detroit incentives blighted neighborhoods home prices

Land-use tax hearing attracts large audience
housing market property tax land value tax larger landowners

Why do we think rising home prices are good?

Slums, crashes, over-developed countryside all have a solution. We trim, blend, and append five 2011 articles from: (1) Business Insider, Feb 16, on Detroit by Kamelia Angelova; (2) Los Angeles Times, Feb 15, on the bubble by Michael Kinsley, a former editorial page editor of The Times; (3) Metroland, Febr 9, on taxing by Bill Batt; (4) Toronto Star (largest newspaper in Canada), Jan 31, on a green act by Frank de Jong (Past Leader, Green Party of Ontario); and (5) Southside Sentinel, Feb 16, on a hearing by Larry S. Chowning.

by K. Angelova, by M. Kinsley, by B. Batt by F. deJong, by L. Chowning

Detroit Mayor Dave Bing is trying to lure residents back to abandoned neighborhoods by offering incentives.

One program offers $150,000 in housing renovation money and requiring only $1,000 down to police officers who are willing to relocate to the city. Another offers college graduates $2,500 to rent and $20,000 forgivable loan to buy properties.

Potential homebuyers can choose from plenty of cheap or free homes, especially in the blighted neighborhoods of Woodward Ave. and Brush Park.

To see the article, click here .

JJS: If we don’t want blight, we could turn those slums into tax havens. And we shouldn’t speculate in land. At least one prominent voice challenges speculation.

Why do we continue to think that rising home prices are a good thing? In the good old days -- before 2007 -- following the prices for which houses in your neighborhood were selling and then recalculating your own net worth was a national sport. The experts who predicted a price decline delivered that prediction as bad news.

Ordinarily we cheer when the price of an essential product goes down, and complain when it goes up. Take oil, for example. We like it when the price of gasoline goes down and are unhappy when it goes up. But with homeownership, it's the other way around.

The housing market affects three different groups. There are those trying to break in -- generally young people searching for their first home. There are those in the middle, who want to trade up to a bigger house. And there are longtime homeowners, "empty nesters" who want to downsize or get out of the market completely.

How are each of these groups affected by rising house prices? Young couples watched the American dream of homeownership pass out of their reach. As prices come down, more people can afford to buy a house.

Then there are the people who want to trade up to a larger house or a nicer neighborhood. Rising prices hurt you just as they hurt the first-time homebuyer.

The people who clearly benefit from rising home prices are those who are downsizing -- typically, older people who have lived in the same house for years. Most of these people enjoyed the enormous past run-up in prices. In 1970, the median price of a house was $25,000. In 2006, at the top of the bubble, it was about $240,000. Even adjusted for inflation, that means home prices more than doubled during the period.

There is no physical reason why a house should become more valuable. It is not growing like a crop. It is not producing anything that you can turn around and sell, like a factory. It just sits there.

About two-thirds of Americans live in homes that they own (along with the bank). There is no way all of them could cash out and collect how much their house is worth -- even though it's 30% or 40% lower than it was before.

A house is worth only what someone will pay for it. Any investment value greater than zero (or zero plus inflation) depends on the greater-fool theory. It's hard to see why people should want that to resume.

To see the whole article, click here .

JJS: There’s a way to prevent bubbling over again.

Buildings depreciate, just like a car or a computer. Land, given enough years, appreciates, like a work of art. Location value is much as half the total real estate value in a locality.

New America Foundation’s Reihan Salam asked, “What if the problem isn’t the property tax but other taxes? In 1879, Henry George . . . found it perverse that we tax productive activities like work and innovative investment while letting landowners grow rich simply because they scooped up property at the right time.

The value of land is due not to what any landowner does -- often they don’t even live in the area -- but what the community does. Since that value is socially created, it’s the rightful source of public revenue. We should recapture its flow rather than tax people’s work and products which they’ve earned with brain and brawn.

When you tax land, you encourage the most valuable use of that land.

To see the whole letter to the editor, click here .

Because of development leapfrogging the protected zone, sprawl will continue as if there was no Greenbelt at all.

This could have been avoided had the province levied a land value tax, which would encourage infill and walkable communities plus generate government revenue that would reduce other taxes.

To see the whole letter to the editor, click here .

JJS: People have a love/hate relationship with taxing land.

The well-attended meeting was symbolic of changes going on in Middlesex County. Residential landowners (waterfront and off-water) are becoming a more powerful lobby group as they continually shoulder more of the tax burden, while larger landowners receive a sizable tax break through land-use taxation.

It was apparent from the start of Tuesday’s hearing that neither side wanted to totally get rid of land-use taxation. Land-use taxation is a way of keeping the rural character of the county, which is something everyone seems to want. Middlesex County currently assesses timberland at $445 per acre and open and farmland at $558 per acre under its land-use ordinance.

W.D. Edwards of Saluda, who is in the timber business, said, “A tree and a stalk of corn do not cost the county of Middlesex anything in services. They don’t go to school. They don’t need police service. They don’t need waste management. If you want this county to stay rural you better not raise the taxes on land use too much because the cornfields and forest will turn into housing developments, and that will cost Middlesex County a lot more money.”

To see the whole article, click here .

JJS: People’s love for nature could be an opening for basic reform. For instance, if the county paid back at least some of the recovered rent as a dividend to residents, then they could afford their land dues. Plus, in rural areas where land values are lower, the rent dividend would go further.

Also, owners of prime urban sites would pay the most and attract the most development in order to afford their land dues, leaving little demand leftover that currently inflates rural land values.

So this geonomic tax shift could both spare the Virginia countryside and revitalize the Detroit urban core.

---------------------

Editor Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Want stewardship? Share natural values.
http://www.progress.org/2009/carp.htm

Most private fortunes come from public favors
http://www.progress.org/2009/teaparty.htm

Mainstream Media Promote Real Land Rights
http://www.progress.org/2010/coverage.htm

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