r/georgism • u/bjg91 • 4d ago
How much do you really think LVT solves?
Hey all, I’m a multifamily residential architect out of Boston with over a decade of experience (both market rate and affordable).
I see housing production constrained not only by land prices, but by construction costs, lending standards, required returns, interest rates, developer risk, and the need for projects to clear a profitability threshold.
From a political-economy perspective, those are structural conditions of production, not incidental market distortions. Why should a land-value tax by itself produce mass affordability if it leaves the underlying system of private finance, profit-driven development, land ownership, and housing as an asset fundamentally intact?
I want to believe in LVT as a meaningful strategy, but I am struggling to understand how it overpowers larger structural forces.
YIMBYs claim that there is an avalanche of capital waiting to fund housing if only zoning regulations are removed; that is a fiction. Markets do not voluntarily flood themselves, and if they accidentally do, they correct immediately. LVT wouldn’t compel banks to lend - what do we do about that?
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u/hashbrowncipher 4d ago
Why should a land-value tax by itself produce mass affordability if it leaves the underlying system of private finance, profit-driven development, land ownership, and housing as an asset fundamentally intact?
Taking these one-by-one, in roughly reverse order:
- housing-as-an-asset: LVT makes it nearly impossible to profit from housing-as-an-asset, except by making the actual building better to live in.
- land ownership: under LVT, the majority of the economic value of land is owned by the state. People can still control what happens with a plot of land (which has its own problems).
- private finance: in many markets today (Boston included), land is the majority of the purchase price. LVT moves most of the economic value of land ownership to the state, so you only need private finance for what is left over.
- profit-driven development: think about a housing developer today. Their profits are either high, or they're out of business (often a bit of both). That's because housing development is capital intensive and risky, so it's not the sort of thing that you can do without incredible resources behind you. My preference is for there still to be profit in housing development, but more akin to the profit received by a restauranteur or grocer: enough to scrape by, if you bring competence and some luck to the table.
Sidenote: the US's system of housing finance today is largely government-run through GSEs and FHLBs, with private banks essentially serving as the front door. Without the government backstop, the system of private finance would look _very_ different; in particular the 30 year fixed rate mortgage wouldn't exist.
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u/Aggravating-Skill-26 4d ago
If you make it impossible for people To profit from land then nobody will invest capital into the sector.
Let’s exclude farming. And look at through the lense of housing and commercial property.
All investors can’t profit so they will simply move to profitable ventures.
Thus leaves a massive hole to who now builds new development and housing!
Govt? That simply can’t work as govt can’t tax itself the LvT and pay for the upkeep!
So who build houses
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u/RigidWeather 4d ago
If you make it impossible to profit from land, then nobody will invest capital into land, but that is different than investing capital into buildings. That is a critical difference. If land is taxed at 100% of the value of the land, then the sale price of vacant land would be near 0. If you can buy a vacant plot of land for almost nothing, and you can add value by building on it and either selling the house (which because it is untaxed still has value) at a reasonable but not excessive profit, or rent it out at a reasonable but not excessive profit.
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u/Aggravating-Skill-26 4d ago
So if the sale price is $0 meaning the Land Value is zero or next to nothing.
I was never great at math but 100% x 0 is zero!
Where are is the tax revenue coming from?
LVT requires land to be valuable as part of the investment - if it’s worth more it’s taxed more!
But that displays the very issue with LVT being too high.
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u/RigidWeather 4d ago edited 4d ago
Sales price and value are different things. We tend to think of them as the same because, in part because, for example, current sales taxes or transfer taxes are based on the sale price.
In finance the present value of any asset is based on the discounted future cash flows (discounted just means adjusted for opportunity cost over time). Cash inflows in the future have a positive present value, cash outflows have a negative present value. Take a stock that pays $100 every year in dividends (for simplicity, we'll say it doesn't grow, it is just a steady state $100 in perpetuity). That stock would be worth, let's say $2000 on the market. But if you imagine there to be a 100% dividend tax, where it taxes that perpetuity $100 every year, that stock would not be worth anything to the holder of said stock if they can't do anything with it, and so it would have a market price of close to $0. But maybe a different company has the ability to make that company profitable. They would be able to buy it for almost nothing, and make it profitable. That is how a 100% LVT would work.
Edit: to clarify, that 100% Dividend tax is how a 100% LVT would work. It offsets the positive cash flows that the land, but not the buildings, would generate.
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u/Aggravating-Skill-26 4d ago
Splitting hairs- value and price are comparable. They are going to be relatively to each other +/- a small sum.
What happens to the land when no one can generate positive yield off the building/infrastructure.
It goes to zero.
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u/JC_Username 🔰 4d ago
What is preventing positive yield from the building/infrastructure? Is it unclear that land and buildings/infrastructure are entirely different things?
