> especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.
>The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
The only claim here is that if you own land which makes you $1000 in income and pay $2000 in taxes for that underutilized land you'd probably prefer to sell up.
Which has to be the least controversial part of LVT.
>Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Personally I think I preferred it when retirees were given tax incentives to sell up and downgrade to a smaller property, because even though moving day is stressful, not easy and costs money, it's not worth sacrificing an entire society over trying to avoid it.
Retirees have been doing this for as long as humans have owned property. Then they die and the house moves on. There is good reason someone will want to live in a house that is larger than they need.
If there are not enough houses don't blame that on existing houses.
> Retirees have been doing this for as long as humans have owned property.
Absolutely not. Extended families lived under the same roof for most of human history. This is a Nuclear Family problem, which only emerged in the 20th century.
more than just that. the very concept of "retirees" is a modern phenomenon. for most of human history you'd have to keep working on the farm or whatever until you were no longer physically able
Multigenerational households were the norm until recently. The eldest son gradually took over the household and raised his family there, or something like that. Both because it would have been terrible waste to have an entire house for some old people, and because household chores were hard work before modern amenities.
The less wealthy the family, the more likely you'll see it.
So your aggressive taxes will hit those people - displacing additional generations, not just the land-owning-but-otherwise-fairly-poor retiree - before it will hit the stereotypical middle class boomer retiree.
Outside of CA's Prop-13 territory, the multi-generational shabby-old-home-owners pay less taxes currently than their richer neighbors who moved more recently and renovated or expanded. The land value of both is going up, but the improvement value is lower for the poorer family. So now you'll get rid of the improvement value and even it out for both, which will hit the poorer land owners the hardest.
But land is a scarce resource, at least desirable land.
Blaming existing houses is exactly what you should do because instead of them you could build higher density.
There are plenty of houses for sale at any time. If building densely is the goal then any one of them can be used to build. Speculators buy houses in hopes that in the future the house next door will sell and then they can combine the lots to a larger building - where this is allowed.
If you're concerned with "it's underutilized because the population density is low and other people need more housing" than it would be much easier and more effective to directly pursue building housing on low-population-density non-residential land. Direct construction driven by the government, vs a multi-step strategy of "make people miserable with tax payments until they sell, hope the people they sell too will be deep-pocketed developers who will build super-high-density stuff instead of just fancier homes for richer families, and hope all this happens quickly."
Cause a tax amount that goes up based on what people with more money than you do on other pieces of property simply gives more power to the wealthy. "Underutilized" as far as tax implications go then means "people with more money than you would like there to be something else there."
And, of course, this already happens with US property taxes in many jurisdictions. And people absolutely hate it.
"Tax incentives to downgrade to a smaller property" sounds great in theory for retirees sitting in huge properties, but I think is limited in practice. The people with the really big places are wealthy and politically influential, so you'll get Prop 13s, or you'll get the recent cuts to property tax in Texas. "Make housing more affordable by cutting the taxes!" And the people impacted by more aggressive taxes will less be the boomers in giant houses and more be the poorer retirees in multi-generational living situations, or ones in fairly small condos.
How would LVT be easier or quicker? In what states are you going to be able to campaign on this?
"Change commercial and industrial under-utilized areas to allow residential, then aggressively subsidize developers or build directly there" sounds much easier to me than "pass a property tax increase that people will fight tooth and nail." Your LVT is gonna need to come with zoning changes too, after all.
California has Prop 13. Texas lowered property taxes recently. Florida is considering property tax rebates. You're gonna have a hard time convincing people to increase property taxes when housing is expensive already. Big overlap between "property owners" and "highly motivated voters" already.
Incentivizing density in single-family areas is quite hard, I'm not convinced it would do much even if it passed! Even in CA where neighborhoods can now have ADUs, sales prices for 5bd big-as-box-as-possible single family units are generally higher than prices for 3bd or 4bd + an ADU properties with separate units. Because the people who can afford those would rather have a giant-ass house than be a small-time landlord on the side. So maybe you just displace the old retirees and a bunch of high-income DINKS move from their condos to those SFHs. Sales price goes down a bit to compensate for the now-higher tax burden; remains unreachable for many but reachable enough for enough that it doesn't spur massive change.
> We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Some of this is due to tax policy, at least in the US. If you own an oversized house that you’ve had for long enough, then most of the value is a capital gain. If you sell it, you pay taxes on all but $500k of that gain, even if you promptly buy a new, smaller house that costs almost as much. If, instead, you hold the house until you die, the tax is waived completely.
California has additional perverse incentives due to property taxes.
Some states are allowing you to “carry around” your assessed value, perhaps the $500k cap gains exclusion should be made similar - you can carry your basis similar to a 1039 exchange if you sell and rebuy in the same area soon enough.
The reusable $500k cap gains exclusion is a huge huge thing, bigger than some realize. (Though it is interesting that you can exclude gains from a house sale but not losses, but you if you own a rental you can claim losses but not exclude gains (though you can 1039).)
The reusable $500k exclusion is great in some markets. In the markets with serious housing cost problems, it’s nowhere near adequate. If you have a house that you’ve owned for 30 years in a market where the cheapest houses cost $3 million, and you want to downsize and move into a nice $2 million condo (sigh), and you live in a high-tax state like CA, you will owe long term capital gains tax on nearly $2.5 million, which comes out to around $750k. Real estate agent fees can easily eat up most of the remaining profit, and you probably end up with much higher HOA fees. And these expenses are basically a complete loss to your heirs. And, in CA, your property taxes increase from near zero to $20k/year.
So you probably don’t make the trade, and those spare bedrooms remain unavailable to anyone who would want them for the rest of your life.
Grandma's problem has been historically solved with a homestead exemption. Of course the value could rise above the exemption, but that just means it should be set high enough to ensure that the proceeds of selling will give Grandma a lot of options.
Well, if grandma's home is surrounded by apartment complexes already, then even without LVT some property developer would definitely make an offer to buy her house for a ton of money, and even throw in some relocation package, for example by gifting her an apartment in one of those neighborhood complexes. Happens in my country all the time - your neighborhood being converted from single family homes to apartment complexes usually means a windfall for you.
The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.