes. So the rents are "market driven" in the sense of supply/demand, but that supply is being artificially choked off.
> I happen to believe you are more in control of the entire situation than you care to admit but would rather stay put and blame the boomers or change the rules because you don't like the cards you were dealt.
I mean sure, I can choose to live somewhere worse and commute for longer or take a worse job, while the boomer lounges about on my tax dime. But the fundamental injustice is very real.
> The "shed no tears" thing goes both ways, but they did get there first and they do already own their house, so it's an uphill battle for you.
They've created a de facto rotten borough by pricing everyone else out. But when democracy stops working the issues don't go away, people just find more direct ways to express them.
This is not always true. I live in a Resource Conservation zoning area that was established to protect wildlife and vegetation in our region and preserve a large watershed area that is one of the primary sources of potable drinking water for folks that live down in the valley in the suburban and metropolitan areas. I consider my family and I extremely lucky to live in the area that we do, but we are a far cry from NIMBYs.
One of the many reasons exclusionary zoning needs to die in a fire. The urban housing crisis has been allowed to grow for decades, so we're long past any single solution, but I'm increasingly convinced no combination of fixes can succeed while exclusionary zoning still exists.
Japanese-style inclusionary zoning splits the difference nicely between making sure people don't live next to loud, potentially dangerous industry and allowing lots of mixed-use, human scale developments of varying density.
There is zoning, and then also the cost of development. Here, the reason why no starter homes are being built is because the cost to develop a subdivision is so high that no one can make a profit selling inexpensive homes.
The original purpose of the tax is to reclaim the land if the possessor can not make enough money off the land, or prosper some other way, to pay the tax.
A mortgage acts like this too and if the tax was insignificant by comparison it would seem so fair but at least a mortgage can eventually be paid off in full. Then the bank no longer has an interest but the taxman never stops.
Taxes always go up but economic fortunes do not, when these become out-of-phase the original purpose is fulfilled.
This is what makes people demolish perfectly good buildings to reduce the taxable value of their property while they try to hold on to the land during a downturn.
Mortgages don't make people act like this.
For the greatest prosperity of the average citizens in a sustainable system, you tax nothing but commerce.
The purpose of taxing the income or property of average citizens is to repress opportunity for the majority.
Not in all cases. I live in a Resource Conservation area where no lot less than 10 acres in size can be subdivided per zoning laws. The zoning is set as it is to preserve watersheds, wildlife, etc. There are limits (by ratio to land area) that dictate structure density, amount of impervious substrate that can exist within the perimeter of my property, etc. Just because I own over 10 acres doesn't mean I can sell my property to a developer so that they can build four high rise apartment buildings and turn a rural area into a burgeoning metropolitan hub (while destroying a large swath of forest in the process).
We pay high property taxes (which are split value taxes, by the way) relative to other rural areas in the region. That is, we are taxed for the virtue of owning relatively large plots of land (for our area) that come with the protections afforded by the zoning laws--even though our sparsely-developed properties and the characteristics thereof provide benefit to all in our area, including city dwellers (e.g. readily available and clean drinking water, maintaining a healthy ecosystem), for which a value could be assessed that would result in lowering our taxes.
That said, I purchased the property specifically for the Resource Conservation zoning protections, as did my neighbors--and we'd have the zoning laws set no other way regardless of the cost of doing so.
Trying to jam more people into the same finite amount of space is not a sustainable solution (here's looking at you, Bay Area). A byproduct of the recent pandemic was that a significant number of people beta tested relying on technology to get their job done independent of where they were physically located. I would argue it generally worked quite well (though not in all cases).
Though a more ambitious plan than merely increasing taxes and hoping that more housing is developed, why not incentivize people to move to less populated area with the intent of promoting a more-even distribution of population density over time; incentivize medium and large businesses to either permit remote work or establish and maintain local/regional offices if remote work is not conducive to their lines of business or their corporate culture; and fund timely development of new and improvement of existing infrastructure that would make previous two goals achievable?
The way people in the US plan for old age and retirement, and the way they are treated by society, is terrible and property taxes are aspect of that. But the only way you should be able to own land tax free is if there are no government services provided on that land. No utilities, no public road, no emergency services, no municipal services. I don't know of anywhere in the US where that is an option. Unless you're saying you want that funding to come from a different source, which would mean a total restructuring of the tax system in the majority of localities.
I live in a town like this. 'Roads' are actually reciprocal easements to allow all other land owners to pass. Each lot has water well and septic, though one group of houses has a large shared water system which pools the individual well permits.
Electricity and gas and internet are private companies using an easement.
Police and fire can easily be funded by sales tax, just like the public transit. Alternatively, land owners can voluntarily pay yearly for police and fire, or opt-out just like people are not forced by government to buy homeowner insurance.
If you don't mind me asking, where do you live? Because my area is very similar, but all 'reciprocal easements allowing owners to pass' are all based on county/state law, and enforced via such. Anything paved, tar/chipped, graveled, or traveled via dirt is a county road and subject to county maintenance and oversight.
An easement is a form of a property contract, not a law. It is enforceable in court by parties to the easement.
Maybe look into the lot lines and confirm if they extend through the 'road'. Then go to county clerk and recorder and find what easements were filed there. Lots of misunderstanding about this, even in local government.
Have those laws been tested? Published appellate cases specific to the law may be very interesting. An encumberance or taking requires compensation.
Also, be careful to not use motor vehicle laws and words like 'drive', as you can do what you want on private property. My child was practicing use of movement via a personal conveyance when 11 years old, in what looks like a car on what looks like a road.
Incorporate a town and do what you want. After incorporating, set up contract to pay county to do maintenance until the town has time to bid it out.
Curious thing here is that with the limited ability of the town to meddle, town council election is occasionally cancelled because it is not contested. There is little to fight over, so not a lot of grift or power.
Wait, why on earth is the article advising you to flee from a black bear? You literally cannot outrun a black bear- I've driven along side one that was running parallel to the road at around 30 miles an hour.
If there aren't cubs around, you yell, clap and raise your arms. It'll run in a heartbeat. If there are cubs around, you back away slowly- running will just make it chase you. If it follows, stop moving.
That's when you play dead, to get used to how you'll be in a minute.
Realistically, it is a game of chicken. If you stop, you're signaling to the bear that you aren't intimidated. As long as it has an escape route, it'll back down.
Brown and black, though not grizzly. The moose are more dangerous.
There are benefits to shared services, the question is how to fund the services and if it should be voluntary.
Sounds quite nice to me. A good example of how private agreements such as easements can solve a lot of problems that people think require "government" solutions.
Yes, get rid of property taxes and completely overhaul the tax system. You could easily replace property taxes with a VAT which I would find much preferable because it’s more flexible. Illinois property taxes robbed my family of a farm that had been in our family for 200 years. My grandparents simply couldn’t afford $20k in taxes every damn year. Patently absurd.
That's obviously not ideal for your family, but it's precisely what property taxes (or more directly a land value tax) is designed to do. If your grandparents couldn't use the land in a way that covered the property taxes, then the argument is that the use of the land is likely inefficient and it would be better overall if the land was being used more productively. It sounds like the system did exactly what it was supposed to do.
Edit: not to mention that VAT and sales taxes are considered regressive taxes that disproportionately burden the less wealthy. I would much quicker remove VAT than property taxes.
It's Illinois. The state is a financial disaster. They are jacking property taxes because they don't know of any other way. Certainly spending less and rooting out the massive systemic corruption do not appear to be on the table.
It may be what property taxes are designed to do but the social agreement that allows them is that taxes are designed to raise funds, not force people out of their homes. The Romans tried this. They ended up with their citizen farmers walking off the land because of the taxes, and ended up going from some of the most advanced farmers to not being able to feed themselves.
I experienced VAT in Europe for some years and it is an overly complex sales tax. Simply have a sales tax which excludes uncooked food at grocery stores and excludes tax on some reasonably small amount of household energy each month. Then delete other taxes.
Why not solve it like social security? You pay in over most of your life, then retire. If you call the fire department after you’ve retired, they’ll still come because you spent a life time paying into it.
For the same reason that I'm planning my retirement without social security. Politicians can't be trusted long term. They'll write laws to allow them to use funds that were previously protected.
The traditional (neoclassical economics) view is that taxes pay for services, but that's not how it really works. The federal government buys these services with money it creates, and then only later does it tax it back.
For state an local governments this is mostly true but even there the federal government helps out.
What you want is for the wealthy to pay for the poor and old and those without much wealth or income.
> tax free if there are no government services provided on that land
You're still giving the "it's property" framing waaay more credit than it's due. Remember, granting someone exclusivity to a contested resource means preventing other people who would like to use the resource from using the resource. It's entirely reasonable for those people, represented in aggregate by the government, to ask for compensation in return, even if the government provided the landowner no additional services beyond the exclusivity.
The entire concept of "owning" land is just a hustle to argue against paying taxes on it.
Maybe we should be honest and say that you can't "own" land? Government always has eminent domain, and power of seizure for unpaid taxes. You are effectively renting the land from the government. Why not just call it that. Give people a 99 year lease instead of a mortgage and property tax. If you do nothing with the land, your lease can be terminated. If you improve the land (build a house on it), you can depreciate that on your taxes as a leasehold improvement.
The details need to be hashed out. I'm not convinced that 99 years is right, it's long enough to ignore and then pretend to be surprised when it comes up for renewal. Perhaps 35 years and no termination clauses, to make it easier to plan around? It would allow one house for having children and one house for retirement. The improvements mechanism would likewise need iteration.
I am interested to see how the various global experiments in these directions will pan out, though it looks like right now the market is betting that the 99 year leases will turn into perpetual ownership. That's unfortunate, because perpetual ownership is directly responsible for most of the largest perverse incentive problems in the real estate industry, not to mention ongoing gigantic deadweight loss.
I don't see how that's relevant, not all land is equally well suited for housing, especially among the elderly who are likely to need some sort of living assistance and regular access to healthcare.
property taxes are terrible for old people. you should be able to buy a reasonable amount of land tax free.
I think something like California's Prop 13 that puts a cap on property tax increases is a better idea -- but it should only apply to owner occupied primary residences, not second homes or investment properties.
> I think something like California's Prop 13 that puts a cap on property tax increases is a better idea
Prop 13 is one of the worst ideas in taxation ever. It would be better just to let the aged and disabled freely defer property taxes beyond a certain, income-based level (and maybe also to let other people do the same with certain limits on total deferred amount relative to assessed value for time-unlimited deferrals, and total time for value-unlimited deferrals.)
Roughly, yes (it's not exactly what I am describing, but pretty close); I’m saying if you are looking for a model to stop that problem elsewhere that has neither, copying Prop 13 (or even just the assessment increase limit, even if applied only to owner occupied primary residence) isn't the thing you should reach for.
Right. But the thing to realize about Prop 13 is that it was passed in malice. Angry voters wanted a "tax revolt" because they were upset with the state. That's why it expands to all property and not just primary residences (Jerry Brown's Prop 8 on the same ballot in 1978 was targeted but voters shot it down).
Of course nowadays it's easier to hire behind grandma than it is to defund school buses.
Land is not equally valuable so you can't look at the total land area of the USA and declare that everyone should be entitled to one tax free plot of land, land in the middle of Manhattan has a different value than land in the middle of a mountain range that's covered in 20 feet of snow half the year and is only accessible by helicopter.
Most old do not live in assisted care. And healthcare is independent of land ownership.
I didn't say "assisted care" my father lived almost his entire life on his own, but still had assistance from his children and occasionally a home healthcare worker - this is a lot harder to do if his allocated tax-free plot of land is 100 miles from family or healthcare services. Healthcare is independent of land ownership, but isn't independent of location - after one medication change, he had to go back to the doctor daily for monitoring for a couple weeks, then weekly after that for 6 months. How would he do that it it was a 4 hour round trip to the nearest healthcare facility?
Yes, people who have the property value go up around them should be kicked out of their homes. Goodbye old people and minorities who live in affordable neighborhoods that become gentrified. Kick them out on the street for failing to plan for possible future dynamics in their neighborhoods. It's the only fair thing to do.
Fairly sure this is to increase population density in the area, so selling old homes for tear downs would be a net gain.
The more reasonable approach to this would be discounts for the primary residence, and possibly discounts for populated units, depending on if you are targeting home owners / overall population and housing cost.
Quarter acre per family might make sense across the US as a whole with large swathes of empty land across the middle, but it makes no sense if you look at the average individual given the percentage of the country living in urban areas.
Boulder Colorado comes to mind with this idea. Live in the city for a certain amount of time and be over a certain age and your taxes are cut in half. Much better than paying the tax and the government giving it back.