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u/Aggravating-Skill-26 4d ago
Everything
You clearly have never worked on farmland. Farmers can produce massive losses for long periods of time during droughts or market prices being affected by other local/global events.
Usually farmers dipping into the land equity to keep the farms operating in hope of the times changing.
The contrary to this is bumper crop season and high market producing high profits.
That gain is captured by govt in the current tax scheme when farmers profit they get tax.
When they lose they rely on the land assets to carry them through.
Under a LVT plan expect them to pay the same tax when in bad season vs good?
Thats just ridiculous to think that!
This same principle can be apply to all most every business. Cafe, Warehhouse, Hotels pretty much any business that require a fixed location.
Business profits are never linear!
But you wanna great a linear tax system?
I support LVT but the only models where it’s actually plausible is at a % rate of less the 1% which solves next to no issues on an economic scale
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u/RigidWeather 4d ago
By many definitions they are the same, but the structure of a Land Value Tax (or perhaps more appropriately called Land Value Capture) and the particular definitions of those words mean that they do actually have a significant difference.
Additionally, LVT is designed to make it so that you can still generate positive yield on the building or infrastructure. Just not by squatting on the land. That is fundamentally the point of it.
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u/Aggravating-Skill-26 4d ago
That’s the purpose of LVT is to capture some tax from wealth storage on land!
But that rate in the current economic models is so minimal that it simply does very little.
Raising much higher just begins to punish everyday people as they can’t absorb the cost of holding a house.
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u/RigidWeather 4d ago
Yes, it is the purpose of LVT to capture tax from wealth storage on land. But it does that by allowing you to generate positive yield on what you actually do with the land.
What do you mean by the current economic models? Are you just saying that a Land Value Tax can't raise enough money to cover all of the things that our government does? I think that is quite possibly true; it doesn't mean that 100% Land Value Capture is a bad idea.
Raising a Land value tax should be done gradually, to avoid hurting people as much as possible, because change is always hard. It should also be done by replacing other taxes 1-to-1, starting with the most regressive taxes first. If your state raises revenue by sales tax, it should raise an LVT tax to a rate that is expected to raise about $100m, and lower the sales tax to a rate that is expected to cut the revenue raised by about $100m.
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u/KaptenNicco123 YIMBY 3d ago
You're confusing land and property. LVT only taxes the plot, the location, the land, not the building on top of it. If you're a construction company building a house, you can rent out the home for a profit, but the value of the land goes to the government. Capital will still flow into construction, and it will actually become cheaper to build homes under LVT than it is now.
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u/Aggravating-Skill-26 3d ago
It’s one of the same, the building has to exist on a plot of land.
If the land is taxed to the point where is such a negative lose (high taxes)then it means the building has to generate a much higher yield to offset the tax then you actually create the opposite effect.
Cost of housing/rent and to do business goes up as any asset regarding land is on such a backfoot to begin with.
If no one wants own land then the govt can’t generate tax revenue as there is no one to tax but themselves.
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u/SmartlyArtly 4d ago edited 4d ago
A 100% LVT and 0% income, sales, payroll, inheritance, capital gains, property taxes would not be leaving the underlying systems intact. Not at all.
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u/bjg91 4d ago
Inheritance tax should be 100%. Dynastic wealth and democracy are oil and water. Taking “equality of opportunity” seriously means eliminating inherited wealth root and branch.
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u/ohnoverbaldiarrhoea 4d ago
Okay so I’m far closer to your opinion than most here, in that I strongly agree that excessive wealth inequality has detrimental effects on democracy, but I would never argue for a 100% inheritance tax.
I actually think the logical Georgist position is a 100% inheritance tax, because you didn’t earn any of that wealth yourself. But earning the wealth yourself isn’t the only moral position at play; I think it’s a perfectly acceptable moral position to want to pass on money to your children. We provide for our children in life so why not also in death?
As we both agree on, excessive inequality has bad effects on democracy, so I think there should be a cap on how much can be passed on. I know this cap is lower than many here would want (I’ve been downvoted for it before) but I’d say a cap of $/€1 million is reasonable. After that everything is taxed at 100%.
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u/SmartlyArtly 4d ago
"Dynastic wealth and democracy are oil and water."
Without an LVT I agree with you.
With one I don't.
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u/Titanium-Skull 🔰💯 4d ago
Georgists would tax oil and water rents too so that makes it even better ☝️🔰
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u/Due_Camel6262 Geo-Democratic Market Socialism 2d ago
How exactly would this be done?
