Experimental real property tax basis-set rate based on usable area per person
Random thought. What if we taxed property based on the area per person of the property, as opposed to sale value?
Edit and quick intro to those who mostly rent: most real property in the US, especially residential property, is taxed yearly based on some variation of something called "fair market value," usually assessed by a local tax assessor's office
I'm proposing that a property would be taxed for every square meter of space per person in the designated property unit. It can't be totally simplified, but should be fairly straightforward. There could also be progressive brackets. It might not make make sense to apply it strictly per person, but rather for a typical use. That is, we would assume "single family residential" properties to house 3.4 (totally made up number) people per house and property.
The goal of this is to find a fair, market-driven incentive to build density into urban cores.
A similar approach could be applied to commercial space (but probably not industrial).
It could be coupled with a sales tax (currently missing in most real property tax regimes, at least in the US) to capture runaway property valuations in certain jurisdictions.
Alternatively, we could drop the property value based tax rate (but not eliminate it), and then add a per person-area surcharge.
It's not meant to increase revenue, although it could certainly be used that way. It could also be use to decrease revenue, and maybe that would be a good way to sell it. But at the end of the day, developers and residents would both have an incentive to pursue as dense development as possible, even if there is not a density driving pressure of desirablity, which only exists in a few really cool urban cores.
As others have touched on, what you've suggested can more or less be accomplished with a straight land tax (property tax is 100% based on the value of the land itself) with a reasonably high rate, paired with a discount for primary-residence owners. This is a Georgist tax proposal...IIRC the proposals there often suggest using it as the only tax, with a high enough rate.
The end result is that single-family homes remain affordable for people who live there, but landlords would be heavily incentivized to build density.
I guess I'm having a hard time understanding what the difference is between a straight land tax and the current tax regime in most of the US? Most jurisdictions I'm aware of tax a percentage of the value of the land described by the deed. The nature of the structure and attachments to the land change its value.
The best goal as I understand it, though, is to have as many people as reasonable living on the same parcel of earth. Discounting primary residence owners works against that goal.
This is what's different. A 2-family rental on 1/10th an acre will pay same taxes as a 5-family apartment building on 1/10th an acre with a land tax. Since the building itself is excluded from the tax equation, there's no penalty for a more-expensive building on the same land, which translates to incentives for denser housing.
Most property taxes in the USA are a function of land + improvement. Land taxes are only the land.
The ideal balance in rate is a high enough tax rate that landlording single family homes is unprofitable while still affordable for primary residents, especially as a transition period.
Hmm. That's an interesting proposal.
My only thought at this time is that how do we recapture the externalities associated with the land use?
Edit. Still thinking about this. I see how it would remove the penalties for building denser housing on the same land, but I don't see how it would necessarily incentivize them.
Taxes out my way are about $1,000 a month, rent about $2600 for a 3BR/1BA condo.
You own a single-family home, thats $1600 in revenue. Convert it into a duplex, drop rent by $300 because lower quality, you've got $2,600 in revenue, and your rent is only $2,300 instead of the next door neighbor who is charging $2,600.
It gives competitive advantage to landlords building denser housing, and creates a viscous cycle of more affordable housing because if you don't build more density as a landlord, you'll be outpriced by one who does.
LVT isn't just a flat tax for all land, though, it's a tax on the value of the land you're working with. Your land becomes more valuable if it is close to amenities or other services.
So while you don't pay more tax if you improve your own property on its own, you do pay more tax if your whole neighborhood improves. This again helps encourage landlords to improve their properties: if everyone around you has improved their living conditions, then your tax is going to go up. If you want to make the same amount of profit as before, you'll need to make similar improvements.
Are you talking about Georgism?
Coming from r/neoliberal, I was about to say "Just tax land lol." A common refrain over there, sometimes said tongue-in-cheek, but also sometimes seriously.
I was unaware of the concept, but my proposal is more about how best to allocate real property taxes, not about whether we should tax real property, or whether we should tax other property or activity.
I'm not following. A charge like $x per assumed person?
If yes, then a single family residence could be anything from a 2 bed one bath starter home around 1200 sqft, to an 8,000 sqft manor set back on 20 acres. Trying to infer the number of people on dwelling type seems like it would most likely favor high income earners. E.g. the average number of people per single family dwelling is 3.4, but if you pick a "fair" rate for that number it will be peanuts to high income families. If you base it on number of bedrooms then you incentivize fewer bedrooms per house.
