Demos: Reclaim New York City Land Rent
|August 23, 2014||Posted by Staff under Good Press|
This 2014 excerpt of Demos, Aug 20, is by Matt Bruenig.
One of the main reasons rich people buy up apartments in NYC (that they do not then live in) is for speculative investment reasons. They are hoping to increase their wealth by flipping the apartment in the future after the price of it has climbed up and up. If you can attack these speculative returns, you can blow up this entire game.
The easiest and most comprehensive way to attack these speculative returns is not a tax on unoccupied apartments. It is a complete tax on speculative housing returns, which is what taxing land rents would entail.
The price of an apartment roughly consists of two things: the value of the physical structure and the value of the location. Since the value of the physical structure does not generally increase over time (unless it is changed in some way), it is only an increase in the value of the location that causes apartment values in NYC to increase. Speculators are not banking on on the value of the aging physical structure of the apartment going up. They are banking on the value of the location going up.
You can tax the annual rental value of the land at very high rates (ideally 100%). This would operate just like a property tax, except it would be assessed only on the land value.
Under such a land value tax regime, any increase in the rental value of the land is entirely captured by an identical increase in the land tax assessed to the owner. This means that when owners go to sell their apartments to a new buyer, that buyer will not be willing to pay the owner more money for it.
Ed. Notes: The reason locations in NYC cost so much is because so many people live there and want to live there. It is the presence of community that creates the value of location. That is why — along with the fact nobody created land — it is fair for the community to recover this value that it creates.
And conversely, it is unfair to tax buildings, businesses, and earnings, things that individuals do create.
If you got rid of all the unfair and counterproductive taxes and replaced them with land dues and the like, plus if you got rid of spending programs which benefit insiders more than the public and replaced them with a Citizen’s Dividend, you’d have geonomics in practice and all the benefits that go with it.