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Comment by merrywhether | Hacker News Reader

High mortgage rates mean that is only more expensive for “poor” people, while the wealthy will continue on their merry way. The US desperately needs a land-value tax as a step towards making home ownership costly and depreciating, removing the home-as-investment angle. Who wants a nest egg that means giving up your dwelling in the case of actually needing to liquidate it anyway? (Oops, got expensive medical bills? Now you’re sick _and_ homeless!)

Actions like this will unfortunately destroy a lot of older middle-class wealth in the short-term, but longer term it would hurt the upper-classes the most (and even short-term it’s not like the upper classes haven’t been winning every transaction anyway). And the longer we let this problem fester, the more lives we disrupt of the younger generations who have seen countless ladders pulled up in front of them.

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States have property taxes. You can argue how they're implemented, every state is different, but to completely dismiss that they exist doesn't help. If your solution is to unfortunately destroy a large group of people than maybe you don't have the best solution.

The easiest argument against current property taxes is that they have completely failed to prevent the current situation. They do not properly incentive the efficient use of land, so mini-kings get to sit in their mini-castles and argue against densification while looking down on the new-comer peasants.

And the current situation is already “destroying” peoples lives as their courses into “normal” adulthood are interrupted and delayed, so it’s somewhat a question of who feels the effects. The difference with devaluing homes is that people may lose some wealth, but they still have a home! Investments are supposed to risky, that’s why you make money off of them sometimes; so let’s make it that way for houses.

I can't speak for everywhere, but I live is a very high tax rate in the north east and of cousre the larger the high or more land, the higher the taxes. The town I live in some houses, which generally don't exceed 1 acre lots can have taxes in excess of 100,000k a year. This is really as close to a land tax in action I can see. There are few empty lots, no one is sitting on land, and you can be sure no one is building large apartment buildings - the taxes would be extremely excessive. To add to that, the high taxes have not encouraged investment from the town itself to build infrastructure that would support more efficient use of land. Sure there are roads. The schools are well funded, its the north east which tends to have excellent investments into schools. Not only am I close to New York city, so not out on the woods or anything, I am also on well and septic. There is no municipal water or sewer. This has the added point of making building affordable housing next to impossible, which was likely not the reason for well and septic, but is now a reason not to add it for NIMBY. So while a land tax to punish the rich would help make people feel better, with what I see it will enrich some, but not benefit who you think would benefit.

>and you can be sure no one is building large apartment buildings - the taxes would be extremely excessive

With a land tax the taxes wouldn't increase if large apartment buildings were built on it because the tax amount is solely based on the value of the land and not the property on it.

>So while a land tax to punish the rich would help make people feel better, with what I see it will enrich some, but not benefit who you think would benefit.

First, people don't propose a land tax to punish the rich. Second, it's not about benefitting specific individuals (picking winners and losers). It's about benefitting everyone by ensuring the optimal use of the land.

I was going off the original reply where it was, I understand you don't see it that way. All zoning is local is a term used, and back to my case this sounds like a tax on land, not the building. In that case, all land is the same, perhaps high regardless of the building. So for this town, we have some lots at 1/2 acre, most at 1 acre. Well + septic. If one want to build denser housing it needs to break zoning that is local which says lots must be 1 acre (some are grandfathered in) with a 36 ft set back from the property line and no more than 30% build up of the land. A federal or state rule could do that, but what that doesn't account for is the water aquifer which perhaps can't handle spitting into 1/4 acre lots and quadrupling the town population. Plus 4x septic systems could but an undue strain on the area. A law could be passed to force a sewer system and a municipal water system which would not be cheap. This is one small town and to get a dense population we are talking millions in infrastructure spending to get to a point that can handle a dense population to better use the land. There are just so many factors in each area, each being unique to the area, that makes efficient land use more complicated. I also haven't even got into environmental protection, water run off and other pollution issues that are also addressed in zoning.

The person we replied to proposed to do this to specifically hurt the upper class. He even acknowledged that doing so would unfortunately destroy the middle class in order to hurt the rich

> argue against densification

there's nothing wrong with being against densification. Cities like SF and Seoul would be a nightmare for me to live in because I hate cities and being around a lot of people.

I fail to see how to tax land at a rate that would hurt rich cash loaded people/corporations and still make homes affordable. If your plan works to the point people can afford the taxes on the cheap homes then the rich people can also afford to have neighborhoods of rentals. Please present your idea though, maybe I'm not understanding.

It's not about hurting rich people. Where is this class warfare idea coming from?! It's about making the best use of the land.

A land tax encourages building denser housing and therefore increasing the number of homes available to people, putting downward pressure on housing (and rent) prices.

A land tax does not go up if the dwelling on it go up in value/price. It encourages replacing single family homes with denser dwellings.

