> The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.
> On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board
Most research asserts that a land value tax decreases the selling price of land.
In a fully functioning spherical chicken market, once balancing in
If I buy land for $100k today, I can assume I'm going to make say $6k a year from renting it to someone and $2k a year from it increasing in value, giving me a 8% roi
If I instead had to pay just $4k a year in LVT, the price would reduce to $50k to keep that 8% roi. I'll still be making money for doing nothing.
Now if that LVT was returned to the population at large, it's quite possible the population has more money to spend on land, so I could increase the rental price from $6k a year, but then the LVT would increase, because the idea is it reduces unimproved land value to zero -- nobody should make money from occupying land, they should make money through improving it.
In reality though any LVT implemented would be full of loopholes which would introduce absurd incentives. Just like taxing income, and worse taxing earned income more than non-earned income.
All property owners can increase rental prices now anyway. They can only increase them to the maximum someone will pay for it. That's why average rental prices tends to track average income. If you have 5 homes and 6 people, each able to pay 2100, 2200... 2600, then the worst home will rent for 2200, and the one who can only afford 2100 will live in a box.
They can only increase rents as much as the next guy. If you're charging $2500 but next door is $2400, nobody will rent from you. But if everybody's charging $2500, then that's what people will have to pay.
You're right that some people will get squeezed out, but in high demand markets there are enough people willing to pay that it doesn't matter. Property owners will eat the 5% increase for a while, like until the existing leases expire, but eventually they'll incorporate that 5% increase into the rent.
abeppu · · focus · HN ↗
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
larsiusprime · · focus · HN ↗
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Gormo · · focus · HN ↗
Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.
larsiusprime · · focus · HN ↗
Most research asserts that a land value tax decreases the selling price of land.
EgregiousCube · · focus · HN ↗
iso1631 · · focus · HN ↗
If I buy land for $100k today, I can assume I'm going to make say $6k a year from renting it to someone and $2k a year from it increasing in value, giving me a 8% roi
If I instead had to pay just $4k a year in LVT, the price would reduce to $50k to keep that 8% roi. I'll still be making money for doing nothing.
Now if that LVT was returned to the population at large, it's quite possible the population has more money to spend on land, so I could increase the rental price from $6k a year, but then the LVT would increase, because the idea is it reduces unimproved land value to zero -- nobody should make money from occupying land, they should make money through improving it.
In reality though any LVT implemented would be full of loopholes which would introduce absurd incentives. Just like taxing income, and worse taxing earned income more than non-earned income.
jlarocco · · focus · HN ↗
iso1631 · · focus · HN ↗
nly · · focus · HN ↗
In fact, I'd argue the majority of landlords are shit investors sat on fairly low yields
jlarocco · · focus · HN ↗
You're right that some people will get squeezed out, but in high demand markets there are enough people willing to pay that it doesn't matter. Property owners will eat the 5% increase for a while, like until the existing leases expire, but eventually they'll incorporate that 5% increase into the rent.
iso1631 · · focus · HN ↗
Gormo · · focus · HN ↗