Ultimately this seems like an inexact proxy variable for lot square footage, finished square footage, and house finish. If your goal is to incentivize higher density housing, which is less profitable to develop, then you need to offer tax incentives or low rate capital to developers in exchange for incorporating these units in new neighborhoods and rebuilds.
As a final note, most governments struggle to keep up on simple processes like market value. Adding a complex system makes it more prone to waste, error, fraud, and bias.
One potential issue with taxing per bedroom is that a lot of independent contractors and now salaried remote workers use a spare bedroom in their dwelling as an office, and I’m not sure it’d make since to tax them extra for not renting it out to somebody instead, especially if considering the benefit brought by someone doing this (reduced traffic, potentially reduced demand for local office space incentivizing conversion of office complexes into residences).
There are fixes for this, though, like tax credits to make small allowances.
So, under this regime both the starter home and the manor would be assumed to have the same residency. As such, the manor would be taxed much more the starter home. The inequity could be reduce by using a progressive tax rate, the way income tax (is supposed to) works. So, we pick some numbers, say 1000 sq ft on .1 acre is a 4% rate, up to 2000 sq ft on .2 acre is 4.5%, and so on. There's probably a programmatic way to do this that doesn't require brackets (but does require math).
Not finish, but it might be more equitable to throw that in there. I'll push back on the "inexact" part but yes, it's a way to tax more for bigger houses and bigger lots for the same number of people.
Corruption and chaos are separate problems. There are so many loopholes, expemptions, appeals, valuations exercises in the current system already. So long as we replace some of what's existing, I wouldn't think it was adding any additional 'attack surface' for exploitation. Worth thinking hard about, though, when implementing an experiments.
Can you give a closed form mathematical expression of what you envision, glossing over the exact coefficients? Because the articulation you give is hard to follow.
If I do follow you are saying tax based on the number of people supported per square foot? Or some such?
The general problem is that most calculations based on bedrooms, square footage, lot size, etc. can either be gamed or have unintended consequences.
For example, I don't follow how or why a large manor with many bedrooms would be assumed to have the same number of people as a starter home, unless we just make that arbitrary. But fixing assumptions limits the flexibility. What about a large multigenerational house in a more rural part of an otherwise urban country?
You also mention varying the tax rate based on the proportion of the lot that is covered in finished square feet, sort of. But I could game that by building an additional floor, gaining square feet on the same lot, but still only having the same number of people living there.
Generally I look at public policy like I look at software development. Simple is better. The more complex, the more prone to unintended consequence. If the goal is to tax higher value properties more, why not introduce progressive rates based on fair market value. A% tax on the value up to $249k, B% on $250-499k, etc? (Edit: or discount multi family structures, etc)
That would avoid some of the gaming of the system. I think that by the time you addressed all the edge cases in your proposed scheme, new unintended consequences would creep in.
I would also say that the dirty secret of counties and municipalities is that they are disincentived to support affordable housing, because it costs them in tax incentives and reduces subsequent revenue. But the fixes are relatively well known. Developers will build affordable housing when they receive low cost capital to do so. This has worked well even in high cost of living areas like the DC metro area.
Edit: here's a gift NYT article describing the sort of developer partnerships I'm describing. This Is Public Housing. Just Don’t Call It That..
Complex formulas don't seem like a better approach then simple laws and subsidies that directly require a certain amount of affordable rentals and other units.
I think this is what it looks like
(area of lot x area of structure)/(number of residents x number of residential units)
(1 acre lot x 1000 sqft)/family of four = tax of 250.
(10 acre lot x 10,000 sqft)/family of four = tax of 25,000.
(1 acre lot x 10,000 sqft)/(10 units x 40) = 25
Overlooking the powerless is a political problem, present in every regime. This regime by itself does nothing to promote diversity or affordability, it addresses only density. Perhaps density will lead to easier solutions for other social problems, we can hope, but I don't think it exacerbates them.
The attraction of simplicity in any system is overwhelming from high policy altitude. Unfortunately, human systems are complex and chaotic. A good system balances promulgation of principle, addressing the details, and equitable flexibility. Human systems rely on the humans to provide honesty, fairness, and goodwill, while recognizing humans unreliability and fickle natures.
Unfortunately, I don't have much time, so this is a quick post. I have worked in higher ed and now in an odd intersection of education and public policy (health policy), so I am fairly familiar with policy considerations. While it is true that people can be chaotic, that doesn't mean policy should be so complex as to create unintended consequences. However, that's the philosophy, so let's get to the numbers.
