patrick.net

Troy says

Hopefully there is a hell that people who take advantage of others have to go to.
If not, enjoy your free money.
“Nessuna soluzione . . . nessun problema!„

Are you talking about me? I'm an atheist, but how am I taking advantage of anyone?

No offense Troy, but did you get up on the wrong side of the bed? Whatever happened to:
It is not the individual I attack; it is the system. It is not the man who is bad; it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy if it were not to endeavour to reform the law and correct the practice. Winston Churchill, 1909

burritos says

but how am I taking advantage of anyone?

doing your part to dispossess people of their natural right to use the commons.

your actions in buy-to-let single family housing is generally parallel on the moral plane with the more wealthy buying up a locale's breathable air to later lease, if such a thing were possible.

SFH landlords justify their actions by arguing that many people cannot afford to buy their homes, but the reason many people cannot afford to buy is because land is too expensive thanks to all the rent-seeking going on in this sector.

The actual housing good depreciates not much at all and thus the cost of ownership need not be as high as it is. It is the specuvestor class buying up the stock that keeps the cost of real estate as high as it is.

To identify a robber in any economic system one need only analyze the transactions of wealth with vs. without their presence.

Here you acquire an asset for $200,000 and expect a 10% cap rate plus/minus whatever land appreciation/disinflation happens in the future.

Ignoring the value of the lot itself to simplify things, that $200,000 plus another $100,000 in maintenance has a service life of 50 years or so.

$300,000 divided by 600 months is a $500/month capital cost.

Even totally ignoring the land value component, this is a pretty good ROI here, but since there has been no actual wealth creation on your part this is mere wealth transfer from a victim of the system to you.

This is how any economic system fails -- capitalist or communist -- to the naked rent-seeking of appropriation vs actual creation and exchange of wealth.

Landlording, especially of SFHs as demonstrated with these numbers, is not much of a wealth-creating activity, it is largely if not entirely mere parisitical rent-seeking by the well-to-do on those less well off.

The top 10% own over 75% of the commercial land in this country, and this is a dominant fact as to how the rich have seen their real incomes grow much more than anyone else since 1980.

Churchill knew had to get land reform through the House of Lords when he made that speech.

yeah, that House of Lords.

Troy says

Here you acquire an asset for $200,000 and expect a 10% cap rate plus/minus whatever land appreciation/disinflation happens in the future.

Ignoring the value of the lot itself to simplify things, that $200,000 plus another $100,000 in maintenance has a service life of 50 years or so.

$300,000 divided by 600 months is a $500/month capital cost.

That's quite an interesting argument. Almost credible. 2 questions.

1. What should I be doing with my saved capital then? RE equity makes up 15% of my invested assets. I live beneath my means to save. Would you find it less draconian if I just did all stocks/bonds/cash? Or just hide the cash in my mattress? Or should I just not save?

2. Then you're saying that all the people who live in a residence that can afford the rent should intrinsically be able to own that same property if it weren't for all the middle men?

Submit a zip code or city with your information or the post won't mean a thing to the rest of us.

swooshn says

Submit a zip code or city with your information or the post won’t mean a thing to the rest of us.

Fife, wa

burritos says

What should I be doing with my saved capital then? RE equity makes up 15% of my invested assets. I live beneath my means to save. Would you find it less draconian if I just did all stocks/bonds/cash? Or just hide the cash in my mattress? Or should I just not save?

Invest in **wealth-creating** enterprise. This includes new MFH, actually.

The current housing stock nearly everywhere is basically seized with inefficiencies and false incentives that work at cross-purposes. One of them is Prop 13, and I gather Washington state has something similar now that limits annual property tax increases to 1%.

I have no moral problems with people getting returns from capital investments, that's the way the world should work, people risking their savings in private endeavors that result in increased wealth production and thus a higher standard of living.

Landlording is a popular pastime of the ruling class (and has been since we all hopped off the boats), and thus it is quite well protected and incentivized in law.

If I were king I'd establish a tax regime that would disincent investment in capturing land rents. The http://en.wikipedia.org/wiki/Land_value_tax generally does a good job with this.

Then you’re saying that all the people who live in a residence that can afford the rent should intrinsically be able to own that same property if it weren’t for all the middle men?

Partially, yes. There are two components in our housing costs, the cost of the fixed improvements and the ground rent, the latter being what we all pay to secure exclusive use of land on this planet. The more money everyone makes the more we all have to bid up the ground rent component, since there's generally a supply/demand mismatch of quality living space nearly everywhere.

Thus real estate in most places will always be on the edge of unaffordability to new buyers. The best way to fix this is to encourage higher housing density and/or increase community transportation efficiency such that there is an oversupply of viable, livable housing.

By killing the scarcity rents we will be able to invest more in the housing good itself.

But this is where my argument goes into woo-woo land. There are realities with current society and its distribution of intelligence, and its mobile nature, that make blanket pronouncements of "what should be" risky.

