Palo Alto/Mountain View is double digit percentage higher than places an hour or two out -- assuming non-commute hours. But, Santa Cruz to Marin, not that wildly different.
Although, the article mentions "family" making 150k-250k. So this implies two incomes, so each person making 75k-125k, which seems like a more accurate reflection of middle class in SV.
Even your cheapest examples are expensive. It's about $150,000 ($100,000 to $250,000) in Palm Bay, FL. That's normal peaceful USA, with tech jobs and even kind of near the beach, not some decaying hellhole.
So make that a factor of 30, without even looking at bad places.
It's really hard to say, but certainly nothing compared to the savings. It depends on what you mean by experience. :-)
Glassdoor says that Harris pays $113,051 for a "Software Engineer IV". Most Harris jobs are in that area.
Payscale says $96,955 for a "Senior Software Engineer" in Melbourne, the next town over. Hmmm, Palo Alto is only $135,305 for this. That's less than 40% extra, but you're paying 3000% extra for the house.
Note that overtime is not normal for the area. You work 40 hours. Spend the rest of the time with your family.
Also note that everything else is cheaper too. There is no state income tax. The sales tax is 6.5%. Power is about $96 per month for those using 1000 kWh per month, and $137 for those using 1400 kWh per month. You'd pay 20% more in Palo Alto. Gasoline is dirt cheap: it's only $2.14 in Palm Bay, but about $3.05 (large variation) in Palo Alto. I could go on forever really, but it gets silly comparing everything from nail polish to turnips.
No, it's not exaggerated. Housing prices on the peninsula (PA/MW in particular) are so far outside of the distribution for the rest of the country, it's not even funny. And it's not just the housing that is significantly more expensive. Schools, daycare, anything that involves kids is easily 2x as expensive around Palo Alto.
Saying that middle class in PA starts at $250K sounds about right. It is very difficult to have a family in the area for less than that.
Source: I recently moved from Mountain View to the Midwest (family of 4). My wife and I have talked a lot about moving back, but we decided that a minimum salary level would likely need to be above $250K for us to even consider it.
I wouldn't say it is that far out of the distribution of NYC. It is very far from the middle of Iowa, but there is at least NYC to share the absurd housing price with :)
Consolidate bay area government (ABAG) and come up with a comprehensive and cohesive growth plan (housing, transportation, taxes, zoning, etc.) Piecemeal reactive and Nimby policies are antithetical to the needs of the area. Forget about 1960s idyll. It's the 2010s, act like it. The area doesn't have to do growth Chinese-style, but we could to growth Singapore-style/Korea-style with North American values (i.e. less patronizing and more community involvement, up to a point)
I think that train already left the station as Apple, Google and Facebook are building new sprawling campuses. There's unlikely to be any significant infrastructure growth without dense business districts.
What does this mean? The large tech companies are no fan of NIMBY policies, they know the insane housing prices make it harder to recruit.
Google in particular has expressed interest in developing high-density housing (by south bay area standards) in Mountain View now that the area around its campus has been rezoned to allow housing.
He's suggesting the corporate campuses needs to be condensed too. I haven't been in the Bay Area for years, but when I was there last at least, it was noteworthy given the property prices, how much low-rise commercial property there was. Frankly, a lot of the problem would be solved with a few highrise districts.
I live in London. My road here has much smaller plots than a typical Palo Alto street. Yet the my road with 660 houses, takes up ~40,000 square meters of land (including the road and gardens). Near our local rail station they're building a few developments that will include at least one 55 story tower. Combined they will house about as many people as our road on maybe about 1,000 square meters of land. High density can solve a lot of problems if done right.
But that, too, is a symptom of NIMBY policies that push sprawl. Google would love to have fewer, taller buildings (if nothing else, it'd make their shuttle system a lot easier to manage), but Mountain View won't let them.
I have some co-workers from NYC (Queens/Brooklyn) and from what they were telling me; Only Manhattan is really crazy, not all of NYC? I'm not sure how accurate that is as I've never lived in NYC.
Most of New York is really crazy. There are many places in Manhattan that are cheaper than places in Brooklyn and Queens now.
If you have a million dollars to spend, though, you may be able to get a pretty nice studio or a pretty crap 1 bedroom, though.
(I'm sure Staten Island and the Bronx are relatively cheaper though. Ultimately the neighborhoods I want to live in are neighborhoods that most other people in my income group want to live in. Thus prices go up.)
NYC is in a much better situation than SF or Palo Alto. A lot more choice here, both in and around the city. You do have to be OK with apx 1 hr commute.
In most of Palo Alto, it's against the law to build anything but the most expensive kind of housing—single family homes with big yards. People who already bought in get to enjoy their walled-off neighborhoods at the expense of families with less money. It's nice that they feel bad enough about it to do something, but instead of legalizing cheaper housing on less land, they're trying to fund a lottery as a totem to make themselves feel better about the artificial affordability crisis they've created.
Actually it doesn't legalize cheaper housing, as it won't change the supply/demand. The house prices will increase by the subsidy amount. All this subsidy does is that it funnels more public (tax-payer) money to house owners.
I agree that monetary subsidies tend to simply get capitalized into higher prices, but if you read the article the proposal is to actually build 2,000 units.
What? No. They are building housing and will rent it out below market price. No one is given a monthly check to spend on housing or anything like that.
Why is it "at the expense of" others, to own a home now?
I've been trying for years to understand the concept of "everyone should be able to live everywhere" but I just cannot wrap my head around it, or it's cousin, "I shouldn't ever have to move, regardless of geopolitical changes".
Why are people so attached to any particular place that they'll suffer immensely to keep that particular place theirs?
But my point is why must people live on that land? Why not go live on some other land nearby? What is the foundational belief backing the idea that everyone should be able to live everywhere?
My belief, and I believe the belief of many others, is that the people who work in your city should be able to live there. If all of your school teachers, fire fighters, and police, not to mention store clerks and janitors, can't afford to live in your town, then that's unsustainable in the long term. At the moment, it's likely that these folks are commuting 40, 50 or more miles into PA to work every day from the South or East.
Isn't that their choice if they want to work so far from where they live? Can't they get a job somewhere else, like in their own neigborhood? These teachers, firemen and policemen must be really hanging to the edge of long term unemployment if they're only able to work in this one small far-away neighborhood. Perhaps the problem then is that we have an oversupply of such workers and those most unemployable who have no choice except Palo Alto should consider changing careers.
I am not sure about what would happen if such people decided from one day to the other to work in their towns. No more policemen, no more teachers, ... ?
The market would take over. Very few people want to teach in dangerous inner city neighborhoods, but salaries and incentives induce people to those areas.
If the police and teachers left, salaries would rise to correct the imbalance. Right now salaries are such that people are willing to work in those areas so the market is working.
New York is also crazy expensive yet there's actually a shortage. People are willing to pay those high prices.
In a sensible system, local taxes would go up and up to be able to pay these necessary workers enough money to live there, which would also act to make the place less attractive and thus lower prices. As it is, we have a system in which rich people get to pick when such a system operates and when it doesn't.