Property Taxes aren't terrible for old people. How the mille-rate is set is terrible for old people.
A fixed mille-rate results in taxes going up as value goes up. This might be difficult to plan for and manage. However, many cities will simply put a lien on the property and collect when the property is sold/transferred/person dies.
However, this isn't necessarily how things need to be done. In New Zealand, the mille-rate is set to clear the budget. That way, the mille-rate changes with the city's budget, not valuations.
If the city wants to do more, they put it into the budget and say "do you want to pay for it?". Then the mille-rate is changed and everyone's taxes change.
If your house changes value, your taxes don't change! Unless your neighborhood changes its relative valuation, then it might go up or down.
Most states and counties I’ve lived in in the southeast US either exempt or minimize property taxes on residents that are over 65.
In fact, my current area (Cobb county, GA) nimbys keep trying to block assisted living residences. The argument is that old people move in, don’t pay into local funds, but the burden is hoisted on other younger families instead.
1/4 acre is the roughly the footprint of 432 Park Ave which is worth billions of dollars. There's no way a single old guy should be able to squat on that tax free.
The lack of property/land value taxes hurts anyone who isn't retired. I care much more about poor young people who get priced out of moving to a better job in the city than an old person who is "forced" to sell their multi-million dollar single family home. If an old person insists on living in a place where they can't afford property taxes, there are plenty of people willing to pay their property taxes until they pass in exchange for a stake in equity of their home.
> property taxes are terrible for old people. you should be able to buy a reasonable amount of land tax free.
When LVT is used to fund UBI, that ability is automatic: the "break even" point (where your taxes minus dividends are zero) would represent you owning a "reasonable amount of land" (as measured by value). If you own more than that, you pay for it; if you own less than that, you're paid for it.
In many states low income seniors can opt out of property taxes and take a lien on the house instead. This way they feel zero tax pressure no matter what happens to the local economy.
Examples are California Tax Postponement Program and New Jersey senior freeze.
This would certainly impact people with older houses disproportionately relative to the wealthier folks doing the teardowns, though. Probably a political downside.
What's the difference between the two in reality? Theoretically, with a land value tax, "improvements" (however that's defined) aren't added to the final tax calculation. However better-looking homes are then a signal that drive up demand for (and therefore price of) land so ultimately it seems LVT does punish improvements if only indirectly.
Instead, I see LVT incentivizing the production and purchase of mobile homes, RVs, and hotels. You could live tax free if you don't have a permanent abode.
If everyone on the block turns their homes into multiplexes or high rises, this would attract businesses/restaurants to cater to the new residents which would ultimately increase the value of the land and the corresponding taxes, so I'm confused how it's different than property taxes in that regard
> this would attract businesses/restaurants to cater to the new residents which would ultimately increase the value of the land and the corresponding taxes
Lot more steps. Developing a property is risky. The double whammy of eating the development cost in addition to increased property tax bill dissuades homeowners from taking the risk. (Yes, theoretically, prices should go down as easily as they go up. In reality, obviously, no, no city does that.)
By the time your land value has increased, you’ve already made money. (Or ridden on your neighbours’ investments.)
Unless every property in the area is owned by the same person each individual owner will want to build a more expensive building because their individual action has minimal effect on land value. Basically if you don’t build big someone else will and you r lvt will go up either way.
> What's the difference between the two in reality?
One taxes the land and the building(s) on it. The other only taxes the former.
In practice, this means that while property taxes and land value taxes both penalize speculation, LVTs more precisely do so, without the side effect property taxes have of penalizing construction.
> However better-looking homes are then a signal that drive up demand for (and therefore price of) land so ultimately it seems LVT does punish improvements if only indirectly.
Even assuming that effect does happen, it'd be considerably worse under a property tax.
> Even assuming that effect does happen, it'd be considerably worse under a property tax.
So your answer is to dismiss my position without evidence? Your point that property tax is worse than LVT isn't justified by your claim. If land values are determined by government assessment like property values are, then you're still paying property tax, albeit with an obfuscated input for improvement in the calculation which may be higher or lower or just the same as a regular property tax.
> So your answer is to dismiss my position without evidence?
My evidence is your evidence. If you're arguing that a parcel of land increases in value due to the existence of improvements on neighboring parcels, then so, too, would improvements on the parcel in question be more valuable (since they're already built in a desirable location). Hence: the impact for land tax + improvement tax would be worse under your premise than the impact for land tax alone.
In reality, the "niceness" of surrounding homes is hardly a factor; proximity to economic centers (be it directly or by proximity to rapid transit) is typically one of the two primary drivers of land values (the other being geography).
Not just neighboring parcels. Any improvements on one's own property (separate from the land itself) would be factored into LVT through an indirect tax on improvements via a higher assessment value. While certains areas can be "nice", not all homes in a given area are equally "nice". Some parcels of land will have their values "propped up" by the home that is sitting on it as well as proximate homes while others are "weighed down" in the same manner. This would result in unequal LVT assessments even for parcels of the same acreage and quality within a given area. As a result, It's difficult to assess the "actual" land value seperatley. From this, one can conclude that an LVT on a parcel with less valuable property or (a property proximate to less desirable property) plus an improvement tax can be lower in cost than an LVT in on a parcel with property that is more in demand.
> In reality, the niceness of surrounding homes is hardly a factor; proximity to economic centers (be it directly or by proximity to rapid transit) ...
Homes can be valuable precisely because they're located away from economic centers. That too is geography in action. And if COVID telecommuting is an indication of market preferences, home-owning adults prefer small, out-of-the-way towns with plenty of space, low property taxes, and good internet connections. So I'd hardly think that proximity to economic centers (usually cities) is as relevant it used to be.
> Any improvements on one's own property (separate from the land itself) would be factored into LVT through an indirect tax on improvements via a higher assessment value.
No, because that's already subtracted out of the total property value to produce the land value.
> And if COVID telecommuting is an indication of market preferences, home-owning adults prefer small, out-of-the-way towns with plenty of space, low property taxes, and good internet connections.
The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value.
> No, because that's already subtracted out of the total property value to produce the land value.
On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals.
> The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value.
Lower cost is not necessarily lower value. It's possible for areas out of the way to cost more, even if they start cheap, simply due to a short-term spurt of high demand. There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit there despite the city being the automotive capital of the United States where one had historically seen the opposite trend.
> On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals.
...which is already subtracted out along with the rest of the improvements' contribution to land values. You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both ways (i.e. overestimating improvement value instead of underestimating it).
> Lower cost is not necessarily lower value.
Land cost is land rental value times some amount of time (usually based on the expected cap rate).
> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit
Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?
> You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both ways (i.e. overestimating improvement value instead of underestimating it).
I did allude to that in a previous comment regarding the "propping up "and "weighing down" of values
> Lower cost is not necessarily lower value.
Land cost is land rental value times some amount of time (usually based on the expected cap rate).
Cap rate/land rental value is difficult to assess on land
> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit
Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?
I'll admit that I don't have the exact values under the constraints you've listed. And given different geographies, that's going to be difficult to accomplish. However, there have been several reports of prices in Idaho increasing due to now-former residents of the Bay Area fleeing into state and buying up land and houses.
Almost all property people buy and sell is productively used, and separating the value of land and improvements is practically impossible.
Edit: As a weird example, subtracting what it would cost to build my California house from its current market value gives a value for the lot far lower than the actual market price of an empty lot in this location. This isn't just due to the depreciation of the construction (2012) but to market inefficiencies. It's actually the norm in our town. Only developers with economies of scale can really afford to build here, modulo a few wealthy families who are building their dream home without concern for ROI.
It's routinely done in appraisals where I live too. Doesn't mean it's in any way accurate, as required to make the mechanism in the grandparent comment work.
Valuing a building+land is already done and used for property tax purposes. Why do you think it would be worse or less accurate to just remove building part?
> gives a value for the lot far lower than the actual market price of an empty lot in this location
Retrofitting or tearing down a house in California is expensive. Particularly if it's an old house where there could be e.g. lead or asbestos. Clean lots (presuming it wasn't previously a laundromat) command a value from the baggage they clearly don't bring.
There's no teardown required here. Developing an empty lot and selling the result will lose you a $1M+ in my town. Spec home development ceased here in 2019.
> no teardown required here. Developing an empty lot and selling the result will lose you a $1M+ in my town.
Lots of people want to design their own homes. For them, paying up for an empty lot is worth it. Put another way: those buying empty lots are developers or rich. With rates rising, the latter set marginal pricing in desirable places.
So no, there is no teardown required. But a teardown is desirable to some people. They bid up empty lots. Hence the deviance you notice, which is well documented in other places rich people like building designer homes. (Hamptons, Jackson Hole, et cetera.)
Not sure how you're using the term "teardown" here. Earlier, you mentioned the cost of the tearing down being a factor. And as I said, I already factored it out entirely.
I mentioned the custom home premium upthread. It's not the cause of the deviance either.
I'm struggling to make sense of the cause and effect in the article:
"The high cost of property taxes have long pushed away speculative investors as it has pushed the carrying cost beyond what is profitable to hold as a passive investment long-term."
Alright, so now the speculative buyers are gone and we're dealing with ordinary home buyers that actually occupy their home. These genuine owners are paying high property taxes. Next:
"This has led to is a glut of high quality housing at very low prices. The amount of money one needs to save up for a downpayment in Chicago on a 2BR in the city center is 5x lower than in San Francisco or New York."
How does specifically a high property tax for genuine buyers lead to lower prices? Because of less demand from speculators? If so, why not just get rid of speculative buying (simply make it illegal)? What does it have to do with property tax for ordinary citizens?
And what on earth does Chicago have to do with San Francisco or New York?
> How does specifically a high property tax for genuine buyers lead to lower prices? Because of less demand from speculators?
Speculators are forced to sell, because the cost of keeping too many houses locked down is high and starts to show on their books, so they have to explain it to the investors, that go away unsatisfied, and so on.
Of course, that only makes a difference if there are many unused houses.
Also the idea is that as prices fall, the absolute value of the tax falls, but speculators still do not have a motivation to buy them, because the price isn't expected to rise.
> If so, why not just get rid of speculative buying (simply make it illegal)?
Because you will need an entire book of rules, that lawyers will use to get a lot of money, and rich people will use to make the tax not apply to them. (But there are some simple rules that can only be gamed a bit. Maybe those are enough.)
Because a suppression of price would also suppress new development? Why would a builder build anything in an area of low profitability, in a backdrop of rising costs and worker shortages?
So how come there's ample low cost high quality housing in Chicago?
The same remark applies to home owners. Your property won't rise in value, so why buy it? You must really want to live in the area, I guess.
And yes, I know the point of a house is to live in it, but almost everywhere it has a double function in also being an appreciating retirement fund.
For now my theory is that a lot of speculative supply got dumped, leading to a one time effect.
> almost everywhere it has a double function in also being an appreciating retirement fund.
That's true, but it's also a looming economic disaster as it prices out the younger generation and entrenches generational wealth.
Chicago are famous for their highest rate of 2.5% per annum, grown smoothly over 15+ years. Thought experiment: What happens if the land value tax rate keeps growing smoothly? What does it look like at 10% per annum? 20%? 100%?
At 100% per annum, the average land value of a house needs to be below $50k or so in current dollars (most would need to be much less). Any higher, and ~nobody is willing to pay the taxes.
A large home costs $200k or so to build vs a small/cheap home at 80k, so property prices now range from 50k (old cheap home) to 250k (new, high-end home).
That's a huge result for housing affordability! People are currently saving deposits of 80k to get a mortgage.
Instead of paying mortgage costs to capital holders, you're paying tax to a government that ostensibly exists to serve you. Instead of buying "the most I can afford so I get a retirement fund", now people are buying housing based on their willingness to pay an ongoing cost for access to amenities.
I think at that point you’re disincentivising capital works too strongly, since there’s a higher risk you’ll lose the property via default on taxes, but it’s not clear to me that the same effect would exist even at a 20% rate.
What author is saying is that if a property has a high yearly ongoing costs, it becomes tougher to just hold onto it and not put it into the market i.e. this causes increase in supply. If I have a $10k/year expense on a property, I am forced to at least generate a yearly $10k+ from the property. This would keep the rentals and property prices in the area in check
The elephant in the room is the amount of housing supply being held by banks and private equity in an effort to shore up housing prices. They can afford high property taxes. Your elderly parents might not be able to.
Obama should have let the bankers twist in the wind when the citizenry was out for blood in 2008. They repaid him by channeling money to Republicans. Put them all in jail.
> They can afford high property taxes. Your elderly parents might not be able to.
Texas has an interesting solution to this. Homeowners over 65 can elect to defer the payment of their property taxes indefinitely, although the taxes eventually get paid when the house changes owners.
