Hacker News Reader

Comment by ejstronge | Hacker News Reader

How would a land value tax change this? The developer was paying a property tax the whole time, and this tax explicitly considers the value of the land.

A vacancy tax may have helped but maybe not. A useful disincentive would need to reduce the developers anticipated return on combining the parcels - and it’s not even clear that this would be a good goal

View on HN

The idea is that a land value tax would have a far higher rate on the value of the land. The empty lot, dilapidated building or surface parking lot, right now, pay far lower taxes than a big building sitting next door. With a land value tax that is revenue neutral, those that own underdeveloped land get blasted, as they now pay the same as the as their neighbors, instead if orders of magnitude less.

Yes, but instead of proposing a new phrase, it would seem that one could simply propose an increase on the tax rate on land values?

I am aware of the history of the term - just frustrated that it’s thrown around as a brand new idea.

A problem with this system is how to assign land values if not using the sales value approach used in property tax assessments

I wasn't using the term incorrectly. I was very intentional about what I said.

Property tax doesn't adequately tax the value of the land. That's the whole point. This was a vacant, unbuilt lot in the heart of New York City. For ~thirty years. That shouldn't even be a thing ever.

Currently the building pays about 20M/yr in property tax. Having a vacant lot there for three decades is many millions in property tax that the city never recieved.

I know you were not using the term incorrectly. My problem is with the term, altogether.

As you've said, you wish to have a higher tax on land. That is very reasonable, and a policy position that one could examine within the established context of our property tax regime.

> Property tax doesn't adequately tax the value of the land. That's the whole point. This was a vacant, unbuilt lot in the heart of New York City. For ~thirty years. That shouldn't even be a thing ever.

No tax will prevent this behavior if the final benefit to the owner is high enough.

How would a land value tax on three adjacent parcels stop an investor from waiting 30 years for the chance to combine the parcels and unlock far greater value?

> No tax will prevent this behavior if the final benefit to the owner is high enough.

Well, naturally. But a speculative bet that a un-/under-developed piece of land will become vastly more valuable in 30 years looks less and less appealing the more the owner is taxed on the value of the land itself, vs. the value of the improvements upon it, which for a undeveloped parcel is by definition very low.

I don't know the specifics for NYC, but I do know that there is effectively no jurisdiction within the US that even comes close to a full LVT as imagined by Henry George.

>How would a land value tax on three adjacent parcels stop an investor from waiting 30 years for the chance to combine the parcels and unlock far greater value?

The goal isn't to stop a developer from combining parcels, or whatever their development objective is — LVT changes the calculus on speculative investments, and hopefully benefiting tax payers as well.

If a developer wants to sit on a parcels for 3 decades, they're still able to do so but they'll also need to pay up for keeping high-value land vacant. That money can then be reinvested into the community.

> If a developer wants to sit on a parcels for 3 decades, they're still able to do so but they'll also need to pay up for keeping high-value land vacant. That money can then be reinvested into the community.

How is that different from what happens now?

It sounds like what you are saying is that you don't believe that property taxes are high enough since there exist vacant buildings.

That is a fine thing to believe but there is nothing about the current structure of property taxes that goes against this, in principle, besides the tax rate.

I'm not arguing for specifics in implementation, rather the outcomes: Better use of productive land and infrastructure.

If the current structure isn't providing that, then perhaps LVT is the way to go over our current structure. If it turns out LTV didn't provide the desired outcomes, then let's try something else!

The current status quo of letting developers speculate endlessly while holding back growth or even providing negative economic externalities doesn't seem to be working as well as it could be.

Yes but if you have a vacant property tax or greatly increases cost of holding and makes the risk reward less favorable for long term holding

You and I are in agreement (see my responses earlier in the chain).

All of this has nothing to do with a land value tax; instead, some people believe that cities should not allow vacant properties. This is a fine opinion, but it does not need to invoke a 100 year-old theory on taxation

How else you do punish vacant land? I suppose you could fine people but it’s the same as a tax in all but name

The solution is to put in a massage parlor.

Sure! Whatever is economically valuable enough to the community to overcome the LVT should be totally viable.

Property tax has a low tax value for the land itself and a high value for the improvements on the property. This means a very valuable, but empty, plot of land has a low taxable value in most jurisdictions in the US.

> Property tax has a low tax value for the land itself and a high value for the improvements on the property.

This is not true in cities like NYC or Boston; also likely not true in many parts of LA. This is why people tear down houses to build new houses.

Do you have examples from any of these cities we can look at? I am in Seattle, for example, and the land my property is on is 1/10th of the total taxed value. The real value is inverted.

I don’t have examples but in my coastal city, land values (for homes) are near 20% of the improvement. Edit: I'm seeing 40% land value compared to total assessed value for homes in my neighborhood, incidentally

Look at bcassessment for a great website that shows the property values of British Columbia with land and improvements broken out. It’s updated annually as the assessments are updated

Looking at Vancouver for an example it’s easy to see how often the houses themselves are insignificant when compared to the value of the underlying land.

The vast majority of the neighborhood in question is 4-8 story buildings. A lot of them being walkups.

The tax system allowed a developer to take a 30-year speculative bet that eventually they would build their skyscraper. Their plans almost completely fell through the year before construction started because they were planning an even bigger building than they built but couldn't lock up enough tenants. They settled on a 40-story, 1 million square foot tower that stands there today and dwarfs all of the buildings at its feet.

I hear you, and I can sympathize as someone who has lived in cities that have changed rapidly.

However, I can see a long-term venture fund taking the exact bet you suggested. If the value of the new building that combines parcels is high enough, there is no way a land value tax would address your desire to stop landlords from waiting for opportune development projects.

What you would like is a punitive vacancy tax, perhaps combined with a required sale after a certain amount of vacancy.

My ultimate question is why you might want this. A land value tax is supposed to encourage the highest and best use of a parcel. This developer recognized that the highest and best use of a parcel might actually include the use of adjacent parcels. Shouldn't we encourage this?

The problem is that it’s too difficult to get rid of tenants. The incentive should be to hold the building in a non vacant state until it’s time to combine the lots and build the mega tower. The reason it was vacant is because New York tenants have unreasonable rights.

Reply on news.ycombinator.com