Buyers of SFH as income properties do provide one useful service of providing market liquidity to people who need to sell. I can imagine alternatives to serve this need, eg. community land banks that take over property, but this is not necessarily superior to the status quo.

The problem I do see though is that land value taxes are just too low, which results in us over-investing in land value and under-investing in the housing stock itself.

A better tax system would front-load the tax burden on productive people, and remove this tax burden when they come to retirement age.

This would serve to beat down the high cost of real estate for everyone starting out, while providing a secure retirement for those leaving the workforce.

It would also incent the more efficient use of existing real estate. I live in a ~25 year old three-story garden apartment complex with ~30 units per acre. The quality of life here is extremely high, with 3 swimming pools and two tennis courts. I wish the supply of this quality of housing was a lot higher than it is now, by creating this higher-quality housing stock we could have more of our housing expense go to the housing good and less to scarcity rents.

Troy says

Invest in **wealth-creating** enterprise. This includes new MFH, actually.

The current housing stock nearly everywhere is basically seized with inefficiencies and false incentives that work at cross-purposes. One of them is Prop 13, and I gather Washington state has something similar now that limits annual property tax increases to 1%.

I don't see the difference for land lording a a SFH and a MFH. What if my SFH cost the same as an single unit apartment with a 3bed 2bath? I don't see how one is creating wealth and the other is a blood sucking venture.

burritos says

I don’t see the difference for land lording a a SFH and a MFH

yeah, it wasn't obvious to me until I got into the philosophy side of it.

Both SFH and MFH have a land component and a improvement component, though of course the SFH is generally heavier on the land value side.

Both LLs provide services to people who want to live in this type of property but don't have their act together for whatever reason well enough to be able to commit long term.

Both LLs will generally benefit greatly over time as the general wage level rises with inflation to put their monthly net more in the black, with no new incremental contribution from them that creates this value. Same thing with the tendency of most communities to become more developed and livable over time, the established LLs reap the benefits of the higher rents that can be commanded from the higher quality of life, without contributing anything to these developments (other than the property tax and income taxes they pay).

But at the end of the day the MFH property is in fact a new contribution of capital wealth that benefits the community with increased housing supply.

When an investor builds a new MFH unit the community can see the wealth creation.

But when an investor picks up existing SFH, there has been no wealth creation, just a new intermediation between the land and the tenancy holder.

To the extent that LLs provide a useful service with their activities I'd like to see it concentrated on creating and maintaining new livable MFH communities, leaving the SFH stock to owner-occupiers.

But MFH LLs have their own economic negatives from the general trend of rising wage inflation being captured.

All capital return on housing is predatory leeching to some extent. We can justify it as "business" and the "free market" but at the end of the day the money the LL takes as rent in the http://en.wikipedia.org/wiki/Economic_rent sense is windfall profit that impoverishes the people that find themselves having to pay it.

The game of Monopoly was originally designed by a person who shares my philosophy about the evils of landlording and rent-seeking, how it makes a few winners and those who don't win the game poorer.

As public policy I think we should work to encourage home ownership and discourage landlording.

How to do this best of course is entirely up for debate, but it's also a pointless debate since the detrimental nature of landlordism is far from being recognized by the public as of now.

That's the first battle, one that us Georgists have been losing for 100 years now . . .

burritos says

Go ahead, bash away.

Why bash away? If you calculated the return based on reasonable assumptions and it seems to have good return, good work!

As to what seems to be taking over this thread, I don't really see the problem with landlording. Landlording fills in several necessary markets, for example:
1) short-term housing
2) medium-term housing
3) people who need mobility for work or other reasons
4) people whose risk or investment profile doesn't involve home buying at the present time
5) people who don't want to deal with maintenance
6) people who are new to the area and don't know where to live yet
7) people who want to check out the neighborhood before buying

As an example, if you're in the first three categories, home buying is incredibly inefficient because of transaction costs. In a normal market, landlording can fill in the gap, allowing tenants to pay a little extra money, in the form of profit to the landlord albeit less than the transaction costs of home-buying, in exchange for the lack of commitment. That's a good thing!

corntrollio says

if you’re in the first three categories, home buying is incredibly inefficient because of transaction costs

I have an idea: let's reduce those "transaction costs".

landlording can fill in the gap, allowing tenants to pay a little extra money, in the form of profit to the landlord albeit less than the transaction costs of home-buying, in exchange for the lack of commitment. That’s a good thing!

yes, landlording is very good for landlords. There are other arrangements that provide the utility that 4,5,6,7 require.

There can still be landlords in a sustainable economy as long as their capital returns are concomitant with their risk-adjusted capitalization.

Landlording, however, goes far far beyond that as rising wages, increasing density, and improving communities have greatly increased land values, giving long-term landowners added wealth for zero incremental contribution.

Whenever someone gets something for nothing in an economy, somebody else is being screwed.

The http://en.wikipedia.org/wiki/Land_value_tax on commercial property is a good first-cut at returing long-run sustainability and affordability to the system.

A large part of the reason the US is screwed now is due to the land question.