I ran your suggested scheme against actual MD property parcel and tax datasets. The result is that your proposed scheme is a regressive tax against affordable housing compared to actual taxes collected. Figure:
Actual vs. proposed taxes by home value bracket.
I don't have much time to slice and dice the data or give a full rundown, but ignore the absolute dollar figures and focus on the graph's shape. Your proposed scheme shifts more of the taxes collected to lower-value properties. The difference in absolute terms is due to using state-level vs. county-level data. That means funding the counties at current service levels would increase the tax burden on lower-income households (based on a quick check of Fed data in the FRED system).
I also calculated the correlation between the current assessed value and the taxes collected under your scheme, with a result of 0.006918505. This effectively means there is little to no correlation between taxes collected and the property's value. The issue is that it creates the opportunity for unintended consequences, like a regressive scheme.
I think there are ways to "correct" this, but it basically adds in progressive schemes based on fair market value or other factors.
Another, possibly larger issue in practical terms is that things like bedroom count aren't reliably tracked by state or federal sources. The Fed issues reports with that data but bases it on MLS data, which isn't always reliable. It would require creating a new process to keep that data accurate, let alone also keep track of the people in the units.
So, I'm left with my initial assessment: complex formulas, or even not-so-complex formulas, lead to unintended consequences. But I encourage you to slice and dice the data yourself.
Edit: I also fired up MATLAB and did a quick dissection of the qualitative behavior of your proposed formula, fixing different values and optimizing the taxes collected, and there are definitely ways to game it as a developer looking to maximize profit. This is where the former math teacher in me says, "reproduction of the result is left as an exercise for the reader."
Have a great night!
Without more about how you generated your graphs, I can't really comment, nevertheless, my equation was meant to be schematic, not definitive. Nevertheless, this tax is not meant to address equity issues, only to promote density. Inequities can (and should) be resolved through other means. If your above graphs indicate that the proposal promotes high-value, high-density, low taxed developments, then it is working as intended.
Every scheme is subject manipulation, corruption, and chaos. This scheme is not meant to address that phenomenon.
Edit: The proposal is meant to be largely value/price agnostic.
Well, I would suggest you download the data and examine it yourself. That said, the plots are pretty simple. I took all the parcel data, and filtered to residential parcels. Then I used the structure square feet, acreage, etc, to compute a "tax unit" for your scheme. I then summed the actual taxes collected and the proposed taxes collected on units in assessed value ranges. That is what the plots show. The correlation value I gave is simply the correlation between asseessed value and your taxes collected. I used 2023 tax data, state parcel mds records, and filtered and joined from there.
I think if you play with the data yourself you will see a few things:
The data that the government actually accurately has is limited and cumbersome to work with, which matters a lot when you base their tax bill on it. Creating new data is actually a lot of work and expensive at a large scale.
Tweaking and adjusting a formula to fit certain outcomes usually just leads to more edge cases, and that is true of general numerical analysis. The more you constrain or torture a quadrature to have certain traits, the more you trade-off somewhere else.
There are a lot of edge cases that are smoothed away by using market value. If your plot of land includes a drainage or cliff feature that can't be developed, the price bakes that in, along with many other things like desirable location, etc. acreage and square footage misses that. Encoding those things specifically in any formula would be tough and the list of exceptions long. Further, the taxes between an identical structure and plot should differ based on if it is in the middle of town that thousands of people want to live in, vs out on a swamp with 5 people. Desirability is also baked into market value, and that is where density is important.
And to my initial suggestion: if the goal is to maximize density or promote affordable housing, etc, then we already have simple and direct policy interventions we know work. What counties lack is the political will to implement them.
Finally, while it is true that any flat tax is regressive, that's a bit beside the point when the contrasted scheme isn't actually flat, but rather disproportionately taxes lower cost housing.
I really, really think if you play with the available data you will see the difficulty in tuning a function that is fair and workable.
I'm not persuaded that your graphs are relevant to the regime. My "equation" was meant to be schematic, not operative, perhaps I misunderstood your request.
But if I take your x-axis on the proposed plot as a soft proxy for density, and assume the best about calculations and data, the graph supports the aims for the proposal, that is, as density increases, taxes approach the lower limit. The curves to the left of the peak are weird, but without knowing what numbers exactly you plugged in, it's hard to comment. How did you plug in population density? I would think you would need at least 18000sqft (approx 1/4 city block) resolution and actual numbers to make any meaningful visualization.
Importantly, your graphs are only showing the landscape as it exists, not as it might be after some period of time with incentives in place.