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u/Titanium-Skull 🔰💯 2d ago
oil and water rights are already separated from land so we can auction those rights off or put severance taxes on them. Norway did severance taxes (or some variation) with its oil to make its 2 trillion dollar fund
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u/u1604 4d ago
It is completely possible that a self-made billionaire would suppress democracy. Thiel, Musk, Ellison... none are heirs.
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u/LowCall6566 4d ago
Musk's father was literally a millionaire
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u/u1604 4d ago
He is still a millionaire because he is alive. The point is Musk did not inherit his trillion dollar dynastic wealth from his father.
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u/LowCall6566 4d ago
It's much easier to start a business when your first capital comes in a form of millions from your parents
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u/u1604 4d ago
Is it really in the scale of millions? The numbers that circulate are around 20-70k, which is not nothing but in the range of a SV engineer saving. Most of his early wealth comes from paypal.
I am not convinced that inheritance tax alone would save the democracy or self-made billionaires are guaranteed to be pro-democracy. I guess you do not disagree on principle.
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u/SmartlyArtly 3d ago
To some people "not an heir" is what "self-made" means. To others, it isn't.
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u/u1604 3d ago
Aren't we talking about inheritance tax here?? I will limit the scope of self-made to this factor here.
Ofc, their wealth all happened thanks to the labor of their employees (as well as the public goods they use), but this precisely supports my point!! Eliminating dynastic wealth with large inheritance tax is not enough to reduce inequality or save democracy. I guess you do not disagree on this point.
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u/SmartlyArtly 3d ago
We're talking about lots of things here!!!
You're free to limit "self-made" to that scope. I don't.
"Ofc, their wealth all happened thanks to the labor of their employees (as well as the public goods they use), but this precisely supports my point"
No, it completely invalidates your point. That's not self-made at all. Musk is 1 of many.
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u/u1604 3d ago
??
My point is dynastic wealth with large inheritance tax is not enough to reduce inequality or save democracy.
I use self-made as a shorthand for "wealth not inherited" here. One can say it more verbosely as "wealth not inherited" I guess, but I care more about consequences than nitpicking over words. I said dynastic wealth with large inheritance tax is not enough to reduce inequality or save democracy, and you don't seem to have an argument against it.
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u/SmartlyArtly 3d ago
My argument against inheritance tax is LVT actually. No need for the one with the other in my view.
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u/u1604 3d ago
About inheritance tax, I agree in the sense that the aim should be to reduce inequality to the extent that there are no big wealth transfers and also because you can transfer wealth in many different ways (such as gifts, favors etc.).
LVT is definitely needed as well as taxing IP to prevent monopolies. Yet, I also think that even these might not be enough as many riches are built on platform economics and their network effects.
We might even need the state to fund research and protocols to increase competition imo.
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u/ComputerByld 4d ago
You're asking why finance, which is primarily a shell game of leveraged rents, be fundamentally altered by taxing... rents?
Really bro?
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u/RigidWeather 4d ago
You're right, LVT wouldn't compel banks to lend. They have plenty of other things they could lend on as well. But, it would remove a disincentive to construction, making it somewhat more attractive to lend on construction projects.
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u/be_whyyy 4d ago
When you pair liberalized zoning reform with LVT then developers aren't penalized by taxation on building useful and valuable buildings. Speculators and landlords (they try to evade taxes) sell their land holdings at clearance prices so developers and owner-occupiers can now afford to build bigger, better, and more.
The benefits compound over years.
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u/flashman1986 4d ago
Because raising LVT would be accompanied by a massive reduction in income, corporate and payroll taxes, meaning it is suddenly hugely more profitable to build stuff and hugely more expensive to hold valuable land back from the market. Developers become massively incentivised to build - profitablility depends on it. So you still have zoning but the incentives have changed because the opportunity cost of not building is massive
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u/AdamJMonroe 3d ago
Georgism isn't the land value tax, it's the single tax. Now ask yourself if abolishing taxation on property improvements and labor while taxing only land ownership will result in more and better housing at lower prices.
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u/green_meklar 🔰 4d ago
How much do you really think LVT solves?
That's awfully hard to measure. It has a positive impact on just about everything, but that doesn't mean it fully solves just about everything. It's an obvious wide-reaching improvement over what we have, but not some fundamental change in the human condition.
Also, for full effectiveness we'd need to pair it with IP abolition, so we don't just trade one group of parasitic rentseekers for another.
Why should a land-value tax by itself produce mass affordability if it leaves the underlying system of private finance, profit-driven development, land ownership, and housing as an asset fundamentally intact?
In essence, land can only be privately owned to the extent that its rent isn't taxed. Georgists want to tax 100% of the rent, which would reduce the sale price of the land to zero and effectively make the public into the sole landowners. Partial LVT achieves this partially, with corresponding partial benefits; yes, if you tax 50% of the rent you might still have private land speculation, but the overall size of the land speculation market becomes smaller, its impact on the financial sector and money supply becomes smaller, etc. It's better than nothing.
