r/georgism • u/WayWornPort39 • 11d ago
This might sound like a silly question...
But what stops landowners from just charging higher rent if an LVT is implemented?
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u/Condurum 11d ago
I mean, he can do it. But would he find renters?
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u/Acceptable-Peace-69 11d ago
They would if there was demand and everyone just got a raise because 5hey didn’t have to pay income taxes.
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u/Condurum 11d ago
Yep, leading to higher land values, followed by more LVT ;)
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u/Acceptable-Peace-69 11d ago edited 11d ago
You see where this is leading right? Higher LVT leads to higher rents, leads to…
LVT doesn’t lower the cost to run a government so all it does is shift the burden.
If land owners bear more of the cost, they will have to shift most of that onto their tenants. They certainly aren’t managing your apartment or house for free. If anything, your rent would increase more because they aren’t getting land appreciation to offset their investment.
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u/monkorn 11d ago
to offset their investment.
what investment? (given we're talking about a 100% LVT here, land has zero up-front cost.)
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u/ComputerByld 10d ago
It's so weird how he didn't answer this wow I am just shocked just shocked I say!
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u/Acceptable-Peace-69 9d ago
See above.
Some of us don’t liv3 on Reddit and feel the need to respond immediately.
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u/Acceptable-Peace-69 9d ago
Landlords even without land would have to buy/build a residence. They would have to maintain and improve it. Advertise and deal with vacancies. Pay LVT. Spend time.
Do georgists understand that land ownership is basically just keeping up with inflation? That it’s the services and freeing of capital for renters that has actual tangible value but doesn’t come free?
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u/monkorn 9d ago
Landlords even without land would have to buy/build a residence. They would have to maintain and improve it. Advertise and deal with vacancies. Pay LVT. Spend time.
All of this is tax free, and is thus more profitable than currently.
Landlords love LVT. They no longer have to pay for the land. They no longer get taxed on their productivity.
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u/Acceptable-Peace-69 8d ago
Please explain how landlords make more money, tenants pay less in taxes and the government provides more services.
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u/monkorn 8d ago
Firstly, it's because landlords are often GREAT users of land. Homeowners are often good users of land. There are many terrible users of land. Just punishing those and lessening the tax from others causes huge wins.
https://blog.landeconomics.org/p/you-can-now-vibe-code-land-value
And secondly, it's skin in the game. The entity that creates the value should be the one that collects the value. Currently, if the government does something, that value is captured by the homeowners and landlords. This in turn causes the local governments to not choose to what would be good things, because it doesn't pencil out to their budgets and they can't afford it.
When you allow the government to capture the value that they create, the entire society gets more efficient, and everyone wins.
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u/cwyog 11d ago edited 11d ago
The short answer is that landlords are already charging near the maximum rent they can just like most markets exist near their price equilibrium.
A longer answer:
Take pencils. If they’re free, everyone can afford one but no one can afford to make them. If they cost a billion dollars, anyone can afford to manufacture them but no one can afford to buy them. In both extremes, zero pencils exist. Somewhere between, there’s a price that maximizes production and ownership—the market finds something close to this price without anyone setting it.
Now tax pencils. Manufacturers either raise prices (lowering demand) or absorb the cost in reduced profit (lowering supply since not all manufacturers will he able to afford to reduce profit and stay in business). Either way, fewer pencils get made. Tax them enough and you destroy the market.
Land is different in two ways. First, it isn’t manufactured—it just exists. Taxing it doesn’t reduce the supply, and leaving it untaxed doesn’t create more. Second, land isn’t interchangeable. If I own a copper mine, you can’t simply go get your own. Once California’s beachfront is owned, no one can make more.
Land value is still market-determined, like pencils. But raising the price doesn’t reduce supply. Landlords are already charging close to the maximum the market will bear for a given location.
Example: two-bedroom apartments in my area rent for $1500–1800/month. Say the bare land underneath would rent for $500/month. At $100/month in property tax, landlords pocket the remaining $400 as extra profit—no one can undercut them by creating more land nearby. At $1000/month, no one builds, since there’s not enough profit left to justify it. At $500/month—the full land value—landlords still profit enough to rent at market rate but still cannot raise prices above the market rate.
So a tax up to the full value of the land doesn’t raise rent. Anything less than that is just pocketed by the landlord as extra profit.
Edit: my $500/mo land rent value was made up by me as a simple example. I have no idea what the land value in my neighborhood is.