Also consider that if town X is 45 minutes from city Y and city Y pays wages that are 25% higher. Applicants will flock from town X to city Y in order to take advantage of stronger wages. Thus this will increase supply and drive wages back down.
Not everyone can live everywhere. But the people living in the most desirable places (thus excluding someone else from living there) should probably pay society for that privilege.
it's the other way around - there's nothing magical about Palo Alto specifically, it's only through people who live and work there the place becomes desirable
so they don't owe the society anything, the society owes them
It's not their owning a home that's the problem. It's the overly strict zoning regulations and process that control whether someone else's land can be turned into more homes.
Your children will have grown up since the 90's dot com bubble when you would have first seen the writing on the wall. This didn't just happen overnight. It's been going on for a couple of decades.
I don't live in U.S but I assume you have families over there. Grandparents, cousins etc. It's healthy to be close to your family. If you're young and free, of course. Would you just separate your kids from their childhood friends, school etc? There are millions of reasons.
My parents did. They left the Bay Area when I was 9, never to return. They went to Texas, then Massachusetts. (thousands of kilometers) We left behind a large family on my mother's side and my dad's brother. I miss them, but one must do what is required. You move to where you can find a job and a home that work together.
I did it. I moved to Florida. My brother did it. He moved to Texas, then Maryland, then Ohio. (again, thousands of kilometers)
You do what is needed to provide for your family. If you can't afford the local area, based on available jobs and house prices, then you move. Often it is painful, but you must do it.
To drag out that old Proudhon quote: "Property is theft". The basic idea is not that "everyone should be able to live everywhere", but that if you wall off a piece of land, given that land is a scarce resource, you are depriving others of access, and some considers that to be equivalent to depriving other of liberty.
From that, even if you believe that property is necessary you may believe that efficiency of land use is an ethical issue where regulation to increase efficiency of use would be the ethical thing to do.
One might also simply believe in a "lighter" version of this and believe that the ability to own your own dwelling should be right, and that high prices and scarcity created by large estates exist "at the expense" of others for that reason.
Some of us believe living in a place, especially a place one was born/grew up, should be a right, not a privilege. Here's Polanyi (with comments from Brad Delong) on land:
"Land could not, in Polanyi's view, be allowed to be the plaything of the self-regulating market for essentially sociological reasons: where people lived determined who they were, and a self-regulating market that told people they could no longer afford to live in the community where they thought they belonged would trigger such a strong sense of communal injustice to spark the chaos of revolution:
Commercialization of the soil was only another name for the liquidation of feudalism which started in Western urban centers as well as in England in the fourteenth century and was concluded some five hundred years later in the course of the European revolutions, when the remnants of villeinage were abolished. To detach man from the soil meant the dissolution of the body economic into its elements so that each element could fit into that part of the system where it was most useful....
Some of this was achieved by individual force and violence, some by revolution from above or below, some by war and conquest, some by legislative action, some by administrative pressure, some by spontaneous small-scale action of private persons over long stretches of time. Whether the dislocation was swiftly healed or whether it caused an open wound in the body social depended primarily on the measures taken to regulate the process....
The inertia of the common law was now deliberately enhanced by statutes expressly passed in order to protect the habitations and occupations of the rural classes against the effects of freedom of contract. A comprehensive effort was launched to ensure some degree of health and salubrity in the housing of the poor, providing them with allotments, giving them a chance to escape from the slums and to breathe the fresh air of nature, the “gentleman’s park.” Wretched Irish tenants and London slum-dwellers were rescued from the grip of the laws of the market by legislative acts designed to protect their habitation against the juggernaut, improvement. On the Continent it was mainly statute law and administrative action that saved the tenant, the peasant, the agricultural laborer from the most violent effects of urbanization."
> "Land could not, in Polanyi's view, be allowed to be the plaything of the self-regulating market for essentially sociological reasons: where people lived determined who they were, and a self-regulating market that told people they could no longer afford to live in the community where they thought they belonged would trigger such a strong sense of communal injustice to spark the chaos of revolution:
That's precisely why land should be left to the market. Because the alternative is not some egalitarian decision making with perfect information. The alternative is allocation of land through the political process, which has historically been used to encourage less than noble ideals like racial segregation and overuse of eminent domain.
Well, on a purely economic basis, many of those homeowners, including investment funds, are paying < 0.1% in property tax and sitting on properties that are worth millions in value. As an example, the homeowner of one property with a market value of $7M was paying 0.04% in tax.[1]
Property taxes help pay for streets, police, ambulatory services, schools and maintaining parks. These essential services are paid for "at the expense of" renters and new homeowners. Of course, this deeply vested interest group also manifests itself in roadblocks for new developments that would mitigate the drastic increases in housing costs.
Not their fault, but it is their gain. One of the other posts here mentions a few solutions that wouldn't force retirees or those on fixed incomes out of their newly valuable properties. The coastal areas of California are unique in the US in that vast discrepancies exist between market value and what long-time property owners pay.
- Apply market-rate taxation only for values over a certain threshold, say $1m+ and non-owner occupied
- Defer tax payments until the property changes hands (aka they sell the property or pass it on)
- Reverse mortgages
It's completely messed up that a change in regional average property value could cause a change in total tax revenue. This causes a city's tax income to vary wildly. Cities take on obligations (bonds, salary increases, pensions) in good times and then hit disaster in bad times.
We fight this in a stupid way. We limit tax increases for a property, with a reset upon sale. This discourages people from moving closer to work, causing our roads to be clogged with commuters.
The right way is to say that assessed home value relates to the total portion of the city budget that your taxes must support. Your tax bill then wouldn't change unless the city budget changes or the relative value of your property changes. Subjecting the total city budget to voter approval is OK.
Basically the problem is millage rate. The dollar value of your property should not directly (by simple multiplication or division) translate into a tax amount. It should instead translate into a portion of the total. That is, it should represent your share.
There are many areas that are too expensive for me, and I just don't buy houses in those areas. That doesn't mean the people living in those areas are doing it at my expense, nor does it mean the government should intervene and subsidize a home for me.
This is known as the 'drive till you qualify' approach to housing and has been studied for some time. Just because you'd rather a longer commute doesn't mean it's in anyones best interest to do so..
"2. The Development and Rehabilitation of Affordable Housing Provides Immediate Fiscal Benefits for States and Localities
SUMMARY: Cities and states benefit financially from the development or substantial rehabilitation of affordable housing. Some of the most significant sources of revenue during the construction or rehabil- itation phase are sales taxes on building materials, corporate taxes on builders’ profits, income taxes on construction workers, and fees for zoning, inspections, and the like.
Modeling one-time fiscal benefits: The fiscal effects of the construction of affordable housing vary from place to place depending on local tax structures, construction costs, development fees, and whether the local mix of industries is conducive to capturing construction-related activity. As with the economic impact estimates discussed above, the fiscal effects discussed in this section are largely derived from one of the input/output models, which are based on actual, industry-specific purchasing and production activities and adjusted to account for local variations.
