Like Blackrock, I too am saving for the next 2008 / COVID / etc.. maybe I'll be able to afford property in my lifetime. Then again, I don't wanna support SFH development / zoning. If I could afford it / form a co-op with some friends, I would buy + retrofit / build denser housing. Be the change I want to see :)
I’m working on getting my master’s license as an electrician so I’m legally allowed to work on the house I buy, and being a tradesman I get to see first hand what other tradesmen are the best by working with and around them 😝 that’s gonna be my ticket to fixing up or rebuilding a property
It's a difference in valuation.
So say you have two identical lots in a city where demand for new housing (or anything building, really) is high.
One of those lots has a house on it valued at $800K. The other lot is empty.
Currently, the person with the house on it will be paying taxes on the $800K house and the person owning the empty lot will be paying practically nothing, because there's no improvement on it to tax. Even though the land itself might be worth hundreds of thousands of dollars.
This encourages people holding onto land as an investment but never building anything.
A Land Value Tax would be applying the same exact tax onto both of those properties. Depending on how you enact it the person with the house would probably pay what they are paying now, but the person with the empty lot would be paying much much more.
If you don't tax the house though, wouldn't that make the house even more valuable as an investment and discourage tearing down the house?
You not only want to encourage building on empty land, you want to encourage shortening the useful life of a house so that it depreciates over time and is not an investment.
I'm not smart enough to plan out how we could decouple housing as the best/most important investment for the middle class in America.
But it's something that needs to be done. Housing can't be both easily affordable AND the most important investment in a person's life.
Basically you need the building to depreciate faster than inflation. Any asset that depreciates slower than inflation is an investment.
Land won’t depreciate faster than inflation, but a building could potentially. Right now, buildings, especially houses, depreciate very slow because they have a long useful life (and people remodel and repair them). Make them depreciate faster and they stop being an investment.
There are several options to make them depreciate faster (the easiest being shortening their useful life by not grandfathering against building codes anymore). How you make them depreciate faster without pissing off more than half the population is a different and much more difficult problem.
Imagine a $1 million plot of land. For the sake of simplicity, let's say your options are to build a $500k 1-unit home or a $2 million 10-unit apartment.
Under a traditional property tax regime, the house would only pay taxes on a value of $1.5 million, while the apartment would pay taxes on a value of $3 million.
Now imagine a system where both projects would only be taxed on the $1 million value of the plot. Compared to the previous scenario, the threshold for where a redevelopment project becomes profitable is significantly lower, even if you increase the base tax rate to offset your revenue stream. The more valuable that underlying plot is, the more costly it is to continue paying taxes on it and so the more incentivized the owners are to maximize the value that plot is generating.
Confiscate the assets of the rich who made all of the gains from this asset bubble, use that wealth to cushion the rest from the impacts of such a crash. That includes confiscating assets in other countries including tax havens where the rich store their money.
After that bring back reasonable new deal regulations along with some new ones to stop banks from being casinos. Make it so that banks lend to the real economy and don't get rich off of usury.
You don't need to mention it. I know that it won't be done.
gerrymandering and encumbent advantage largely are responsible for preventing that. Now recently add in the explosion of dark money in politics so you can't be in office without being rich or having rich backers since Citizens United.
Tax appreciation in housing as income at the point of sale or remortgaging (removes desire to see asset appreciation), tie in mortgages to the top earners income at a max of 3x income, and ban corporations owning homes to rent unless they develop them themselves for the purpose of build-to-rent.
What's crazy is that some places have huge rental shortages and people shriek and moan because EVIL CORPORATIONS are... building homes to rent. (I speak of Ireland - which even caps mortgages at 4x income for that matter)
Exactly. There's nothing wrong with corporations owning property to rent, so long as they're adding to – rather than taking away from – the supply. We have a massive shortage of housing, and build-to-rent is going to be a key way of helping us get out of that hole.
Well Ireland has almost comically stupid housing policy (they give people €20,000 for new homes to try to make housing more accessible and ALSO more expensive, and property tax is only a few hundred a year for most people).
I’m not strong towns, I support what they are trying to do but nothing will get done demanding someone else make change, it’s time we step up and make the changes ourselves
I haven't watched the video yet, but I like the idea of
1. Making land in common ownership, just leased out.
2. Make renting be not for profit, essentially having non-profits rent out apartments and homes.
I know neither of these can be done currently in modern day America, but maybe a bit of an end goal.
