The Department of Housing and Urban Development said that fair market rents for fiscal year 2024 will rise about 12 % nationwide and that the department has increased funding for housing choice vouchers.
Yes, almost nowhere in North America currently has land value taxes, including my city. Rather, most places here have property taxes, which are different in a critical way. This video explains the issue well. But essentially property taxes bundle land values and improvement values (i.e., what’s built on the land). The problem with this is it creates a financial disincentive for improving your land while those who wildly underutilize urban land (e.g., for parking lots in downtown or vacant lots) pay pennies in property taxes. This often makes it profitable for speculators to buy up vacant land, hold it vacant (or at minimal use like a parking lot), and just wait for it to appreciate, then sell or rent out at massive unearned profits. And when a whole bunch of others catch wind of this scheme for free, unearned profits, well they start buying up land, too, further driving up prices.
Land value taxes can stop this as they don’t tax you for your improvements but they tax you significantly more for the land you hold. This means the annual taxes you pay on that vacant lot or that downtown parking lot will be more than your expected annual gains from appreciation. Both because your taxes are higher and because appreciation will be less now that holding that land incurs a not-insignificant tax obligation.
Long story short, property taxes make speculation profitable and incentivize land hoarding, while land value taxes make speculation unprofitable and incentivize denser development.
The only thing I’d be concerned about is that if you charge a land tax to everyone as if they’re going to build a mega-walmart on that land, then individuals who would otherwise be able to own land would not be able to because they don’t have institutional money like that.
I don’t really want a world where only institutions and the super-rich can own land because all land is taxed like it might have a mall built on that land.
Land value taxes would actually have (and do actually have!) the opposite effect. First, land is taxed based on its value, much like property taxes are based on the value of the property. This is typically appraised by using fancy statistics. The idea being you don’t tax rural land at anywhere near the same rate (in dollars per acre) as you tax land in Manhattan.
Second is – as the data from the Australian Capital Territory shows – a land value tax makes possessing land an obligation and also reduces upwards speculative pressure on land prices. Thus, land value taxes tend to make land cheaper to purchase. In theory, if you raise land value taxes high enough, you could make land prices approach zero, as the tax obligations start to equal the benefits of owning the land. In effect, such a situation would be functionally equivalent to renting land from the government.
And of course the big benefit of renting vs owning is you don’t have to pay an upfront cost, which means much lower barriers to entry for starting small businesses and startups, and also means you could buy a home without also paying upfront for the land.
Edit:
A good quote by American economist Henry George I think explains it nicely:
The tax upon land values is, therefore, the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive.
After all, possessing land is an asset, hence why we’re willing to spend so much money for it. Even by merely possessing land, you can rent it out to someone else for money. This is called the “rental value” of the land. Henry George was famous for advocating that we tax land to the value of the full rental value of land. At this level of taxation, owning land is equally asset and obligation, so its price would approach zero. Thus, regardless of if you owned land or not, you would be at neither advantage nor disadvantage.
It could reduce land speculation, but as you increase the amount of money someone needs just to own land, then fewer and fewer people will be able to own land. Eventually if you raise prices high enough, only the super-rich could afford it because they’re the only ones who can afford to pay the tax. At that point, you’ve re-implemented feudalism, as powerful landlords extract wealth to pay taxes to the king.
As it stands, you need a ton of money just to own land. Roughly speaking, if you think owning a parcel can provide you $1000 of value per year, you might be willing to spend $10k or $20k or more upfront to own it. And last time I checked, people who can afford that much money upfront are disproportionately rich.
But if it’s taxed at $1000 per year, the net benefits to owning the land evaporate, and you won’t be willing to spend money upfront on it. Nor will others, hence the price of land drops towards zero. Neither you nor rich people want to waste money on something that is just as much an obligation as it is an asset.
And that’s the key idea here: to decouple access to land from economic advantage. This is reverse feudalism. In feudalism, it’s all about concentrating control of land to concentrate the benefits of land ownership. With LVT, it’s about taxing away the benefits of land ownership so it’s no longer this precious commodity that is worth hoarding.
Under a “full” LVT, there would be precisely zero economic benefit nor reason to hoard land. You would effectively just rent land from the government if you believed you had a suitable use for it. And renters are statistically poorer, as paying upfront is a massive barrier to entry. Hence why homeowners are statistically richer, because you need money to pay the upfront cost.
Estonia levies an LVT to fund municipalities. It is a state level tax, but 100% of the revenue funds Local Councils. The rate is set by the Local Council within the limits of 0.1–2.5%. It is one of the most important sources of funding for municipalities.[90] LVT is levied on the value of the land only. Few exemptions are available and even public institutions are subject to it. Church sites are exempt, but other land held by religious institutions is not.[90] The tax has contributed to a high rate (~90%)[90] of owner-occupied residences within Estonia, compared to a rate of 67.4% in the United States.[91]
Reducing the upfront cost of land via land value taxes makes land easier to access for the masses, and it makes the peculiar benefits of land more evenly felt. It’s the opposite of feudalism.