Also importantly, property value and absolute tax values are not really relevant to determining whether this regime might properly incentivize density increases. A better set of axes in my opinion would density on the independent axis, and rate per person on the dependent. Also informative would be pop density to share of tax burden.
As an aside, if we think property value is somehow important, we can roll that into capital tax levies.
I think you misunderstand the plots, but also, they aren't really the big picture of my comment.
The x axis of the plots is "buckets" of homes by assessed value, and the y axis is the amount of taxes collected. The point I made with the plot is that you need to be careful with policy to exactingly look at negative outcomes. In this case, it looks like the tax burden is shifting onto lower value properties, which strongly correlate to lower income household. I.e., regressively increasing taxes on the poor.
The larger point I was making is that even if you swap variables, change the formula, etc, you will keep finding these unfavorable outcomes, or introduce ways to game the system. This is in part due to the fundamental maths of fitting curves to data, but also the nature of proxy variables.
I linked the data I used and described the methods, and if you are interested in the policy side of things I think it would be fun to play with.
Back to the big picture, in general I think a simpler and more direct policy is better than something based on people per area. For one, keeping up on who lives where is a challenge, and as I discussed, proxy variables create l bring their own baggage.
It is possible for a county to establish zoning and development requirements that simply require x units per acre for development in specific zones. Then you can't even bypass the intent even if you are rich and don't care about the tax burden. Or require a permitting process that has a review with requirements to address elements of the municipalities 50 year plan, e.g., address density, walkabout, etc.
Some other folks suggest a land only tax, and I like those in theory for residential, but they fall down for commercial parcels.
So my real feedback here is just that simple and direct policy is usually the best first approach, with added complexity only when needs must.
I like your goal, but the proposed process seems to be more complex than necessary. Something like Detroit's proposed split rate property tax shifts most of the assumed value of the property to the land itself, taxing land based on the demand in the neighborhood regardless of what's currently built there. That encourages development to cause landowners to attempt to recoup the cost of the taxes or sell the property to someone who will develop it. And it doesn't require significant additional calculations or tracking above what the tax assessor's office already does.
I don't really see those conclusions in the linked paper. That paper seems to be arguing that split rate taxes have the following effect:
So it seems more about promoting commercial investment, which the paper says currently only happens with tax incentives, while also lowering residential tax burdens.
Am I missing something from the paper?
I think local/neighbourhood demand is an aspect that needs to be considered in any pro-densification strategy, otherwise a tax scheme like OP is suggesting (based solely on areas + inhabitants) would penalize rural properties, where density per parcel (outside designated village centres) may be undesirable (from environmental, usability, and planning perspectives). No point in building dense apartments in the middle of nowhere.
Heck, I know of very rural municipalities near me that require special permission to sever parcels <10 acres iirc for sale, though possibly OP was envisioning applications to more ex/sub/urban type settings.
Not that this has anything to do with the tax proposal, but there are high-density rural developments. Usually these are large tracts of land where the buildings are concentrated in a small portion and the rest left undeveloped or dedicated to agricultural uses.
Gonna throw up an outlier: Accessible spaces often need to be larger. I bought "more" house than I needed for two of us because a wheelchair and medical equipment takes up space and needs more room around everything. (Urban centers with old buildings are not usually very accessible, and new buildings aren't affordable, which is why disabled folks living alone end up in public housing that is of very questionable quality.)
Accessibility is a real issue. I don't have a ready answer except to say that it's certainly possible to make dense, vertical spaces accessible, to wit, assisted living centers. Retrofitting old spaces is of course a challenge.
That public housing is questionable is a political issue. In any regime, there will be pressure to ignore the powerless. Perhaps in denser areas, the disabled and otherwise disadvantaged might be more visible, and so lead to greater attention to their plight.
In my experience they do live in dense areas, and they're mostly ignored/considered to be "a problem" as are many poor people. In our city the disability housing are mostly two high rises and besides the bed bug outbreak and the elevator that broke for months at a time (effectively trapping people there) it doesn't seem... great. That needs fixed regardless, but we're luckily in a situation where my partner has options however...
I don't live in a major city, but when I've visited, it would be hell for my wheelchaired partner. I don't love that I'm having to move out to a small town and commute to work further, but none of the existing small ranches in the small city I live in would work. Larger houses in town were too expensive. And it's already not super dense. While we looked at a downtown condo, there wasn't accessible parking for our van and the sidewalks are OK but didn't put us within "walking" distance to groceries or the doctor or anything he needs. Our downtown area has a decent sidewalk and lack of obstructions but that isn't always the case.
