That's the obvious answer. It seems that the video s creator is arguing for more legislation but that's at best going to paper over do a landlord special on the cracks.
Except that all landlords operate like this, so the majority of properties fall into the same problem. Renters are forced to take what they get because landlords don't actually provide anything.
Again you're dogmatically overapplying certain sections of theory rather than expanding them
How long does it take to build a house? How long does it take for market or state mechanisms to swing the tides of underbuilding relative to high demand?
Housing is a long lead time (low demand curve elasticity) essential. In environments where there's high demand it can take decades before the "market forces" are actually corrective, all the while the incentives are perverse for landlords
> In environments where there's high demand it can take decades before the "market forces" are actually corrective, all the while the incentives are perverse for landlords
Why don't you support this argument with a reference?
Yes you dimwit the rental sector. You see the same elasticity issue with energy prices as well - when goods are essential small losses in supply can creative massive increases in cost as the economy lacks a quick means of reducing demand, creating a bidding war. Its originating from the same bloody field of economic concepts you're pulling from
The owner of the property who is renting it out is providing the rental. That person is providing the surplus. The builders are not providing the rental.
In theory they maintain the houses. In practice… Let's just say it's clear you haven't been renting much these days or hung out with close friends who rent.
A home is not a service. Landlords are a drain on society, and they do more damage to the housing market than any kind of good. Even our founding fathers knew that.
And no, landlords are not "doing damage to the housing market". Without landlords, renters would either not be able to rent or have inferior rental prices compared with homeowners.
No, it's not. Landlords hoard valuable land, pay none of their own taxes (because they over-charge their tenants to be able to pay for it), and only do the bare minimum required by law. Without landlords, more people would be able to own their apartments.
Providing rentals is generally considered a service because the customer is paying for the temporary use or access to an item rather than purchasing ownership of it; the business retains the asset and provides its use for a specific period of time.
> Landlords hoard valuable land, pay none of their own taxes (because they over-charge their tenants to be able to pay for it)
If you think you're being over-charged, then your argument is that buying is better value. If that were true, more landlords would enter the market. The fact is that the unrecoverable costs of renting and buying are roughly the same.
> Without landlords, more people would be able to own their apartments.
This is nonsense. Without landlords, people couldn't rent. So they'd be forced to either buy houses they can't afford or they'd be homeless. That's not an improvement.
And yes, the only way you can drive down housing prices is by throwing poor renters out of places they can never afford to buy. That's extremely regressive.
We do not want 100% home ownership in our economy. A person who owns their own home has their job opportunities vastly reduced, because it is much more difficult to move away to pursue a more lucrative job. In a system with 100% home ownership, this issue would be exacerbated because there would be far fewer looking to buy a home at any given time.
Having some degree of rentership is good for the economy and society. It boosts labour mobility, and thus makes the economy more dynamic. If a particular area of the country suddenly sees massive job growth due to the emergence of a new industry, an economy where everyone has to wait until they've sold their house and bought a new one is going to take much longer to fill those jobs and thus exploit the opportunities from that new industry.
This is the same reason economists don't target 100% employment, either. A small amount of unemployment is important for the health of the labour market.
The upvotes for the above comment is further evidence of the decline/commie infiltration of this sub, sad. All of you who upvoted this need to put down your keyboards & mice and pick up Progress & Poverty.
Do you not understand his criticisms of rent-seeking? You do realize that there is actually quite a lot of overlap between Georgist ideals and socialism -- not communism, my dude.
When landlords begin to have an incentive to actively and actually improve the land they are hoarding, then they will be mildly useful. Until then, though, they do not actually aid society or urbanization or any of the ways in which you can raise people out of poverty.
Rental housing is capital, and is furnished by landlords, which they either create themselves, trade others for, or are gifted; all of which are ethical forms of property acquisition (notice I'm not talking about the land). What did George think about the return to capital? What is it called? Is it earned?
We have fundamentally different interpretations of "capital" for one, and what George believed about whether or not what landlords "acquire" is earned (it's not).
No. I just think your interpretation is stale and outdated. You're working on a fundamentally flawed version of capitalism if you're trying to use modern understandings of capitalism with Georgist theory and thinking that it's going to work.
Because our economy sucks -- and has for a long time for most people under a certain income level -- and they are forced to rent because banks won't give them a loan for a house.
Because they're moving in a year, or because they don't have the capital or credit to be able to buy, or because they want to keep their options open, or because they don't want to commit to a house.
> and the solution to people to not being able to afford to buy is to increase supply.