The National Association of Home Builders (2010) uses national averages to estimate that local jurisdictions stand to gain roughly $827,000 in immediate revenue from the construction of 100 LIHTC family units and roughly $768,000 when 100 LIHTC senior units are built.8 As Figure 2 shows, permitting/impact fees and utility user fees represent more than half of all local government revenues associated with the construction of a 100-unit LIHTC property for families.9 These estimates provide an important national baseline for the country’s most prolific affordable housing production program but, given local economic and project nuances, cannot be directly applied to any specific housing market or project.
The input/output models discussed above have also been applied by researchers to produce more localized information on the fiscal effects of specific affordable housing programs and developments. The following are examples:
Hangen and Northrup (2010) analyze the effects of developing and rehabilitating 582 affordable homes in Rhode Island in 2007 and 2008 using $25 million in housing bond funds and conclude that the activity had a significant impact on the income, corporate, and sales taxes collected by the state. The authors estimate that the $25 million in state funding leveraged an additional $231 million in investments, and the subsequent income, corporate, and sales taxes and fees associated with the total economic activity increased state revenues by roughly $16.7 million during the development period (excluding local taxes and fees).
A study conducted by the Minnesota Housing Finance Agency (2009) provides further evidence that a public investment in affordable housing can leverage significant capital and generate real revenue for state and local governments. Over two years (2006-08), an investment of $260.1 million in affordable housing leveraged roughly $470 million in additional public and private funds and resulted in nearly $1.4 billion in direct, indirect, and induced economic activity. This level of activity generated roughly $62.5 million in state and local tax revenue.
In an analysis of a proposed Pennsylvania state housing trust fund, Econsult (2009) focuses on state-level impacts and finds that for every $1 million in proposed spending, the state stands to gain $82,000 in revenue from the construction of new affordable single-family homes; one-time state revenues would be even higher if the $1 million were spent on the construction of affordable multifamily housing ($86,000) or on remodeling or rehabilitating existing homes ($116,000). These estimates exclude taxes and fees that local jurisdictions may impose. Making these estimates even more conservative, they do not include the impact ...
The "drive till you qualify" and "rather a longer commute" assumptions are wrong. You don't have to work in Palo Alto. You can have a short commute if you work elsewhere.
This industry is totally relocatable. It's not like mining, shipping, petroleum, or even farming. Computers are available everywhere. Cramming everybody into a little spit of land is crazy.
If you really like Palo Alto, you can vacation there. It's not a good budget choice to actually live there.
"The "drive till you qualify" and "rather a longer commute" assumptions are wrong. You don't have to work in Palo Alto. You can have a short commute if you work elsewhere."
The literature I just posted wasn't from the point-of-view of the people who would benefit from affordable housing, it was from the point of view of municipalities and states self-interested in seeing returns on investments in affordable housing.
Moreover, how does your logic make any sense at all? If you work in Palo Alto and don't need to travel far, you can be said to have a 'short' commute. If you live further away, then the commute is necessarily 'longer'. If you change jobs -> then the job you left will probably be replaced -> if the job is replaced at the same wages, the person being hired either has to live in an area their wages can't afford or they'll have to commute into it, a 'long' commute and the cycle continues. Your logic really only works if you are only worried about _your_ interests, not the interests of the town itself.
"This industry is totally relocatable. It's not like mining, shipping, petroleum, or even farming. Computers are available everywhere."
Isn't this arguing my point for me? Unless Palo Alto was incorporated solely for the benefit of computer programmers, there are other people who have lived there and are afforded the right to vote on it's future - teachers, cops, firemen, postal workers, janitors or other professions, and these programmers surely don't operate in a bubble but utilize some type of support staff? Governments shouldn't base policy on the singular peculiarities of one profession.
"Cramming everybody into a little spit of land is crazy."
I'd argue encouraging urban sprawl ('drive till you qualify') is less sustainable (i.e., more crazy) than encouraging more densely concentrated living/working areas - but that's not research talking, only my intuition.
No, but Palo Alto is in trouble if all the teachers, firemen, government workers, etc. start moving to more affordable places. The can't live on technology companies alone.
so why not up the salaries of those professions until people stop moving out and start moving in? Market forces _should_ be used to equalize/stablize, rather than the hubris of trying to control the market via subsidies/indirect incentives. More often than not, those backfire.
I think that's what's gotten us into trouble to begin with. There are fewer houses in the Bay Area than the number of people with extremely good salaries. If you raise everyone's salary, people will outbid each other on housing, and the prices go up.
The opportunity the government has is to step in and buy housing now, while prices are what they are, and then allocate them while ignoring the capitalist desire to sell/rent to the highest bidder. Their shareholders do not expect 10% YoY growth, after all.
> I think that's what's gotten us into trouble to begin with. There are fewer houses in the Bay Area than the number of people with extremely good salaries.
Why not simply allow to increase the density (say skyscrapers) by chaning the zoning regulations to solve the obvious issues?
I mean: If you can pass a law for subsidiaries one can also pass a law to change the zoning regulations.
Well yes, but if it was THAT simple (as those things have to, generally, be voted on by elected representatives) then it would have been done already.
But yes, that's the real solution: and it's not happening at all in the Bay Area.
The Bay is 40,000 units under what it would take to level prices (not reduce, level) and people are still protesting "ruining the character of neighborhoods" by building.
I get wanting character or style... but legislate that, not less density.
"ruining the character of their overperforming investments" is what they should say.
But yeah, this is where regulation is needed, because the financial incentives are to let the market saturate like it is now. If you own property and rent it out, you certainly don't have to keep it well-maintained. What is your tennant going to do, move out? To where?
I'm almost tired enough of this situation to move away from New York. (I say after installing my window A/C units this morning. What year is it!?)
I'm a little more charitable about it than that - neighborhoods often do have a certain character and vibe. Putting a really ugly or cheap building in the middle can ruin that.
It's great when large building projects take style and such into account as it makes the neighborhood nicer AND the new building nicer, usually. I'm in that situation with a new shopping center just a few blocks from me: it's going to be really nice and add to the area while still being a massive new set of buildings and stores.
However people are dumb and selfish so often have a kneejerk reaction and try to block any development for arbitrary reasons (like height)
That would make it worst. Supply and demand only works if you can increase or decrease both.
By increasing people's wages...demand goes up (more people can afford it). Housing prices go up because there's no increase in supply, and someone gets squeezed out.
Eh, why not? Suppose you don't want to just pay more for these services, allowing those people to live in Palo Alto. OK, run the services from far away. If that makes the service bad, then home values will drop.
For example, the firemen can be based out of the Central Valley. You'd better build with concrete and steel, because the service will be slow.
That works for school too. Put the kids on a bus. Perhaps people with kids should leave the area.
See? There are options. Pay more, or get bad service. You can totally have a city with pure technology companies, just as you can have one with only retired rich people.
I suggest a mix: pay more for some things, and run other things from far away.
What about the right to build a house on land you own? As long as its not hurting anyone and is safe, why should my neighbors be able to tell me what I can't do with my own property?