Both over the decades as it has created a dependent class, and more recently as unbridled speculation and lending in land destroyed the nation's finances.

Troy says

There are other arrangements that provide the utility that 4,5,6,7 require.

What do you suggest?

Troy says

I have an idea: let’s reduce those “transaction costs”.

Easier said than done. Realtors cause a lot of transaction costs, but there are other things too, such as bankster fees. Property is a very illiquid market, so that's another transaction cost, although harder to quantify to a dollar amount.

Landlording is a more efficient market. The tenant relationship is regulated in many municipalities to curb abuses, and there is lots of competition. There are some places like SF that screw things up with rent control, Prop 13 statewide, bad planning department, etc. but many places do a better job.

corntrollio says

As to what seems to be taking over this thread, I don’t really see the problem with landlording. Landlording fills in several necessary markets, for example:
1) short-term housing
2) medium-term housing
3) people who need mobility for work or other reasons

Yes. I've had a few tennants who wanted a SFH because of children and all, but didn't want to buy. What kind of options would they have in a world with out SFH land lords.

corntrollio says

What do you suggest?

for 4,5,6,7 somehow building up our MFH housing stock to create an oversupply situation and having the renters hold the whip hand wrt rents.

Coops, semi-condos, community-managed, high-quality privately-managed apartments.

For a $160B/yr national investment we could put the 400,000 illegals who lost their job:

http://research.stlouisfed.org/fred2/series/CES2023610001?cid=32310

to work with $100,000 in wages and $300,000 in materials. That's enough to build 800,000 quality MFH units a year, 4000 200-unit buildings, one for every 75,000 people every year. After 10 years we would have built one unit for every 400 people, greatly reducing the undersupply problem of housing for people who desire less attachment.

Property is a very illiquid market, so that’s another transaction cost, although harder to quantify to a dollar amount.

This can be solved with a community land bank coupled with high land value taxes. With high LVT, the nominal cost of real property falls to the depreciated cost of the improvements, making it much more affordable and manageable for local government to manage instead of the profit-seeking landlord class.

In this regime buying a house would be reduced to bidding on how much rent you wanted to pay to the community (plus depreciation, maintenance, and wear & tear), and it would be a quasi-free market model with total community capture of site value.

Theoretically. I fully admit all the above is just half-baked ideas.

burritos says

What kind of options would they have in a world with out SFH land lords.

god bless your self-serving little heart.

Troy says

it would be a quasi-free market model with total community capture of site value.

So basically if you regulate the hell out of the market and engage in central planning, it becomes quasi-free market. That seems paradoxical.

Pennsylvania does have land value taxes, by the way. Is there evidence that Pennsylvania has lower transaction costs or higher liquidity of property market? Even in states that don't have a formal LVT, property tax is a form of land value tax -- it just taxes improvements at the same rate. Changing to an LVT might be a good reform in itself, but I don't know what that has to do with eliminating the rental market as we now know it.

corntrollio says

Changing to an LVT might be a good reform in itself, but I don’t know what that has to do with eliminating the rental market as we now know it.

LVT encourages density. It eliminates much of the windfall profits out of the rental market.

In my personal case, the assessor has my current property at $52M in land value and $43M in improvements.

Gross on this place is around $10M per year. A 10% LVT or 75% land rental value tax would totally fix the state's budget problem and also allow us to cut income and sales taxes.

A LVT regime on SFH would capture most of the ground rents the tenants are paying to the landlords.

The revenues on this are immense, enough to destroy the capital returns that the parasites enjoy on their properties, converting this into tax revenue that could reduce or eliminate other tax burdens.

See my icon for more :)

Troy says

burritos says

What kind of options would they have in a world with out SFH land lords.

god bless your self-serving little heart.
“Nessuna soluzione . . . nessun problema!„

You own a property that is worth $52M and you call me a vampire? Sheesh.

You brought out an interesting thought exercise, but do you believe that this is a likely or even remote scenario, or is this utopian real estate vision something you dream of when your bored? Given the history of land lording and this being the U.S. where greed is good, I don't see how this would evolve.

As for me being self serving, I don't deny hoping for the RE prices going up giving me more equity. Increased equity gives land lords options. However, with the money I've saved and earned, who's to say I didn't create value with the goods/services I exchanged earning that money? Why must I create even more value when deciding how to use that money? Why can't I just bank it? And that's how I view RE investment. Not as an investment, but as purchasing a stored value to hedge against inflation. Not something that appreciates beyond inflation.

It's not my fault that society demands never ending entitlements/goods/services that they can't afford what without having a government print its fiat currency. Society lives beyond its means. I try to live beneath my means and use the surplus to protect my future. I do invest in stocks/mutual funds. Whether my apple or exxon stock creates value more so than the living abode that houses my military family who has no interest in owning a property, well that's debatable.

So while I appreciate your disdain I don't see how it's going to turn into what you've envisioned.

burritos says

I don’t see how this would evolve.

me neither.

