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In the long term, the ethically right answer seems pretty clearly to me to be a land value tax [0]. But due to encouragement of home ownership [1], that's not g

• saulpw 5y ago
  How about a land value tax with an exemption for primary residence?
  • lifty 5y ago
    This sounds like a reasonable trade off which doesn’t hVe the risk of uprooting people from their primary residence.
    • R0b0t1 5y ago
      I like it too, but it seems to incentivize sprawl. If people attempt to lease land the LVT will be passed to their tenants. To avoid paying the LVT, tenants will look for new construction.
      • lotsofpulp 5y ago
        Higher fossil fuel taxes would counter the sprawl incentive.
      • nextaccountic 5y ago
        Isn't this a good thing? The more constructions, the more housing.
  • acomjean 5y ago
    We have straight property tax in Cambridge(ma United States). If you live if your unit they’ll reduce the value that is taxed (by about 400000$ Or about $2500) I’m not sure it’s helped, but it might be worse without it. https://www.cambridgema.gov/departments/finance/propertytaxinformation https://www.cambridgema.gov/departments/finance/propertytaxi...
  • imtringued 5y ago
    It would certainly be better than nothing. You can then add some sort of capital gains on primary residences so taxes will be paid on sale not during use.
• murgindrag 5y ago
  I'm not sold on the Economist article. I do believe in home ownership. The idea that a person spends a lifetime in the same home and community is a good one. We're tribal creatures, and you want a tribe -- you want people to know their neighbors, have community BBQs, and live in real communities. You want enough of a vested interest in municipal politics that democratic structures work. You want kids growing up with the same friends in school. The flips side can be pretty dark too. For example, there are are plenty of stories of poorer communities, especially African American tenant ones, being broken up and priced out by gentrification of rental markets. Ownership is less economically efficient, but much more resilient. Once a mortgage is paid off, you've always got a roof overhead. You just need to earn enough for food, clothing, and medicine. I think the trick would be to implement significant differences in land tax based on: * a home you live in; versus * an individual investment property (e.g. if you own 2-3 homes); versus * an institutional investment property (e.g. investment fund owns hundreds of homes)
  • paganel 5y ago
    Unfortunately “community barbecues” oftentimes meant “barbecues with people who are exactly like me and who think exactly like I do”, an attitude which has had a pretty corrosive effect on democracy in the near past.
    • therealdrag0 5y ago
      Otoh we’re self sorting more than ever aren’t we?
      • esyir 5y ago
        I would bet that the people in your neighbourhood (weak self selection) are going to have greater diversity of opinion than whatever bubble we currently exist in (strong self selection).
  • simonh 5y ago
    I don’t think the article is saying ownership is a bad thing in itself, but that the vast resources that have been poured into promoting and subsidising it have had some pretty undesirable consequences. Here in the UK we have started imposing tax penalties on buy to rent that disincentivizes owning more than one or two rental properties. The problem with punishing institutional investors is it would take huge amounts on investment out of the housing market, just as we have a massive need for more housing. We need more houses for people to buy and more new housing available to rent. Rental properties by themselves aren’t a problem, it’s taking houses out of individual ownership and transferring them to the rental sector that’s the problem.
• thepangolino 5y ago
  Wouldn't a land value tax encourage urban sprawling ? Current ubran policies in the western world, coupled with the normalization of remote working already do this to some extent.
  • zeepthee 5y ago
    How would it encourage urban sprawling?
    • Pet_Ant 5y ago
      Preosumably the closer to the city centre the higher the per square fot value so to minimise costs you move to the edge of town, thus sprawl.
      • pydry 5y ago
        Or you buy an apartment in a high rise and share the cost with the other residents. It would certainly discourage the building of houses in the city centre.
        • taffer 5y ago
          > It would certainly discourage the building of houses in the city centre. No, that's not how it works. The value of a property is made up of the value of the land and the value of the buildings on it. If one of these two components is taxed, its value is reduced. However, it is important to remember that the supply of land is fixed, but the supply of buildings is not. If one taxes buildings, as is the case with a traditional property tax, construction activity is reduced, but if one taxes only land, as is the case with a land value tax, construction activity is not impeded at all. That's the beauty of a land value tax: it doesn't distort anything. With a property tax, an undeveloped lot in the center of town is taxed less than a high-rise. With a land value tax, both are taxed at the same rate. Relatively speaking, a property tax promotes sprawl, a land value tax promotes density.
          • 5y ago
• inter_netuser 5y ago
  how is land value tax any different from a property tax that all homeowners already pay? If anything, it might end up being lower tax on residential housing, and much higher on commercial/retail.
  • oftenwrong 5y ago
    Property tax increases when you improve the property, and land value tax does not. Therefore, property tax creates a disincentive to improve property, and land value tax creates an incentive to improve property.
  • taffer 5y ago
    In contrast to the property tax, the land value tax only taxes the value of the land, not the value of the buildings. A land value tax is always the same regardless of whether the land is undeveloped, a single-family house or an apartment building. A property tax, on the other hand, encourages the former and discourages the latter. A property tax encourages urban sprawl, a land value tax does not.
• deleted 5y ago
  [deleted]
• dogma1138 5y ago
  LTV won’t work in the UK land ownership is way too concentrated and leaseholds give land owners an easy tool to transfer the cost to the leaseholders. London and other metropolitan areas still have a lot of low income housing in very high value areas, there are current/former council houses in Westminster and Kensington and Chelsea for example that sit on land worth billions. LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive (and since many newly developed terraced, detached and townhouses also come as leasehold these days even buying a house won’t help) and just push for further gentrification as housing like this https://en.m.wikipedia.org/wiki/Hallfield_Estate https://en.m.wikipedia.org/wiki/Hallfield_Estate would become economically non-viable.