Well then, we'd better walk into every major stock exchange and explain that we're holding the guns to their heads because they're not trading everything at the highest price humanly possible, draining the rest of the economy in the process, and that therefore, as stockholders, we are being hurt and have the right to hold them at gunpoint for higher asset prices.
You don't have a right to "value". The exact same argument works against you. Preventing me from building housing hurts the poor! It makes their cost of living increase. And surely they suffer far more than rich property owners.
All economic transactions hurt someone's value, but they create more value than they destroy. It's a net good.
It may not be a human right, but restricting one of the most fundamental of human needs is definitely a major cause for concern. The cumulative effect this has had actoss the country is disastrous.
I wonder if there'd be political support for a delayed change to the zoning laws -- multi-family dwellings become legal once 80% of the housing stock in a neighborhood turns over, or something like that.
It's not the city of Palo Alto that created the crisis, it's all the companies and people who are moving into a city that clearly doesn't want them there.
It always amazes me how techies swing from an extreme open borders position to an extreme xenophobia position the second the debate is about the city they live in.
> The plan is a among a series of proposals being mulled by the Palo Alto City Council to provide affordable housing to those considered middle class in the area - families making between $150,000 to $250,000 annually.
As a point of reference, starting salary for a teacher in the Palo Alto Unified School District is $57.5k. Someone who has taught in the district for 30 years with significant post-credential grad school makes double that.
And because of the way the free market works despite the average family working twice as many hours as one in the fifties they're no better off, and in a lot of cases worse off, in terms of what they can actually afford. And kids never get to see their parents.
I don't know what the solution is long term but I have a feeling someday this experiment in free market capitalism is going to be considered in similar ways to the USSR's experiment in communism a few decades from now.
> And because of the way the free market works despite the average family working twice as many hours as one in the fifties they're no better off
IMO the fifties in the US were a total anomaly and they're not coming back ever. It was a time where (more than?) half of the world was taken out of competition due to idiotic economic system of communism, and Europe, the only potential competitor to the US, was still in shambles after the war. The US were a sole economic superpower, no wonder people had it great back then.
When people have the opportunity to earn more, they do, no matter how hard it is for them. Then they find things to spend that extra money on that they wouldn't otherwise have spent it on, like a house in a more expensive neighborhood and they end up still not having much money. It's just a personal choice. Ask if your wife is willing to not work, buy a house in a cheap town, buy a used Japanese import car and carry on living a comfortable 50's lifestyle if you want. But you won't want because you'll see all that money waiting for you.
When people have the opportunity to earn more, they do, no matter how hard it is for them.
Citation needed.
It really depends on how you view the world. If that view is all about money and consumption, then, yeah, you probably won't leave money on the table. There are, however, competing worldviews that offer different versions of the good life, and in my experience, there are plenty of willing to leave money on the table because of it.
Free-market capitalism ? On the contrary, its absurd regulations for new housing that raised prices.
If free market was reigning, many more apartments would have been built, lowering housing prices.
> I don't know what the solution is long term but I have a feeling someday this experiment in free market capitalism
The skyrocketing housing prices are caused by strict zoning regulations, and there is absolutely nothing about free market capitalism in strict zoning regulations.
To build on that - the point of these proposals isn't to cover the teacher who has been in the district for 30 years though. It's to cover the young teacher they have to hire when the older one retires. They are likely having issues hiring anyone that can actually afford to live in Palo Alto. Because of housing costs, it's next to impossible for anyone to move there and establish roots in the area (read: buy a house). This means that you're going to see more volatility in the labor market for traditionally middle class government jobs (teachers, police, etc). That will be important to try and balance in the future.
I once went drinking with a couple very smart women in Mountain View. Both went to a very well known school, got good grades, and had degrees in math heavy STEM fields.
One worked for Google, and lived in a shared house in Sunnyvale because it was the only way to save towards something
The other was a teacher at a fancy school up in SF that will remain un-named. She literally lived in a kitchen pantry in the tenderloin. (Deep pantry - deep enough to fit a bed).
The tricky thing about Google compensation is they tend to weight total comp toward RSUs. So it's totally conceivable that woman may only be making $90-110k per year in hard salary. I lived in MV for a year and the rental prices are high enough (2.3k for a two bed in the burbs) that living in shared housing might be advisable at that salary level.
Exactly. Here in the Netherlands, housing is also subsidized: you can roughly subtract the mortgage's interest from your income before tax is calculated. The only result is that houses are more expensive.
The purpose of that system is to have more people owning their own home and fewer people renting. It assures that there is a cap on how much of the housing is owned by companies for the purpose of renting it out.
Good idea. Too little too late. I suffer horribly with my small family and two good jobs. One job basically pays for the taxes. And housing is so expensive I cant get over the hump to get a mortgage to see any tax benefits. Its really crushing to not be a landed gentry here. We rent is a good school district and have a kind landlord but we cannot build housing equity besides having good jobs.
Two solutions: either rely on the private sector to provide `reverse mortgages'. Or let the government offer the same product, ie allow people on low income but with lots of land value to defer payment until death or sale.
In addition, phase in land tax over a decade so that people have time to adapt. If you phase out other taxes at a similar rate, you will even get a great increase in land values.
(Basically, land in a jurisdiction that charges less eg income taxes or sales taxes is great for doing business on. So people will bid up its price.)
"phase out other taxes" is the gaping hole in that argument.
Property isn't just a market - its peoples homes and communities too - thats the other gaping hole. Why should Grandma need to move away so some Unicorn startup can move in?
Why should some old people who managed to get lucky a few decades ago be allowed to sit on some of the most desireable real estate on the planet and not pay the community for it?
Anyway, grandma is a red herring.
> "phase out other taxes" is the gaping hole in that argument.
When taxes fall, real estate prices rise by enough to make up for it. Capturing that rise is simple with a land tax. (See https://en.wikipedia.org/wiki/Henry_George_theorem for how that's a rather orthodex statement. Nothing outside the mainstream of economics here.)
The whole process is very economically efficient. Swap taxes on elastic economic activity like work or investing for taxes on inelastic land.
Right, this is why gentrification gets people's backs up. You're not just buying property as a physical asset, you're buying into the community that made that area desirable/up-and-coming/trendy/call it what you will. If they hadn't been there, you wouldn't want to be there either. But a piece of community isn't something you can own without contributing back to it, and if you don't, it destroys it.
My grandma lives near there, in San Francisco, in a $1.1 million house. She is neither red nor a herring.
She's a nice little old lady. Well, maybe she isn't nice by modern San Francisco standards; she is strictly Catholic and rather unhappy with the sexual behavior of most residents. Other than possibly that though, you'd probably like her. She keeps busy with plants, lots of noisy clocks, and a bird. Unlike a herring, she does not eat copepods and doesn't swim. She only managed to spawn 7 times, 1 or 2 at a time. She is mostly beige colored, not red. She is several times longer than the largest known herring.
All things considered, I'm certain she isn't a red herring.
Look, if she were a red herring, how could she even sign the paperwork to buy a house in the first place? Why would a herring even want a house, especially one that isn't flooded?