So it's basically taking an interest-free home equity loan against the property, in a round-about way? You're basically de-valuing the property since whoever buys it next will have to pay a lump sum in taxes to take ownership.
I guess that doesn't matter to you if you're dead.
What happens if the deferred taxes exceed the cost of the house?
The estate has to pay the taxes, so they can pay the taxes and keep the property, or sell it and pay the taxes using the proceeds. I believe that interest also accrues during the deferral.
I'm not sure what happens in the case where the accrued taxes exceed the value of the house, though.
Basically they put a tax lien on the property, they just don't collect on it while the original homeowner is occupying the property.
I'm not a lawyer, but my basic understanding of this is that if it exceeds the value of the property, the estate can just let the city/county seize the house. Otherwise, they'd need to pay the deferred taxes in order to transfer the title to the heirs.
Homeowners over 65 in Texas (along with certain widower situations and disabled veterans) are also eligible for exemptions that “freeze” the amount of tax they are required to pay (if the property is their homestead) irrespective of the appraised value of the property.
Banks/investors don't let property to just sit there if the cost of renting out is small. (Ie. if the risk of getting into an long eviction fight is low, then they will not let it sit empty.)
On the other hand, it also increases the demand to rent property on AirBnB, if that's allowed and it's a desirable area. Tourists can pay more than locals.
In general, as costs go up, the more there is incentive to try to cater to wealthier customers.
That can be right in the short term, but in the long term you'd expect developers to stay out of the market, so how is it that Chicago has a "glut of high quality housing at very low prices"?
My guess is that this probably indicates that the primary obstacle to construction currently isn't developer capital. It could be that housing construction is still profitable, as there's comparatively less political resistance and less of the budget has to go to legal fees and bribes.
In the interest of being intellectually honest though, that's probably not the full story. It's worth pointing out that Chicago's population peaked in the 50's and that property taxes were probably lower back then.
Also worth pointing out that there's a lot of directions for sprawl to help meet housing demand. I actually grew up in Indiana and my dad worked in Chicago. We lived in Indiana because the property tax was significantly lower even though housing prices were comparable.
I don't think this statement is true because in high cost areas developers still don't develop because higher price also mean higher land costs. On top of that places like NY have lower taxes but not enough development over a long term scale. This taxes codes don't change on a whim. There is also a factor of zoning when it comes to build there very well might not be any land to develop near a city because it's all saturated from long term speculation
In NYC property taxes are almost certainly the least relevant issue. In NYC there is a tremendous amount of political friction around new high-rise construction.
>> now the speculative buyers are gone and we're dealing with ordinary home buyers that actually occupy their home. These genuine owners are paying high property taxes.
Homeowners are concerned with the size of the deposit required, the size of the loan needed, and ongoing costs (inc taxes). This tax will likely mean a smaller deposit and loan than would otherwise be the case. This could be offset by higher ongoing costs by the property tax.
For a speculator, they have the same concerns as a homeowner, but most significantly the potential for capital gains. Yield also comes into it, but let's face it - without strong capital gains no one would be paying these prices (homeowners included).
Lower potential for capital gains effects speculator demand more than homeowner demand.
> These genuine owners are paying high property taxes.
Not if the tax base goes down. Which is the point.
> If so, why not just get rid of speculative buying (simply make it illegal)?
This makes the lawyer rich too. It’s not a smash-and-grab at a Walgreens. You can’t put real estate cops on every deal. If price is expected to go up, people will speculate.
I doubt speculator demand has anything to do with anything in the long term.
I also doubt that developers would bother with a market like the one described. Why not go to some other state/city where construction costs are low and property taxes are also low?
Blackrock is currently propping up residential property prices in Atlanta to keep the bottom from falling out of the housing market. As the "cheapest of the Big 6", once Atlanta falls, other cities will, as well.
General contractors don't just do general contracting, and it's not like tech where you can pick up and move anywhere there's internet.
>Blackrock is currently propping up residential property prices in Atlanta to keep the bottom from falling out of the housing market
source? On one hand they could be as you said, but the alternative could be that investors think that "cheapest of the big 6" makes real estate there undervalued and therefore a good investment.
I think it is utopia to compete with investors on price. Sure, you can make it too expensive for them. It will be too expensive for everyone else too.
Why not make property tax cumulative with the amount of property owned and impose a progressive tax here? It would have an equalizing effect on ownership and speculation would be less attractive for those that already own o lot of properties.
Sure, you have to fix a lot of holes to circumvent taxes so that not every company creates a large amount of holdings, but such strategies are a problem with every tax.
To now say a high property tax would scare away investors doesn't sound workable at all.
I don’t know about NY, but in SF property taxes are effectively frozen based on the value of your home when purchased.
I rented a house once in West Portal where the landlord was paying property taxes on the 1970 value of the home, which was something like $70k. The owner was gifted this house and taxes basis from their parents, who originally bought it. The tax bill came out to just a few thousand dollars as of 2020.
Meanwhile my neighbor at the time bought their house for $3m and was paying something like $35k.
I thought about writing the property taxes in front of each house on the sidewalk with sidewalk chalk to make a point how messed up this tax policy is, but I opted instead to keep the peace and do nothing.
This loophole is used by families in CA as a way to pass assets to their heirs. The worst part is the tax rate also gets passed down, but one generation tops.
Not only keep the peace, but you probably already understand that West Portal residents likely do not care about wealth inequality, or care about it in the opposite way that you seen to. I mean you don't wind up there by accident.
San Francisco (all of CA) has very low property taxes compared to non-CA cities. Because of Prop 13, property taxes are limited to 1% of the purchase price of the home (appraised values can change a max of 2%/yr).
As a result, my neighbor has a house with an effective tax rate of <0.1% ($3,000/yr on a single family house worth >$3M).
I think New York means NYC in this context and NYC has incredibly low property taxes. I believe it's due to a cap on maximum annual increases. New York State tends to have high property taxes on the other hand.
I'm less familiar with San Francisco, but I wouldn't be surprised if they had low property taxes due to Prop 13.
Even if this is provable, why not have a progressive property tax rate? Owner occupied properties can be charged half the rate of rented properties. Rather than increase it for everyone and making it harder on the very people who are likely to sell it to a speculative investor.
It's also desirable to nudge owner occupied properties towards efficient uses.
For instance, there's loads of large family houses being occupied by empty-nesters, while those trying to raise a young family are squashed into undersized townhouses.
Shifting the cost-base from "pay a huge mortgage and a tiny property tax" to "pay a moderate mortgage and an moderate property tax" means it's more likely to be worth the hassle of moving to a smaller house when you no longer need the space.
Landlords will just pass the extra tax to tenets. And mostly low income tenets will bear the cost as they are least likely to have enough money for down payment.
"We can't tax landlords, they'll make the tenants pay for it" is not how markets work. Pricing is held down by ability to pay, because - as far as landlords are concerned - getting paid some money is better than getting none.
Longer term, the impact on rental costs depends on whether you think this policy would increase the amount of housing available for people to live in.
Where I live, many properties are bought and kept empty - the rental income isn't worth the hassle and they are being held for capital gains. High property taxes would presumably result in some of those properties being sold to occupiers.
Consider an extreme case - a land value tax of 20% (meaning you pay the government the full value of the unimproved land every 5 years). Land values would plummet, right? Lets say it were introduced over 30 years, so prices could adjust smoothly instead of crashing. What does the steady state look like after 30 years?
I understand it's going to hard but not impossible. Assessors can work together at the state level and identify owners with multiple properties and send them the extra tax bill or a way to dispute it. They have enough information about what we own and where we live.
Tax policies that require more than perfunctory policing are generally a bad idea IMO; tax evasion becomes a realistic option (everything from farming out properties to their extended family to "reside in" to avoid paying the higher rate to befriending assessors to have them misidentify you as a resident).
Policing is definitely possible, but I don't think the added cost and operational complexity make it advisable.
I agree that the cause and effect is backwards, but for a different reason. High property values lead to lower property tax rates (but not necessarily dollar amounts). The total property tax is largely set by how much money is needed to provide services to a place, which is mostly independent of property values (though I guess stuff like building schools is more expensive if it costs more to buy the land). NYC also has a city income tax further lowering the amount of money that needs to be raised.
If I have $10M to spend on property to take out of the market and hold for a period, do I buy where it will cost me 250k per year in taxes or 50k per year in taxes?
If you're a speculator, you'll buy it wherever the expected profit, after taking out all expenses, is the highest.
If the tax is high in a location where they think they can flip the house for a 50% gain in a few years that's still better profit than a lower tax in a place where they'll gain 5% in a few years. So the property tax doesn't, all by itself, matter to the speculator. It's just a cost of doing business.
A high property tax does, however, hurt the person who just wants a house to live in it and doesn't care about being a speculator.
This is local democracy in action. Vested landowners can put up barriers to entry to prop up their investments. They can also hand it down to their family, entrenching wealth for generations. Sucks to be an outsider.
The biggest barrier to entry for first time home buyers is by far mortgage rates.
Low mortgage rates cause house values to go up because value is based on what an affordable monthly payment for that house.
Low rates means value goes up to equalize payments which is mostly superfluous for people with only one home and good for anyone with investment property but it causes a 20% down payment to be an unsurmountable barrier to entry for those looking to enter the market.
Home ownership is one if not the best way for families to generationally escape poverty.
That's exactly my point. If a house is a million dollars with a 3% loan, that house will be significantly cheaper with a 15% loan but the payments will remain relatively static making a 20% down payment significantly easier for those who are trying to get in the market for the first time.
When people bring up the prices of houses for baby boomers they totally overlook the interest rates and monthly payments.
The price of a house doesn't really matter. The payment and the down payment are what matter and the volatility of those isn't based on the piece of land changing value (in the shorter term).
In the last 6 years, my house doubled in value. Also, I recently refinanced for less than half the rate.
When borrowing money is cheap, there's a lot more competition for things bought with loans. On the other hand, the market rates for rent don't really change because the people don't suddenly have more disposable income.
If the present and future are worth the same, then the value of land is practically infinite because millions of generations of humans can use it. The obvious problem in this case is that nobody should own land forever.
Local example of this in action. In Berkeley there were two candidates for District 4 supervisor in 2022: the incumbent, who owns two houses, each worth over $2 million, and the challenger, a renter. The challenger had to withdraw from the race because his rent was increased to a level he can no longer afford.
I think this new rule only applies to property that is inherited and not lived in by the inheritor (e.g., rental property or vacation home). If you inherit a home and live in it, I think you can still keep the old property tax basis. There may be some dollar value limitations or other rules I’m not remembering though.
EDIT: just checked, the property value can go up by $1M from when it was purchased without the inheritor owing additional tax. [1] Beyond that, tax is due on the incremental additional appreciation. In reality, this will only affect properties in a few metro areas (Bay Area, LA, OC, SD) and certain beachside properties. This isn't to say that the law is good or bad, just to describe the scope of its likely impact.
The push back on Prop 13 blows my mind. "What will actually make housing cheaper, is to make costs higher, actually."
Ok you've forced a bunch of house painters and restaurant owners to sell and move out. More tech workers buy the houses, more large chains buy the retail space, now what?
Prop 13 solved two problems at once. It forced a reduction in the out-of-control government spending, and it saved seniors from losing their houses. IMHO the only problem with Prop 13 was the "grandfathering" clause. The cuts should have been perpetual and across the board.
> It forced a reduction in the out-of-control government spending
No, it didn't. California just kept adding taxes everywhere else to make up the difference and still had an annual deficit most of the 13 years I lived there.
> It saved seniors from losing their houses
Why are seniors magically allowed to be immune to basic market forces when no one else is?
> Why are seniors magically allowed to be immune to basic market forces when no one else is?
Because they have fixed incomes (generally). This income is immune to market forces. That's why.
While many elderly invested wisely (and at the right time) to become wealthy, especially when leveraging dips (like during the 80s), it doesn't change the average case. Living month to month on a fixed income is the norm after retirement.
I do not think elderly invested wisely. Cities grew. They got lucky. It's as simply as that. The remote working is taking pressure off the cities. And you can see many crying about return to office, who have multi year leaseholds or own the buildings.
I specifically called out that this is a minority situation, so the characterization you put forward seems like a wild overstatement.
Some seniors bought post ww2 bonds at phenomenal rates. There were many ppl who made wise investments, regardless. Patience turned thousands into hundreds of thousands outside of the housing prices.
Except, while it was always rhetorically useful to talk about seniors with limited and fixed incomes being able to stay in their homes, Prop 13 also benefits people with multiple homes, landlords with rental properties, kids inheriting their parents house and running it as an AirBnb, etc. It benefits _corporations_ and non-residential property. Corporations can also skirt around it by not triggering a reassessment by not transferring ownership all at once.