Yes, almost nowhere in North America currently has land value taxes, including my city. Rather, most places here have property taxes, which are different in a critical way. This video explains the issue well. But essentially property taxes bundle land values and improvement values (i.e., what’s built on the land). The problem with this is it creates a financial disincentive for improving your land while those who wildly underutilize urban land (e.g., for parking lots in downtown or vacant lots) pay pennies in property taxes. This often makes it profitable for speculators to buy up vacant land, hold it vacant (or at minimal use like a parking lot), and just wait for it to appreciate, then sell or rent out at massive unearned profits. And when a whole bunch of others catch wind of this scheme for free, unearned profits, well they start buying up land, too, further driving up prices.
Land value taxes can stop this as they don’t tax you for your improvements but they tax you significantly more for the land you hold. This means the annual taxes you pay on that vacant lot or that downtown parking lot will be more than your expected annual gains from appreciation. Both because your taxes are higher and because appreciation will be less now that holding that land incurs a not-insignificant tax obligation.
Long story short, property taxes make speculation profitable and incentivize land hoarding, while land value taxes make speculation unprofitable and incentivize denser development.
Ah, I didn’t realize the distinction.
The only thing I’d be concerned about is that if you charge a land tax to everyone as if they’re going to build a mega-walmart on that land, then individuals who would otherwise be able to own land would not be able to because they don’t have institutional money like that.
I don’t really want a world where only institutions and the super-rich can own land because all land is taxed like it might have a mall built on that land.
Land value taxes would actually have (and do actually have!) the opposite effect. First, land is taxed based on its value, much like property taxes are based on the value of the property. This is typically appraised by using fancy statistics. The idea being you don’t tax rural land at anywhere near the same rate (in dollars per acre) as you tax land in Manhattan.
Second is – as the data from the Australian Capital Territory shows – a land value tax makes possessing land an obligation and also reduces upwards speculative pressure on land prices. Thus, land value taxes tend to make land cheaper to purchase. In theory, if you raise land value taxes high enough, you could make land prices approach zero, as the tax obligations start to equal the benefits of owning the land. In effect, such a situation would be functionally equivalent to renting land from the government.
And of course the big benefit of renting vs owning is you don’t have to pay an upfront cost, which means much lower barriers to entry for starting small businesses and startups, and also means you could buy a home without also paying upfront for the land.
Edit:
A good quote by American economist Henry George I think explains it nicely:
After all, possessing land is an asset, hence why we’re willing to spend so much money for it. Even by merely possessing land, you can rent it out to someone else for money. This is called the “rental value” of the land. Henry George was famous for advocating that we tax land to the value of the full rental value of land. At this level of taxation, owning land is equally asset and obligation, so its price would approach zero. Thus, regardless of if you owned land or not, you would be at neither advantage nor disadvantage.
A great socioeconomic equalizer, if you ask me.
It could reduce land speculation, but as you increase the amount of money someone needs just to own land, then fewer and fewer people will be able to own land. Eventually if you raise prices high enough, only the super-rich could afford it because they’re the only ones who can afford to pay the tax. At that point, you’ve re-implemented feudalism, as powerful landlords extract wealth to pay taxes to the king.
As it stands, you need a ton of money just to own land. Roughly speaking, if you think owning a parcel can provide you $1000 of value per year, you might be willing to spend $10k or $20k or more upfront to own it. And last time I checked, people who can afford that much money upfront are disproportionately rich.
But if it’s taxed at $1000 per year, the net benefits to owning the land evaporate, and you won’t be willing to spend money upfront on it. Nor will others, hence the price of land drops towards zero. Neither you nor rich people want to waste money on something that is just as much an obligation as it is an asset.
And that’s the key idea here: to decouple access to land from economic advantage. This is reverse feudalism. In feudalism, it’s all about concentrating control of land to concentrate the benefits of land ownership. With LVT, it’s about taxing away the benefits of land ownership so it’s no longer this precious commodity that is worth hoarding.
Under a “full” LVT, there would be precisely zero economic benefit nor reason to hoard land. You would effectively just rent land from the government if you believed you had a suitable use for it. And renters are statistically poorer, as paying upfront is a massive barrier to entry. Hence why homeowners are statistically richer, because you need money to pay the upfront cost.
Edit:
I’ll add some empirical results from Estonia:
Reducing the upfront cost of land via land value taxes makes land easier to access for the masses, and it makes the peculiar benefits of land more evenly felt. It’s the opposite of feudalism.