How do existing property taxes not penalize retirees/Grandma, forcing them to move out? If they start owing LVT, they could defer payment until they sell their property[0]. There are many ways asset-rich, cash-poor people could be accommodated. And I doubt there are that many of them anyway.
> allow people on low income but with lots of land value to defer payment until death.
if this is done on land that people live in, it will still penalizes landowners unfairly. If your land was bought when it was cheap, and the value appreciated, you end up paying tax money that you didn't really "earn" - in other words, it's only fair if you get reimbursed when land value depreciates. Deferring it till death is just delaying the unfair value exchange.
Payment on sale is similar, but slightly less unfair than an annual tax.
Yes, your tax payment would go down, if the value of the land deprecates. (No, you wouldn't get last years tax back.)
This is not about penalizing. This is about two things: first, shift taxation from where it hurts the economy (income tax etc) to where it doesn't do any damage to incentives (land supply is perfectly fixed). Second, making housing more affordable for eg young people.
(There's also effect on NIMBYism etc.)
The actual tax is supposed to be on the annual land rent. We'd only tax the value of the land as an easy and reliable proxy. (And yes, we'd also tax the imputed rent, ie the virtual rent that is short-cut for an owner-occupier. Not just the rent that accrues to someone who rents to other people.)
Switzerland already taxed imputed rent. (Look up Eigenmietwert.)
Of course any tax is a loss to the party who pays it. Don't think it has anything to do with Braess' paradox.
The main thing that differentiates different ways to tax is:
- what does it do for (or against) income equality?
- what does it do to economic incentives?
For things like sin taxes (like on alcohol, CO2, etc) you want to muck around with economic incentives.
In general, when you just want to raise revenue, changing economic incentives as little as possible is good. Hence, inelastic things should be taxed.
Land in all its forms, eg mineral resources, or straight up parcels of real estate to build houses on is perfectly inelastic, because the supply is fixed.
Taxing land does well on the equality score as well: richer people tend to own more land; so it's a progressive tax.
> Of course any tax is a loss to the party who pays it.
that's not true if you count the thing the tax is paying for - social services, or medicare, etc. There's economies of scale that you cannot easily achieve. A high LVT might encourage better land use, and thus, spur an economy to newer hights, which could vastly offset the individual "loss" on that tax (despite the fact that said individual may not feel like they've gained anything).
Oh, definitely. I was replying specifically to this line:
> The overall benefit to society is good, but to the individual, a LVT is going to (at least, in the short term) be a loss.
The nice thing about investing land tax value well is that this increases land value. (Eg a train station increases property values nearby.) Thus public infrastructure investment can pay for itself in terms of new taxes---without blunting any economic incentives.
Are you saying there should be a 100% capital gains tax on land? What about people who buy houses in an up-and-coming area, don't perform any renovations, and then sell later at a profit? Did they "earn" any of that value?
Land creates an economic rent every year---most visible when you actually rent out the land, but also occurring as opportunity costs for owner occupiers. That rent is produced basically by people bidding up for the right to use the land, but not by anything the landowner does.
(Things the landowner does, like putting a nice house on top of the land are explicitly excluded from a land tax.)
The idea is that you can tax that (imputed) rent without any economic loss---since the landowner doesn't do anything for it, there's nothing to discourage with a high tax.
In principle, one could try to tax 100% of the rent. In practice figuring out the exact rent that accrues due to the land is hard---especially for owner occupied places.
But, we have a good proxy: the value of the land is (the market's best guess of) the net present value of all future income from the land.
So as a proxy, you tax x% of the value of the land every year.
If land appreciates in value over time, the tax rises proportionally. But unlike a capital gains tax, one pays the tax on the entire value of the land, not just the gains since the time you bought.
Of course, a tax on the land changes the sum of the future income streams. And thus changes the value of the land, which changes the absolute value of the tax payment. Fortunately, solving that equation isn't too hard.
In the case of constant interest rates, constant tax rates, constant annual rent:
a: annual rent
V: value of the property
i: interest rate (per year)
r: land tax rate (per year)
a = i * V + r * V
Reordering gives us the impact of land tax rates on price:
V = a / (r + i)
effective tax rate on the annual rent:
(r*V) / a = r / (r + i)
That's an increasing function of r, but it never reaches 100% (unless mortgage interest rates drop to 0%)
So for your example, people buying a house and later just flipping it, would accrue land tax while holding the property, and would be able to pocket any difference in price tax free. (Ie if one could buy and sell on the same day, there would be almost no tax to pay on any gain.) Of course, the land tax itself would blunt a sharp appreciation of the property somewhat.
Not a lot of the above description of the impact of taxes on land prices was specific to a land tax.
A property tax has similar effects. A land tax just excludes houses and other things on top of the property from taxation.
This in nothing even specific to a tax directly on the property. If for some reason you had a property where any shop on top of it would be excluded from VAT, the value of the property would go up. And if for some reason VAT would be doubled on retail in that area, the value of the property would drop.
Because any drop in taxation on other economic activity will lead to higher land prices, people have high hopes that if the government can tap into land prices as a source of revenue, they will be able to reduce these other taxes without loss of revenue (but gains in economic efficiency).
The noob question cause I feel like I don't understand the issue: Why are companies not pushing for remote workers? Are the downsides overweighing the positive or is it a cultural thing?
This seems like a bad idea (gut check). Won't the availability of public money for private housing help to drive prices up?
Everything I see seems to indicate that the price of housing expands to fill the amount of money available.
Cheap interest rates managed to change the base price of homes such that the mortgage payment is roughly the same. Now it is individuals & condo developers collecting that difference rather than banks.
Or am I totally off base here?
Increasing property taxes shifts the burden of ownership to the people who have money... though suppose that would get passed through to renters as well.
> Everything I see seems to indicate that the price of housing expands to fill the amount of money available.
This applies to many many other areas too. The price of anything in short supply expands as far as possible to change consumer surplus into producer surplus.
If it were apple juice in short supply more people would start selling apple juice and eventually the price would fall. Presumably in Palo Alto you can't just throw up more flats/houses in 6 months and put them up for sale though
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[ 3.2 ms ] story [ 236 ms ] threadFactoid: there's a house in downtown PA with a yard the size of a small farm. Of course, it was bought when the surrounding area was farmland.
Palo Alto: Averages roughly $4,000,000.
http://www.zillow.com/homes/for_sale/Palo-Alto-CA/fsba,fsbo_...
Austin, Texas: Averages roughly $400,000 (10x less)
http://www.zillow.com/homes/for_sale/Austin-TX/fsba,fsbo_lt/...
Orlando, Florida: Averages roughly $400,000 (10x less)
http://www.zillow.com/homes/for_sale/Orlando-FL/fsba,fsbo_lt...
Chicago, Illinois: Averages roughly $800,000 (5x less)
http://www.zillow.com/homes/for_sale/Chicago-IL/fsba,fsbo_lt...
Philadelphia, Pennsylvania: Averages roughly $400,000 (10x less)
http://www.zillow.com/homes/for_sale/Philadelphia-PA/fsba,fs...