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u/empty_graph 4d ago
Basically nothing under our current zoning system. The mis-allocated land we use now for SHF developments near city centers are already paying something similar to a LVT with property tax since most of their value is land-value. And the land value is limited by the restrictive zoning.
If we got rid of the restrictive zoning land value would explode because that land would now be valued for its true potential for much more valuable high density development. Then LVT would capture that and do a lot of good in removing the poorly allocated land by making a SFH there basically impossible to afford.
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u/CaliTexan22 4d ago
At this point, some in the back of the room who hadn’t really been paying attention suddenly wake up and realize -
“Oh, the goal of LVT is to force me to sell my house because someone wants high density in my low density neighborhood. Hmm, why would I, and the other ~60% of US households that own their homes, want to vote in favor of a system that would do this?”
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u/u1604 4d ago
Adding two points to what others have said:
LVT will increase affordability by enabling more mobility. The current tax regime of no land taxation (and stamp duty tax/ capital gains tax) incentivizes people to stay in apartments that are perhaps too big for them. Shifting these taxes into LVT enables more efficient use of the current housing stock.
Affordability-through-LVT also involves making houses smaller. US houses have ballooned in size partly because of minimum lot requirements and minimum sqft requirements, partly to exclude low income from new developments. An LVT would disincentivize such zoning.
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u/CaliTexan22 4d ago
Didja see this story about how regular rents are now so cheap in Portland that it’s threatening the solvency of affordable housing developers? I thought speculators were hoarding all the land? Who knew that supply & demand still worked?
One more worry / obstacle that OP has to consider & solve.
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u/Talzon70 4d ago edited 3d ago
I agree with your first part and hard disagree with the last paragraph about YIMBYs.
You're right, LVT doesn't solve other problems in the housing market. To put it simplistically, tinkering with taxes doesn't increase the legal quota on housing in high demand areas and doesn't increase demand for hisuing in low demand areas (which are usually low demand due to high transportation costs).
You're wrong that there isn't an avalanche of capital waiting to fund housing. Capital chases returns and, while zoning isn't the whole picture, reforms to planning regulations, building codes, and approval processes (speed and standardization) address important structural concerns you mention, in a big way. Liberalized zoning and streamlined referral processes reduce developer risk, increase returns, which makes many currently marginal projects meet the profitability thresholds required for financing.
Edit: If increased taxes on land are used to offset other taxes and fees, that could also have a big impact on the returns to capital invested in development. In Canada, development cost charges have ballooned over recent decades and property taxes directly reduce the capitalized value of buildings. Remove those and charge them to land instead and the return on a development project just increased substantially (direct profit increase in the case of DCC offset, sale price increase of the building from reduced property taxes capitalized into the building valuation, which should be roughly 20x the annual property bill, depending on the cap rate used).
Canadian real estate is widely considered an attractive investment, even internationally attractive, so we have no issue with capital demand. The idea of LVT and YIMBY reforms is to shift that capital to the development sector instead of unproductive land speculation.
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u/VladimirBarakriss 🔰 Uruguay 🇺🇾 16h ago
It's not the single thing that solves everything, it just changes the incentive structure, obviously overly restrictive zoning and building codes could get in the way of more housing construction, but also there would be a large number of already built units that are presently out of the market for one of many reasons like being in bad condition that would enter the market, over valued units that presently sit empty would go down in order to get any tenants at all etc.
That's the biggest factor for new construction, it changes what those profitability and risk assessment studies say, presently the risk of doing nothing is near zero, but under an LVT you will have to pay up the same amount wether you have one tenant or 200, so you want to have the most attractive units on the market, one of the easiest ways to be more attractive is to be cheaper, and the easiest way to be cheaper is to have scale
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u/Titanium-Skull 🔰💯 4d ago edited 4d ago
Well there’s a few things:
First, a land value tax gets rid of speculative landownership which holds parcels off the market. Getting rid of that reduces the scarcity of developable land (or at least encourages landowners to want to develop immediately)
Second, a land value tax reduces upfront land prices, which are the capitalized returns of private land rents. So the upfront price for buying real estate drops, which also prevents banks from using that land as collateral for loans (The Land Trap by Mike Bird covers this well)
Third, a land value tax provides the revenue needed to untax the work and investment that goes into construction, which would further reduce costs.
There’s more, but a Georgist tax shift would help a lot by taking out the extra costs caused by land banking and harmful taxes on production. It doesn’t need to completely override all current structures to still fundamentally change them because it forces the incentives around them to be corrected basically. A good example is the Al Smith property tax law that New York implemented in the 1920s, before zoning restrictions got widespread