I only bring this up because I see a lot of assumptions that we'd have to "take care of " disabled folks without acknowledging that disabled folks live in all sorts of families resulting in different needs and that any of us can become disabled at any point, and most of us will be. So maybe this is a good tax policy, but if it punishes disabled folks and their families it needs those considerations built in from the ground, not figured out later.
Eh, this seems unnecessarily complicated, even compared to an already-complicated calculation of value today. If the goal is to drive more dense occupation of land, then tax land/sqft value higher and the actual building lower. Obviously, this type of thing would never fly in rural areas, though.
I'm curious as to how effective this type of thing would be to incentivize urban development. You'd have to have people who actually want to live in a dense urban environment. There are many, such as myself, who would sooner buy 10 acres and slap a tent in the middle of it before living in your typical city apartment.
First, there's more living space than just downtown or dense urban areas. We're headed for a cyberpunk global situation, and one of the driving factors is how everyone and everything in the economy is fixated on cramming all citizens into urban centers. When there's no jobs anywhere except there, people move, which devastates already shell shocked rural areas, and further pushes more of them to pack up what little they have left and cram themselves in alongside everyone else in a city.
That aside, the issue with housing and housing density is corruption and greed.
One can propose, even implement, all sorts of land valuation scenarios. Enforcing them via tax and law and so on. But they're all managed by people, and people are corruptible. Especially lowly local government bureaucrats on fixed public incomes who are as greedy as everyone else (gee, a new kitchen would be nice; gee, my kids need braces; gee, I'd like a new car).
The rich use their money to evade and control land valuation. Which they'll do in your scheme, along with controlling the rest of local government while they're at it.
Somehow, they don't get reevaluated after they renovate and turn what was a small mansion into a huge one. Or they'll get an exception, one that some random nobody little person who maybe comes into money and wants to build themselves their dream house never will, so the little person ends up with a huge tax bill compared to the rich asshole who knows how to play the corruption game.
Further pricing them out of having a life.
Maybe the wealthy get part of their space reassessed as commercial or something, or they push through some bullshit about "public works" and the fact they put in some basement apartments they house their personal staff in gets them a break on valuation. Which would give them a tax break (sucking cash out of public coffers) while also allowing them to have a firmer amount of control over their employees (piss me off and not only do I fire you, but you also lose your living space today; so either shut your mouth and back to work, or pack your shit and get out).
We could talk about corruption endlessly, because lawyers and the wealthy are fully aware of how powerful the allure of money is. Especially to little people who don't have any. So whether we leave land values alone, or change the system, nothing at all changes really.
About housing density, that's more corruption and regulatory capture. Of course it's obvious more housing is needed in just about every city in North America. And most of Europe to boot. The problem is who builds it?
Government can't because that's counter to private interests who want to profit off renovation and construction, so any attempt - even if the government in question manages to find the money for eight and nine and ten digit construction projects - is bogged down in red tape and legal obstructions until enough politicians are put on the take to cut it all out and get with the corruption program. And coming up with those hundreds of millions of dollars to tear down old properties and put up new dense apartment structures is a whole other can of worms that's exceptionally difficult anyway.
Private building contractors want maximum profit. Which they get by going after wealthy buyers. Why build row houses or low income apartments when you can build townhouses and condos instead? And on the outskirts they don't cram in starter home neighborhoods, they mark out luxury suburbs with generous yards and pools and split level multi-bedroom homes.
They build units that bring in three, five, ten times more than a low-income version on that same piece of land would.
Cities all across both continents are full of NIMBYS. Ask most people, and they say shit like "oh, of course the city needs more housing. People gotta have a roof, right?" But then you propose putting it up anywhere near them, and suddenly it's like "hold up, not here. What's your problem. Fuck it, my lawyer is now on the case."
And wealthy people have better lawyers. Because someone who has provable legal skills and the connections to utilize them with charges accordingly. Especially if their connections include rich clients and the ear of government officials. They're paid to plaster everything with red tape and injunctions and lawsuits and all of that, meaning little to nothing ever gets done. So every neighborhood anywhere in most cities, even "bad" ones, are either left to rot or eventually selected for gentrification as slums are ripped apart for, you guessed it, condos and townhouses.
The poor, who actually staff the city all these wealthy people want to live in because "cities are great, I hate bumfuck nowhere rural places. Except on the weekends when I briefly visit the country to feel special and take Instagram pics", well the poor are left to fuck right off. Or, more specifically, shoved into the remaining slums or to the city outskirts.