Seattle, Washington: Averages roughly $1,000,000 (4x less)
http://www.zillow.com/homes/for_sale/Seattle-WA/fsba,fsbo_lt...
Palo Alto is definitely _much_ more expensive.
So make that a factor of 30, without even looking at bad places.
Glassdoor says that Harris pays $113,051 for a "Software Engineer IV". Most Harris jobs are in that area.
Payscale says $96,955 for a "Senior Software Engineer" in Melbourne, the next town over. Hmmm, Palo Alto is only $135,305 for this. That's less than 40% extra, but you're paying 3000% extra for the house.
Note that overtime is not normal for the area. You work 40 hours. Spend the rest of the time with your family.
Also note that everything else is cheaper too. There is no state income tax. The sales tax is 6.5%. Power is about $96 per month for those using 1000 kWh per month, and $137 for those using 1400 kWh per month. You'd pay 20% more in Palo Alto. Gasoline is dirt cheap: it's only $2.14 in Palm Bay, but about $3.05 (large variation) in Palo Alto. I could go on forever really, but it gets silly comparing everything from nail polish to turnips.
And yes, we have a tech industry.
Saying that middle class in PA starts at $250K sounds about right. It is very difficult to have a family in the area for less than that.
Source: I recently moved from Mountain View to the Midwest (family of 4). My wife and I have talked a lot about moving back, but we decided that a minimum salary level would likely need to be above $250K for us to even consider it.
Google in particular has expressed interest in developing high-density housing (by south bay area standards) in Mountain View now that the area around its campus has been rezoned to allow housing.
I live in London. My road here has much smaller plots than a typical Palo Alto street. Yet the my road with 660 houses, takes up ~40,000 square meters of land (including the road and gardens). Near our local rail station they're building a few developments that will include at least one 55 story tower. Combined they will house about as many people as our road on maybe about 1,000 square meters of land. High density can solve a lot of problems if done right.
If you have a million dollars to spend, though, you may be able to get a pretty nice studio or a pretty crap 1 bedroom, though.
(I'm sure Staten Island and the Bronx are relatively cheaper though. Ultimately the neighborhoods I want to live in are neighborhoods that most other people in my income group want to live in. Thus prices go up.)
I've been trying for years to understand the concept of "everyone should be able to live everywhere" but I just cannot wrap my head around it, or it's cousin, "I shouldn't ever have to move, regardless of geopolitical changes".
Why are people so attached to any particular place that they'll suffer immensely to keep that particular place theirs?
That said, the GP didn't say that owning the house was the problem, but rather the regulation that makes that the only legal choice.
I agree that it sucks, but I'm not sure if it's unsustainable. There are plenty of worse situations in the world that pretty long-lasting.
If the police and teachers left, salaries would rise to correct the imbalance. Right now salaries are such that people are willing to work in those areas so the market is working.
New York is also crazy expensive yet there's actually a shortage. People are willing to pay those high prices.
so they don't owe the society anything, the society owes them
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newswelcome.html
My parents did. They left the Bay Area when I was 9, never to return. They went to Texas, then Massachusetts. (thousands of kilometers) We left behind a large family on my mother's side and my dad's brother. I miss them, but one must do what is required. You move to where you can find a job and a home that work together.
I did it. I moved to Florida. My brother did it. He moved to Texas, then Maryland, then Ohio. (again, thousands of kilometers)
You do what is needed to provide for your family. If you can't afford the local area, based on available jobs and house prices, then you move. Often it is painful, but you must do it.
From that, even if you believe that property is necessary you may believe that efficiency of land use is an ethical issue where regulation to increase efficiency of use would be the ethical thing to do.
One might also simply believe in a "lighter" version of this and believe that the ability to own your own dwelling should be right, and that high prices and scarcity created by large estates exist "at the expense" of others for that reason.
"Land could not, in Polanyi's view, be allowed to be the plaything of the self-regulating market for essentially sociological reasons: where people lived determined who they were, and a self-regulating market that told people they could no longer afford to live in the community where they thought they belonged would trigger such a strong sense of communal injustice to spark the chaos of revolution:
Commercialization of the soil was only another name for the liquidation of feudalism which started in Western urban centers as well as in England in the fourteenth century and was concluded some five hundred years later in the course of the European revolutions, when the remnants of villeinage were abolished. To detach man from the soil meant the dissolution of the body economic into its elements so that each element could fit into that part of the system where it was most useful....
Some of this was achieved by individual force and violence, some by revolution from above or below, some by war and conquest, some by legislative action, some by administrative pressure, some by spontaneous small-scale action of private persons over long stretches of time. Whether the dislocation was swiftly healed or whether it caused an open wound in the body social depended primarily on the measures taken to regulate the process....
The inertia of the common law was now deliberately enhanced by statutes expressly passed in order to protect the habitations and occupations of the rural classes against the effects of freedom of contract. A comprehensive effort was launched to ensure some degree of health and salubrity in the housing of the poor, providing them with allotments, giving them a chance to escape from the slums and to breathe the fresh air of nature, the “gentleman’s park.” Wretched Irish tenants and London slum-dwellers were rescued from the grip of the laws of the market by legislative acts designed to protect their habitation against the juggernaut, improvement. On the Continent it was mainly statute law and administrative action that saved the tenant, the peasant, the agricultural laborer from the most violent effects of urbanization."
http://www.bradford-delong.com/2016/05/highlighted-for-march...
Different values.
That's precisely why land should be left to the market. Because the alternative is not some egalitarian decision making with perfect information. The alternative is allocation of land through the political process, which has historically been used to encourage less than noble ideals like racial segregation and overuse of eminent domain.
Property taxes help pay for streets, police, ambulatory services, schools and maintaining parks. These essential services are paid for "at the expense of" renters and new homeowners. Of course, this deeply vested interest group also manifests itself in roadblocks for new developments that would mitigate the drastic increases in housing costs.
[1] http://www.zillow.com/homedetails/1536-Bryant-St-Palo-Alto-C...
Wow. We really have become a horrible society.
We fight this in a stupid way. We limit tax increases for a property, with a reset upon sale. This discourages people from moving closer to work, causing our roads to be clogged with commuters.
The right way is to say that assessed home value relates to the total portion of the city budget that your taxes must support. Your tax bill then wouldn't change unless the city budget changes or the relative value of your property changes. Subjecting the total city budget to voter approval is OK.
Basically the problem is millage rate. The dollar value of your property should not directly (by simple multiplication or division) translate into a tax amount. It should instead translate into a portion of the total. That is, it should represent your share.
"2. The Development and Rehabilitation of Affordable Housing Provides Immediate Fiscal Benefits for States and Localities SUMMARY: Cities and states benefit financially from the development or substantial rehabilitation of affordable housing. Some of the most significant sources of revenue during the construction or rehabil- itation phase are sales taxes on building materials, corporate taxes on builders’ profits, income taxes on construction workers, and fees for zoning, inspections, and the like.