Meanwhile, why are only senior home owners worthy of that stability? Why do seniors who rent not get rent stabilization as a matter of law?
If this were really motivated out of altruistic concern for vulnerable retirees, the law would look very different.
Oh, right I'm sorry, since the beginning of 2021 if you inherit a home in CA you should move into it and run your _prior_ home as an AirBnb. My understanding is you need to make it your 'primary residence' within 1 year, but it doesn't say how long it must remain your primary residence?
With the "portability" affordances for people over 55, and with the special treatment of farms, I think there's still plenty of room for heirs to receive properties with ridiculously low assessments. A savvy person trying to give the greatest tax advantage to their heirs would sell their property with the lowest assessment, and buy the most expensive property they can, make it their permanent residence, and leave it to a child or grandchild.
In combination with the special treatment for farms, I think there's plenty of room left for people to inherit property which they don't actually need, with ridiculously low assessments.
That doesn't mean they should be excused from paying their fair share, especially since the elderly make greater use of public services. Float the tax rates to the market level and allow fixed income elderly to accrue a lien against the property that can be paid out of the estate when they die.
How is it incidental? Its a bad answer for why because there is a way to solve the problem you described without letting the elderly freeload off the backs of the young.
> California just kept adding taxes everywhere else to make up the difference and still had an annual deficit most of the 13 years I lived there.
The state taxes were added to partially backfill the lost local taxes. Prop 13 was a major contribution to moving control from local governments (which it kneecapped fiscally) to the State (which it also kneecapped, because of the supermajority requirement to raisd any tax, but not as badly.)
I lived in California for most of my life and I remember the effects of Prop 13. Before Prop 13 the parks had recreation coaches, the libraries were open seven days a week, and schools had more than enough teachers. As is typical with any forced budget reduction, the changes were targeted for maximum effect on public perception.
The federal government went through a similar activity a few years later when Reagan slashed budgets. Everyone survived.
The state/federal budgets today are astronomically higher, even after accounting for inflation.
Below is a newspaper article I saved from over 30 years ago:
--
See Dick and Jane-and Simple Simon-Solve the School Budget
By ALICE J. GLASSER
Once upon a time, a very long time ago, there was a schoolhouse
with a few children and a teacher.
The children went to school to learn and the teacher went to teach.
It was all very simple.
Then a few more kids came, so they hired another teacher. Now, with two
teachers, they needed someone to supervise. So they hired a principal.
(Meanwhile, a lot more kids came, but just one more teacher.)
So the principal hired an assistant. But still more kids came, so they
built another school and hired another principal. And now, with two
principals, they needed someone to supervise. So they hired a
superintendent, an assistant superintendent, a supervisor of Here and
a supervisor of There. And since they needed a place for all these people,
they built their own building and called themselves Unified. And they were
happy until someone pointed out that there wasn't enough for them to do.
So they hired a director of This and a director of That to develop pages
and pages of things for them to do.
But there still was a problem. Unified had no one to implement these pages and
pages of plans. So they hired coordinators of This
and coordinators of That to decide which of the pages and pages of plans
they should implement. (Meanwhile, a lot more kids came but just a few more
teachers.)
Now Unified needed a bigger building for all their people. So they bought a
really big place. So big that they hired a few more Heres and Theres and
Thises and Thats to fill up the space. And they were happy until they
realized that they had run out of money. Their budget didn't balance.
(Meanwhile, a lot more kids came and an occasional teacher.)
So they hired a financial expert of This and a resource planner of That,
and Unified came up with a Plan to balance the budget. They would break
down all the walls between all the classrooms and once again
have just one schoolroom. Only this time there would be 500 kids and one
teacher. Of course, the teacher couldn't really teach and the kids couldn't
really learn, but Unified was happy. Their budget was balanced.
It was all very simple.
----
As chairperson of the Mar Vista School Site Council in West Los Angeles, Alice J. Glasser has been wrestling with Los Angeles Unified School District budgeting problems. By profession, she is a physician.
It does, but commercial property tends to change ownership and undergo construction more often. Therefore property taxes on commercial property tends to be higher.
As a result, cities have an incentive to build commercial property over residential homes. The result is that the people working in those offices are competing for limited residential space (leading to high prices) and often have to settle for long commutes (leading to gridlock).
Prop. 13 means that a commercial renter can rent out the land to one tenant after another virtually forever without the taxes going up very much at all (way below inflation). At some point it gets to a point where it is never economically advantageous for either renter or landlord to ever have the landlord sell... the situation is only disadvantageous for the city/community (which is getting far less in taxes than other places).
Even if commercial property is changing hands, there are well-known loopholes to structure that as multiple transactions, none of which transfer more than a 50% stake, and which therefore do not trigger a Prop 13 Reassessment.
Grandma is a millionaire. She can take out a reverse mortgage to pay her taxes and she'll still be a millionaire. Or she can agree to a lien that pays her taxes upon her death or move. We don't need to worry about grandma losing her house.
You do have to worry about working families losing their houses in gentrifying areas though. The UK gets "property" tax right in the form of council tax. It's low, paid for by the person living in the property, and often is punitively high for the owners of empty properties.
When people say that the US is a "low tax economy" they seem to forget property taxes, which make the effective rate in almost _all_ US states higher than the UK (and much of the rest of Europe) if you own a home. It's just a "poor value for money" economy instead.
It created a landed gentry in California and has caused out of control housing prices. The world changes, trying to insulate one particular group from change is deeply unfair.
Inexpensive senior housing comes from the same place inexpesive housing for everyone else does: building more housing.
Unlike first-time buyers, though, for whom asset inflation is itself strictly a tax (paid by them, to seniors, but far more so, banks and investors), price inflation of an asset you already hold is free money.
> The problem is that the land tax component of a traditional property tax is too small to deter land speculation. Although property taxes vary from place to place, they are typically between 1% and 2% of the property's total value paid annually. If inflation is low, then for longtime property owners, this amounts to roughly the same cost as if they paid a one-time sales tax on the property of between 10% and 20%. Thus, the property tax applied to building values inflates their price by between 10% and 20%. And the property tax applied to land value allows 80% to 90% of publicly-created land value to accrue as a windfall to landowners. Thus, typical land taxes are too weak to discourage land speculation.
Property taxes discourage existing inventory from being taken off the market in order to speculate via property holding, at the expense of also discouraging new building.
Land value tax discourages holding vacant or under-built property, at the expense of lowering the cost of the land. This means existing homeowners won’t be able to sell their old homes for as much as they could if fewer surrounding properties are developed (more modern, better built, larger, with more units), because their old home is closer to being worth the raw value of the land.
If you want to sell a $50,000 home for $500,000 because it sits on land that grew from being worth $10,000 to $450,000, then a LVT is terrible for you: you need to put in actual work improving your property rather than just sitting on a decrepit old building and selling it for a profit. The problem in the US is that the voters who mostly own their home can’t stomach their home value decreasing: that reduces their paper wealth as well as their ability to take out loans and second mortgages for things like college or car payments. So politically it’s a hard solution to push for (even if, on net, it would help the community be stronger).
Doesn't this presume that all property is taxed at a flat rate? Wouldn't the answer be to split the property based on what the city wants to accomplish? Then empty land can be taxed at a different rate to property with a residence on it (or whatever priority the city would apply).
Check out all the different tax rates that Wellington, New Zealand applies to a property [1]. I count 50!
There is so much incompetence and political game playing regarding property taxes. I work in commercial real estate development. We negotiated a TIF district in a small midwestern town to help redevelop their vacant mall. In theory, if we could redevelop the mall and fill it with new stores, the sales taxes and property taxes from this growth would greatly benefit the city over the long term and help finance this risky project.
First we came into battle with the school district. They would not allow us to build apartments on the mall site because "renters don't contribute to property taxes for the school", even though the citizens of this town need rentals because not everyone can afford a home. It then came to light that the city had been paying the school district out of their operating budget... which is illegal, schools can only be funded by property taxes. But would any politician want to go to war with the school district because they had accidentally been paying them illegally with taxpayer dollars? No way, they'd be voted out for attacking schools. So the school district continues draining the operating budget from the city to this day, while also getting their share of property taxes.
Enter the county assessor. We went back through all the assessment records and discovered that the county assessor had not re-assessed the commercial properties in the area for 8 years... meanwhile jacking taxes up on single family homes annually. Essentially they were giving businesses a freeze on property taxes while shifting the burden onto homeowners. If the county wasn't reassessing commercial real estate, than our TIF development couldn't demonstrate growth as the taxes would not change! So we tried to shake the hornets nest and let the county and city know that their taxpayers were being taken advantage of...
What was the end result? Why had they not been reassessing commercial properties? Incompetence, the assessor was some idiot who was voted in because he had the "D" next to his name and did not know anything about assessing property taxes and argued that he was simply "too understaffed" to assess commercial properties for the last 10 years.
Now imagine a whole country where massive, expensive errors like this can play out without anyone noticing for nearly a decade... it's frightening how broken, corrupt, or incompetent our government is in the United States.
In theory, decentralized government delegating various decisions closer to the people allows for more oversight and flexibility. In practice, in most places the oversight doesn't happen and just results in local politicians doing what they want, and simply enforcing a one-size-fits-all rule of law would be an improvement.
Sorry this was annoying and messy for you, but I look at many other countries and on balance this doesn't sound too bad, and certainly not "broken or incompetent" as if the US was on the verge of collapse because of things like this.
If anything, this sounds like a system working, and you doing a bit of whining. Yeah, there's political game playing, that's called the price of localism and democracy.
A city breaking the law for decades by paying the school district illegally and no one doing anything about it out of fear of getting bad PR for their election campaign... or mishandling property assessments for 8 years are all pretty huge examples of incompetence and are not something I expect in a first world country.
It's the exact opposite of the system working. It's people being given power because of their party rather than their qualification and it indicates a greater sickness in politics in which we have become binary sports fans rooting for our team no matter the cost or quality of the candidate.
To be fair I have no clue how broken property taxes are in Europe or Japan or other first world places, but this ordeal was eye opening to me having grown up assuming our local governments were held to a higher standard.
High property taxes are clearly not intrinsically good; they're passed on to renters, and so they decrease affordability. Land value taxes sidestep this (increasing density decreases marginal tax burden on tenants), but they're not going to happen. You have to design policy for the world we actually have, not the one you'd prefer to live in.
(Property taxes are a real problem where I live; we're an upper-middle-class enclave directly adjacent to the roughest part of Chicago, and affordability issues prevent people in Chicago from moving across the border to get our services. In the world we actually live in, annexing the Village I live in would make more public policy sense than raising property taxes, which gives you a sense of how clumsy those taxes are as an intervention.)
LVTs are a panacea for the concerns paper wealthy. They fear taxes on stock trades, capital gains taxes, and other forms of paper wealth tax; a LVT lets them point at the homes of the masses and say "Look, there is an easy to track and tax asset class, sink your teeth into that and not my stock portfolio or trades."
Financial transaction taxes aren’t really a concern for people who own stocks. Trades used to cost money before the zero-fee brokerages. An FTT will just be like everyone having to pay a slightly higher fee: a little less liquidity, slightly wider spreads, not much cost if your investment strategy is shaped roughly like ‘buy SPY and then do nothing for a long time, then sell some and maybe buy some bonds’.
It just doesn't matter. Land value taxes aren't going to happen. We need to make smarter decisions with the policy levers we actually have, and not pretend we'll have levers we don't.
This is one area where (I hate to say it) the red states have tended to do a better job than the blue states.
Take Texas as an example. Up until this last year at least, Texas had relatively low property values but high property taxes. But high property taxes on a $200,000 house aren't the end of the world.
But here's a big one: in Texas, seniors (65+) can defer their property taxes to be settled upon their death. This allows seniors to stay in their house if they really want but incentivizes seniors to downsize to avoid passing on that liability onto their children.
This is exactly what you want.
Compare that to California, for example. "But what about the Seniors?" led to Prop 13, which was a massive tax giveaway to Disney and affluent property holders. Capping property taxes deprives the state of taxes to fund services for no good reason.
Even worse, when your children inherit that house, they inherit the house on a stepped up basis (meaning they pay no capital gains tax and the capital tax base gets reset to the market value so if you sell immediately you won't pay any CG tax) and children and grandchildren can inherit the artifically low property tax rates.
New York has a different set of problems. A big one is that single family homes are subsidized. A $1m SFH will pay less than half the property tax of an equal value condo. And there's all sorts of caps on property taxes on SFHs too.
