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> 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends.

This is addressed to some extent, with the argument that zoning reforms are more practical because existing property owners are incentivized to support rather than fight zoning updates that allow more development, so they can fully maximize the ratio of their revenue against the tax. (“It turns NIMBYs into YIMBYs,” she quotes a researcher as saying.)

> existing property owners are incentivized to support rather than fight zoning updates that allow more development

Regular people who own some land are not going to have the capital or skillset to tear down their house and build a highrise on the plot of land.

So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen.

Consolidation of all ownership onto a few large players is not a good thing for society.

> Consolidation of all ownership onto a few large players is not a good thing for society.

For the past few decades a large percentage of new housing has been built by large developers who buy cheap land just outside of town, clear cut it, then build a bunch of cheaply made identical houses in complexes with nothing else allowed, leaving behind an HOA to enforce conformity. The laws encourage these large developers, and sprawl. It's too much overhead for an individual or a small developer to build in an established neighborhood, especially if they are not building expensive housing.

Even lately hedgefunds and other large investors have been buying up housing at a greater rate, because they know the supply has been restricted by law. They'll squeeze everyone they can for money and lobby to keep their gravy train going.

>So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen.

Now those giant corporations are finally paying their damn taxes.

And how does that specifically help a family?

They have a home to live in, close to jobs, schools, and other families, at prices they can afford.

>3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing

The house you 'own', in fact is nothing more than tenancy. Just a different kind of tenancy. Stop paying property taxes and find out you still have a landlord.

I think far bigger issue is how to apply LVT. a cookie-cutter approach is guaranteed to fail. an overly complex system is just another byzantine labyrinth of a tax code that'll be gamed.

That’s insane.

California needs a constitutional convention that gets rid of the stupid proposition law. Every random suburban town has a market worse than Manhattan because there is a fundamentally inequitable tax system.

2) "Think on the margin" - a LVT might not make Bill Gates turn his mansion into condos, but down the bell curve there are likely plenty of people right on the fence who may be swayed.

3) LVT would (theoretically) equally encourage the development of condos as it would rental units.

> It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with.

This is a personal bias because you are trying to prevent other people from making their own decision on how they want to live. An uncharitable interpretation of your comment could be that you are forcing your will upon other people against their will.

The fact that an LVT increases personal freedom is usually ignored because personal freedom counts for nothing these days. I find it particularly amusing that we have this group of people called liberals wanting their fake freedom.

The average single-family dwelling landlord is subsidizing someone; rents are usually below actual carrying costs (maintenance, etc) and most landlords would be better off selling.

It’s one of the reasons banks and companies aren’t in the single family rental business.

The main thing that covers for it is property appreciation - the rent is used to just offset carrying costs while you wait for the property to go up in value.

I'm strongly going to need a source to back up your claim.

Try doing the exercise yourself to be convinced. Check out zillow/redfin/etc for properties and then do the planning to buy and rent it. Consider all costs. Look at equivalent rents in that area. Can you make any profit? Probably not.

Source: been doing this spreadsheet exercise for more than a decade. Have never found a property I could buy and rent out at a profit.

Find banks or real-estate companies that invest in single family homes for the purpose of renting them.

If you can find one, you often find that they'd rather let the property sit empty than renting it.

Or just look at the cost of buying a house vs renting a similar house, account for maintenance, and see if the numbers line up.

This isn’t really a source though, it’s requiring the other commenter to prove the point you made.

Anecdotally, I know people who buy single family homes and rent them for profit. My 3 bed, 2 bath single-family home has a $3,000/monthly mortgage, I could easily rent it for more than $3,500 (closer to $4,000). Take out 10% for maintenance fees, and I net $200 a month.

> Anecdotally, I know people who buy single family homes and rent them for profit. My 3 bed, 2 bath single-family home has a $3,000/monthly mortgage, I could easily rent it for more than $3,500 (closer to $4,000). Take out 10% for maintenance fees, and I net $200 a month.

In other words, you could not make a profit.

You need to consider all costs, not just mortgage. Taxes, insurance, maintenance, repairs, downtime (when it sits empty between renters).

If your mortgage is $3000 and you can only rent it for less than $4000, you can't make a profit.

I go through this math often while daydreaming of renting my house and retiring somewhere cheaper. There isn't any scenario I can come up with where it would actually be profitable.

That shows exactly the point, 10% for maintenance isn't enough, doesn't cover taxes, insurance, and other costs, and netting $200/month on a (assumed) $450k+ house isn't great, that's less than the interest earned on a deposit of the same amount.

Even if you only count the downpayment, $2400 a year on $90k is a 2.6% return; you therefore are getting the majority of your return from appreciation.

To actually make a profit on the rental portion, you need to discount the appreciation. You can do this if you're paying into a mortgage from 20 years ago and renting at todays prices, but that's just ignoring the fact that you could sell the property.