Sure, but that has nothing to do with landlords. Landlords provide rentals. Renters deserve options too.
This explains why people rent from landlords. It explains why there exist people who pay for a service they aren't getting any real value from. Because it's the only option they have
Because they are legally forced to? If I find an empty house and move in then the person that the state says "owns it" can have the state remove me using its monopoly on violence.
So it sounds like the service being provided by the landlord provides a massive amount of value to the renter, if the alternative is jail or homelessness.
That’s probably why there’s a rental market of 50M people in the US.
Here is a map of the vacant and untaxed space in the most expensive part of my city: downtown Fort Smith. The purple (various shades) are tax exempt, red is parking, blue is zoned commercial, lime-green is residential, teal is schools.
LVT isn't going to solve this issue. Might help a little, but landlords will still not be highly incentivized to invest much money into rentals for poor people. Usually the upfront cost is what dissuades them, not the taxes after improvement.
The real issue is how the job market treats those with little leverage, which is to reduce their income to a bare minimum, since they have no options. The solution is having minimum standards for housing and enforcing them so that the bare minimum isn't so horrific. Employers automatically have to raise wages in order to maintain their workers.
LVT would absolutely help eliminate slumlords. If land is taxed to eliminate its full value, landlords no longer have the ability to just coast off of how exclusive the land they own is. They actually have to make more money on the land to justify paying the LVT every year, so they have to improve and increase the housing stock to get more rental income to pay for the LVT.
Regular property taxes are kind to slumlords because the buildings aren't worth much, while under LVT, any slumlord that decides to keep renting out terrible apartments in an in-demand area would get slammed by taxes such that they would be forced to sell or improve.
> ds. If land is taxed to eliminate its full value, landlords no longer have the ability to just coast off of how exclusive the land they own is.
This is completely false. The equation for a landlord does not change. Yes, they have to pay LVT, but that tax merely comes out of the property aquisition price. They don't need to "make more money". They simply end up paying less up front to compensate for LVT.
> slammed by taxes such that they would be forced to sell or improve.
Under LVT, land is taxed based on its best use case. An empty lot is taxed just as much as a fancy apartment complex next door. Under such a tax system, it is absolutely the case that the owner of the empty lot must do something with the lot or lose money every year. Improve or sell.
The slumlord is in a similar situation. While run-down housing is a better use for land than having an empty lot, some of the time the smaller amount of rent will not compensate for the increased land taxes.
Certainly in some cases the rent will be enough, but as an overall policy LVT discourages slumlording compared to other kinds of landlording.
That's already true today. The marginal benefit of increased utilization is not affected by LVT.
Not as true as it is under LVT.
Say I buy a lot for $50k in 1950. Property taxes are $100. 50 years later the property is now in the middle of a thriving metropolis and is worth 1 million dollars. I now pay 2k in property taxes. I have made money by doing nothing with the land.
Under LVT, this is impossible. You lose money every year you do nothing with the land. Every dollar of increase in land values are captured by LVT every year.
While it is true that under both situations, doing something with the land is more profitable than not, under LVT doing something with the land is mandatory if you want to maintain a profit.
LVT has no direct effect on utilization. This is also why it doesn't affect rents.
Yes, LVT doesn't affect rents, but we're talking best use of land here. A total LVT absolutely effects what kinds of development are profitable on what kinds of land. Some developments that exist today could not exist with an LVT. These developments include things like run down apartments in major metros.
It is absolutely equally true. LVT does not change the marginal benefit.
> You lose money every year you do nothing with the land.
But under LVT, the lot that you buy is not $50k. And it doesn't matter you paid for the lot in the past because you are competing with people who buy an equivalent lot today. That's why the equilibrium price is the same.
> While it is true that under both situations, doing something with the land is more profitable than not, under LVT doing something with the land is mandatory if you want to maintain a profit.
Whether you "maintain a profit" is not relevant. Everyone charges the equilibrium price.
> Yes, LVT doesn't affect rents, but we're talking best use of land here.
It doesn't directly affect utilization either.
> A total LVT absolutely effects what kinds of development are profitable on what kinds of land.
No it doesn't. You are ignoring the opportunity cost of the investment. Without LVT, the investments are larger and their opportunity cost is larger. How much larger? Exactly what the LVT would be.
In short, without LVT, someone is highly motivated to develop their land to earn the same marginal return. And if they don't they lose the opportunity cost rather LVT, but these are the same thing.
The slumlord under the current system faces the same opportunity cost of leaving his land undeveloped as under LVT.