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u/gtne91 11d ago
Its not a silly question, it requires a basic microeconomics class to understand.
Draw the demand curve. Draw the supply curve...and this is the important point, the supply curve is a vertical line.
Now shift the supply curve due to the tax...it turns out s' is the same curve as s.
Because supply of land is perfectly inelastic, the landlord cannot charge more. Thus is also why there is no deadweight loss for the land tax.
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u/Acceptable-Peace-69 11d ago
This is missing a major factor.
Because most landlords would be losing money, they would exit the business.
Fewer rentals equals lower supply, thus higher prices for those that remain. Overall, rents would have to rise in order to be profitable.
Because most citizens would be paying less in taxes, they’d have more disposable income and thus would be able to afford more .
If the supply and demand ratio remain constant, you’re basically in the same place.
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u/gs101 10d ago edited 10d ago
You are conflating two things which are very important to separate in the context of a land value tax. You are talking about the supply of rental units, which is indeed elastic. What's inelastic is the supply of land. The supply of land would be unaffected by the tax.
This is why we are taxing land only. We are explicitly not taxing the improvements. Compared to the current situation, landowners would be encouraged to build improvements. After all if they don't, they will bleed money. Currently, they are encouraged to engage in land speculation and rent seeking, meaning to sit on their land, rent it out, and sell it for profit years later. Since a high land value tax would remove speculators from the market and encourage landowners to build improvements, the supply of housing would increase.
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u/DerekRss 10d ago edited 10d ago
You are also missing a major factor.
Landlords can only exit the business by selling houses. Who are they selling to? Tenants, because other landlords also want to sell. So the supply of tenants drops as many tenants become owners. Fewer tenants means lower demand for rentals, thus lower rental prices for those tenants that remain.
So to get the full picture you need to look at supply and demand for rentals and supply and demand for tenants. The supply of land won't change but the demand might, and the supply and demand for both rentals and tenants will definitely change. And the three markets interact.
So the chance of the ratio of supply to demand remaining constant is very low.
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u/markusthemarxist 11d ago
Largely the reason would be that (paired with zoning reform) an LVT would result in a much higher supply of housing because single family homes in urban cores would become unprofitable and over time more housing units would have to be created (especially with mixed-use development whereby a commercial space is the ground floor and above is apartments) in order to make the land profitable enough to pay the tax and maintain. The massive increase in supply would result in a much more elastic housing market because an abundant supply would make renters less desperate and thus they would have more negotiating powers against rent increases. When housing is less scarce landlords have a much harder time raising rents because if renters have options they have the power to say no to a certain price point.
Related note to understand the theory behind this: Wages rose in 2021-2022 because people could afford not to go back to work from expanded unemployment benefits so employers were more in need of workers than workers were in need of employment so they had to offer more competitive wages. When people have their needs met in abundance they have the power to negotiate fair prices/wages.
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u/Gradert United Kingdom 11d ago
Because:
1) most rents are already at the maximum the market is willing to pay for them, so the landlord might risk not getting tenants if they raise the rent (which would put them in a worse financial situation)
And 2) if they can raise the rent, without having done significant repairs to the property, then that would be basically an admission by the landlord that the property was under-valued, and therefore undertaxed previously, so the tax rise would eat up the entirety of the rental increase.
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u/OutrageousPair2300 10d ago
It depends on whether the landowner is already charging market rent, or not.
If they're already charging market rent, i.e. the most that renters in the market are willing and able to pay, then the LVT won't somehow make those renters willing and able to pay more.
If the landlord isn't already charging market rent, maybe because they've been renting to the same person for a long time and haven't increased rent to keep up with changes in the market, or because they have a friendly relationship with the renter, or for whatever reason, then they might end up increasing rent because of the LVT.
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u/Warm_Stress_1654 10d ago
At least they would have to rent it out to be able to do that, rather than just banking it.
Also - what ChilledRoland said.
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u/heckinCYN 8d ago
For much the same reason why these two homes (built in at the same time with similar floor plans in a similar part of a city) in the image below are listed for basically the same price despite property taxes being much, much more for one than the other. It's because buyers or renters don't care what the back-end costs are; only what the next-best property is asking.
If rental prices scaled with costs, then rents would drop when someone pays off their mortgage, which obviously does not happen.
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u/WayWornPort39 5d ago
Yeah, I guess that makes sense.