  • ClumsyPilot 5y ago
    "leaseholds give land owners an easy tool to transfer the cost to the leaseholders" This relationship has always reminding me of medieval surfdom, i think it's deeply unfair and rigged and needs to be abolished.
    • dogma1138 5y ago
      It is the UK never really had a “democratization” of land ownership like the rest of Europe especially following WW2.
    • imtringued 5y ago
      https://www.ducksters.com/history/middle_ages_feudal_system.php https://www.ducksters.com/history/middle_ages_feudal_system.... >Lords and Knights - The lords ran the local manors. They also were the king's knights and could be called into battle at any moment by their Baron. The lords owned everything on their land including the peasants, crops, and village. It was not the king (the government) but the local lord (the property owner) that abused his subjects the most.
  • imtringued 5y ago
    >LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive Increasing the cost of ownership makes it more expensive to speculate on real estate which would drive prices down. The most speculative assets have no maintenance costs.
• newswasboring 5y ago
  Land ownership tax doesn't work because land is a basic need. You have to exist somewhere. The problem isn't ownership of land, it's excessive ownership of land. Ownership of land beyond need into greed. You can easily design land ownership tax like income tax where people who own more pay more. People who own enough for their family are not taxed at all and if you want more you pay a lot more. Of course there is the usual issue of the definition of "enough" but those kind of questions are solved all the time in parliaments. This all or nothing behavior is what harms the prospect of land tax.
  • imtringued 5y ago
    Well, when people talk about wealth taxes those are always above a certain threshold. I am perfectly fine with taxing excessive ownership of land. We don't need the theoretically perfect utopia. We need something that is good enough to give us another 80 years of peace.
  • therealdrag0 5y ago
    Sounds like you haven’t heard much if the theory behind LVT. For example one way it aligns incentives is pressuring land to be put to more productive use. Aka if someone can’t afford the taxes they might have to sell it to someone who can and likely that second entity will build more units on the land which utilizes the land more efficiently. Not in every instance perhaps but enough to matter. Its a way of forcing communally central land to be put to good use and for the profitability to feed back into the community.
• rocqua 5y ago
  Homeownership is a great ideal. Letting people work towards having a place to live without paying rent is great for independence. What is stupid is promoting Homeownership as a personal investment for the individual home-owner. A home is already a great thing to own financially, because it 'produces' not having to pay rent. There is no need to also have it pay 5% a year for people who have 100% leverage (which is very common in the Netherlands for mortgages). But politicians get lots of votes by making the current middle class richer for owning homes. Nevermind that it is bad long-term as people have been saying for the last 20 years.
  • refurb 5y ago
    In a perfect market where there was always enough housing and rental units to supply the demand, rent would just end up settling at the same price as owning. See price vs rent index.
  • wallacoloo 5y ago
    Just a note that 100% leverage would mean that you’re borrowing against 100% of the portion of the asset you bought to purchase more of the asset. I.e. you put 50% money down and borrowed to buy the other 50%. A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%). 5% down gets you 1900% leverage. If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.
    • rocqua 5y ago
      True, my bad. In that case, Dutch mortgages allow "infinite" leverage. There are some fixed cost: transfer tax, mortgage fee, notary fees, etc. (It used to be you could also finance these). But the full amount that will be transferred to the seller can be financed.
• refurb 5y ago
  It’s a nice theory but it would involve tossing people out of their homes because they can’t afford the tax. If you make an exception for them, then the entire system is defunct because it’ll just be a web of exceptions that just create a “housing elite” that is exempt from the rules. The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
  • merrywhether 5y ago
    Who’s getting tossed out of homes? If they own any part of it, they can sell their land at its new higher value and pocket their share of the gains. Then the can either move into a nearby newly redeveloped multi-unit building (increased efficiency as incentivized by LVT) or they can move further out to land with the same low value on which they used to live in a detached home. This same type of thinking drives me crazy in CA where Prop 13 exists because someone might have to move because they’ve made a million dollars in house value (simply by existing) that they might have to realize.
    • refurb 5y ago
      You just described someone forced out of their home.
      • pessimizer 5y ago
        And very precisely, too. They can't afford to keep their home because since other people want it, the taxes rise. The only solution is to sell to one of those people who wants it, and to move to a less desired home. 1) The buyer is pricing the house at its worth minus its future tax liabilities (which is what the seller receives), and the seller will use that money to purchase another house which also has tax liabilities. That house has to be worse, or the tax liabilities lower (or in the same general tax area, both.) 2) The seller is in an appreciating asset, but can't choose when to sell. They must sell when the tax liabilities become too much[*]. Meaning they must regardless of whether the property will probably continue to appreciate. This is a wealthy buyer's advantage over the seller, although this is partially ameliorated by competition between wealthy buyers who have priced in likely appreciation. But a very wealthy buyer can create appreciation through buying nearby properties to control the area, and through lobbying. 3) Also, real estate tax law tends to benefit wealthy buyers who leave rental properties empty, and can use those liabilities to offset profits they make in another area. This seems like a formula for downward mobility. And for people to be forced out of the neighborhoods where they have networks and jobs, and have to move to worse places where they have no networks, and are farther from jobs. [*] In the worst case, they mortgage the home in order to pay the tax liabilities, and to extend the time before they must sell - meaning that when they sell, they're actually paying off back taxes with the money, meaning they have even less (or no) money for their next residence.
• zhengiszen 5y ago
  Thanks for the review it comes like a revelation.
• ryan_lane 5y ago
  It seems to me that a LVT eventually leads to 100% of the land being owned by the super wealthy in dense areas. It's a state sponsored transfer of wealth. It still results in a middle-man that leeches money from renters, and the taxes would most likely be passed onto them. In this case, why not just be direct and have the land owned by the state, and have density requirements for use of that land based on population of the area?