Additionally a $100m condo only pays about 10-15x the property tax of a $1m condo in NYC.
I'm a big fan of making property speculation less lucrative. High property taxes are a good thing. We need to stop giving away money under the auspices of "but what about the Seniors?"
> children and grandchildren can inherit the artifically low property tax rates
Grandchild -> child is readjusted to market rate property taxes. Only parent -> child IFF both are and continue to be primary homes, does it receive the previous tax treatment.
Instead of taxes, I prefer depreciation terms (see japan), which incentivizes new construction and does no harm to those that continue to occupy the land in old age. you’ll also find that older houses go down in value as expected.
Coming from a state with a higher property tax rate I can qualify this by saying higher is not better. Taxes are always a disincentive. While the author claims it is a disincentive to sitting on a property and is comparing it to the effect on price like the FED's interests rates, these comparisons are myopic. He misses the bigger picture of longevity of private property ownership, the Constitutional protections of a property owner, and the inevitable results of the state seizing the property for back taxes. The long term benefits of the first two are long proven and the cold destruction of a member of a community the result of the last.
Oh yeah, and the higher tax gets passed to the renter/leasee in higher rents and is a further disincentive to usage and investment.
Agreed on the taxes being (at least partially) passed on to renters in a typical case.
However, don’t understand how you are linking constitutional protection of property ownership with tax rates… it is obviously not an absolute because we do pay property taxes… so this is a matter of degrees.
Free society chooses to find the right level. It does not imply negation of bill of rights…
Here's a crazy idea: 0% for primary residence, 50% for income properties (rentals, etc.). Will it kill renting? Heck no, not for property owners who live in one of their own units, at least. It might affect individuals and entities who hoard and exploit people, though.
The article overlooks one important factor: Raising property taxes would lower house values, reducing loan sizes, and therefore bank profits. We can't have that money being squandered on social services or infrastructure.
When people take out a mortgage, they normally only care about total monthly cost. If the property tax increases they can afford to spend less on a house for the same monthly payment.
Maybe instead of messing with the money via the fed and then finding volatility in housing we should just end the fed. Housing becomes a safe haven asset to avoid the other ramifications of fed policy namely inflation and the machinations of policy qe/qt, contractions and tightening. Yes it’s not in a vacuum but… we didn’t get here by accident.
Taxing and taxing higher on property is an assault on our ability or “own” property which is a freedom. Free societies have property ownership. Higher taxes whilst monetary devaluation seems like the system now wants to take away our ability to own things.
Right now we have lots of income tax, but most countries have very low land value tax/property tax. This means you don't "own" all the fruits of your labour, but you "own" land, which derives its value from the labour of society as a whole around the land.
The Georgist proposal is that you should own all the fruit of your personal labour (no income tax) but that the proceeds of the labour of society should be returned to society at large, through a land value tax that captures the rental value of the land.
The current status quo in most countries is that you can own a piece of land in the middle of a metropolis and do no labour, and yet reap significant reward. This is in essence a theft from society, as the citizens of the metropolis are labouring and building capital that creates value for the piece of land, yet the land-owner proportionally does very little to create value for their land. If you want to discourage theft and encourage keeping the fruits of your labour, the Georgist proposal is fantastic.
I agree with this article, housing shouldn't be an "investment" but rather a place to live and have a good life.
By taxing it, it provides disincentive for people to use it as an income generating or speculative asset.
We shouldn't view housing as a way to "get rich" but housing actually provides much better utility if it's price is stable and not prone to boom bust cycles. Since more people would be able to buy at any given time for their budget if prices stay low.
If the homevoter hypothesis is true then the counterargument to this is just the argument itself. Property taxes cool speculation, but I'm me, and I bought into the neighborhood and thus want to see line go up.
Yes, local politics is inherently more tailored, but it's also more vulnerable to conflicts of interest. Most local town councils are controlled by an oligopoly of the loudest homeowners who will vote down anything that is perceived to impact their home prices. The people who want affordable housing are not part of the voting quorum because they do not live or own the neighborhood.
In other words, don't say the quiet part out loud!
Generally, high taxes on anything are bad. Taxation facilitates a transfer of assets from the productive sector to the non-productive sector, e.g., from the homeowner to the government. The recipient then uses the money to further their plans without regard to the taxpayer. It has always been that way. Using econo-speak doesn't make it any less true. Looking at cities like NYC, eliminating rent control would do more for the housing market than raising property taxes.
Also it should be used as tool to increase densification. Just increase if property is not sufficiently dense, maybe to some 20%. At that point people are free to choose either to allow redevelopment to happen or support local community.
Residential real estate represents 5% of the GDP (in the US), 25% of an individuals wealth, and 65% of the homes are owner occupied. A 20% tax even if only for property deemed underdeveloped would bankrupt a ton of people (myself included) and throw the entire market into chaos. Most people who were hit with this wouldn't be able to redevelop because of the expense, so they would be forced to sell. The market would get flooded and drive down the value. Investors would snatch everything up, redevelop, and start driving up rental prices. We need change but this would be horrible in so many ways.
Nah, rents aren't determined by owners' costs (except at the margin where property owners are debating whether to 'stay in the game') - they're determined by bog standard supply/demand and usually set to the maximum rate the market will bear.
This assumption (which is largely correct) gets thrown out the window when the entire tranche of supply is hit with a cost increase all at the same time (and every participant knows it).
The point of this "margin" you mention gets rather deterministically and uniformily raised across the board.
I don't understand this. The owners have pay mortgage, taxes, insurance, and repairs. How can it be decoupled? The landlords I know would have to sell if they lost their renters, or if the rental income fell below a certain amount.
If the market cost of renting a unit drops below the landlords' cost to maintain the unit, the renter doesn't go "oh well, that's a shame, I guess I will pay the higher amount."
The landlord either eats the loss or gets out of the game. Since vacancy is the worst possible outcome for a landlord, they can't just hold their units off the market to get the price they want.
It's often easier to think about the reverse situation -- imagine there's an error at the bank and the property owner's mortgage goes poof and his cost of operating the rental is cut in half -- do you think he'd lower the rent for his tenants? Of course not.
It's not a perfect market, rents are sticky, landlords don't profit maximize all of the time (e.g. they might keep the rent the same for several years for good tenants), but in general landlords will charge the highest amount they can charge at all times regardless of what their cost basis looks like.
Threads about real estate are invariably overrun by clueless 20-somethings who think 'muh zoning' will let them afford property in the [elite metropolitan neighborhood]. Statistically none of you will be able to afford a home here; my advice is to leave while the leaving's good.
Especially if you were lured here by some VC who sold you a metric ton of variance and went to the bank with the drift. But hey, they're on your side with the whole zoning thing.
When you strip away the politics and bogus economics, house pricing is just the adult version of lunch table drama. That drama is actually a microcosm -- everyone in the cafeteria was selected at the real estate level.
You may have been raised to think you could be elite, but only a small minority can be. And if you're downvoting comments because they imply you're not...
It is cruel, but changing it would require far more drastic measures than proposed here.
I'd settle for home prices in [way out there suburb of a delapidated major urban area] to be relatively affordable. You might be surprised to know that many of the "twenty somethings" that make it out to the big city actually have brains inside their heads.
If speculation is the problem, then making expected return from real estate investments less than expected return from risk-free or low risk investments should fix it.
Something like, if 10 or 20-year US Treasury bond pays more than you'd make being a landlord and you expect little to zero asset appreciation, then there is no incentive getting into real estate.
And it's possible to discourage house flipping by introducing some sort of friction. Like a high tax of some sort that is applied only if you sell sooner than X number of years (let's say 5)
> With sales and income taxes (which can only be levied provincially and federally) governments establish a tax rate, and then see how much money that brings in.
> Each year municipalities decide how much money they need to bring in, and then set their property tax rates accordingly, to ensure they collect the requisite sum. They start from the total they need to raise, in other words, and work backwards to figure out what tax rate will yield that amount.
Because of this "backward" system of tax calculation, if every single building doubled in value, the tax rate will be halved, and the city will receive the exact same revenue.
So if you raise the property tax rate more than what it should "naturally" be, what will you do with the budget surplus? What will you spend it on?
The real estate industry is a closed looped system, and because its monopolistic, anti-free market, and dealing with a finite product that simply trades hands its golden age was done after the great expansion of the United States after the Louisiana Purchase and the Mexican Treaties of 1848.
This a foundational industry that pitted the upstate New Yorkers and the agrarian Virginians against Alexander Hamilton at almost every corner of his life in the establishment of free markets disruptions with the Bank of New York and later the Department of Treasury.
Disruption can be seen in vertical markets of big cities and land creation like that of China in the South China Sea with man-made islands and expansion of territorial rights, but outside of that it's golden age is gone and the taxation will only become more intrusive for programs as our populous grows and the need to extract support for the expansion from the adult working class is through taxation.
Hopefully this isn't rambling, but rather insight into how perverse the market has become because of no more land, and way more people.
The market didn't become more perverse because no more land. It was perverse from it's inception, you just wouldn't come across the scaling issue until such time as population seeking space outstripped finite supply of land.
Any market will run into this fundamental problem. The issue is apriori to market facillitated resource allocation systems. Whatever unit you use to represent value or as the unit of transaction; it will inevitably centralize once demand starts outstripping supply, and rent extraction becomes an effective capital amplifier.
It's the magic of power laws. Everybody without capital assets pays everyone who has it. Those with it lift the prices by virtue of the fact they too are factored into average buying power amongst the potential set of transactors. That justifies higher asks, which decreases your non-capital owning members supply of transaction medium to devote to acquiring more capital which increases your rent extractors capability to diversify, rinse, repeat.
There.
Is.
No.
Escape.
Except estate taxes, assuming no immortal legal fictions. In the presence of such, you're hosed for recreating a level playing field for latecomers.
There is an incredible amount of land not to mention upzoning and vertical development. Not to mention there is no monopoly on housing unit production. In fact many companies want to build but can’t due to approval processes and zoning.
it saddens me that we have not put more thought into this topic and we constantly put our education, safety, and services on the economic roller coaster.
no matter how much your home is worth today or in ten years you and other in the community want a standard level of education, safety, and services from your local governments. this should be priced as a service based on the cost to provide it to the members of the community and not based on dynamically changing home values
property taxes should have a baseline cost to cover the essential services (schools, critical infrastructure, safety, etc.) that is the same for everyone (no exemptions) and a variable cost for the non-essential services (parks, beautification projects, etc.) (very limited exemptions) that can be based on the value of your home or land
this way the essential services are always funded and not impacted by economic downturns or property appraisal disputes/challenges and local governments don't have to play the game of increase the millage rate to make up costs for essential services
This article doesn't take into account the negative migration that's been happening from Cook county for the past two decades. Less demand means lower prices.
Currently trapped renting in a high property tax area because the monthly tax bill would be as high as the mortgage payment. This rent trap is starting to feel real permanent because any raise in the property tax just gets passed through to the renter when they raise the rent each year.
They label property taxes as an absolute value paid, rather than as a percentage. Illinois per the Tax Foundation had the second highest rate*. In fact, it speaks to Illinois' and Chicago's affordability** that with such a high marginal rate, their property taxes as a dollar amount are on-par with many other states.
I'm not sure what you're saying, yes Illinois property taxes are high but that's mainly because of the collar counties around cook (https://www.civicfed.org/civic-federation/blog/2017-effectiv...). It's hilarious that you think that high taxes has done anything good for Illinois. the state is bankrupt and in absolute shambles financially. The taxes are high on everything to try to dig out of the hole (which will never happen), effective sales tax in the Chicago area is now over 10%!! All of this nets reduced buying power so yeah, housing will probably be slightly cheaper on average but at the cost of standard of living all around. Your argument is absolutely clueless to the reality on the ground. High property taxes just look good on a spreadsheet.
> "This has led to is a glut of high quality housing at very low prices."
Yes, but this (obviously) doesn't mean this housing is more affordable. It's not. Sure the razor is less but the blades (i.e., taxes) count as well. Both come out of the same pocket, so to speak.
Housing prices are a function of affordability, and that is the collective sum of all associated payments, not just mortgage.
So while we're on the topic, this is why the "college loan debt means more people can't afford to buy" logic (?) doesn't work. Eliminate that debt and prices will go up. Why? Simple! Because the market can bear higher prices.
Roughly the same can be said for raising the minimum wage. Eventually, housing will eat that up as well. It just takes longer because leases are one-year cycles (and perhaps other local rent-increase limits).
What we need is more supply. The only way to truly lower prices is to increase supply. Anything else is smoke & mirrors.
If you want to tamp down on speculation, can't we be a little more creative and targeted than just high vs low property tax rates?