I only have a leased tenancy in that $100M property, btw.

However, with the money I’ve saved and earned, who’s to say I didn’t create value with the goods/services I exchanged earning that money?

Show me your receipts and invoices of the wealth you've added. You bought existing housing stock and are leasing it out. Removing you from the equation does not alter the wealth that exists in trade.

You are an unnecessary intermediary, taking your cut. You are the parasite in this picture.

If you are arguing that you paid good money for your property, that's the same argument used to justify retaining the human chattel slavery system back in the 1800s.

One of my favorite Georgist quotes: "To prove a legal title to land one must trace it back to the man who stole it" -- David Lloyd George.

Why can’t I just bank it? And that’s how I view RE investment. Not as an investment, but as purchasing a stored value to hedge against inflation. Not something that appreciates beyond inflation.

Indeed, this is a good hedge against inflation -- well, wage inflation, since only wage inflation pushes up property values.

But Winston Churchill covered the difference in land ownership back in 1909 when the Liberal Dems were campaigning very seriously to institute a tax on the rental value of land (they got it through the Commons but the Lords blocked it, precipitating a very serious constitutional crisis).

Anyhoo, Churchill:

"Land, which is a necessity of human existence, which is the original source of all wealth, which is strictly limited in extent, which is fixed in geographical position. Land, I say, differs from all other forms of property in these primary and fundamental conditions.

"Nothing is more amusing than to watch the efforts of our monopolist opponents to prove that other forms of property and increment are exactly the same and are similar in all respects to the unearned increment in land."

http://www.cooperativeindividualism.org/churchill_monopolyspeech.html

So while I appreciate your disdain I don’t see how it’s going to turn into what you’ve envisioned.

It's not. The system is far too corrupted to change. We can't even repeal Prop 13 on commercial property here in California.

If I had the capital I'd do something similar as you, but in Tokyo. There is a crying market need for foreigner-friendly housing there, and I'd like to think managing a 6-12 unit complex would be worth the hassle and give me a free place to live in this world.

This was my experience living 1995-2000 in Tokyo, I leased a nice 25m2 place from a old Japanese dude and his wife who bought in 1986 apparently. They lived on the first floor, his son in one of the 2nd floor units, and they had 3 more units paying the mortgage.

Here's a pic:

http://goo.gl/maps/OBe6

The merit of this arrangement compared to investing in SFH are signal. For one, there were 5 households living well in a ~120m2 land footprint. This is a very economical use of land. In Georgist terms the owner was making maximum utility in the available space.

Additionally, the owner was resident in his place. This is very good for social reasons, just like (almost) all classes riding the same trains in Japan results in a more harmonious society.

I'd like to do something similar in Japan, but land prices are pretty freaking high -- Y1,400,000 per meter are common in the nice areas, that's $70M per acre.

Here's a 264m2 lot for $7.2M:

http://used.realestate.yahoo.co.jp/bin/cdetail?rps=6&pf=13&md=key&key=%C6%EE%CB%E3%C9%DB&code=a2104232901atho

the reason this is so expensive are several. One, Japan has a very low property tax, almost nothing. 2ndly, interest rates are half ours. 3rdly, as you can tell in the picture, density is allowed to be insane. This 30,000 sqft lot is zoned up to about 2000 m2 of living space, which is 40 or so units (10 x 1B, 25 x 2B, 5 x 3B), making the capital cost of the land about $500/unit/month.

Anyhoo, I find it sad that Japan, like us, doesn't understand the power of the land value tax. The total land value of Tokyo alone is around $25T or more, an immense tax base that nobody can see.

Same thing here.

Troy says

Show me your receipts and invoices of the wealth you’ve added. You bought existing housing stock and are leasing it out. Removing you from the equation does not alter the wealth that exists in trade.

You are an unnecessary intermediary, taking your cut. You are the parasite in this picture.

If you are arguing that you paid good money for your property, that’s the same argument used to justify retaining the human chattel slavery system back in the 1800s.

Yes, I'm arguing that I'm using money that I earned(not inherited) that was independent of the purchase of the property. I could argue, value was created during the original earning of it. Why am I obligated to create additional wealth with my savings protection strategy. If I bank it, that's the ultimate middleman. They create no wealth, just shuffle money between people and take their cut.

Also, in this last downturn, my 2005 property was purchased for 200k. Today, it might sell for 145k. So I've lost my down payment on paper. In essence I've sheltered the tenant(who buy the way can buy a similar property for less but chooses to rent cause of his life circumstances) from this financial loss.

Troy, do you live in a world where people should not be held accountable for their own choices in life?

If someone works hard and picks a good career path, they'll more than likely be fine. Or should everyone just be guaranteed a house regardless?

Some people can't afford houses, period. It's just the way it is. Of course, the first instinct of any American is to blame someone else. "It's _____'s fault I can't afford a house! It's _____'s fault I'm poor!" Burritos should be able to do whatever the hell he wants with his money, he earned it.

