How Much Money Do Parking Lots Make?
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You buy a parking lot, sit on it as the value of land increases (paying effectively 0% in taxes), then you eventually sell, paying only a capital gains tax (much lower than income).
I only bring up California, because I know it. I'm sure there's similar dodgy tax advantages in other states.
Point being -- taxing land the way we do (especially in California) seems to be problematic.
This is also the reason you see single family homes with front and back yards like 1000 meters away from sky scrapers in Los Angeles and San Jose. Those homes are paying property taxes of like $400 a year, and most of them are being rented out. It's not poor old ladies living in them that don't want to leave the neighborhood they lived their whole lives in, but gentrified under their feet into some urban monster. It's business people arbitraging tax laws.
I feel like the intuition behind prop 13 is similar to rent control but for land owners. Basically it freezes the price owners have to pay in taxes, so if the price of land goes up dramatically, people who have owned the land for longer pay far less in taxes.
For example, person A bought a house in SF 25 years ago for 300k. Person B buys an identical house today for 1.5M, therefore paying 5x as much in taxes every year even though both houses are worth the same value. This stifles development because any time land changes hands, the taxes dramatically increase. Even though you could make more money turning a parking lot into housing, people often don't because the taxes would increase to a point where it wouldn't be worth it.
The simplified end result for prop 13 (and rent control) is that young people are basically subsidizing old people through their taxes (and rents), keeping prices artificially high. It is incredibly hard to repeal these laws because most of the voters are unfairly benefiting from them or don't comprehend that rent control hurts them.
In the example I'm thinking of, it was a meeting about a law that was due to expire that limited new development to 5 stories, and effectively limited average height to 3-4 stories due to floor area ratios, and simultaneously put strict limits on the number of housing units you could build per acre. Mind you, this expiration would affect just the dense downtown core around the train station, not the vast majority of the city, which is zoned single family. They still hated the idea, it'd cause too much traffic. One lady gave an impassioned speech about how the drive to their second home in Tahoe, which used to take 4 hours now took 6-8 on Friday due to traffic. This came right after a speech from someone who was about to lose their primary residence due to rent spiking. I don't know how she was able bring herself to follow that, but she certainly tried.
First, a lot of property is opened up to the market because people are now willing to sell it, which should lower housing/land prices in general and enable more development. Second, the state gets a lot more tax money to use for education and whatever else.
Showing an alternative, Pennsylvania has several towns and cities with a split-rate tax, which means that there's a higher tax on the assessed land value than on the assessed value of the property. Taking this to an extreme, you can tax only the land value, not the property, providing a very strong incentive to make the best use of desirable land. A split rate tax just lets you turn the dial between typical property taxes and a land tax.
Many arguments in favor of the land value tax are based in concepts of economic rent and fairness. While I'm sympathetic to these arguments, I think the best argument is that it seems to work, both in theory and practice. Places that implement a split rate or land value tax tend to have fewer empty lots, parking lots, single-family homes in the middle of downtown, etc.
And not just that, but typical property taxes provide a disincentive to even improve your own property, since you'll pay more tax. They encourage blight.
It's not just California, it's everywhere. Tax policy isn't the only thing stopping us from avoiding sprawl by "thickening up" valuable areas of towns and cities, but it's a big one. Parking minimums are another, and of course zoning is yet another. All of them are important in terms of making our cities walkable, amenable to public transit, and sustainable environmentally.
*edit -- I should clarify that Prop-13 makes this effect worse in California than many places, though.
If you make a "substantial change" to the property, the tax is reassessed. That's what generates the "empty lots, parking lots, single-family homes in the middle of downtown, etc." -- if you replace your empty lot with a useful building, your property taxes immediately spike.
Extending Prop 13 to cover property redevelopment would do as much to solve the undeveloped-land problem as repealing Prop 13 would. (Obviously, those two policies would differ in other ways.)
