Saturday, October 22, 2005
Anti-property.... a good idea
Check out this BBC article on a great new strategy to create housing and avoid abandonment being premiered in Britain: Britain's Deputy Prime Minister's office has floated a plan that would enable local authorities to move families into buildings that have stood vacant for a year and to hold them for more than seven years before returning them to their owners. See also this story from: The Mirror.
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8 comments:
On the surface this sounds like a good idea, but a better approach, IMO, would be to tax the land value. This would provide a much better incentive for landlords to put the land to use, and would not be subject to tactics designed to skirt the law like listing the property for sale without any real intent to sell.
would taxing land value cause the landlords to rent the vacant props at a higher rent to recoup losses, and therefore further distance any use from serving the homeless?
either way, i think it is great to see legislators aggressively pursuing some form of vacancy control. a lot of landlords are perfectly willing to pay higher taxes and leave the properties vacant for decades before passing them down to their benefactors, simply becasue they can afford to and have no interests in investing in rennovation. leasing these buildings to the city acomplishes use and rennovation, w/ relative little cost to the landlord, and houses people who need it most, maybe, right?
at least this way, the empty spaces are (attemptingly) guaranteed to be used, and also, specifically for homeless people, and not merely refixed resold or rerented to those already living in some form of home (and perhaps considered, less in immediate need).
i dont know, i am very curious about different cities and various degress of vacancy control policy.
I expect the queen will be exempt.
If the landlords can afford to let the properties sit vacant while paying the taxes on them, then clearly the tax rate on those properties is too low.
I'd rather see them increase the taxes on those idle properties, and use the additional revenue to help the homeless.
As far as whether landlords rented at a higher rent to recoup losses, they can only rent for what the market will bear.
believe me, i have no problem taxing landlords, whether b/c their current rates are too low or whether for sitting on vacant properties, or whether because i may not even believe in private land ownership. but it seems that this idea is one that gets at using what is already built, what is already, to some degree, ready to accomodate, avoiding the bureaucratic barriers of getting new housing funded, located, approved and built. as much as we need to be adding tons of new affordable housing and specifically housing for the homeless to current housing stock, why should we not be investigating utilizing housing that is simply going to waste, and in the process stir the dialogue around property rights?
another BBC report on the the UK housing crisis:
http://news.bbc.co.uk/1/hi/england/4365130.stm
Here's what I fail to understand: how the Henry George approach--taxing the land value--would automatically change the economics of vacancy and abandonment.
In our system, property owners pay taxes on a percentage of the building value plus a tiny fraction of the land value. So, in a vaccuum, raising the taxes on the land might provide a disincentive to holding apartments vacant.
But, if the UK is like the US, owners also pay income taxes. When a building (or even a single apartment) is vacant, a landlord can report a loss on that unit, thus reducing his or her income. This functions as an indirect tax credit.
In a situation of scarcity, rents spiral higher, and the paper loss a vacant apartment can generate rises in lockstep, even if the property in question is in a marginal or somewhat less valuable area. This, it seems to me, is the incentive towards vacancy that governments have to address.
Am I wrong? Georgists out there: please give me a pragmatic example of how land value taxation would work in the real world. Has any community adopted the Georgist proposition? What happened? Thanks.
A purely geoist/georgist approache would not tax building value or incomes.
As you correctly state, in the existing system, income tax and building value tax provides a disincentive to putting the land to good use, and an incentive to leave it idle.
So it would take more than just taxing land value to change the economics of abandonment. But it would be a necessary step.
As long as the economic situation remains unchanged, I expect that landlord will continue to sit on idle property. Under the proposed law landlords could escape by a number of ways.
Let me see if I understand: if we only tax land value, it would remove the ability for landlords to devalue their buildings by leaving them vacant or refusing to repair them because this would have no impact on their tax bills.
But still, some neighborhoods are more desirable than others (Upper East Side of Manhattan vs. East New York, Brooklyn, let's say) and the land values would reflect that, no?
Land value taxation might remove some of the financial incentive to warehouse apartments in buildings that sit on valuable turf. But wouldn't it leave poor neighborhoods with comparatively little protection? And wouldn't Britain's approach help those neighborhoods?
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