The biggest risk that most small landlords don't account for is a bad tenant - they exist and they will quickly eat through your $200/net a month.

The final proof is no company anywhere is building single-family rentals. If there was money to be made there, they would; but you need to get to apartments and the cost-savings inherent in them before it makes sense.

You realize that a mortgage is a loan, right? You’re paying both interest and equity on it over time, which you need to take into account. The longer you pay it, the more of your payments are really going right back into your own pocket. Renters get zero equity in exchange for their rent.

And yes, I’ll agree that some portion of the ROI on a house is the expected appreciation, but we’ve setup a system where that’s effectively guaranteed in many locations and simultaneously unavailable to renters. There’s a reason “be a landlord” is now the go-to “get rich” strategy for a large number of people.

You seem to be assuming that a rental property is subject to a mortgage. I don't know how what fraction of the US rental property is covered by mortgages, but it is definitely not 100%. For those that are not, your math is totally wrong.

I've been a landlord of a non-mortgaged property and am about to become one again (reluctantly). We charge a below market rental rate, and typically make around 4-6% (pretax) of the nominal property value a year (we typically divert 1-2% of the rent into a maintainance fund).

> Even if you only count the downpayment, $2400 a year on $90k is a 2.6% return; you therefore are getting the majority of your return from appreciation.

I would also getting the increased equity in the house as each mortgage payment lowers the total loan amount.

How many years would it take to recoup your down payment if the home value doesn't change?

If you pocket 500 per month, you are looking at around 35 years to break even on a $200k down payment.

You will never break even when take into account opportunity cost compared to a low appreciation bond or stock.

> If you pocket 500 per month, you are looking at around 35 years to break even on a $200k down payment.

Not sure your definition of break even. After 30 years, I will have paid off the entire house.

Key word down payment. You put 200k down on the rental and get 200k in rent. You pay 1.6 million on a 800k loan and own the house at the end. Without appreciation, you are 600k in the hole

I don't understand where the 1.6 million came from. If you're talking about interest on the loan, the premise was that the rent covers the mortgage payment (interest and capital) plus maintenance plus returns some net cash. In that case, when the net cash has returned enough to cover the downpayment, you'd be richer by the entire value of the house even without appreciation.

You are correct. Renters cover the mortgage and you are neutral at 35 years. Not in bebt

So, for your 200k downpayment, you now have 200k * 1.047^35 = 1MM as the total house value that you own even without house appreciation, so almost a 5% rate of return.

Average expenses for a landlord on a well-managed SFH run 45 - 50% of gross rents.

I find this extremely dubious based on my own experiences with renting and home maintenance. You need a citation to be at all credible.

Maybe they mean they need that much to live purely off the rental income, for their hands are like gelatin desserts. :)

https://i.redd.it/f0kl4a40cl861.jpg

This is known as liquidity preference. People would rather keep their property liquid, meaning they have the ability to decide what happens with the property with little delay. Renting out a property makes it less liquid, constructing a building on top of land makes it less liquid. People demand a compensation for giving up liquidity called liquidity premium. Rental payments must exceed that liquidity premium. If they do not, the land owner would rather keep his property liquid, i.e. ready to sell or rent out to someone whose rental payments exceed the liquidity premium.

The reason why liquidity preference exists is that land can be used for almost anything, is limited in supply and going up in value, making an early commitment can lose you a lot of potential profit. For example, a 10 year lease to a farmer could turn out to be a bad decision if 3 years into the lease, a power utility offers to build wind turbines on the land and you are still stuck with 7 years on that lease. The power company moves on and you lost your opportunity.

It turns out, a land value tax neutralizes liquidity preference.

https://www.wfae.org/business/2022-02-09/as-single-family-re...

That count?

I thought private equity was going into the single family rental business. In a big way.

https://www.nytimes.com/2020/03/04/magazine/wall-street-land...

https://www.wsj.com/articles/built-to-rent-suburbs-are-poise...

> Today, built-to-rent homes make up just over 6% of new homes built in the U.S. every year, according to Hunter Housing Economics, a real estate consulting firm, which projects the number of these homes built annually will double by 2024. The country’s largest home builders are planning for that future. Backed by banks and private investment firms, they have already bet billions on the sector, and will put down some $40 billion more during the next 18 months, Brad Hunter, founder of Hunter Housing Economics, projects. Built-to-rent subdivisions have been constructed or are under development in nearly 30 states. Taylor Morrison Home Corp. , Mr. Wood’s development partner and the nation’s fifth-largest builder, has said built-to-rent could soon become 50% of its total business. The company didn’t disclose the current share.

> Homeownership is expected to decline over the next two decades—a trend that started with the generation after the baby boomers, according to the Urban Institute, a Washington, D.C., think tank that advocates for homeownership. Prices are rising faster than ever, leaving more people, including those with higher incomes, more likely to rent.