I think it's a mistake to focus too heavily on "should we tax land value" vs "should we tax property value". You're correct that taxing property value disincentivizes development, and that is bad. But we're talking here about cases like someone's small personal residence in the middle of downtown San Jose with $4,000,000 of land value and $200,000 of property value. (Numbers completely invented.) If they were taxed on assessed value, land+property, which is the default in most places, that immense land value would quickly make it prohibitive not to redevelop. The tiny property value is a rounding error.
A good old wealth tax on everything would fix that.
Distributing the tax across property, a progressive capital gains tax, a progressive corporate tax, and a small wealth tax is a much better option than a flat and high wealth tax.
Taxing income outside the USA already happens. Taxing wealth would also happen.
There has been a huge push in the last decade to tighten up "anti-money laundering" (but usually anti-tax) laws. The cliche of the swiss bank account offering secrecy for Americans no longer exists - the Swiss now report holdings directly to the US and similar locales do likewise.
A land value tax still does this, albeit indirectly. If you improve your property, the area gets marginally more desirable and land value rises.
The solution for this in UK is to remove capital gains tax for the main home of owner-occupiers, and a transaction tax (stamp duty) paid by the purchaser.
So a virtuous feedback cycle is created, where everyone is incentivized to improve and develop their property to the point where they're best taking advantage of the land it sits on -- or to sell it to someone who will.
I'm familiar with stamp duty -- it has a lot of problems, mainly around the fact that it discourages people from moving. It seems significantly worse than a land tax, to me.
Well, more specifically, if you redevelop the land (say, by putting in apartment building in where there used to be a single-story house), the property tax gets recalculated. So the tax code heavily penalizes redeveloping any property.
That would mean I could buy an old house for $800k, and pay like $30 in property tax a year? I don't believe it.
If you go to Zillow, find some older homes then look at the tax history you'll be amazed.
It would make commercial properties no longer subject to Prop 13.
[0] https://ballotpedia.org/California_Tax_on_Commercial_and_Ind...
Property tax is basically a wealth tax. Most wealthy people don't want their wealth taxed. They'll pay millions to defeat this. I wouldn't be surprised if they made ads that straight up lie and tell people their property tax will go up and some BS about farms.
A fully paid house and a 97% mortgaged house pay the same property tax in most locales.
(I also think that tenants rather than landlords are paying “going rate” property taxes, even though landlords are the ones writing the check based on actual rates.)
(That’s the SBA cutoff for “small business” in property renting; NAIC business codes 5311x0.)
https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%...
I think that's a protection against the business owning a Trust that owns the land. It's to force the business to own the land directly.
Commercial property is also exempt under Prop 13?! What a screwed up system. I kind of understand if it applies to primary residences. I think it's ridiculous it also applies to commercial property as well.
We can't increase taxes on poor old grandpa's deli. He'll never be able to compete with all the other delis that also have to pay rising taxes. Think of poor grandpa!
Meanwhile, you've got landlords owning those shitty 6-unit dingbat apartments they built in the 70s for $100k, paying taxes of $1k per year, charging rents or $3k/month for each unit. All the while, they're collecting another $1k or so in land value increases per month, that will be taxed at a lower capital gains rate -- of which the state will see almost nothing. AND it's the whole reason no one ever sells those buildings to be redeveloped. They make so much money, since they pay no taxes, that there's no better investment in the world. Why would anyone ever sell one? Even at $10M, you'd still be crazy to sell it. It'll be worth $11M next year, and you get all that tax-free profit.
Totally legally, and totally cool.
> that will be taxed at a lower capital gains rate -- of which the state will see almost nothing
...is not quite correct; California does not have a special reduced cap gains tax rate like the Feds.
But this does not make the whole setup any less ridiculous.
* The value of land is largely created by public services such as schools, infrastructure, parks and public transport. Therefore, it makes sense to recover this value through taxation.
* Almost all taxes reduce or distort what is taxed. The supply of land, on the other hand, is fixed and cannot be reduced. This way, public services such as schools can be paid for without distorting the economy.
