Comment by Aurornis
1 day ago
> 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.
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.
>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.
2 replies →
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.
1 reply →
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.
1 reply →
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.
Im very pro building more homes as well but to call it quick OR easy is wrongheaded.
An LVT is an excellent stopgap and a way to incentivize the creation of higher density housing where it is needed.
1 reply →
> 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.
4 replies →
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.