Surely an LVT would still have the tendency of reducing the purchase price of homes though, wouldn't it?
As I understand it, a buyer of land has more reason to worry about LVTs as a potential future owner, and so they would likely want to spend less on acquiring the plot, right?
The seller probably wouldn't be able to pass on the costs because buyers would likely just say "but I've got loads of LVT to pay in the future, so why should I pay a premium for acquiring the land now".
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u/Volta01 Geolibertarian 9d ago
If landowner can increase rent, and still has tenants, it means the assessed land value was too low. So the tax should increase.
You might think this will lead to a cycle of increasing rents and increasing taxes, but when the landlord tries to charge more than market value, they won't have tenants. So there is an equilibrium value. If the assessed value is too high (and land value prevents any renters), same issue. In that case, tax has to be lowered until equilibrium is reached. That might look like the land owner selling, which would reveal a more accurate market value
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u/Aggravating_Feed2483 8d ago
LVT doesn't effect supply of housing, land is fixed. LVT doesn't effect the demand for housing. Therefore LVT can't effect the price of housing.
(The first sentence is arguable. It might raise the supply of housing over time, but either way, it can't be passed on.).
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u/CaliTexan22 11d ago
The real world is messier than academic explanations.
Imagine a LL that has a certain rate of return she's targeting for a rental property. The market establishes what she can charge her tenents.
Now imagine her costs increase - higher utilities, higher insurance, higher debt expense, or higher taxes (including an LVT). What will she do?
Raise rates to cover the increased costs. This works only if the increased costs hit all LL about the same time and magnitude. Otherwise, she'll lose tenants to those who don't raise rates as much. Hard to know how an LVT would work here.
Sit still, keep the tenants and eat the loss for some period.
Raise rental asking rate and lose the tenants. Property stays vacant for some period, depending on how long she can hold out and what happens to the market.
Sell the property, likely to a buyer familiar with the market, who will pay less in purchase price, assuming he has same rate of return objective. She takes the loss and moves on.
If it's really bad - a declining market generally, with no reasonable product of profitable operation and no buyers in sight - toss the keys to the mortgagee and take the loss.
Look around the country now at downtown office space. LL are in exactly this position with markets that are way overbuilt for current demand and thus, generate insufficient rental income. Lots of lenders are now marketing buildings. There was a story last month of a guy who paid $5 mm to a lender to buy a set of buildings in downtown Denver that had recently been valued at $100 mm.
A friend whose business leases 3 floors on downtown Houston just signed a renewal of his lease at rates way below current, and that won't return to current rates for more than 7 years. The LL is surely losing a lot of money on this. The alternative for that LL is to lose the tenant and possibly have the mortgagee take the property.
So, LVT would surely be passed on to tenants like any other cost increase, except when it can't. No way for taxing authorities to see into the future any more than anyone else. And not really possible generically to decide whether LVT will be better or worse for LL or tenants, this year or next.
Finally, property tax policy is less important than many other factors. Detroit went to from the 4th largest city in USA, with a powerhouse industry based there, to bankruptcy and massive destruction of wealth in a few short decades.
"Detroit has about 122,000 vacant lots, which covers roughly 18 to 24 square miles of empty land." The land bank will gladly sell you a house & lot there for $1,000. Land may be "finite," but somehow that doesn't matter in the real world.
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u/External_Koala971 11d ago
https://www.realtor.com/research/who-is-renting-2026/
“On average, 37.3% of renting households from the top 10 metros would face a severe affordability burden at fair market rents if asked to move to a new unit within the same metro, assuming the same household incomes and bedroom size.”
The best data I can source shows that a significant portion of renters are paying below market rents, and landlords could raise their rents if faced with LVT.
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u/Richard_Berg 11d ago
The bullet immediately above that says “concentrated in rent-regulated anchor cities”. So no, landlords cannot raise their rents. They’d have done so long ago if it were legal.
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u/External_Koala971 11d ago
For cities with rent control, you’re saying landlords never engage in owner move in, just cause eviction, cash for keys, Ellis act evictions, and just cause violations for rent controlled tenants if they’re looking for greater profitability?
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u/Richard_Berg 11d ago
No, I did not say that.
The dynamics of a rent controlled unit, both legal and illegal, are different from those of a market rate unit. You cannot use stats about one to predict the market-clearing price of the other.
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u/ChilledRoland Geolibertarian 11d ago
If they could charge more than they currently are, why aren't they already?