* Property cannot be hidden or moved to tax havens.
* Land taxes prevent vacancies and thus speculation. The reduction of vacancies also helps against urban sprawl.
There's no some god-given justification for taxes.
We have them because:
a) somebody can enforce their payment
b) societies need a money pool to do public things
c) societies need to encourage/discourage some things
A country could opt not to have taxes, and not maintain an army for example, and live it to the goodwill of the citizens to build infrastructure. That couldn't would be stomped by one that did have taxes and used them to build a good army. So that doesn't work out that good...
Now, assuming a society decide it needs taxes, what taxes to have is more a question of "how much money are needed" and "how to present it nicely" and "what to encourage/discourage".
Regarding "how much money is needed", the justification for property tax is simple: if income tax money aren't enough, governments might add not just property tax, but even a breathing tax. On the plus side, property is difficult to hide (as money would be e.g. in the Kayman islands).
Regarding "what to discourage", the justification for property tax is, not to hog down property and prevent its use.
You also want to get some of the value the community/government creates in an area and pushes property values (not just market value, but also use-value, like having a school nearby) up back.
This setup works for a very small percentage of the population. If you want an access road to your property you'll need to purchase the right of way from neighbors. And you'll have to live with the fact that the land you bought might not ever sell. As a primary property it's going to be extremely hard to get financing for any improvements so most of these properties are relegated to a cabin in the woods, vacation home.
And sometimes it's both: the poor old ladies who want to hang onto it for their descendants to inherit, ostensibly because it was the "family home" but more rationally/coldly because it could turn a tidy profit for said descendants.
You can effectively use control of parking lots to squeeze all the margins out of local businesses such as restaurants.
Yup, a guy sold Dodgers for a few billion bucks, but he still knew to hold onto the parkint log.
https://bleacherreport.com/articles/1120695-dodgers-sale-det...
It says: "Everybody works but the vacant lot. I paid $3,600 for this lot and will hold till I get $6000. The profit is unearned increment made possible by the presence of this community and enterprise of its people. I take the profit without earning it."
These lots produce negative externalities to society and should be taxed accordingly.
"George advocated for Georgism" is a tautology :-)
George advocated for the things George advocatedThere is no way you could buy the property now and operate a parking lot, but they got in when it was cheap, so it's all profit now.
That is, maybe they could sell for $10 million now vs making $200k per year on parking, but if they hold on for another 5 years, the offers could rise to $15 million.
Honest man.
This is why interest/usury are predatory and parasitic practices, and are banned in several religions.
https://en.wikipedia.org/wiki/AirTrain_JFK#Ridership
>The AirTrain's ridership has risen each year since then. In 2017, there were 7,655,901 passengers who paid to travel between JFK Airport and either Howard Beach or Jamaica. This represents a 292% increase over 2004, the first full year of operation, when 2,623,791 riders paid.
>An additional 12.6 million people are estimated to have ridden the AirTrain for free in 2017.
When such an answer already exists, there is no reason to even ruminate on self driving cars.
I would argue that traveling from and to a large airport is about as disadvantageous as it gets for individual travel: Your schedule is determined by someone else. Your route is already fixed. The only benefit of individual that I can think of in that case is the possibility to travel to/from somewhat remote locations directly from/to the airport.
A large part of that circumstance being the nonexistance of the former and creation of our urban environments to specifically cater to the latter.
That's a nice talking points and might even apply to some (US) cities. But I live with an extensively (and expensively) built public transportation and still it loses vs. individual transport quite often.
* $2,700 in Alabama
* $80,000 in Massachusetts
* $84,000 in California
* $208,000 in New Jersey
https://reason.org/policy-study/23rd-annual-highway-report/m...
I didn't realize roads were so expensive.
No thanks. I don't want government mandated spyware on my phone. Its shocking that your solution is to try and ban poor people from public transport rather than providing them a proper place to stay.