Property taxes do not exist to have any impact on mortgage rates. We’ve had 5% mortgage rates a little while back and all was fine.

Let's tax the rich more! That will solve all our problems! I'm sure the gov won't burn through the extra revenue and come back asking for more!

It's an entirely legitimate use of tax to disincentivize behavior that is a social net negative. That it's overwhelmingly the upper class that would be hit by it only means that they're the ones benefiting tremendously from everyone else's suffering.

Any serious conversation about changing the equation needs to start from the perspective of capacity utilization. We certainly need to increase the number of housing units, however, if the utilization rate remains the same or drops, you've really not created any new housing. In southern California we see new projects being built that are $3,600 / month for a 600 sqft 1br/1ba apartment in mediocre neighborhoods or next to freeways. From a bay area perspective, this may seem cheap, but wages are lower here and IPO opportunities are not as rich. Looking at public documents for the REIT that owns one of these aforementioned luxury properties showed a 40% occupancy rate, which wasn't a surprise given the price.

So until municipalities want to really study the overall capacity and exactly how it is being used, changing tax policies will be unlikely to address whatever the real issue happens to be. Our problem is not simply "supply and demand", it's more subtle than that.

If I were still in the multi-family residential marketplace I'd be buying and converting to short-term rentals in cute neighborhoods. It would be the highest and best use of capital deployment under current legal structures.

Wouldn't a SANKEY diagram showing incoming units and utilization of such units be a nice way of seeing the problem and making adjustments? Having such data would be fascinating.

Why? Who would this system benefit? You destroy the housing market to replace it with rich landlords owning apartment buildings and charging increasing amounts of rent to more poorer people who accumulate no equity. In your get sick scenario, you are still homeless but owe massive medical bills.

After paying off the medical bills with appreciating uome ownership, your credit is still good, and you can eventually buy another house. All your land-value tax does is punish wealth accumulation. What is the reform you wish to create? How does this help anyone?

Landlords already charge the maximum rent they can do.

LVT doesn't punish wealth accumulation, it punishes monopolies

Part of the reason people like Trump have very fancy residences is because they are exempt under bankruptcy laws. So he can store his wealth as gold plating on his toilet, file for bankruptcy, get out of all the loans he can't pay, then continue on with his lackluster investing. I bet even a tax on the value won't remove that very lucrative use of it.

What a principal residence as an investment does for most middle to upper-middle class Americans is force them to save some money so that they have some amount of wealth when they retire. I don't know if that is important or not, since it's not very liquid and has dire consequences if you lose it.

Owning a residence gives you two important things in retirement:

1 - it lowers your monthly costs (no house payment/rent to pay)

2 - it provides some protection against inflation so even in bad inflation, your housing cost won’t change.

> Part of the reason people like Trump have very fancy residences is because they are exempt under bankruptcy laws. So he can store his wealth as gold plating on his toilet, file for bankruptcy, get out of all the loans he can't pay, then continue on with his lackluster investing

A real issue, but a bad example. Trump has never declared personal bankruptcy. A few of his 500 businesses have gone bankrupt, but all that happens when an LLC goes bankrupt is that the owners lose their investments and creditors take over the company.

i wish people would stop falling over themselves to post any random factoid about trump they read on facebook 7 years ago, it's very often missing context or just flat out wrong and really diminishes the quality of conversation that can be had

How is property exempt from bankruptcy? That's the first thing that goes usually?

Each state will have different laws but many states protect you from having to sell your homestead in bankruptcy.

Interesting. Not the case in the UK!

How is it only more expensive for poor people but not wealthy people? Did you mean less accessible?

Not OP, but guessing he means wealthy people have more opportunities to buy without financing when the cost of financing seems to overtake other opportunities.

How many rich people take out a mortgage?

Here's an article on mortgage/financing options for the ultra-wealthy: https://www.ft.com/content/ebf761ea-fcc8-4fd4-a636-87561398d...

A better question is probably how many rich people need to take out a mortgage to fund their housing needs.

Using equity for cheap money to buy more equity makes perfect sense.

Yea, even if you pay with cash you’re probably financing it after you own the property.

Most of them

Property taxes are regressive, so I'm not sure how that would help.

You know what really killed the rich? SALT deduction limits in the Trump tax plan. That policy actually caused the rich to pay more in taxes.

That's why CA tried to work around it by trying to classify property taxes as a charitable donation.

Wait and see, the Dems will pass a new sweeping tax plan that won't include the SALT deduction limit and they'll claim that it taxes the rich more.

I'm not sure why you're being downvoted so heavily. It's true, SALT deduction limits did hit the rich and now that may be undone [0] (regardless of what you think of Trump and regardless of whether Trump did it to punish blue states)

[0] https://www.washingtonpost.com/outlook/2021/11/05/salt-tax-d...

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