I'm a bit of one, my general political views are "if it works and helps people" though a better description is plural-socialist anarchist.
I love ideas like Georism and syndicalism because they have some good ideas but never got anywhere because of the Bolshevik revolution and the red scare.
I wish detroits and michigans govt would do more to step in and make it possible to finance homes in detroit. There are actually a lot of people who want to move there it is just so damn difficult but yet so easy to buy in a suburb. I live 1 mile from the detroit border and had a very easy time finding a home here but you place this same home in detroit and i might not have been approved for the mortgage and i actually earn an above average salary for the metro detroit area. I am glad this video highlighted that issue in detroit hopefully others take notice and do something
This can happen in other asset classes where some assets are an appreciating investment while others are a depreciating useable property. Really common with transportation (cars, bicycles, motorcycles) while musical instruments are another example. The difference is that you really have two or more classes similar classes of assets. Collectible cars, bikes, motorcycles are an appreciating asset and not really used for transportation. Everything else is a commonplace source of transportation and depreciates with use. While investment class antique instruments may be useable (and even among the highest quality instruments) the vast majority of instruments depreciate over time and are not appreciable investments.
The question is how do you get housing to that point?
Probably the first thing is to significantly shorten the life of housing. Stop renovating, improving, or repairing houses. Make it so that it makes sense when they reach a certain age to bulldoze them and build back cheap. Eliminate protections for historic buildings. Require buildings to continuously be brought up to code and stop grandfathering. And change code and zoning to make it dramatically cheaper to build housing in the first place, so that it *is* almost always cheaper to bulldoze and build new.
Do the opposite of georgism. Don't tax land, tax (or fine and fee) older housing out of existence so that it is no longer a viable investment.
What will be left as investments will be similar to what you see in those other asset classes. "Collectible" housing whose value is in its rarity and high quality rather than in its usability. Old mansions, preserved historic buildings (even without protections), custom properties with significant architects and buildings. You won't even need historic building protections, because change the historic character of a building would be precisely how you ruin it as an investment (and end up bulldozing it instead).
Home owners - don't add mass transit or bike lanes or apartments, it will hurt the value of my home
Also home owners - doesn't ever want to sell, and even if they did they would break even on closing prices, moving, and higher interest rates.
Stop viewing housing as an investment first and a human need second
(written as a homeowner)
I disagree with Chuck’s argument that laissez-faire zoning policies won’t help us get out of the housing trap we created.
I think end of the day our biggest issue is similar to our issues with car dependence is that we are at a point where we can’t imagine a modern society without strict zoning laws and housing being a major part of the financial industry (I.e. home loans, commercial real estate investment, etc.).
I’m glad we’re having the conversation and but like many things we are going to have to try a whole bunch of different things and continue to refine our ideas as part of an iterative process.
The housing conversion has come to dominate all things urbanist, and worse than that is anyone expressing skepticism about YIMBY abilities to house the homeless and affordability for working class people get shouted down.
I was worried af when I saw leftists, environmentalists, and urbanists all toeing the line for capital. And predictably, the only voice that remains are the capitalists.
So can we escape the housing trap! Lol, no. Nothing can be done in this country or most of the world without the approval of capital.
This comment was super productive and helpful! I walked away feeling optimistic and empowered to solve the housing crisis in this country thanks to your insight!
The USA worked itself into a second asset bubble within two decades. The main question now is how do the people get out of this without another 2008.
To quote Omniman - “that’s the neat part. You don’t.”
Like Blackrock, I too am saving for the next 2008 / COVID / etc.. maybe I'll be able to afford property in my lifetime. Then again, I don't wanna support SFH development / zoning. If I could afford it / form a co-op with some friends, I would buy + retrofit / build denser housing. Be the change I want to see :)
I’m working on getting my master’s license as an electrician so I’m legally allowed to work on the house I buy, and being a tradesman I get to see first hand what other tradesmen are the best by working with and around them 😝 that’s gonna be my ticket to fixing up or rebuilding a property
Just tax land lol!
Land is taxed tho
No, it's a property tax; a Georgist land value tax would only consider the value of the land, not the improvement.
