Lower land prices so at last the cycle can turn
13% of all U.S. homes are vacant
| The way the Census calculates vacancy rates is to include vacation homes but in states where people don’t take vacations, the rate is still high. This 2011 article from CNN, Mar 28 by Les Christie is followed by letters published in Britain’s Financial Times and videos by Brit Fred Harrison, the researcher who resurrected the 18-year land-price cycle, which drives the rest of the business cycle, that give details of a reform to keep housing affordable for everyone. |
by Les Christie
High residential vacancies are slowing many housing markets, as foreclosed homes sit on the market and lower sale prices and land values.The national vacancy rate crept up to just over 13% according to last week's decennial census report. That's up from 12.1% in 2007.
Maine had the highest proportion of empty housing stock, at 22.8%. Other states with gluts of empty houses included Vermont (20.5%), Florida (17.5%), Arizona (16.3%), and Alaska (15.9%).
The way the census calculates the vacancy rates, however, is problematic. It includes properties such as ski lodges, beach houses and pied-à-terres that many real estate statisticians would not.
These are often summer homes or second homes, but census lumps them together with homes that have been sold but not occupied, empty homes for sale or rent, and homes used by migrant workers. Basically, anything other than a primary residence is considered vacant.
"You can only live in one home," said William Chapin of the Census Bureau's Housing Statistics Branch. "If you own five homes that you occasionally live in, four of them will be counted as vacant."
But Paul Bishop, the vice president for research for the National Association of Realtors, countered that these properties aren't vacant in the usual sense of the term. "A vacation home is hardly the same situation as a foreclosed home that has been taken back by the bank," he said.
In Maine, more than two-thirds of the 160,000 vacancies were vacation homes in 2009; Vermont had a similarly high concentration.
Compare them with Connecticut, which has a vacancy rate of just 7.9%, the lowest of all the states. If you back out the vacation properties from the statistics, the states have very similar vacancy rates: 6.1% for Connecticut and 7% for Maine.
Some states have high vacancy rates even after backing out the second homes: Florida's is about 10%; Arizona's is 10.7%; and Nevada's 11.4% [the states where the bubble was biggest].
Besides Connecticut, the other states with lowest vacancy rates are California, Iowa, Illinois, Virginia and Washington, all at 9.2% or lower.
To see the whole article, click here .
JJS: Economics is plagued with bad data, not to mention unsound policy proposals, disprovable theories, and flawed precepts. To understand how economies work, why they sometimes fail to, and what to do about it, one must turn to the thinkers who follow “rent” or the money that society spends on the nature it uses.
- Property hits the right goal on tax
Chris Nicholson, Director, CentreForum (Mar 31): In pursuing economically efficient taxes, the principle of taxing economic rent still stands. In a world of internationally mobile labor, the attraction of taxing the rent of a factor of production that cannot move -- land -- increases. That is one reason why the Institute for Fiscal Studies Mirrlees Commission report recommended that land value taxation should be firmly on the Chancellor of the Exchequer’s tax reform agenda. It is also why Nick Clegg, UK Deputy Prime Minister, backed by your editorial “Tax Britain’s high value houses” (March 29), is right to suggest that such taxation should be looked at as a source of revenue if a 50p income tax rate is to be dropped.
To see the whole letter, click here .
- Levy on land to alleviate distortions
Dominique Hurle (Mar 31): It is unfair that owner-occupiers avoid paying tax on the imputed rent of the property they live in, and in a time when everyone is being called upon to pay their fair share, this loophole should be closed. The tax arbitrage of home ownership has caused a number of harmful market distortions: raising house prices, encouraging excessive leverage and poor diversification of household capital investment, and reducing the stock of quality rental property. The only unfairness in the proposal is that it applies only to high-value houses, doing nothing to address the distortion caused by the current tax system to the rest of the market.
To see the whole letter, click here .
- Taxing Unearned Rent Is Equitable
Arnold J. Harper (Apr 1): The unearned element of the increase in the value of a property is usually attributable to the location of the site on which the house stands. Bricks and mortar depreciate.
Levies applied to property as if the land and the building are inseparable are crude instruments often producing unfairness.
Returning the unearned economic rent of land to the community, by taxation applied to that value, is equitable.
To see the whole letter, click here .
- Besides the Financial Times, also the London Times
Roger Sandilands (Apr 2): There was an excellent article in yesterday's London Times: "Not a plague on all your houses, just a tax", by Phillip Collins, commenting on Business Secretary Vince Cable's recent case for a "mansion tax". (To see the whole letter, click here ).
What do landowners qua landowners do? Essentially, Ricardian land rents depend on how much a given application of labor and capital can produce on a plot as compared to the same application on the least productive land in use.
If produce on the most desirable land more than covers labor costs, the land commands rent. But land, the free gift of Nature, has zero labor costs. Thus its market-clearing price, determined by variable demand relative to the fixed and immobile supply, is a pure surplus to which the community has an equal ethical claim.
What is true of differential agricultural rents is equally true of urban land where the bulk of all land values resides today. Hence land values can and should be the first, natural source of state revenue prior to any taxation of the produce of our labor. Left in private hands they are an invitation to boom-bust land speculation.
- Fred Harrison’s New Videos
John Burns (Apr 4): Fred spreads the message simply and at times from many angles:
Ghost Town 1 - Ireland: To watch, click here .
Ghost Town 2 - Spain: To watch, click here .
Garden of Life: To watch, click here
Hout Bay: To watch, click here .
The train: To watch, click here .
The Making of The Killing Field: To watch, click here
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Editor Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Home builders' index & Jobs numbers Both down
Mainly because six years of land bubble gone
New-home sales drop to record low in January |
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