Troy says

The merit of this arrangement compared to investing in SFH are signal. For one, there were 5 households living well in a ~120m2 land footprint. This is a very economical use of land. In Georgist terms the owner was making maximum utility in the available space.

Following your argument to the logical end point SFH should be simply outlawed and everyone live in MFH making the best use of the land for everyone. Oh yea that's been done, russia, eastern europe, etc..

Why is ownership in condo's and townhouses any different from SFH. What makes SFH special? Why are landlords with MFH any different than SFH. Your arguments don't make any sense. Shelter is shelter whether it stands alone (SFH) or is part of a larger structure. Are townhouses and row houses (also called zero lot line) SFH or MFH and should landlords be allowed? It's all a bunch of crap.

bob2356 says

It’s all a bunch of crap.

No, the idea that landlording is really providing a necessary service is a bunch of crap.

Ideally I'd like to see all LLs thrown into plastic shredders and the actually productive people of this country able to acquire living space on this planet without having to outbid the people with thicker wallets who are actively looking to enslave them. That'd be great.

But my thoughts above are just an acknowledgement that if most everyone had their choice they'd pick SFH, so it behooves us to zone for SFH, and SFH zoning produces market distortions since it is an artificial constraint on the housing supply.

MFH, with its commons, and inherent on-site management potential, is in fact different from SFH in several respects.

The capital investment in a SFH property is immensely different to MFH, both in construction and long-run maintenance. MFH is much more suited to the management model, while any rental SFH is just an unnecessary intermediation by a parasitical leech taking advantage of a gap in how we as a society manage the land commons known as "real estate".

Japan is actually active in building quality Quango-managed MFH:

http://www.ur-net.go.jp/profile/english/toshi/index.html

it's an interesting idea and at any rate a much better use of government than our throwing tens of billions of section 8 vouchers at low-income people to subsidize their LL's mortgages.

Supply of multifamily in most places really sucks. It doesn't have to, but that's what laissez faire produces, the cheapest shit for our throwaway tenant class.

It doesn't have to be this way, we could as a nation redirect the massive chunk of our monthly paychecks we blow on bidding up the price of housing
towards more productive long-run investments in actual wealth.

I don't pretend I have any answers, I'm just throwing ideas out. But I do know that the status laissez faire quo is screwing over millions of Americans and is only going to get worse as more and more land from the commons is snatched up as this balance-sheet recession continues to create fire-sale conditions in the land market.

StoutFiles says

Some people can’t afford houses, period. It’s just the way it is.

Burros' actions, along with the specuvestor operators alongside of him, are exacerbating this.

Houses are in fact a very durable good. Their amortized construction cost + maintenance is a few hundreds of dollars a month, a mere fraction of the typical Section 8 voucher.

The land component -- which is driven by expectation of future appreciation of the site value and the NPV of the rents this property will collect over the infinite horizon is what makes real estate, especially SFH with its lower density -- "expensive".

It doesn't have to be this way. We could, for example, shift the Federal income tax to a land value tax. This is the idea of my icon to the left, the "Single Tax" idea. While government is probably too large these days to fully cover the modern welfare/warfare state, the LVT could pay for most everything besides FICA and Medicare, if we make some needed cutbacks in military.

StoutFiles says

Burritos should be able to do whatever the hell he wants with his money, he earned it.

That way lies permanent poverty for millions as land -- a good completely fixed in supply -- becomes increasing monopolized by the haves.

http://en.wikipedia.org/wiki/Progress_and_Poverty

It doesn't have to be this way.

burritos says

So I’ve lost my down payment on paper. In essence I’ve sheltered the tenant(who buy the way can buy a similar property for less but chooses to rent cause of his life circumstances) from this financial loss.

Your nobility is touching.

burritos says

Why am I obligated to create additional wealth with my savings protection strategy. If I bank it, that’s the ultimate middleman. They create no wealth, just shuffle money between people and take their cut.

You're not obligated to do anything with your hard-earned money.

My larger point is that there's an immense hole in our economy -- the private capture of publicly-created value. You didn't create the value of that $1650/mo rental, Uncle Sugar is with their housing allowances and decision to privatize family housing for soldiers at (I assume) Ft Lewis.

You're perfectly free to vector in on this leak and snatch what yield you can.

If I had my way we'd find ways to close it, but I'm pretty sure I'm not going to have my way anytime soon, so, like I first said above, enjoy your free money.

It's just another brick in the wall.

Troy - I don't see your ideas as being realistic.

1 - not everyone WANTS to buy. Some people move frequently for various reasons.

2 - in theory, yes, if you eliminate landlords, the prices would probably go down...in isolation. However, your idea is that it's bad for the economy and that everyone would have more money if this system of landlording didn't exist. If everyone had more money, guess what would happen? Prices would get driven up.

3 - The idea of providing disincentive to owning landing and renting it is dangerous. Now you get into your personal values of what is good for society. You know what...I think iPads are stupid and cause people to waste too much time. Lets tax Apple more so they don't make them.