Modeling one-time fiscal benefits: The fiscal effects of the construction of affordable housing vary from place to place depending on local tax structures, construction costs, development fees, and whether the local mix of industries is conducive to capturing construction-related activity. As with the economic impact estimates discussed above, the fiscal effects discussed in this section are largely derived from one of the input/output models, which are based on actual, industry-specific purchasing and production activities and adjusted to account for local variations. The National Association of Home Builders (2010) uses national averages to estimate that local jurisdictions stand to gain roughly $827,000 in immediate revenue from the construction of 100 LIHTC family units and roughly $768,000 when 100 LIHTC senior units are built.8 As Figure 2 shows, permitting/impact fees and utility user fees represent more than half of all local government revenues associated with the construction of a 100-unit LIHTC property for families.9 These estimates provide an important national baseline for the country’s most prolific affordable housing production program but, given local economic and project nuances, cannot be directly applied to any specific housing market or project.
The input/output models discussed above have also been applied by researchers to produce more localized information on the fiscal effects of specific affordable housing programs and developments. The following are examples:
Hangen and Northrup (2010) analyze the effects of developing and rehabilitating 582 affordable homes in Rhode Island in 2007 and 2008 using $25 million in housing bond funds and conclude that the activity had a significant impact on the income, corporate, and sales taxes collected by the state. The authors estimate that the $25 million in state funding leveraged an additional $231 million in investments, and the subsequent income, corporate, and sales taxes and fees associated with the total economic activity increased state revenues by roughly $16.7 million during the development period (excluding local taxes and fees).
A study conducted by the Minnesota Housing Finance Agency (2009) provides further evidence that a public investment in affordable housing can leverage significant capital and generate real revenue for state and local governments. Over two years (2006-08), an investment of $260.1 million in affordable housing leveraged roughly $470 million in additional public and private funds and resulted in nearly $1.4 billion in direct, indirect, and induced economic activity. This level of activity generated roughly $62.5 million in state and local tax revenue.
In an analysis of a proposed Pennsylvania state housing trust fund, Econsult (2009) focuses on state-level impacts and finds that for every $1 million in proposed spending, the state stands to gain $82,000 in revenue from the construction of new affordable single-family homes; one-time state revenues would be even higher if the $1 million were spent on the construction of affordable multifamily housing ($86,000) or on remodeling or rehabilitating existing homes ($116,000). These estimates exclude taxes and fees that local jurisdictions may impose. Making these estimates even more conservative, they do not include the impact ...
This industry is totally relocatable. It's not like mining, shipping, petroleum, or even farming. Computers are available everywhere. Cramming everybody into a little spit of land is crazy.
If you really like Palo Alto, you can vacation there. It's not a good budget choice to actually live there.
The literature I just posted wasn't from the point-of-view of the people who would benefit from affordable housing, it was from the point of view of municipalities and states self-interested in seeing returns on investments in affordable housing.
Moreover, how does your logic make any sense at all? If you work in Palo Alto and don't need to travel far, you can be said to have a 'short' commute. If you live further away, then the commute is necessarily 'longer'. If you change jobs -> then the job you left will probably be replaced -> if the job is replaced at the same wages, the person being hired either has to live in an area their wages can't afford or they'll have to commute into it, a 'long' commute and the cycle continues. Your logic really only works if you are only worried about _your_ interests, not the interests of the town itself.
"This industry is totally relocatable. It's not like mining, shipping, petroleum, or even farming. Computers are available everywhere."
Isn't this arguing my point for me? Unless Palo Alto was incorporated solely for the benefit of computer programmers, there are other people who have lived there and are afforded the right to vote on it's future - teachers, cops, firemen, postal workers, janitors or other professions, and these programmers surely don't operate in a bubble but utilize some type of support staff? Governments shouldn't base policy on the singular peculiarities of one profession.
"Cramming everybody into a little spit of land is crazy."
I'd argue encouraging urban sprawl ('drive till you qualify') is less sustainable (i.e., more crazy) than encouraging more densely concentrated living/working areas - but that's not research talking, only my intuition.
The opportunity the government has is to step in and buy housing now, while prices are what they are, and then allocate them while ignoring the capitalist desire to sell/rent to the highest bidder. Their shareholders do not expect 10% YoY growth, after all.
Why not simply allow to increase the density (say skyscrapers) by chaning the zoning regulations to solve the obvious issues?
I mean: If you can pass a law for subsidiaries one can also pass a law to change the zoning regulations.
But yes, that's the real solution: and it's not happening at all in the Bay Area.
The Bay is 40,000 units under what it would take to level prices (not reduce, level) and people are still protesting "ruining the character of neighborhoods" by building.
I get wanting character or style... but legislate that, not less density.
But yeah, this is where regulation is needed, because the financial incentives are to let the market saturate like it is now. If you own property and rent it out, you certainly don't have to keep it well-maintained. What is your tennant going to do, move out? To where?
I'm almost tired enough of this situation to move away from New York. (I say after installing my window A/C units this morning. What year is it!?)
It's great when large building projects take style and such into account as it makes the neighborhood nicer AND the new building nicer, usually. I'm in that situation with a new shopping center just a few blocks from me: it's going to be really nice and add to the area while still being a massive new set of buildings and stores.
However people are dumb and selfish so often have a kneejerk reaction and try to block any development for arbitrary reasons (like height)
By increasing people's wages...demand goes up (more people can afford it). Housing prices go up because there's no increase in supply, and someone gets squeezed out.
There are thousands of shuttered towns and cities around the country because they failed.
For example, the firemen can be based out of the Central Valley. You'd better build with concrete and steel, because the service will be slow.
That works for school too. Put the kids on a bus. Perhaps people with kids should leave the area.
See? There are options. Pay more, or get bad service. You can totally have a city with pure technology companies, just as you can have one with only retired rich people.
I suggest a mix: pay more for some things, and run other things from far away.
All economic transactions hurt someone's value, but they create more value than they destroy. It's a net good.
http://www.economist.com/blogs/freeexchange/2015/03/wealth-i...
As a point of reference, starting salary for a teacher in the Palo Alto Unified School District is $57.5k. Someone who has taught in the district for 30 years with significant post-credential grad school makes double that.
I don't know what the solution is long term but I have a feeling someday this experiment in free market capitalism is going to be considered in similar ways to the USSR's experiment in communism a few decades from now.
IMO the fifties in the US were a total anomaly and they're not coming back ever. It was a time where (more than?) half of the world was taken out of competition due to idiotic economic system of communism, and Europe, the only potential competitor to the US, was still in shambles after the war. The US were a sole economic superpower, no wonder people had it great back then.
Citation needed.
It really depends on how you view the world. If that view is all about money and consumption, then, yeah, you probably won't leave money on the table. There are, however, competing worldviews that offer different versions of the good life, and in my experience, there are plenty of willing to leave money on the table because of it.
The skyrocketing housing prices are caused by strict zoning regulations, and there is absolutely nothing about free market capitalism in strict zoning regulations.
