Hacker News Reader

Comment by disillusioned | Hacker News Reader

The rallying cry of Georgists is "land value tax would solve this," and at least in Detroit, they're looking to try it.

The concept is a very interesting one, but I think that the overarching shift towards institutional mega-REIT ownership of a significant portion of housing inventory, coupled with the obvious pervasive NIMBYism against density, continues to exacerbate the ability for basically anyone truly middle-class or below, to ever actually be able to buy a home.

NYT has a great piece on the Georgist approach being considered in Detroit: https://www.nytimes.com/2023/11/12/business/georgism-land-ta...

Here's The Economist's short summary as well: https://www.economist.com/united-states/2023/10/05/detroit-w...

They also had a piece about how in Switzerland, essentially no one new is able to purchase a home, so it's become a nation of renters: https://www.nytimes.com/2023/11/06/realestate/zurich-switzer...

View on HN

I really reccomend this primer on the idea.

https://www.astralcodexten.com/p/your-book-review-progress-a...

Georgism is simply one of those ideas that has changed how I look at the city around me. After reading that primer, I recommend looking around your city with fresh eyes, noticing how many vacant shops, mostly empty parking lots, and underutilized spaces blight otherwise productive (and expensive) urban cores.

http://www.vacantnewyork.com/

From https://archive.ph/eLjbX about the proposed Detroit land tax:

  land will be taxed at a new rate of 11.8%, whether or not it has anything built on it.

Homeowners are guaranteed that they won't pay more tax. They can make the change fairly cost neutral for honeowners because currently land value is usually low compared to value of the house.

Increasing tax to 12% will drastically devalue existing vacant land. Land owners are currently paying say 7% mortgage (or equivalent opportunity cost by tying up equity).

Adding a 12% land tax would massively devalue land. The city is basically saying use it or lose it. To make it worthwhile to use it, any extra investment needs to return enough income to cover the new land tax (the tax is still there even if developed since the land value remains the same). I imagine owners would sue the city. Having your land value crashed by heavy taxation seems a bit harsh (not that most of us would be weeping for the investors).

The land value tax appears to only affect some of Detroit:

Before: https://detroitmi.gov/sites/detroitmi.localhost/files/2023-0...

After: https://detroitmi.gov/sites/detroitmi.localhost/files/2023-0...

I can't think of a way to model the drop in property market value due to the taxation. Can anyone think of a good approximation for how precipitously the market value would drop?

PS: I live near an area totally blighted by investors over many decades. I agree with the purpose behind land value tax - even though a land tax appears to completely screw over current investors. Investors have been screwing us locals for a long time, so maybe it is just.

A %12 tax is relatively mild, but you're right that a transition to a tax system that taxes land more and taxes everything else less will screw over existing investors of underutilized land.

Another pain point is that homeowners who have been sitting on lots that are highly desirable and infilled will be taxed considerably more. This is in the long run a major benefit of the LTV: that underutilized land is put to productive use. That doesn't mean the political optics won't be difficult to square.

> will screw over existing investors of underutilized land.

That's a feature, not a bug.

Yeah, I absolutely agree. It's just that it makes georgism politically difficult, as benefits are diffused across a wider population and the negatives are intensely focused on a smaller population.

> A %12 tax is relatively mild

Strong disagree.

12% is halving value in 5 years. A tax that steals half of the asset over 5 years is not "mild". The tax makes a mockery of any reasonable multiyear plans. It's okay to say screw retirement savings, but be honest exactly what is being said.

Investing often talks about percentage points because small differences in returns matter. 12% is two orders of magnitude bigger - it's significant. 1% really matters - which you would know if you were involved with finance or had a variable rate mortgage.

Note the word relative. The land value tax has been championed by economists across the political sprectrum as a single tax to displace other taxes with. The entire movement of georgism advocates for a land value tax approaching %100.

"at least in Detroit, they're looking to try it."

Is Detroit a place with a really tight housing market? It wasn't that long ago that neighbors were offering potential purchasers of near by houses dinner every week for a year to encourage them to go ahead and buy it because they didn't want more empty houses on their block.

Lovely. "A place that doesn't have the problems Georgism is designed to solve is planning to test Georgism." That's going to make it close to a meaningless experiment.

[Edit: Including politically meaningless. No matter what happens, one side or the other will use "wrong circumstances" as an escape hatch to deny the general applicability of the results.]

First two paragraphs of TFA:

> When Mayor Mike Duggan talks about his accomplishments in Detroit, the list is both impressive and sad. He had the streetlights turned back on, and reopened closed parks. In the decade since he took office, the city has demolished some 25,000 blighted homes whose rusty debris and incubation of crime drag down neighborhoods.

> The progress would be even greater, the mayor argues, if the city hadn’t been smothered by speculation. In the years after the Great Recession, tens of thousands of Detroit properties were bought by absentee landlords and faceless LLCs. The owners are so negligent and hard to find that the city mows their lawns without asking.

Reply on news.ycombinator.com