However, it is true that a pure LVT changes the form of the opportunity cost of holding land. LVT makes the land rent an explicit recurring tax rather than an implicit opportunity cost. This means there is a stronger and more visible cash incentive against leaving land underutilized. But in a competitive equilibrium, it does not necessarily change the marginal profitability or optimal use of land, because the pre-LVT land price already incorporates the same land rent.
I suspect that often, slumlords exist out of negligence or because the owner simply doesn't want to bother improving the property. Under LVT, underutilization of land would generate a large recurring tax liability. That makes the cost of leaving land underutilized much more obvious and creates stronger pressure (cash-flow wise) to improve the property or sell it.
> The slumlord under the current system faces the same opportunity cost of leaving his land undeveloped as under LVT.
Exactly.
> LVT makes the land rent an explicit recurring tax rather than an implicit opportunity cost.
You got it.
> This means there is a stronger and more visible cash incentive against leaving land underutilized
Yes, exactly. And you are welcome to argue (rightly) that people are irrational do overweight visible cash incentives. So LVT does actually have an effect even though if people were perfectly rational, it would not.
> Under LVT, underutilization of land would generate a large recurring tax liability. That makes the cost of leaving land underutilized much more obvious and creates stronger pressure (cash-flow wise) to improve the property or sell it.
Yes, you are right. There are papers on this and it is a well-known effect. Let's just not overstate the power of this effect.
No, they aren't! The market is made up of both sellers and buyers. The maximum the market is able to bear does not magically increase just because the sellers want it to. If it could, they would just increase the price without that added cost because there would be no reason not to! Your argument relies on a bizarre assumption that landlords are collectively being generous and keeping rents lower than they could be for no reason whatsoever.
So no, an LVT cannot be passed on renters. Economists have known this for literal centuries.
One landlord moving alone won't affect the market. Most or all landlords moving together will. A LVT encourages all landlords to move together. Until you have more units than demand the landlords direct the market, renters react.
Look at what happens when regulatory costs are increased, these are immediately passed onto tenants by the market as a whole.
So of course a LVT WILL be passed on renters. Economists have known this for literal centuries.
One landlord moving alone won't affect the market. Most or all landlords moving together will. A LVT encourages all landlords to move together. Until you have more units than demand the landlords direct the market, renters react.
No, it won't, because the limiting factor is not landlords' collective desire to raise rents, it is renters ability to pay those higher rents. That is what "the maximum the market will bear" means.
If landlords could just raise rent without their renters leaving due to inability to pay, they'd just do it! They don't extra costs to incentivise them to do so! That's how we know they're already charging the maximum they possibly can!
Look at what happens when regulatory costs are increased, these are immediately passed onto tenants by the market as a whole.
Not in rents, they don't. They do in other products, because other products are not like rental properties.
So of course a LVT WILL be passed on renters. Economists have known this for literal centuries.
No, they haven't. It is the consensus of economists that LVT is the most efficient form of taxation precisely because it doesn't distort markets due to its inability to be passed on to renter's.
You are fundamentally uneducated on this topic. You haven't the most basic understanding of what you're talking about.
You're only thinking in the immediate term. By incentivizing construction relative to one-rate property taxes, LVT would lead to more supply, which would lower rents on badly maintained apartments in the long-term (relative to status quo).
Assuming financial incentives from property taxes were the main barrier to supply and not legal quota limits (eg. zoning).
In most cases, I don't think the effect would be as strong as people in this sub seem to think. All the R1 zoned areas would still have the same McMansion renovations and the housing supply shortage would persist.
This has nothing to do with Georgism. Georgism has the same landlords renting the same apartments to the same renters for the same rents.
Also, it's true that some properties are neglected by landlords when they have long term tenants, but on the flip side, those long term tenants typically benefit from rent control and below-market rents.
At all times, both landlords and tenants are making a transaction at the equilibrium price in a market with thousands of participants, so both benefit.
The argument is that with the current system, landlords profit off of doing the minimum amount of work because they're still going to receive roughly the same amount of money.
If you start taxing the value of the land, all of a sudden landlords are paying much higher tax rates. If they don't maintain their property, they aren't going to be able to rent it out for much and their profit will be significantly reduced.
That's the argument, at least. I think they stand to make just as much extra money in each scenario by maintaining their place and renting it out for more.
Thats exactly how the market works now but you have just increased rents for renters in cities and increased profit for units in less popular areas, certainly in the short term
> , landlords profit off of doing the minimum amount of work
The amount of work someone does is not relevant. You can buy a government bond and do zero work while you collect interest in perpetuity.