There are plenty of products in our economy that I don't think have any real value or contribute anything to the progress of our society. But that's my opinion. Someone else might think these same products are great.

*For the record, I dont hate iPads - it was just an example. :)

1 - not everyone WANTS to buy. Some people move frequently for various reasons.

I see a possible future where MFH and perhaps even SFH housing for people who like moving is more on the hotel model. No leases, plenty of supply.

This requires building a lot more supply.

If everyone had more money, guess what would happen? Prices would get driven up.

yes, I've thought about the feedback effect, that's why we need to solve the supply part too. Due to basic physics and topology it is generally impossible to economically create more SFH in a given area, but it is not impossible to create an overabundance of MFH supply. This oversupply will drive scarcity rents to zero, and it is the scarcity rents that make real estate so expensive.

Housing supply can also be expanded in a tangential way by more aggressive investment in mass transit, to reduce the time and cost frictions of moving around our urban centers. There is some hope that the supertrain to Fresno will open up the land market more, but I have my doubts, since a daily commute is pretty spendy. Same thing in Tokyo, you can commute from 50 miles out by Shinkansen but it is hella expensive.

Note though that in a LVT regime scarcity rents go to the state, not the LL. -- LLs theoretically/ideally get returns on their management labor and any capital investments they've made into the fixed improvements.

Even in my utopia there will still be non-uniformity and thus scarcity rents. Views will be different, and not every homesite will be beachfront. But for those who wish to economize there should be an oversupply of quality, livable "above average" housing alternatives in every community.

The idea of providing disincentive to owning landing and renting it is dangerous.

yes, it is a "dangerous idea". Discovering the Georgist argument has been more a curse than a boon.

But I share it with some esteemed people, foremost of which is probably Winston Churchill.

http://www.cooperativeindividualism.org/churchill_monopolyspeech.html

specifically the Rewards for Service and Enrichment Without Service sections, in which WSC details why land is different from other forms of private investment and capitalism in general.

This is echoing the basic thesis of http://en.wikipedia.org/wiki/Progress_and_Poverty of course.

The funny thing is, the most successful economies on the planet do something similar to a LVT -- Hong Kong and Singapore.

In Hong Kong the state owns all the land. Private Equity is forced to invest in actual capital. Singapore, same thing I think. Singapore has the #3 per-capita GDP in the world.

Additionally, the high-tax high-welfare societies of the Norway-Sweden-Denmark region also get some of this LL-constraining policy through the side door of high taxes on income and a generous state-owned social safety net.

The UK is rather stupid in their housing voucher program, a wealth transfer system similar to our own stupid Section 8 bullshit.

Ironically, in Communist China, I gather they've now let the landlords and specuvestors run free with their 2007 land reform. Communist Vietnam also now apparently has a serious problem with the landlordism, something the newly established government in the mid-1950s actually applied a rather absolute solution to, but the LLs have crawled back like the cockroaches they are.

There are plenty of products in our economy that I don’t think have any real value or contribute anything to the progress of our society.

As Churchill said, Land is different than "products". Imagine a future world where corporations have monopolized all the breathable air and potable water in nature, and everyone else is forced to purchase their air and water from them.

This is endgame extrapolation of the individual morality of the LL class pursuing their little corners of the Monopoly board.

LLs did not create the land, the Great Creator did. LLs did nothing to create the site value of the land either, yet they profit greatly from it. This is such a good deal the top 10% of the country owns 75% of the commercial land. Go to any third-world shithole and you see a similar poverty of land distribution.

Thomas Jefferson, 1785:

"Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a commonstock for man to labour and live on. . . . it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small land holders are the most precious part of a state."

The Vietnam War was actually a land revolt inside a Cold War confrontation:

"The "Land to the Tiller" program has reduced farm tenancy from around 60 percent three years ago to almost the vanishing point. It has thus undercut the main theme of communist propaganda vis-a-vis the rural population.

"Our farmers have not been merely passive recipients of government largesse but have enthusiastically participated in the program to improve their lives. They are using the additional income from the sale of crops formerly paid in rent to develop the rural economy, thus contributing to the growth of the nation. Our farmers have now a new sense of personal worth and dignity and have become masters of their destiny, free men with reasons to preserve their freedom."

http://www.presidency.ucsb.edu/ws/index.php?pid=3790#axzz1NX2P5419

Land is different.

True - you do make some very good points. Land is definitely different than products, and I do agree with a lot of what you say.

Troy says

My larger point is that there’s an immense hole in our economy — the private capture of publicly-created value. You didn’t create the value of that $1650/mo rental, Uncle Sugar is with their housing allowances and decision to privatize family housing for soldiers at (I assume) Ft Lewis.

Nor did I create any value when I invested in exxon stock. Oil arguably is a necessary good for a modern civilization to exist. I have not contributed anything to the situation except cash. With the cash I am deriving a dividend and benefiting from capital appreciation. This too is a parasitical situation cause if people weren't able to invest in oil and garner profit from it then the prices of oil could be low and then people would be able to maximize their productiveness without paying an inordinate amount of money to use this necessary commodity.

burritos says

Nor did I create any value when I invested in exxon stock.

yes, oil is another wealth sink, and the great fortunes that the oil industry collected since 1859 were largely a theft from the commons.