What happens on the outskirts? Well the existing residents crank up their own NIMBY screaming over the influx of poor people. "It's dragging down our property values" will be the rallying cry. Sometimes it works, but not always because we're not talking about rich NIMBYs most of the time, but middle class or barely not-poor themselves.
But eventually some new slum (or soon-to-be slum) will end up self-designating, somewhere the NIMBY outcry doesn't work. The buildings stop being upkept as well because, surprise, they're all poor there! So the land value slides some more, and more, and more. Years go by, media cashes in by writing "what went wrong" and "how can we fix it" bullshit stories once or twice a year.
Eventually some rich asshole starts buying lots up, because the city continued to grow and sometimes it'll grow in the direction of an outskirt slum. They start tearing shit apart to put up, you guessed it, condos and townhouses, and the whole process starts over.
Meanwhile, there's little or no public transportation. Even as the entire city of well connected (rich) people refuses to invest in it while also insisting "well, all those poor fuckers who hand us our coffee and clean our toilets can just take the bus into work." Pay for a car, or have a semi-nice place to live? When you're poor, it's often one or the other. And the car gets you to your job.
So they rent where they only enrich someone who's usually already rich. Or they might own but it'll be a shitty house in a shitty location where they can't afford to upkeep it. What was already low value becomes lower value. Crime creeps in because wealthy citizens will NIMBY about crime rates above anything else, and throw money at police to lock their own living areas down "safely." Slums, cops are paid to shoot first and there won't be any questions, which just encourages more criminal activity since the cops are the enemy.
Everyone knows the fix. Put. Up. Low. Cost. Housing. It could be apartments, it could be houses, but it has to exist so poor people can live in it. But no one wants to build it, or allow it to be built, or allow it to be purchased.
And we haven't even touched on how land and housing has become an investment vehicle. Which encourages venture capital and Wall Street and foreign investors to scoop up property and just sit on it. They could rent it out, but really that's a big mess that can cause problems. Really it's just cheaper for some of them to simply sit on the land. After all, it's in a city, and everyone wants to live in the city.
So the city grows, and grows, and grows, and suddenly what they bought for a million an acre (or whatever) seven or ten years ago has quadrupled in value. Who do they sell it to? Well, it might be another venture capitalist, yay! Or, even if it does go to a builder who's going to develop it for the current market, they're going to, wait for it, build luxury. After all, it's expensive land. With tons of value. Why would the destroy their expensive investment by building apartments for poor people when they could put up condo towers and rake in off wealthy upper middle class (and above) city dwellers.
If they do rent it out, that's renting not owning. They won't let little people own, so the single most obvious (and generationally profitable) avenue for building wealth is kept away from the poor. And they charge crushing rates, further removing wealth from the classes of citizens who least have it to give up.
What option do you have as a poor schlub when vast areas of housing are locked into venture capital schemes who see it as a profit vehicle? People gotta sleep somewhere, so those overpriced profit centers usually find some desperate renter soon enough. Adding further value to the already wealthy owner, who makes sure their lobbyists and social media warriors frequently remind everyone "hey, it's expensive to own a house/apartment/whatever, and we spend a lot to upkeep it, and it's not fair to call us greedy when we're spending so much."
The part where they more than cover their skimped on upkeep costs with their inflated rents is always left out. And the bit about how, after a decade of owning it, they've got vast capital gains from the increase in land value is definitely never brought up or given serious attention by anyone (courts, governments, etc) who could maybe have a shot at altering the scenario.
Everyone knows what the problems are, and what the core fixes will be. Some people disagree on how to get to those core fixes, and the rest are just corrupt or greedy and will use those levers to only ever allow things to move in directions they prefer.
Even if you could, somehow, magically (and it would basically be a magic trick to completely reform land valuation across North America and Europe at the local municipal level) change up the way land valuation is assessed and taxed, it won't address the core issue. Too many people are too invested in keeping things exactly the way they are now.
Messy and profitable.
Cyberpunk, here we come. Wake up choom, time to make the doughnuts.
-- To be clear, all of this sucks. None of it is good, and I'm not happy about it in anyway. But government listens to money, not people. As much as I want some charismatic leader to rise up out of the masses and lead a wholesale change in how modern societies are arranged, to make them more equitable, that leader will probably just be killed or jailed as soon as they appear and begin gathering people behind them. Can't let anything get in the way of the doughnuts. Or the line going up.