- Some cities are already getting into vacancy taxes; here the problem seems to be enforcement. No one's going door to door in luxury condo buildings looking for empty ones.
- Can a tax due when a property is sold be based on how long the seller owned the property? If you lived there for 20 years and now you're moving to downsize, you pay a low rate. If you held it for 9 months to renovate and flip it, pay a high rate.
- Can a tax rate due when a property is sold be based on the number of homes the seller has been purchased in the past 5 years? If you've been a resident homeowner, low rate. If you're a development company bought subdivision land and is now able to sell dozens of houses, low rate. If you're a speculator who has bought several homes, and are flipping them, high rate.
The problem is once you start making complex rules people will start finding loopholes and ways to work around it.
Like you pointed out vacancy taxes are very difficult to actually enforce.
If taxes are based on how long you have owned the property maybe instead of selling the property I give you a transferable 20 year rent to own lease or create a corporation that owns the property and sell you that corporation so that the ownership never changes.
If taxes are based on how many properties you purchase in a year then maybe you create a separate corporation that purchases each property. No single entity has purchased more than one home.
I am not a lawyer and these examples probably aren't that good, but I think you get the point. The simpler the rules are the harder they are to work around.
I don't think vacancy taxes are _actually_ hard to enforce, but I think there are a lot of noisy objections from people who don't want them enforced, and that can be enough to sway municipal government.
I agree that simpler rules are generally harder to work around.
_However_, I notice that argument is almost always made to claim that governments shouldn't try to change behavior in line with the preferences of their electorate. Tax laws have loopholes, regulations have loopholes and push jobs and industries overseas, etc. The logical end point seems to be that democratic processes are doomed to be ineffective and we should just trust everything to the invisible hand of the market.
What if the real problem is that the mindset that improving policy is so hard that governments shouldn't even try, itself dooms us to bad policies?
What if 20 years ago we had all said, "making complex rules to identify and block spam emails is too hard; there will always be some way for the spammers to get through. So let's not waste resources on it."
I agree legislatures are often complicit and that is part of the reason why our laws are so ineffective. Spam filtering rules are much easier to update than legislation. I'm not saying we shouldn't try, but you also can't dodge a simple tax of x percent on each property. Perhaps a better way to offset it is something like a universal basic income.
But what do Chicagoans get from their high property taxes that New Yorkers don't get with their low property taxes? Services seem about similar in both places to me(though, there is a huge swath I don't have experience with, like services for the poor or school services).
The tax burden is similar (maybe slightly lower in NY), but collected through different means. NYC has a city income tax, Chicago doesn't.
If we're going to pick a means of collecting the same amount, encouraging good use of land and discouraging excess consumption seem like nice side effects.
I'm not sure that's how it works—at least in the case of NYC. The ~4% tax only applies to those with residence within the city's limits. If you live in Westchester however and work in Manhattan, you escape the 4% income tax (but instead pay higher property taxes).
This article argues that relatively high property taxes are good. It's a geographically zero-sum situation. Real estate is a rivalrous good and people will pay as much as they can afford to buy it. High property taxes put political pressure on interest rates, which in turn have broad effects on the economy.
Economic mechanisms like this, which don't change anything in the physical world, almost never have any long-term impact, positive or negative, since the economy is a densely-connected network. Findings of large effects depend on stopping accounting somewhere, and you can get positive or negative findings depending on where you stop.
Money juggling is a great distraction from what really matters: physical quantities and actions.
My experience of high property taxes is that it no longer feels like you own a home. You pay rent on it forever. At any time the rent can rise to more than you can afford. I own my home outright but likely won't be able to stay when I retire.
Maybe subsidizing 30 year mortgages with low down payments is not such a great idea for the general populous. Imagine if house payments were similar but you paid off your mortgage in 10-15 years instead of 30. That would be a much better state of affairs.
"interest rates are a powerful tool to help control home prices"
Unless you're paying cash, most people think in terms of what their monthly payment will be. So driving down the price may not make any particular house any more affordable.
I totally disagree because high property taxes means people would be pushed toward small and small, bad and worst houses. As a result instead of encouraging remote work and energy saving high taxes encourage crappy popular housing that waste much more energy AND can't be improved.
At maximum I agree about taxing homes depending on their energy consumption (all sources) to encourage modern house development. But definitively not high taxes on properties. I'm Italian and I've seen the effect of them destroying the market AND pushing people toward crappier and crappier homes. It's not just a personal idea.
I have generally found it to be true that only those who don’t pay property taxes..that is, those who don’t own property by virtue of paying for it and/or have inherited property..are usually the ones who clamour to increase property taxes as a punitive measure.
In other words, the assetless classes support taxing those with earned fixed assets.
When reframed this way, the article reads to me as a high falutin petty and bitter whine.
All taxes are theft. The only justifiable tax is a tax on consumption and perhaps a tax on children because population increases exponentially. That would take care of all the bundle of taxes and simplify the tax code.
I have nothing against property taxes and I think they are good and should be higher - as the article says, the price of the houses stays the same and the government gets a bigger cut at the expense of land speculators. That's a good thing.
However the arguments feels defective because it uses Chicago as an example. Surely the reason housing is plentiful and affordable in that city is because it has been slowly depopulating for decades and it currently only 75% as populous as it was at its peak.
I always thought the low property taxes in NYC were twofold:
1. The absolutely staggering incomes at the top top end in NYC make income taxes a more effective revenue source.
2. In addition to property taxes, if you own an apartment in a building, there are a lot of other monthly costs. As I’m writing to this, it occurs to me that they may be completely equivalent to the maintenance costs on a house, but I suspect that condo and co-op boards are not nearly that efficient.
My in-laws spend more than that but their home is worth more. They've owned it free and clear for like 20 years but they are getting out this year.
Their city used to be full of families, much higher values, lots of great local businesses and some big business headquarters. That's all gone and it's not desirable at all.
There is a lot of frustration over the blanket example they used for Chicago. Is Chicago cheaper than NYC/SFO? Yes.. does that mean it's affordable for the area? No. We have encountered quite a lot of inflation in the housing market due to people from the HLOCs moving in. It's screwing us over pretty badly.
The prices are like that due to the labor market and that we've been a blue collar city for the longest time.
What's the deal with Brock Whittaker's website at brooock.com, anyway? It only seems to have one page: <http://brooock.com/a/property-taxes-are-good>. There's no home page, no list of other posts. Kinda disappointing, really, since I was curious to see what else this guy had to say.
@tdarb's pblog (https://pblog.xyz) is pretty simple. It's just a shell script that builds a site and RSS feed with pandoc. The build system's a makefile.
I would want to see statistical backing for this. Kindly share if you know of any reasonable models that have studied this.
—
FWIW: Chicago has high property tax rate and it does seem to correlate to relatively steady median price movements.
But that is just one example…
There are likely other factors at play in Chicago as well: number of units of supply per capita and quality of public transportation come to mind as two that might have some bearing on housing prices.
This article doesn't provide any reasons why a property owner should want lower property taxes; why would you want to constrain prices and prevent speculation?
I don't own any property myself and am sympathetic to the idea of raising property tax, but many arguments for LVT/raising property taxes don't paint a convincing argument for why property owners should vote against their self interests.
This is totally my personal bias, but I'm unsure that speculation has a positive value in the housing market, and I think governments should largely try to ensure that as many people as possible can afford homes, rather than ensuring that people can profit off the sales of their homes.
In the United States, people have long seen real estate as a path to wealth (unlike Japan, for example), so it's difficult to reason that people's primary homes shouldn't be their escape hatch into retirement (e.g. the dream of someone buying a house in 1980s Palo Alto and selling it in 2022).
There isn't one. Land, and thus real estate, is an inherently limited pie, so any market disbalance like what we have right now can only be corrected by taking some of the pie away from those who have too much of it. The only argument you can make to the former is that it's fairer that way. If they don't find it persuasive at face value, you can remind that, once enough people are sufficiently desperate to reach for torches and pitchforks, property owners would lose a lot more that any such tax.
An effective 2.5% property tax, such as the example given for Chicago, is not high.
Try living in NY, where effective tax is between 3.5% and 5% (mine is 3.8 in the city of Rochester). It’s really hard for people to become homeowners at that rate, especially when the market goes up and an appraiser can show up at any time and re-assess your value and raise your taxes.
In Texas property tax functions as an income tax by proxy, as the state lacks an income tax but redistributes property tax monies from rich school districts to poor ones. Therefore property taxes are high. Well, high compared to many other states, though not compared to, say, New Jersey. This is not really healthy.
What a piece of BS. High ever rising property taxes are good at pushing older people out of their houses. It is fucking immoral. If the author is so concerned about speculative investors (yes they are huge problem) then this problem must be addressed separately. Not difficult to do at all.
Property taxes are unconstitutional and immoral. They are an implicit nationalization of all property because there is no way to own property unencumbered. Implicitly the govt owns all the land and charges you rent. The level, high or low, is irrelevant to the principle.
That argument is easily debunked by introducing a citizen's dividend.
With a citizen's dividend the opposite is true, private land ownership is forcing people into homelessness and taking away their contributions to their local community.
I'm gonna blow your mind right now: the foundation of all law is the government's monopoly on violence. Might makes right. The only "social contract" in force is, "Obey and be protected. Defy us and die."
> The only "social contract" in force is, "Obey and be protected. Defy us and die."
That same contract is also in force in the absence of a government monopoly on violence, with the difference that the "and die" part gets implemented far more frequently.
That's why anarchists (of any stripe - left or right) shouldn't be trusted, since what they are really aiming for is to destroy democratic institutions and replace them with an authoritarianism that enforces only their preferences.
Yes, I agree anarchy is a dead end. The original idea was govt has monopoly on force to avoid anarchy (and the violence and injustices it entails) but the Constitution was originally designed to limit when the govt can validly use force. We have obviously drifter far away from that ideal.
Maybe not at the presidential level, but you can definitely do so at the local and legislative level if you get involved in your party's local nominating committees. The alternative is running every presidential election like a California recall election, which is a famously dysfunctional process.
Mind not blown. I agree with that and argue the point with people all the time. At the bottom of all the govt regs and laws is a gun. It seems like an obvious point to me but some people struggle with it.
In my view the govt necessarily has a monopoly on the use of force which is unavoidable. The important part of the "social contract" is when is it valid for the govt to use that force. The US Constitution originally laid out when the use of that force was moral. Using force to extract tax payment from property owners is not on that list and turns the govt into criminals operating under the color of the law which is terrible situation.
> This has led to is a glut of high quality housing at very low prices. The amount of money one needs to save up for a downpayment in Chicago on a 2BR in the city center is 5x lower than in San Francisco or New York.
That is because it is Chicago and not SF. Not because of taxes.
property taxes are used to pay for services that the local government provides. when property taxes are high, it means that either the local government is proving more services, the local government is in debt and needs to raise taxes to finance its debt, or the cost of those basic services has risen. At the end of the day your local government needs to spend almost every penny it gets. If they have extra money, they are going to spend it on stupid things like tanks for the police.
High property taxes will make housing cheaper, but it wouldn't make housing affordable. Sure that house might only costs 100k but with a 2k per month property tax, no one can afford it.
Property taxes paying for local services keeps poor people poor. I don't understand why people think this is ethical.
Property tax is possibly the worst way to fund the government. The only thing it's really good at is imposing a market force. It's largely regressive. In fact it's almost identical to gas tax.
on the contrary, property tax is actually a good way for people to pay for what they voted for. If your town voted to increase the education budget, your property tax directly goes into that. You are not paying for something that your town did not vote for.
Property tax can be regressive within a community, but can often be progressive within a county/state. Different towns can have different property tax rates. Rich people would actually prefer a higher property tax to a certain degree to keep the poor out. If the avg property tax is 2k a month, then everyone living there needs to make at least 6 figures.
They are a fine way to build up a solid conservative voting bloc among the elderly. They have property that has appreciated, but their income is well down (usually) from their peak earning years.
Not if you're retired on fixed income. My parents' property taxes kept going up year after year in upstate NY -- one of the deciding factors when they moved. It's a shame because my dad put so much into that property.
I'm not disgreeing that there can be valid benefits of higher property taxes.
The problem with it though is that it is a very regressive tax, especially in states that get the majority of their income from property tax as compared to income taxes (I'm looking at you Texas).
> They can be adjusted annually based off the needs of a local market
Or, in the case of Texas, a very large portion of property taxes in urban centers ends up as recapture and goes into a state-controlled slush fund. These portions (school taxes) are not actually adjusted at all.
> the money collected from property taxes doesn't evaporate from a local area
See above statement again. This may be true for city-level property taxes though.