Georgism has the answer for that -- the http://en.wikipedia.org/wiki/Severance_tax

This severance tax is used for good measure by the secret Socialists up in Alaska -- their "permanent" fund distributes thousands of dollars a year in a citizen's dividend and also has $60,000 per capita or so saved up, all from severance taxes on the state's oil.

Norway does it even better -- they have a $100,000 per capita pension fund built up from severance taxes from their oil sector. Every Norwegian is basically rich. Their form of "Socialism" works, LOL.

This too is a parasitical situation cause if people weren’t able to invest in oil and garner profit from it then the prices of oil could be low

This is somewhat garbled. Oil -- well gasoline for me -- has immense utility -- I will gladly pay $10 a gallon when prices get that high, and so will most other people reliant on internal combustion engines.

Big Oil threatens to cut production if it doesn't pocket every last penny of that profit, but that is bluffing, though it is indeed a powerful bluff. Australia's political system apparently blinked over the idea of a 30% resource profit tax in its primary sector and the threats made by Rio Tinto et al to take their toys and go elsewhere.

Norway overcame this bluff -- the industry threat of boycotting Norway's fields because of the high severance taxes -- by just building up their own state-owned oil recovery capital and know-how. This allowed them to offer "take it or leave it" tax deals to the oil majors.

Georgist taxation is very powerful in that in directly targets some very large http://en.wikipedia.org/wiki/Economic_rent sectors in the system, the "bad" profit margins that continuosly enrich the rich and impoverish the poverished.

It is impossible to make oil "cheap" -- this is a basic supply/demand question like land -- but it is demonstrably possible to direct the "windfall profits" -- aka economic rents -- from the industry to government. This is the very basis of Georgist tax regimes, and why William F Buckley liked it:

http://www.cooperativeindividualism.org/buckley_hgeorge.html

IMV Georgism is really a very "lean and mean" form of Capitalism, one that encourages wealth to focus on wealth creation and not rent protection.

Marx called this regime "Capitalism's last ditch".

Troy says

It’s all a bunch of crap.

No, the idea that landlording is really providing a necessary service is a bunch of crap.

Ideally I’d like to see all LLs thrown into plastic shredders and the actually productive people of this country able to acquire living space on this planet without having to outbid the people with thicker wallets who are actively looking to enslave them. That’d be great.

So who do people rent a SFH from? Where are your ideas for people who want to rent a house? Or are renters just scum suckers who must be segregated into MFH renter ghettos (ve have veys of making you rent) so the Georgian upper crust SFH homeowners aren't forced to deal with the lower classes.

I'm a renter and a landlord. I have not intention of buying a house where I am since the job is a locums and we will only be here a couple of years. Am I supposed to jam my family and belongings into an apartment complex to satisfy some nonsense elitist ivory tower semi socialist idealist fantasies?

I repeat it's all a bunch of crap. Shelter is shelter. If max utilzation of land is the goal then owners are no different than renters and everyone should be in MFH. Georgists are just one more group of we know what's best for other people hypocrites.

Perhaps you haven't noticed but any time there is an attempt to foster social policy by taxation it is a disaster.

bob2356 says

So who do people rent a SFH from? Where are your ideas for people who want to rent a house?

For one, I'd like to see higher-quality MFH compete with SFH. I'm perfectly happy with my garden apartment, there's 600 units on 20 acres but there's more grass, playground, and pools here than the kids know what to do with. If management had bothered to build more underground parking there could be even more commons space for people to enjoy.

The quality of life in this MFH complex is much, much greater than the $600,000 wall-to-wall townhomes with mere meters of margin between concrete driveway slabs that surround the complex.

Noise is not a problem since for some reason this place was built pretty sound-proof. Plus I have pretty upperclass neighbors, I must admit.

Secondly, I'd perhaps like to see city government get into the land management business via land banks. The local oversupply of actually livable MFH would turn SFH living into a marginal luxury, lowering the actual cost of SFH due to lesser demand for it, and also the LVT structure would reduce the actual cost of acquiring SFH to this rental value.

Instead of all this jazz about realtors, title companies, $400,000 mortgages, the SFH market would be converted into people bidding on tax leases on property, with those willing to pay more getting the property as it comes onto the market. Selling a SFH would be simply ceasing the payment of the LVT and getting charged for refurbishment costs necessary to restore the place to how the tenant received it.

This is what I meant by the hotel model above.

I admit this is half-baked compared to fee simple tenancy and introduces as many problems as it attempts to solve. It's just a rough idea.

Alternatively, we could just impose a 75% rent tax on SFH, basically driving the buy-to-let people out of the market and leaving the supply available for actual owner-occupiers. Vacancy could be handled by the land bank idea, people wishing to leave could sell the property back to the bank and go, and the community would manage this.