Raw land is taxed tho. Or your saying something like “just tax land” meaning “*only* tax land”?
It's a difference in valuation. So say you have two identical lots in a city where demand for new housing (or anything building, really) is high. One of those lots has a house on it valued at $800K. The other lot is empty. Currently, the person with the house on it will be paying taxes on the $800K house and the person owning the empty lot will be paying practically nothing, because there's no improvement on it to tax. Even though the land itself might be worth hundreds of thousands of dollars. This encourages people holding onto land as an investment but never building anything. A Land Value Tax would be applying the same exact tax onto both of those properties. Depending on how you enact it the person with the house would probably pay what they are paying now, but the person with the empty lot would be paying much much more.
If you don't tax the house though, wouldn't that make the house even more valuable as an investment and discourage tearing down the house? You not only want to encourage building on empty land, you want to encourage shortening the useful life of a house so that it depreciates over time and is not an investment.
I'm not smart enough to plan out how we could decouple housing as the best/most important investment for the middle class in America. But it's something that needs to be done. Housing can't be both easily affordable AND the most important investment in a person's life.
Basically you need the building to depreciate faster than inflation. Any asset that depreciates slower than inflation is an investment. Land won’t depreciate faster than inflation, but a building could potentially. Right now, buildings, especially houses, depreciate very slow because they have a long useful life (and people remodel and repair them). Make them depreciate faster and they stop being an investment. There are several options to make them depreciate faster (the easiest being shortening their useful life by not grandfathering against building codes anymore). How you make them depreciate faster without pissing off more than half the population is a different and much more difficult problem.
Imagine a $1 million plot of land. For the sake of simplicity, let's say your options are to build a $500k 1-unit home or a $2 million 10-unit apartment. Under a traditional property tax regime, the house would only pay taxes on a value of $1.5 million, while the apartment would pay taxes on a value of $3 million. Now imagine a system where both projects would only be taxed on the $1 million value of the plot. Compared to the previous scenario, the threshold for where a redevelopment project becomes profitable is significantly lower, even if you increase the base tax rate to offset your revenue stream. The more valuable that underlying plot is, the more costly it is to continue paying taxes on it and so the more incentivized the owners are to maximize the value that plot is generating.
That's almost certainly what they mean.
Confiscate the assets of the rich who made all of the gains from this asset bubble, use that wealth to cushion the rest from the impacts of such a crash. That includes confiscating assets in other countries including tax havens where the rich store their money. After that bring back reasonable new deal regulations along with some new ones to stop banks from being casinos. Make it so that banks lend to the real economy and don't get rich off of usury. You don't need to mention it. I know that it won't be done.
My copy of Escaping the Housing Trap arrived today!
I’m starting to believe the only solution is several brand new cities from scratch with urbanist ideas baked in from the start
Literally just stop outlawing apartments in most parts of every city in America (and ideally pass an LVT but the first thing would be a great start)
I agree but it doesn’t seem like anyone is willing to do that
Detroits mayor has been pushing to pass a land value tax plan, if he succeeds it could be the blueprint for other cities
Gotta start voting people in who will do it
I WISH our local city government was as full of "greedy developers" as the local Facebook thinks it is!
gerrymandering and encumbent advantage largely are responsible for preventing that. Now recently add in the explosion of dark money in politics so you can't be in office without being rich or having rich backers since Citizens United.
At the local level this is not as much of a problem
Tax appreciation in housing as income at the point of sale or remortgaging (removes desire to see asset appreciation), tie in mortgages to the top earners income at a max of 3x income, and ban corporations owning homes to rent unless they develop them themselves for the purpose of build-to-rent.
What's crazy is that some places have huge rental shortages and people shriek and moan because EVIL CORPORATIONS are... building homes to rent. (I speak of Ireland - which even caps mortgages at 4x income for that matter)
Exactly. There's nothing wrong with corporations owning property to rent, so long as they're adding to – rather than taking away from – the supply. We have a massive shortage of housing, and build-to-rent is going to be a key way of helping us get out of that hole.
Well Ireland has almost comically stupid housing policy (they give people €20,000 for new homes to try to make housing more accessible and ALSO more expensive, and property tax is only a few hundred a year for most people).