> Retirees and low income individuals are often able to make cases to reduce their tax burden
I would disagree with this. There are exceptions written into the law that provide exemptions for some of these groups (which are often abused and disincentivise "good" use), but overall lower-end properties have many more comparables to set value based off of, and tends to be much closer to "market". These residents also don't tend to have the funds to many these arguments, and commission-based tax-appealers don't stand to make much money taking on these cases (the absolute dollar value is relatively low). Further, high-value properties without many comparables are the easiest ones to argue for lower tax burden on.
Finally, when property values actually do decrease (due to central bank action on interest rates, etc) it can be difficult to get the assessed value lowered without an actual sale.
Tldr, the current implementation of property taxes in many locations is extremely regressive.
Ok what if you're a poor person and you want to buy a home in a rich neighborhood? Ope, guess you can't! Government is going to fine you for wanting something better for yourself.
It seems like the higher taxes should be applied to non primary residences, along with perhaps some kind of penalty built in for holding the property for only a short period of time.
> And perhaps, the best attribute: the money collected from property taxes doesn't evaporate from a local area like it does when borrowers pay higher interest rates. It goes back into the local neighborhood, leading to better local infrastructure and higher quality schools.
This much is demonstrably false, at least where I live. I don't even pay property taxes to the city, I pay them to the county. There's no tie between those funds and my neighborhood. Then, a lot of the taxes are passed from the county up to the state as well, where it's further spread out.
> I don't even pay property taxes to the city, I pay them to the county.
The county is still a lot more local than a bank that might have an HQ across the country and is barely accountable even there. Also, most people's property taxes do go to their town or city, so your sample-of-one is not really a basis for a policy statement.
I was responding to the article's incorrect statement that the money stayed in your neighborhood, which is not correct in my case. I say "my case", but it's the case for everyone who lives in my county, the 12th most populous in the nation. Probably true for others as well.
In my region of northern New Hampshire, there are a lot of retired folks with houses rising from $200k-ish values to closer to $500k-ish values in the last 5-10 years.
As such, there's a lot of discussion around lowering property taxes to help these retirees.
In my opinion? Fuck 'em. Property taxes are a brilliant method of perfectly progressive taxation: you can always choose to live in a cheaper home. If your home is so expensive that you can't afford the property tax, downgrade. Those of us who can't afford property will shed no tears.
Who would want to settle down in an area that is trying to churn you out though?
Sure, the "fuck 'em" attitude has been used by NIMBYs forever. But now we're using it to deprioritise the existing residents that might've sculpted the community. E.g. "Artists who can't the 200% rent increase? Fuck 'em."
Most folks like some sense of stability with their housing. Not everyone's a 20 y/o digital nomad.
If there was a supply of cheaper housing, I'd agree with this wholeheartedly. Part of the problem is that, in a lot of places (SF, NYC, Seattle, etc) you can price folks into homelessness. Sure, no one is entitled to live in a specific area, but for those who built their lives there, have a community, family, it's cruel to tell them "move to Nowheresville, OH so you can afford a roof"
I mean, either you are cruel to home owners who have capital or you are cruel to poor people. I know where my priorities would be. Or we could of course try to remove the cruelty completely by not using a market system to manage a natural monopoly (space in a community). But if you choose cruelty, at least be cruel to those that can choose to suffer as opposed that cannot really escape
> I mean, either you are cruel to home owners who have capital or you are cruel to poor people.
False equivalence. There's no reason you have to be cruel to either.
You can always build more housing or provide financial services to help poorer people buy homes. Or just, you know, lower the cost of homes so property taxes don't have to be astronomical and force older people out of their homes to begin with.
If housing costs and property taxes are so high it forces older people out, I don't see how that somehow benefits poor people anyway. They still can't afford those stupid expensive houses.
If you disincentivise individual ownership of expensive land and buildings, building dense housing becomes more profitable. Also, you can pay for social programs with the tax revenue.
You were just told that your plan will cause people to become homeless and your response is “I’ll worry about them when they’re homeless.” You’re a perfect politician: make plans with no thoughts to unintended consequences even when you’re warned about them.
They won't become homeless. They will have to move after selling and incredibly expensive house. As opposed to those who are homeless but are not receiving any tax benefits for not having a home, they will have capital to rent for a long time and/or buy a new one in a cheap area
I’m sorry you’re so misinformed despite all the comments in this thread and on this post spelling it out for you. I don’t wanna go in circles, everything you’ve said in the above comment has already been debunked by others here.
That's the hard question. Once you have a community that decides to so it differently, you can use democratic consensus or voting (partial exampl Vienna, lots of counter-market public housing), but to get there you either need force or political will for places like boulder (think cutting off any subsidies for private home ownership and replacing then with mandates to have public bodies or cooperatives build dense-but nice housing in their own backyard. Corruption management would of course be an issue, but at least in my country construction is famously corrupt even in the private sector...). For Honolulu I don't know...but is that actually an issue?
The point I'm getting at is that some places are much more desirable than others. In a market, it's prices that act as a mechanism for deciding who can live in a limited space. For example, way more people want to live on the beach than there are houses on the beach.
On the other hand: if you own property, you could take a loan out in order to turn your single family home into a rent-collecting multi-unit house. That’s what people did all the time before zoning laws, and it’s a reasonable way for a retiree to earn an income.
The problem is the zoning laws: we don’t allow people to let out part of their property, so they’re forced either to attempt to downsize into a non-existent market, or get evicted for not being able to afford their taxes.
There's a reasonable and holistic argument to be made for the generalized version of your position, but specifically wanting people to be removed from their homes by forces they can't control under the rationale, "fuck 'em", is counterproductive and - I don't think it's uncalled for to say - immoral. It's important to have a base level of humanity for people, regardless of what side of which broken social dynamic they are lucky or unlucky enough to be on. Choosing not to do so will in fact hurt our chances of fixing systems in most cases, regardless of how righteous it feels.
>you can always choose to live in a cheaper home
Here also - you're oversimplifying. Yes, you can always choose to engage in all manner of frustrating, saddening, and burdensome life changes. But it's unfair to imply it is easy. You may cite the burdens of others as justification for forcing such a change, but it's a complicated, emotional, difficult, subjective argument that you do no justice by abbreviating into hostile quips. You sound like you're sure this group of people you're imagining is the enemy, and not simply equal human beings, some of whom may have voted in a selfish way on some policy that arguably increased the strain of the situation. It's simply not enough to justify your tone. It's unrealistic to attack every individual who does not always act in perfect unselfish harmony with the greater society, especially when such balance is impossible to objectively define. I.e. it is reasonable to expect individuals to make various concessions for society, but it is not reasonable to expect people not to fight as hard as they can to keep their home (even though it may ultimately be that they must lose it).
The main problem is that in America, the tax structure is very much tilted in favor of home-owning at the expense of renters, that collectively, the homeowner class is receiving subsidies from the renter class (and the homeowner class already has greater net worth and everything else).
There are multiple ways to reduce the impact of the problem. All of them would reduce property values and some might displace existing homeowners. All redistribution is painful and surely people will lose out, the same way that savers lose purchasing power to inflation. Nevertheless, I think it is a necessary rebalance of a system that has been favoring owning over renting for too long.
(1) Tax on imputed rent when owning (imputed rent should not be pre-tax)
> removed from their homes by forces they can't control
A caveat here is that many of these people vote against denser zoning in their neighborhood. So, in a way, the appreciation of their primary home is due to factors that they do control.
"in a way" -- the region in question is northern New Hampshire.
on balance, the housing price appreciation, and therefore tax burden, on "these people" is functionally entirely due to external macroeconomic factors, which you can clearly see on the Zillow Housing price index by typing in "New Hampshire" or any relevant zip code: https://www.zillow.com/home-values/
The average NH home increased $7k-$10k in value per year linearly for the last 10 years!
Then it increased $25k Jan '20 -> Jan '21.
Then it increased *$53k* Jan '21 -> Jan '22.
10 years worth of price appreciation, and therefore tax appreciation, occurred in a 2 year window.
I understand many people have a pet housing policy issue they care about, but trying to attribute this step-function change in tax burden to "New Hampshire zoning laws" and "these people" as opposed to the massive increase in demand caused by Covid urban flight/WFH & relaxed monetary policy is completely unreasonable.
> You can always choose to live in a cheaper home.
So your 90 year old grandpa has been living in a two bedroom apartment on the lower east side for 65 years. When he moved in at age 25, it was considered a crummy but affordable neighborhood, but now it's expensive and desirable. You want a 90 year old to have to move? I agree that maybe a 65 year old couple no longer needs to be in a 3,000 square foot home, but there are a lot of cases that make this complicated.
If Grandpa rents that apartment instead of owning it, he'd if anything stand to benefit (especially if we tax land value specifically and not the building).
My point is that a lot of (and maybe most) 90 year olds are not really capable of moving. Moves are a pretty big pain in the ass in your 20s and 30s, but doing the process of finding a new apartment and physically moving are much harder at that age. And then you move to somewhere cheaper because the whole point is you can't afford the city anymore, but now you need to find all new doctors (many 90 year olds have multiple doctors they see regularly), figure out how to see family (perhaps you remained in your old place because your family lived nearby), get to the grocery store (you're 90... you likely can't drive). It's not practical.
> My point is that a lot of (and maybe most) 90 year olds are not really capable of moving.
And mine is that a lot of (and maybe most) 90 year olds wouldn't need to move. The ones who would be motivated to move are also largely the ones who are wealthy enough to do so.
Grandfathering until the chickens come to roost hasn't helped the vulnerable either, yet that same party largely consists of individuals proposing that solution to the vulnerable.
It's cruel, but that same cruelty is deemed acceptable towards 'have nots'.
Why does grandpa get to live in a two bedroom apartment in the LES during retirement when so many other people can't afford it despite working for a living?
If he owns, you'd think that he could sell the two bedroom and downgrade to a one bedroom to keep the monthly cost down. Or even a studio. But at some point it's an incredibly desirable, expensive neighborhood and I'm not sure anyone deserves the privilege to live where they want as long as they want.
Because 90 year old grandpa can't move as easily as us youngins and it's not his fault that the neighborhood gentrified around him. At this point he can't afford to the taxes on a studio either. But anyway, the process of moving is really pretty tough at that age, even the logistics of finding a new apartment and hiring movers. Now, you move out to the suburbs because you can't afford the city anymore, but you don't drive because you are 90, so it isn't so easy to buy groceries anymore. You gotta find a new ophthalmologist, cardiologist and primary care doctor instead of seeing the folks you've been going to for the last 10 years.
Maybe 65 is too young for retirement age, but I certainly feel that there is an age at which old people should start getting special privileges, like the right to not have to move. And the rest of us can wait our turns and hope that we get to take advantage of those privileges some day.
First, grandpa will have to move eventually. 90 year olds in Ukraine got caught up in a war they had nothing to do with and had to move.
Second, if the neighborhood gentrified around grandpa, his house value has gone up - he can sell at a good profit and use the money for his retirement as he wishes.
Third - consider the counterfactual renter who was living in the same place and working just like grandpa, but had to move at the age of 60 because he couldn't afford the rent anymore. Why does grandpa get to stay but the other person, who is a renter with the same life story get forced out of the neighborhood?
Grandpa has a senior exemption that reduces his property tax, and if he is also low-income he also gets a senior tax freeze that keeps his taxes low enough to pay them. If his health was failing and things were really, really tight money-wise he could apply to not pay his taxes at all and instead put a lien on his property that gets paid when he passes and the kids sell it.
High taxes don't have to be cruel. The real question is - what are they doing with the money? Are you getting a good value from your taxes? I mean, everyone knows that these governments are wasteful. But they are still spending the money on things. It's happening. Do you get any value from that?
I just moved out of Chicago last year. I am not going to claim that Chicago is well run or a model of efficiency. But they have a lot of programs that they spend money on. The library system in Chicago is incredible. It is undeniably world class. Where I live now, youth hockey costs $500 for a session. In Chicago, it was $175 - with better coaches and the random NHL player showing up to show how to do drills and such. Piano lessons cost twice as much. The list goes on. But you know, grandpa is probably not taking piano lessons or playing hockey. So maybe he's not getting the best deal. I don't know.
> 90 year olds in Ukraine got caught up in a war they had nothing to do with and had to move.
I don't think this is a good example of why all grandpas will have to move eventually. We're not in a world war, at least not officially, and certainly not at all points in history.
Would you apply that argument to other property besides land/houses?
For instance suppose when Grandpa was a young man in 1950 he bought a used 1940 Martin D-45 guitar for a little under $400. That's equivalent to around $4800 in today's money.