You've probably thought about this so I'd be curious to hear what you're response would be. But wouldn't this favor landlords? If a landlord can take a house and split it into individual apartments they'll save where as the single family trying to buy the same house would be at a disadvantage.
Now in already dense areas this might be a moot point. But in areas where I live the challenge is actually making home ownership affordable to even upper middle class families. I fear this could lock people into renting even longer than they currently are.
I'm not totally sold on the concept, but in regards to your specific concern, it would benefit condo owners as much as landlords. Nothing in the proposal as stated really benefits a given system of property ownership as far as I can see?
That's a fair point. But it is also kinda the point. Converting oversized single family structures into multifamily is an easy and direct way to raise density. I'm not certain homeownership is a desirable goal, in any event, especially if it requires sprawl to accomplish. The same would probably happen on undeveloped lots, they would be developed into apartment buildings instead of single family home subdevelopments.
Even if we are persuaded that homeownership is what's needed, there's no reason a reconfigured house (or developed lot, for that matter) couldn't be converted to owned condominiums instead of just apartments, and there's plenty of ways to incentivize that behavior.
Also, 'ownership' is also really just a question of degree. It's easier for a landlord to displace you from a leased real property interest than it is for a bank a government to the same from a piece of real property titled in your name. But there's no reason it has to be, it's simply what we (or, depending on your degree of cynicism, they) decided the law should be.
Speaking as a former renter, homeownership vs renting is, for me, about do I own my home, or does my home own me? The quality of life for an apartment dweller is pitiful, and the rights of a renter even moreso, and increasing the financial influence of landlords won't fix that.
Your experience is hardly unique, but the real issue is no ownership but rights. The law, mostly wrongly in my opinion, has been written to provide too few rights to lease interests as opposed to title interests. This is changeable, even at the local level. But it's not about finance or taxation, this is an individual rights issue.
This would mean more condos and eventually cheap condos.
Also, it would increase the number of apartment buildings, which would increase competition, which would decrease landowner influence since you can just move if they're dicks or overprice things.
So to set a baseline, we agree that increased density is a good goal.
The challenge I see here is that a family home (condo or house) is the largest investments many people will make. Ownership is desired because rather than putting money in a landlord's pocket, you are paying off the cost of an appreciating asset. If we just swap out mortgages for rent payment we will be moving more money out of middle income families and into a land holding class. To me that sounds like an easy way to widen wealth gaps. I think we'd have to concurrently reduce rents substantially so that people could invest the difference elsewhere.
The other challenge I see is cultural. Outside of large cities I don't think people want to buy condos. Maybe this is a solution for larger cities, but we have similar housing problems in small/medium sized cities where the culture isn't quite "city dweller."
Part of the dream is to encourage cultural change. In Japan, for example, there are very dense (well planned) cities, and vast unoccupied natural areas, plus some rural areas that perform rural type functions (like agricultural production), plus industrial areas adjacent to the dense cities. This is a cultural choice to mostly avoid sprawl. It's not perfect, and wealthier/high status individuals get exceptions, but it works pretty well.
The U.S. prioritizes mini-manors and home ownership. It's got a fairly robust and entrenched tradition behind it, but there's nothing sacred or natural about it. Which means it can be changed.
Nevertheless, homeownership doesn't have to really change to accommodate density, just shift the image of ideal home as detached single family with shed and picket fence to flat in a building. There's nothing here in this tax regime that inherently converts the single family homeowner into a landlord. They could be just as likely to be converted into a subdeveloper. Instead of subdividing a big plot of land and building a bunch of single family homes on lots, the owner is converting an existing structure into 5 new homes, sold just like any other home.
I have an old house cut up into apartments. I landlord for a little additional income but mostly for the sense of community I'm able to be a part of. I'm an atypical landlord, my rents are below market rate and the units very funky (but sound-I'm not a slumlord). But I could be nearly as happy selling the tenants their units and letting them build a collective.
edit: 'but'
It's kinda weird to bring up Japan in a conversation about property values and housing without bringing up the fact that housing depreciates in value in Japan, which makes the market both for investment and for home ownership very, very different.
I'm for densifying housing in the US, fwiw. But I think a one-to-one comparison to Japan here is flawed.
Just for clarification, I was not using Japan for the sake of values or property ownership, but rather to point out a culture that values density and creates a beautiful and healthy landscape with it.
So I would have a couple of questions with this.