"The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land"

The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.

The carbon price and dividend shows a great example of how to correctly set incentives.

You tax the carbon. That tax money is then put into an account. At the end of the year, every single individual is then given an equal share. The disincentives the use of carbon, while at the same time providing means that a majority of people actually get a net benefit.

The land tax should be set so that the price of the house becomes just the price of the house - the cost of the materials and labor. The land value should drop to zero. You then take that money, maybe use some of it for some public goods, might use some of it to get rid of bad taxes like property, income and sales, then give the rest back just as with the carbon tax.

The transition needs to be done with care(I heavily like giving everyone tax credits equal to the current value of their land, others like phasing in the tax over decades), but once we are in a land value tax environment everyone will be better off.

"The land tax should be set so that the price of the house becomes just the price of the house - the cost of the materials and labor."

How is that even possible? The root cause of property values being high in specific areas is because demand is high. Without changing demand, I don't see how it can just be labor and materials, especially since the buyer will be paying land value tax as well (since it's not a condo, high rise apartments, etc).

An income tax discourages you from earning money. A land value tax discourages you from using land. Using land more efficiently allows more people to live in that area.

I find proposals to reduce land value close to $0 extreme. After all, it would require some absurd tax rate like 100000% land value tax. The value of the land is 2k€ at 100% LVT representing the maximum in taxes one would pay for the property. At 100000% the payment is still 2k€ but the value of the land is now 2€ and you are paying 1000x on top of that land value in land value taxes. This means you can purchase the land for very little upfront. However, a 100% LVT would be more than sufficient because people can easily afford to prepay one year of taxes.

Let me give an example. Let's say there is currently a property in San Francisco. It's 2100 SQ/FT, it's current market value is $2.5 million, and the house is appraised by insurance for $500k.

The most optimal result, the result that we call 100% LVT(although 101% is much worse than 99%, so we try to aim cautiously) - is if the new market price after a LVT is implemented is $500k. Maybe that means a $24000/year tax. Maybe it means more. We keep raising the tax until the sale price asymptotes at the value of the improvements. Let's say it ends up at $24000/year. $24000/year is the value of the positive externalities that is being captured by this property, and we are therefore taxing the entirety of it.

It might help to also show you the lot next to it[0]. It's totally unimproved. It's going for $2 million. The goal for the land value tax is if the new sale price of that lot is $0. You'll note that if you try to do some math of current sale price to get some tax percent, you can't ever really get to zero. It would need to be an infinite percent tax. But that's because the tax is not based on the market price, but a set amount based on the lot. Because we know the lot next door is exactly the same size, and we know this lot is verrry very slightly closer to a train line, and we can see the general trend of the city is that lots closer to the train are worth more, so this lot based on some algorithm might be $24005/year, and we confirm that when someone buys it for $0. If someone bids thousands of dollars for it, next year we adjust the tax on it slightly up.

[0]: https://www.zillow.com/homedetails/736-Hyde-St-San-Francisco...

An increase in the tax of the land reduces the purchase price of the land.

It's the exact same thing in reverse with interest rates over time. As mortgage interest rates drop, the monthly payment is what people look at, so home prices go up.

I doubt that would actually occur. People with deep pockets could buy it up because they don't care about the tax. They'll just pass the cost on to renters anyways.

The reason that most taxes can be passed on is because as price is raised, the supply and demand curve is pushed and less is made. With land, there is a finite supply, none can be created, none can be destroyed, so land value taxes can not be passed on.

As the land value will always be zero, there is little value in holding land that you are not using productively, so speculation will drop heavily.

> With land, there is a finite supply

You say all this as if there isn't any meaningful supply-and-demand to be had in the secondary market.

The reform of zoning laws (atleast in California) is blocked by property owners sitting on low-tax properties.

Raising the land value tax would be a surefire way to make the opposition disappear as property owners would have to scramble to make their land more productive.

Or they'll block land value tax just as they so zoning.

But you seem to be agreeing with my point that it inherently is designed to affect choices (eg changing land usage to be more productive).

Yes, LVT solves problems at multiple levels (removes barriers to zoning reforms and incentivizes more productive use of land).

It’s also politically difficult to get passed. However, it seems if we were to try to turn the tide on just one policy, it would be LVT, as it solves a lot of other political problems downstream.

It's insanely perverse that we let companies like Blackrock buy up lots of homes and turn them into rentals.

I don't understand how that's any more perverse than small landlords doing the same thing. What is the perversity argument around rentals? Is it that is a single family home being rented? Is it that it's a private equity company doing the renting? Is it the unique combination?

Having had many many bad landlords of single family homes in the past, I'd prefer somebody like Blackrock as a land lord as they are less slokey and more likely to follow the law then a lot of landlords I've been forced to deal with.