He's still got that guitar and has kept it in good shape. Vintage D-45s from 1942 and earlier go for insane amounts on the collector market, and he could sell that for over $100k, probably over $150k.
Why should Grandpa have the privilege of owning a vintage 1940 Martin D-45 as long as he wants when so many other people who would like to play a vintage D-45 cannot afford too despite being working musicians?
Should we therefore have a periodic instrument value tax on musical instruments to keep people from keeping their instruments too long? Grandpa can sell the vintage D-45 and use a fraction of the proceeds to buy a new acoustic guitar or even hire a luthier to build him a custom guitar so its not like having to give up his 1940 D-45 would keep him from having a guitar.
Great! I'd like to experience living until old age and owning a tax advantaged two bedroom in Manhattan that has appreciated wildly through no effort of my own. Where do I sign up?
Southern NH here and I would be interested to see if NH's eye-watering property taxes (when you only have one lever, it gets used a lot) have a similar effect as Chicago. Personally, being somewhat involved in city politics, while I appreciate your take, it does mean pricing people out of their forever homes when they've done nothing more than retire to a fixed income in the middle of a bubble. I don't have the answer, but I can definitely imagine the fear of the unknown seeing you will not only be forced out of your home but your town and region to find something affordable.
I lived in Nashua. There is zero new construction going on, lotes are very big so there is a lot of wasted space. The result is that housing is too expensive.
But the absolute home value shouldn't affect property taxes. It should only be the relative home value. The county takes the entire budget, and divides it by the total of all the home values in the county to determine the basis for assessing taxes.
The problem comes when a given home goes up in value more then their neighbors, or when one neighborhood increases more than other ones.
Alternatively, have them pay for an appraisal and finance the progressive property taxes out of home equity. Upon death, the property is sold and the equity used to pay progressive taxes is repaid.
This prevents the generational wealth transfer of subsidized senior housing tax rates with the benefits going to next of kin, who sells the asset and receives the proceeds.
The local budget shouldn't change much from year to year, but when values go up, they are quick to reassess high on, many times, artificially inflated values. When values go down, then they aren't too quick to reassess accurately downward.
In this situation, you just end up displacing retirees which is not good.
I'm not talking about having special rules for retirees, just saying the politicians feast when home values skyrocket and cities need to have a reasonable balanced approach to be able to have great services and departments for the community, but not try to optimize for their budget.
So many great cities have been destroyed from high property taxes. They jack up prop taxes, then lose families and are left with mostly older citizens, and there's a breaking point and they leave.
Home values plummet along with property taxes. So what they thought might be good for the community ended up being a poor decision.
Also property taxes are not perfectly progressive. Only areas with nice homes have good schools.
So, politicians get voted in, raise property taxes to extort established neighborhoods into selling because they can no longer afford the government's shakedown of their residence, so the corrupt politicians' business associates can purchase the properties and rent them.
> Those of us who can't afford property will shed no tears.
You seem to believe the fallacy that not being able to afford a home is other homeowners fault, and not due to poor government planning (likely by the same politicians you willingly vote for.)
I took their statement differently; rather, that they aren't concerned for the fallout of the Haves at the sacrifice for the HaveNots.
I am uninformed in this game, so this is not a statement by me: However i've been told that one issue is squatters, land being used purely as investment and with low costs you can easily afford to buy land and squat it till a time when you later sell it in the market.
As someone looking to buy land to build a home on, i've noticed quite a lot of property seemingly being used purely for investment. Flipped through the years for profit with no real added value, in an area of the country (PNW) that is very, very expensive due to limited supply. It is very cheap to keep land, tens of dollars a year for 10 acres (the lot size i'm familiar with) iirc.
Inhibiting this behavior seems beneficial.
Though i imagine more interesting (than simply "high") taxes could help more. Ie something like a higher tax on unimproved and uninhabited land. Encourage usage, not squatting.
But.. i don't know anything here. I just have experience looking to buy land, and watching what goes up for sale.
Yes agreed, though I do think people conflate things and vilify wrong targets, which sounds a lot like the OP.
E.g. in California it's en vogue to rail against "Prop 13" without considering why it was passed, or how it helps people on fixed incomes remain in their homes. , or more importantly how the financialization of homes has made things bad globally.
Just because it was passed for a good reason does not make it a good policy. Prop 13, whatever the good intentions, is a disaster and has created a modern landed gentry in California.
And the same politicians that those homeowners vote for. And lobby. Especially retirees who have time to do things like endlessly harangue their local councils to implement NIMBYist policies to prevent increasing housing supply in order to drive their housing prices higher. Of course, couched in language like "preserving the historical character of the neighborhood" and "keeping the riff raff out".
I think you are missing something. It's not about blame, that doesn't matter. People are lashing out. It's about anger at the system. It's becoming increasingly obvious that recently a large part of our personal prosperity is based on incumbency. Our government is routinely breaking social contracts which maintain order. That makes people angry at the system, government and their fellow citizens.
One can very convincingly make the argument that state and national governments are undemocratic and difficult for individuals or local groups to influence. But on the scale of a county, small town, or city government, that's less the case. Individual voters who have repeatedly NIMBY voted against densification have absolutely caused their own home values to inflate.
Over here in Hanover they've gone from $500k up to $1M, and honestly the 2% tax rate is the only thing that kept prices somewhat in check in the presence of near-zero interest rates.
Strange, around here property taxes are allocated based on proportional value, true, but the total amount collected is set by the township budget.
So if they collected $10m last year, and will collect $10.1m this year, it doesn't matter if the houses have tripled in value, you'll pay roughly the same dollar amount.
This is how they work pretty much anywhere; the locality aims to collect a certain amount in total taxes, and sets a per-$1000 tax rate based on the total value of all taxable property in their jurisdiction.
People think doubling house value doubles property tax, but the bill could go down if double is less than the average increase for the area.
If the only thing that changes are home prices going up, why wouldn't property taxes(as a percent of home prices) go down? It's not like the city is offering new services because housing prices are rising?
Almost anyone can afford property… provided you’re willing to move.
I’m where I live it costs $40-$50k / acre up to $150k / acre. 30 min away it’s $3-4k / acre.
I personally am opposed to property taxes. I think it basically implies rent of the land. Then again, I’m basically opposed to all taxes except tariffs and perhaps licensing fees.
For instance, you could implement a licensing fee to use the public roads. Or add a tax on import / export of goods across the protected border(s). But beyond that I view all taxes as far too intrusive. Why should my land be assessed? Why should I provide any details to the government so they can tax me? The “government” is infact my “neighbors” and I simply don’t think it’s their business what my assets are.
I'd say Fuck the idea of making it cheaper to live forever in the exact house when you could downsize and make the home available for a family.
If the area was underutilized when they bought in cheap, they earned their windfall. I hope they didn't prevent apartment buildings from being built in their area.
Thank you -- this is a more concise version of my thoughts. If your house goes up in value, you just earned likely hundreds of thousands of dollars in the resulting windfall when you sell. Why on earth should I feel bad for you? I understand that communities change when this sort of thing happens, but pushing out the retired couple living in a multi-bedroom apartment for a small family is a healthier thing for the community. You don't want to freeze communities in time, they need to grow and evolve.
Imagine you bought a house and worked diligently for 30 years to pay it off. Now in retirement your cost of living skyrockets, through no fault of your own, such that you can no longer afford to live there in your 70s and 80s. How is that in any way fair or just?
Now imagine the same exact thing but instead of buying a house, the person rented for 30 years (probably would have been forced out of the neighborhood much sooner). Are you still empathizing?
What about the people who couldn't get a loan in the 1940s-70s because of redlining and ended up having to rent for the same amount of time?
All of this "empathy" talk hides real wealth redistribution towards property owners. Just holding on to a piece of property should not increase your share of real productive capital disproportionately.
Low taxes incentivizes a retiree to stay in possible a more spacious home than they need instead of selling to a young family. If you are a retired couple or a single without any large adult children living with you, you're better off with less to maintain.
Funding local public schools through property taxes is terrible, and makes sure that kids from wealthier neighborhoods get better public schools. Kids are a special case; we even expect people without kids to pay for kids. Public education should be uniform and high-quality, not dependent on local political dynamics and neighborhood wealth (and wealth disparities.)
Property values for tax calculation purposes are not reassessed round here so you pay on whatever the assessed value was when your bought the property. Sounds nice, but what actually happens is that baby boomers, who bought their houses ages ago, pay essentially no tax on houses. Meanwhile, more recent residents get to foot the bill with sky high property taxes. I know people with previously purchased houses of the order or 5 (yes 5) houses that they are renting out for outrageous rents - all with very low property taxes on them. Please make the normal tax rate lower and actually tax everyone.
The difference is turning a profit was not my primary motivation, owning my primary residence was. If making money was my top priority then there are several other houses I looked at that I would have bought instead.
Imagine someone offered you a house but the agreement was that you could only sell it for what you bought it for. I doubt you would buy it considering there are other options on the market where you could profit in the future. It's 100% speculation. It's part of the package.
I'm not sure what this absurd hypothetical has to do with anything. I do not believe anyone is proposing such a requirement.
Personally I am in favor of systems that discourage speculative investment but encourage homeownership. This can be done without indiscriminately punishing people for realizing gains in the market value of their domicile. One such mechanism could be offering incentives or tax breaks that require the buyer to use the home as their primary residence for a certain amount of time.
I think having the opportunity to own the land you personally live on is a right. Owning land on which others reside but not yourself should be considered a privilege, and privileges always come with strings attached.
I think someones FIRST house should be property tax free up to a certain amount that is reasonably indexed to some home value inflation metric.
Any houses or value after that should be taxed.
I think that the government constantly threatening to take your basic shelter that that you PAYED FOR already and put you out on the street... even though.. I repeat.. you PAYED FOR THE PROPERTY ALREADY..is outright fascism.
High property taxes are only “good” in this stupid system that we have to reduce speculation. But what would really be good is if we could stop using housing as investments that drive the prices of homes higher via inflationary mechanisms so that the prices of homes remain more stable over longer periods of time. Which is exactly how a lot of other countries housing markets work. In a better system, property taxes should be relegated to the dustbin because it turns property ownership into property leasing which is antithetical to the idea of private property.
> But what would really be good is if we could stop using housing as investments that drive the prices of homes higher via inflationary mechanisms so that the prices of homes remain more stable over longer periods of time.
Housing only becomes a good investment if supply is sufficiently limited such that demand can't be met. NIMBYism and decades of artificially low interest rates are mostly to blame here, although I agree that in the short-term, penalties on speculation can help keep costs in line.
> In a better system, property taxes should be relegated to the dustbin because it turns property ownership into property leasing which is antithetical to the idea of private property.
I disagree 100%. Protecting property costs money, and the government is in charge of protecting your property rights. It seems perfectly reasonable that you should have to pay a fee proportional to the value of the property as an "insurance" against its loss.
Or producing meat, or maintaining prisons, or building security critical CPUs, or funding medical research...
These people think the market exists, but really we just have a fucked-up version of socialism that privatizes the profits while subsidizing the risk. It supports toxic industries while fucking everyone else over.
In this case, particularly talking about agriculture and the prison industrial complex... or the huge scam with the covid loans where they just used the money for stock buybacks.
You realize that there is a website called Red State and that it's a right-wing propaganda outfit, right? I personally think it's hilarious that the "godless Reds" used to be commies, and now they're Republicans.
I live in very high tax San Francisco, which is similar to Somalia in many ways. Our politicians are corrupt (Nancy Pelosi is a world class Options trader), we have a meteoric increase in crime, and we let people die on the streets - 1,300 over the last 2 years [1].
People on the left are viscous critics of the democratic machine politicians. Pointing to them isn't an effective critique because: yes I agree. Liars and crooks all of them.
Running to the right and embracing authoritarianism is much preferable to the politicians than, say, a general strike and a unionization movement. Which would actually harm the people in power instead of squishing those at the bottom.
> Constitutionaliam is a grift run by conservatives to smoke screen their agendas. Nobody argues it in good faith.
I argue it in good faith. I want government to shrink. The constitution should be used as a tool to constrain the size and scope of Government. And with the New Supreme Court it's chipping away at the concept the State can rule by edict. It's an exciting restoration of Democracy.
Today Government spending is 44% of GDP - which is colossal by most measures. In fact It's much larger than the CCP. Government size will shrink either through inflation or default because its debt burden is 130% of GDP. In research done by Hirschmann capital, 51 out of 52 times a country’s debt-to-GDP ratio reached 130%, the country eventually defaulted. The one exception is Japan - whose trajectory doesn't look great today.
Like it or not, you are either fighting constitutionalism or the mathematical force of Gravity. But there is no way Government will continue to expand.