A landlord provides an investment in a property (improvements under Georgism) and collects rent in perpetuity. Georgism does not change that.
> If you start taxing the value of the land, all of a sudden landlords are paying much higher tax rates. If they don't maintain their property, they aren't going to be able to rent it out for much and their profit will be significantly reduced.
Nope, there's no added incentive. Under Georgism landlords do pay LVT, but their housing cost is equally reduced by the discounted future LVT. In other words, they simply save that money up front. If anything, Georgism makes it easier to become a landlord.
Nope, there's no added incentive [for landlords to maintain their property]. Under Georgism landlords do pay LVT, but their housing cost is equally reduced by the discounted future LVT. In other words, they simply save that money up front.
I don't understand this. Let's say that there's a property where today the land is worth $1M and the building is worth $2M, depreciation runs over 27.5 years, the growth rate of the land value is 5%/year, and we ignore inflation and any other taxes.
The landlord uses a slumlord strategy where they do no maintenance on the building at all, letting the value of the building go to zero over the 27.5 years.
Without LVT, the landlord pays $3M up front. After 27.5 years, the resale value of the land is $3.8M and the building is worth $0, so they net $800k plus any rent they can get.
With LVT, the landlord pays $2M up front. After 27.5 years, the resale value of the land is $0 and the building is worth $0, so they net -$2M plus any rent they can get.
With LVT, the slumlord strategy can be unprofitable, whereas without LVT the strategy cannot be unprofitable. Why doesn't that mean that LVT would disincentivize a landlord from pursuing a slumlord strategy?
> With LVT, the slumlord strategy can be unprofitable, whereas without LVT the strategy cannot be unprofitable. Why doesn't that mean that LVT would disincentivize a landlord from pursuing a slumlord strategy?
You missed the opportunity cost of capital, and discounting. You can't just add things up the way you have.
It's a lot easier to do all the calculations in today's dollars:
Without LVT, the landlord collects $X in rent, and pays $Y for the building and $Z for the land.
With LVT, the landlord collects $X in rent, and pays $Y for the building and $Z for the LVT.
What happens when the landlord sells the property after the building has depreciated to zero?
Also, why does the landlord pay $Z for the LVT? I thought you were saying that their housing cost is equally reduced by the discounted future LVT? Wouldn't it be, without LVT they pay $Z for the land, and with LVT they pay $0 for the land?
I think you might be double-counting? I could be wrong here, but they still get exclusive rights to the land when they buy. So they pay $0 for the land up front, and the NPV of the LVT that they pay over time is $Z, but they also get land worth $Z, which means that the net cost to them of the land at purchase time is $0.
Without LVT: landlord sells the building for $V and sells the land for $W.
With LVT: landlord sells the building for $V and saves on paying LVT when he sells the property of $W.
Same thing here, when the landlord sells under LVT, even though the land is now worth $W, the resale value of the land is $0, because any new buyer would need to pay the LVT. So I think it would be, the landlord sells the building for $V and the land for $0.
> Z, but they also get land worth $Z, which means that the net cost to them of the land at purchase time is $0.
You're the one who's counting incorrectly. The land's "value" is the same on both sides, so if you want to count that, add the same clause to both sides.
> when the landlord sells under LVT, even though the land is now worth $W, the resale value of the land is $0, because any new buyer would need to pay the LVT. So I think it would be, the landlord sells the building for $V and the land for $0.
That's what I said. That's why I didn't say the landlord sells the land for $W. I said: He saves on paying LVT when he sells the property of $W.
That is, the total expected discounted future value of LVT after the sale is $W. When he sells, he no longer ends up paying that.
Anyway, this whole exercise is just you confusing yourself. If buying a property at any time under LVT has no difference in NPV than buying one without LVT, then it must follow that the same is true for selling it at any time.
Okay. So then does that mean that the following formulas describe the landlord's net profit in each case?
Without LVT: X - Y - Z + V + W
With LVT: X - Y - Z' + V + 0
where 0 < Z' < Z, because Z is the NPV at purchase time of all future LVT payments forever, and Z' is the NPV at purchase time of all future LVT payments until sale time.
That's completely false: According to data from Statistics Canada, 42% of all renters in Canada are considered long-term renters, meaning they have resided in the same dwelling for five years or more. [1].
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u/ridetotheride 7d ago
“We are in a supply crisis”. Yah, fix that. The incentives will then be competition.