1st, fair market value taxes property based on the size and location of a property. A smaller dwelling in the center of a very high demand urban area carries a higher tax burden than a large sprawling one in the middle of nowhere because that property is worth more. Would taxing based on sqft/person not end up disproportionately favor people in denser urban areas with better economies compared to people in rural and more economically poor settings?
2nd, I currently live on a property that is somewhere between 6-7 acres in a single family dwelling. Would I be taxed on the size of my property or the size of my house?
3rd, the location where our home is located has zoning laws that aim to reduce the number of people living here to protect the environment. How would a tax law with a clear incentive towards density work in areas with zoning laws to prevent density? The zoning laws are not township wide but specific to a certain area due to its ecosystem.
Yes that's the point, to incentivize dense residential development (required for things like walkability and good public transport). Green buffers are important, we could surely make exemptions for conservation corridors.
Rural buffers, like you describe in 3, are tricky. While they're good for some things, they're pretty awful for others. That's another discussion, and if we were to determine collectively to support them, they would be due some kind of exemption.
I could see something like this working for specific areas, such as cities/town centers and directly surrounding areas. But the trade off between space and proximity in many places may very well not achieve these goals. They could even instead create a reinforcing loop where residential spaces close to job centers are denser due to space constraints already in place and then end up with the benefit of close proximity and lower taxes, while larger residential spaces not in close proximity to high demand areas become more expensive, pushing more demand onto the lower taxed more dense areas rather than resulting in incentivized residential development.
I also would wonder how the tax would handle things such as divorce or other changes in family size. Would sqft/person be based on the actual number of people or the number of bedrooms? It might get sticky if a divorce means a higher tax rate or if having lots of kids means a lower one.
It takes a lot of time for ideal neighborhoods with walkability and transport to be developed. A change in tax code might be able to push towards that but I think would punish many people who live in suburban spaces. Changing zoning laws to incentivize density and mixed use space would likely be a less painful route to the goal you want.
It might incentivize more kids, I'm assuming other social and economic pressures determine family size. It might incentivize additional families to occupy the same structure, which is a win and aligned with the overall policy goal in my opinion.
Divorce sucks on so many fronts; there are already a lot of perverse incentives around it. It's definitely an issue that deserves some meditation.
It takes a lot of time for any incentive to work. Tax incentives provide more government flexibility, because they are easier to develop and implement than zoning laws. Zoning also comes with it's own sets of complications and complexities. Also, why not both?
There are two parts to this, taxing square footage and lowering the tax based on the assumed number of people.
Regarding taxing square footage, there are edge cases like how do you count an enclosed porch or unfinished basement. If closet space is included, there would be incentive to have storage space that somehow doesn't count instead of closets.
Deciding on the number of assumed people in a fair way seems difficult. It would be easiest to count bedrooms. But do you assume two people for a master bedroom?
There would be incentive to have more, smaller bedrooms, even if you don't normally use those rooms that way. I would expect houses with no closets, but lots of bedrooms that could be used as storage. Also, maybe dining rooms would come back because they could be used as a bedroom?
It's not entirely a bad thing, since it means more people could live there, in theory.
All of this seems like going after a non-problem in rural areas, but there's no particular reason why different localities need to do things the same way.
I would think total area of structure and total area of lot would be considered. It almost doesn't matter whether we include 'outside' structures, as if they are not part of the interior, they are definitely part of the lot. We would tax differently for each however, because we want the twin incentives of more structures per land area, and more people per structure.
It's not necessary to assume a number of residents. It's probably not that hard, using, say, census data, to determine the actual number of people in a residence. There are also already various exemption and appeal mechanisms in place for property valuation, adding 'actual number' isn't that big a deal.
My main point is just that however you do it, there are hidden incentives that you might not think of, but other people can find. Maybe they're not that big a deal in the end, though.
Interior versus exterior can be gamed: smaller house, larger porches. Also, temporary structures.
I wouldn't want to give people the incentive to lie to census workers. If you count actual people, there are still edge cases like college students.
In theory, you can also just ask people where they live and update government records when they move. In some countries, that's how it works. The US is less organized that way, due to deep-seated skepticism about government. Even assigning people numbers for government purposes is bit fraught.
Corruption, fraud, chaos, are a part of any system. I'm not thinking this regime would do much to move that needle either direction, but it might help with sprawl, which is a growing problem on many fronts. Things like the Canyonero, heating cooling costs, lack of public transit, walkability, time and access to third places, are all improved in denser developments.
Edit: spelling
What's a "Canyanero?"
https://www.youtube.com/watch?v=PI_Jl5WFQkA