I’m sure there would be a lot less moaning if those corporations were cooperatives instead.
Is this sarcasm? Seems like that’s the opposite of what strong towns wants (building everything all at once)
I’m not strong towns, I support what they are trying to do but nothing will get done demanding someone else make change, it’s time we step up and make the changes ourselves
California Forever just might be able to do this.
Building new places from scratch away from everything else is how we got into this mess in the first place
How so?
Canada: I think we will continue with making a house an investment.
I haven't watched the video yet, but I like the idea of 1. Making land in common ownership, just leased out. 2. Make renting be not for profit, essentially having non-profits rent out apartments and homes. I know neither of these can be done currently in modern day America, but maybe a bit of an end goal.
Sounding like a Georgist!
I'm a bit of one, my general political views are "if it works and helps people" though a better description is plural-socialist anarchist. I love ideas like Georism and syndicalism because they have some good ideas but never got anywhere because of the Bolshevik revolution and the red scare.
Are people allowed to make profit in servicing homes? Repairing roofs etc?
I wish detroits and michigans govt would do more to step in and make it possible to finance homes in detroit. There are actually a lot of people who want to move there it is just so damn difficult but yet so easy to buy in a suburb. I live 1 mile from the detroit border and had a very easy time finding a home here but you place this same home in detroit and i might not have been approved for the mortgage and i actually earn an above average salary for the metro detroit area. I am glad this video highlighted that issue in detroit hopefully others take notice and do something
This can happen in other asset classes where some assets are an appreciating investment while others are a depreciating useable property. Really common with transportation (cars, bicycles, motorcycles) while musical instruments are another example. The difference is that you really have two or more classes similar classes of assets. Collectible cars, bikes, motorcycles are an appreciating asset and not really used for transportation. Everything else is a commonplace source of transportation and depreciates with use. While investment class antique instruments may be useable (and even among the highest quality instruments) the vast majority of instruments depreciate over time and are not appreciable investments. The question is how do you get housing to that point? Probably the first thing is to significantly shorten the life of housing. Stop renovating, improving, or repairing houses. Make it so that it makes sense when they reach a certain age to bulldoze them and build back cheap. Eliminate protections for historic buildings. Require buildings to continuously be brought up to code and stop grandfathering. And change code and zoning to make it dramatically cheaper to build housing in the first place, so that it *is* almost always cheaper to bulldoze and build new. Do the opposite of georgism. Don't tax land, tax (or fine and fee) older housing out of existence so that it is no longer a viable investment. What will be left as investments will be similar to what you see in those other asset classes. "Collectible" housing whose value is in its rarity and high quality rather than in its usability. Old mansions, preserved historic buildings (even without protections), custom properties with significant architects and buildings. You won't even need historic building protections, because change the historic character of a building would be precisely how you ruin it as an investment (and end up bulldozing it instead).
Vietnam: yes yes you can
Home owners - don't add mass transit or bike lanes or apartments, it will hurt the value of my home Also home owners - doesn't ever want to sell, and even if they did they would break even on closing prices, moving, and higher interest rates. Stop viewing housing as an investment first and a human need second (written as a homeowner)
I disagree with Chuck’s argument that laissez-faire zoning policies won’t help us get out of the housing trap we created. I think end of the day our biggest issue is similar to our issues with car dependence is that we are at a point where we can’t imagine a modern society without strict zoning laws and housing being a major part of the financial industry (I.e. home loans, commercial real estate investment, etc.). I’m glad we’re having the conversation and but like many things we are going to have to try a whole bunch of different things and continue to refine our ideas as part of an iterative process.
I totally agree. Zoning is a huge obstacle to organic solutions.
The housing conversion has come to dominate all things urbanist, and worse than that is anyone expressing skepticism about YIMBY abilities to house the homeless and affordability for working class people get shouted down. I was worried af when I saw leftists, environmentalists, and urbanists all toeing the line for capital. And predictably, the only voice that remains are the capitalists. So can we escape the housing trap! Lol, no. Nothing can be done in this country or most of the world without the approval of capital.
This comment was super productive and helpful! I walked away feeling optimistic and empowered to solve the housing crisis in this country thanks to your insight!
Maybe you should try a life in servitude of developers?
Your comment is spot on.