The irony is that the father didn't want these, but they were thrown into a financing deal that he was on the other side of.
https://www.streetfilms.org/parking-craters-a-scourge-of-ame...
Turned out the people who owned them weren't dummies and had the same strategy. The prices I could get (and few were even willing to talk) were enormous multiples of likely revenue: basically the price of a buildable city lot where you didn't have to demolish an existing structure.
* They seemed only a decade away. Now, 10 years later, they are only a couple of decades away. Like fusion power.
I have more research to do; if you any insights/knowledge, my curiosity compels me to ask that you share. ;^)
Like here
I wonder how much this actually matters? Money is money, whether it's coming from one person parked for 8 hours or four people each parked for 2 hours.
Sure, most lots will charge a somewhat lower rate for a longer period of time (i.e. the per-hour is less than three per-20-minutes, the per-four-hours is less than four per-hours, etc.), but if lots really do prefer short-duration parkers over longer-duration parkers, then it'd make sense for them to just not incentivize that behavior and charge a flat rate (or even invert it), no?
The variable hourly-rates is also a form of price anchoring and takes advantage of sunk costs. Look at Westfield's Sydney CBD rates here: https://www.westfield.com.au/sydney/parking
Once you pay that first $35 it's not so bad to stick around and spend a bit more. Westfield has a vested interest in this since they run the shopping centre, but other local operators have to compete with this so can't be too much more expensive.
The CBD shouldn't be for cars.
I just wish they'd build more parking near some of the suburban train stations. It's usually OK far from the CBD, but a park and ride strategy would definitely help at places 15-20 minutes out. Mascot and Green Square have both gone through a lot of development, are expecting a lot of new people, and still have tiny roads with no dedicated parking near stations.
Fortunately, many self-driving car companies are using alternative fuel vehicles (Cruise uses the Bolt, Tesla is obviously electric, Waymo has the i-Pace and Pacifica Hybrids), and things like inductive charging are also helpful for complete autonomy so the future of autonomous zombie cars may involve fewer tailpipe emissions at least :)
It seems less promising, now that I see the piles of scooters in downtowns.
On top of that people won't need to start and end at the same time with self driving cars, as you have the ability to sleep/read/do work during the commute.
Of course the increased traffic of homing cars might turn the roads into metaphorical parking spots...
As horrific as that idea sounds you just know that will be the reality until there is a law against it.
I'd just send it to the nearest Sears parking lot (and instruct it to attempt to find shade?)
They already are [1]:
> If you park your car on the lower level of the Millennium Lakeside Garage under Maggie Daley Park, you might feel like you've just pulled into a subterranean car dealership. > Rows of new and used Volkswagens and Hondas—nearly 400 in total—fill a lot of the space. You might spot a worker painting a Jetta with a spray gun. The level above has a more nautical feel, with dozens of empty boat trailers. > Yet the garage still isn't close to full, a problem for the international joint venture that paid $370 million in 2016 to lease it and three other city-owned garages under Millennium and Grant parks. With 9,176 spaces, the garages constitute the largest underground parking system in the country. At 3.8 million square feet, it's almost as big as Willis Tower. > It's actually too big, which is why Rick West, the executive who runs the garages, is exploring creative ways to fill excess space in Lakeside, the easternmost and largest garage, with 3,850 spaces. He'd like to convert part of it into warehouse space, even hiring a brokerage to market the property to logistics firms. But he hasn't landed any tenants yet. > "I'm really looking at anything and everything having to do with mobility—that could be mobility of people or mobility of things," says West, CEO of Millennium Garages. "How do I keep this asset relevant for the next many, many decades?"
[1] https://www.chicagobusiness.com/commercial-real-estate/prime...
Even if it was the point, stick a charger on every space and BAM! now you've got a reason to let your electric self-driving car park there instead of wasting battery driving all the way back home only to drive all the way back to you and home again later.