One worked for Google, and lived in a shared house in Sunnyvale because it was the only way to save towards something
The other was a teacher at a fancy school up in SF that will remain un-named. She literally lived in a kitchen pantry in the tenderloin. (Deep pantry - deep enough to fit a bed).
(Of course, because these two sensible policies would not be in favour of landowners. Subsidies demand is.)
Two solutions: either rely on the private sector to provide `reverse mortgages'. Or let the government offer the same product, ie allow people on low income but with lots of land value to defer payment until death or sale.
In addition, phase in land tax over a decade so that people have time to adapt. If you phase out other taxes at a similar rate, you will even get a great increase in land values.
(Basically, land in a jurisdiction that charges less eg income taxes or sales taxes is great for doing business on. So people will bid up its price.)
Property isn't just a market - its peoples homes and communities too - thats the other gaping hole. Why should Grandma need to move away so some Unicorn startup can move in?
Anyway, grandma is a red herring.
> "phase out other taxes" is the gaping hole in that argument.
See eg http://www.georgistjournal.org/2012/10/16/the-unplumbed-reve...
When taxes fall, real estate prices rise by enough to make up for it. Capturing that rise is simple with a land tax. (See https://en.wikipedia.org/wiki/Henry_George_theorem for how that's a rather orthodex statement. Nothing outside the mainstream of economics here.)
The whole process is very economically efficient. Swap taxes on elastic economic activity like work or investing for taxes on inelastic land.
She's a nice little old lady. Well, maybe she isn't nice by modern San Francisco standards; she is strictly Catholic and rather unhappy with the sexual behavior of most residents. Other than possibly that though, you'd probably like her. She keeps busy with plants, lots of noisy clocks, and a bird. Unlike a herring, she does not eat copepods and doesn't swim. She only managed to spawn 7 times, 1 or 2 at a time. She is mostly beige colored, not red. She is several times longer than the largest known herring.
All things considered, I'm certain she isn't a red herring.
Look, if she were a red herring, how could she even sign the paperwork to buy a house in the first place? Why would a herring even want a house, especially one that isn't flooded?
0 - http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.htm...
if this is done on land that people live in, it will still penalizes landowners unfairly. If your land was bought when it was cheap, and the value appreciated, you end up paying tax money that you didn't really "earn" - in other words, it's only fair if you get reimbursed when land value depreciates. Deferring it till death is just delaying the unfair value exchange.
Payment on sale is similar, but slightly less unfair than an annual tax.
This is not about penalizing. This is about two things: first, shift taxation from where it hurts the economy (income tax etc) to where it doesn't do any damage to incentives (land supply is perfectly fixed). Second, making housing more affordable for eg young people.
(There's also effect on NIMBYism etc.)
The actual tax is supposed to be on the annual land rent. We'd only tax the value of the land as an easy and reliable proxy. (And yes, we'd also tax the imputed rent, ie the virtual rent that is short-cut for an owner-occupier. Not just the rent that accrues to someone who rents to other people.)
Switzerland already taxed imputed rent. (Look up Eigenmietwert.)
https://en.wikipedia.org/wiki/Imputed_rent
The main thing that differentiates different ways to tax is: - what does it do for (or against) income equality? - what does it do to economic incentives?
For things like sin taxes (like on alcohol, CO2, etc) you want to muck around with economic incentives.
In general, when you just want to raise revenue, changing economic incentives as little as possible is good. Hence, inelastic things should be taxed.
Land in all its forms, eg mineral resources, or straight up parcels of real estate to build houses on is perfectly inelastic, because the supply is fixed.
Taxing land does well on the equality score as well: richer people tend to own more land; so it's a progressive tax.
that's not true if you count the thing the tax is paying for - social services, or medicare, etc. There's economies of scale that you cannot easily achieve. A high LVT might encourage better land use, and thus, spur an economy to newer hights, which could vastly offset the individual "loss" on that tax (despite the fact that said individual may not feel like they've gained anything).
> The overall benefit to society is good, but to the individual, a LVT is going to (at least, in the short term) be a loss.
The nice thing about investing land tax value well is that this increases land value. (Eg a train station increases property values nearby.) Thus public infrastructure investment can pay for itself in terms of new taxes---without blunting any economic incentives.
See https://en.wikipedia.org/wiki/Henry_George_theorem
(Things the landowner does, like putting a nice house on top of the land are explicitly excluded from a land tax.)
The idea is that you can tax that (imputed) rent without any economic loss---since the landowner doesn't do anything for it, there's nothing to discourage with a high tax.
In principle, one could try to tax 100% of the rent. In practice figuring out the exact rent that accrues due to the land is hard---especially for owner occupied places.
But, we have a good proxy: the value of the land is (the market's best guess of) the net present value of all future income from the land.
So as a proxy, you tax x% of the value of the land every year.
If land appreciates in value over time, the tax rises proportionally. But unlike a capital gains tax, one pays the tax on the entire value of the land, not just the gains since the time you bought.
Of course, a tax on the land changes the sum of the future income streams. And thus changes the value of the land, which changes the absolute value of the tax payment. Fortunately, solving that equation isn't too hard.
In the case of constant interest rates, constant tax rates, constant annual rent:
a: annual rent V: value of the property i: interest rate (per year) r: land tax rate (per year)
a = i * V + r * V
Reordering gives us the impact of land tax rates on price:
V = a / (r + i)
effective tax rate on the annual rent:
(r*V) / a = r / (r + i)
That's an increasing function of r, but it never reaches 100% (unless mortgage interest rates drop to 0%)
So for your example, people buying a house and later just flipping it, would accrue land tax while holding the property, and would be able to pocket any difference in price tax free. (Ie if one could buy and sell on the same day, there would be almost no tax to pay on any gain.) Of course, the land tax itself would blunt a sharp appreciation of the property somewhat.
Not a lot of the above description of the impact of taxes on land prices was specific to a land tax.
A property tax has similar effects. A land tax just excludes houses and other things on top of the property from taxation.
This in nothing even specific to a tax directly on the property. If for some reason you had a property where any shop on top of it would be excluded from VAT, the value of the property would go up. And if for some reason VAT would be doubled on retail in that area, the value of the property would drop.
Because any drop in taxation on other economic activity will lead to higher land prices, people have high hopes that if the government can tap into land prices as a source of revenue, they will be able to reduce these other taxes without loss of revenue (but gains in economic efficiency).
I'd much prefer deliberate and well-planned interactions, with plenty of distraction-free time in between to actually get some work done.
Everything I see seems to indicate that the price of housing expands to fill the amount of money available.
Cheap interest rates managed to change the base price of homes such that the mortgage payment is roughly the same. Now it is individuals & condo developers collecting that difference rather than banks.
Or am I totally off base here?
Increasing property taxes shifts the burden of ownership to the people who have money... though suppose that would get passed through to renters as well.
This applies to many many other areas too. The price of anything in short supply expands as far as possible to change consumer surplus into producer surplus.
If it were apple juice in short supply more people would start selling apple juice and eventually the price would fall. Presumably in Palo Alto you can't just throw up more flats/houses in 6 months and put them up for sale though