The overhead on this could easily be paid for by the community collection of ground rent, money that in my case is going to some management company in Boston and then god-knows-where.

Am I supposed to jam my family and belongings into an apartment complex to satisfy some nonsense elitist ivory tower semi socialist idealist fantasies?

"jam". See, thats' the serious bias you have here defending the status quo.

There's no reason MFH could not be superior to SFH, it's the screwed up system we have now that is making it so.

My ideas may be fantasy, but the current reality for millions of Americans is simply peonage, paying the mortgage on someone else's property in a neo-feudal system.

Perhaps you haven’t noticed but any time there is an attempt to foster social policy by taxation it is a disaster.

tell it to the swedes.

Still didn't answer the basic questions. Why should SFH exists for owners at all. If MFH is better for renters, then why not for owners? If only owners have SFH then are renters only allowed to exist in MFH? Why would that be? What makes owners special, why under your systems would renters be shut out?

What social policies has Sweden implemented by taxation? Health care, education, and retirement income are not social policies, they are public services. Sweden was in the forefront of deregulation in Europe and has been known for free trade for decades.

Troy says

tell it to the swedes.

The Danish do the housing market better. They have a more direct secondary market for mortgages, which either cuts out the middleman bankster or cuts the bankster's fee to a fixed and small margin. In addition, you can refinance below par if you agree to a higher interest rate. This is far more efficient than our bankster-driven and government subsidized system.

Troy says

Norway does it even better — they have a $100,000 per capita pension fund built up from severance taxes from their oil sector. Every Norwegian is basically rich. Their form of “Socialism” works, LOL.

This in itself is an example of vamprism. I don't see how someone gets a free ride on the financial benefits of oil for doing nothing except for being birthed out of a Norwegian birthing canal. iWhy should Norway citizens derive any financial benefit from oil in the ground. They didn't do anything to create the wealth. Instead of hording these 100,000 per capita pension, the price of oil should be reduced so that poor non oil producing nations can afford the oil for their own existence.

bob2356 says

Why should SFH exists for owners at all.

Because having a spot of ground to call your own on this planet is a basic human right.

Georgism doesn't eliminate this right, it just makes people pay the market price for it -- not to a LL, but to the community that is largely responsible for the site value to begin with.

In the purest LVT system, those economizing on a below-average amount of land in ground-rent terms would actually see a citizen's dividend, exacted from those desiring the above-average locations.

There are associated problems with this -- land values rising and people losing their security in tenancy by higher LVTs, but they are solvable.

What social policies has Sweden implemented by taxation? Health care, education, and retirement income are not social policies, they are public services.

I generally buy the theory/observation that "all taxes come out of rents".

This is why I don't oppose a much higher taxation level -- across the board -- in the US, instead of trying to load a 60% top marginal rate only on millionaires.

http://www.wealthandwant.com/themes/ATCOR.html

The more that is taxed out of incomes, the less we have to bid up the price of land. It is something of a free lunch, as long as the revenue generated from these taxes is returned to the people who pay them in the form of public goods and services, like in the Nordic countries.

Now, I don't have the first clue about the housing situation in the Norway-Sweden-Denmark triangle. It could suck or be great.

A 10-second google yielded this:

"1 400 000 tenants lives in nearly 850 000 dwellings owned by 300 public housing companies “allmännyttan” in Sweden."

http://www.socialhousingaction.com/social_housing_in_sweden.htm

Sweden was in the forefront of deregulation in Europe and has been known for free trade for decades.

Georgism is no way incompatible with free-trade. He was a major proponent of it.

http://mises.org/daily/1592

burritos says

the price of oil should be reduced so that poor non oil producing nations can afford the oil for their own existence.

this argument has merit, though in this world we collectively allocate success and failure at the state level. Norwegians have the government they deserve, as does everyone else. There is no over-arching world state framework within which we can collectively allocate the world's wealth, like how it is done in the Eurosocialist areas.

However, the price of oil is what it is. Socializing its ownership cannot make it less expensive, this is driven purely by supply and demand, and how much the last successful buyer-bidder is willing to pay for it.

If people want to burn oil, they need to get a job. The price of gas is a major ass-spreader in Norway, and wisely so. This discourages the locals from wastefully burning up the merchandize.

Troy says

doing your part to dispossess people of their natural right to use the commons.

your actions in buy-to-let single family housing is generally parallel on the moral plane with the more wealthy buying up a locale’s breathable air to later lease, if such a thing were possible.

You really are a nutjob. So, when I rented out a room in my last house, was I being a scumsucking leech landlord? Should I not have leased the room out at all, or should I have just let anybody that wanted to live there walk right in and set up camp for free.

Troy says

Because having a spot of ground to call your own on this planet is a basic human right.

Everybody in a free country has that right. Don't be melodramatic with this bullshit, which is that everybody ought to have the right to claim any land or home as theirs at any moment of their choosing. That's like a 7 year-old whining about not getting into fucking med school.