Need a land value tax or some sort of hybrid. It's crazy that in the middle of a housing crises it's cheaper/easier to hold onto empty land than retain the housing.
That's being tried by Detroit in the US, decoupling land and structure in property taxes to encourage development. Our current assessment system basically let land speculators off the hook. Businesses think they pay too much property taxes and want to shift to residential, but land speculators are withholding residential stock increasing costs for everyone. The only issue I see with this is that older homeowners living in older homes would receive a massive increase in property taxes.
Detroit may put the land-value tax to the test
www.vox.com
I've posted on here in favour of land value taxes before, but I crunched the numbers last fall, and changed my mind. (Unfortunately, a poorly timed Excel crash lost all of my data.) At the risk of derailing this into a discussion about urban development:
A property is two things; a building and a piece of land. Right now, we tax them both at the same rate. So you can think of a metric that's a land-share ratio; what portion of the property value is the land. If I remember my old numbers, it was around 30% of the value of all the residential properties combined is the land. If you shift the tax burden onto land, then properties with more than 30% of the value being land will pay more in taxes, and those with less of the value being land will pay less.
The first set of winners and losers is, I think, uncontroversial. Vacant lots are 100% land value, so they would have the biggest tax increases -- if my memory of 30% overall is correct, then going to a pure land value tax would increase their taxes 3x. The big winner is high rise apartments, which pack a lot of building value on their land; around 10% of their value is land, so they'd pay about 1/3 the tax under a pure land value tax. So far, great. But there's not all that many of either of these, in the scheme of a city with half a million homes. So the second tier is even more important.
The second big loser are pre-1970s bungalows and duplexes; in Killarney, and Capitol Hill and Windsor Park and so on. High land value; inner city communities and large 50' lots to boot. Low building value; these are 60+ year old houses. On one hand, these are prime for redevelopment. But on the other hand, this represents a lot of our most affordable housing -- not only do the rents tend to be cheap (60+ year old houses), they are in areas that tend to support less expensive transportation; fewer cars, less driving. And to look at it from another perspective, the first random old bungalow I clicked on in Killarney had a property value around $600K. That's about $2500 a year in property tax. If you triple that, it's an extra $400 a month, which is a big cost to a low income household that inherited the property, or to be passed on from the landlord. And yes, that would spur people to sell, but they can't all sell at the same time; there's not enough developers or builders to make that happen. On the other hand, if you're a land speculator holding a $600K empty lot as an asset, is an extra 0.8% of the value in cost per year really going to motivate you?
But whatever you think about the old pre 70s houses, to me the big deal-breaker is the second big winner. After high rise apartments, the second biggest winner is new build suburbs. The land is right at the fringes, so it's worth almost nothing, the lots are much smaller, and the houses are not only much bigger on average, they're also brand new. And within new suburbs, the more expensive the home, the bigger the tax break. And like I said, there's not that many high rises, so a land value tax would largely be shifting taxes away from the newest suburbs and onto the pre-1970 houses.
I didn't look at any numbers beyond residential, but two things seem clear to me at the high level. One is that looking at the city overall, 50% of the land is not commercial, so if a pure land value tax was applied straight across the board, it would shift a lot of the tax burden to the residential side. The second is going back to the building value vs land value metric. Vacant lots aside, the lowest building-to-land values (and therefore the biggest tax increases) are warehousing type buildings, which is a sector that is cost and access sensitive and which Rockyview is currently competing hard to gain. The highest building-to-land are the downtown high rise offices -- we don't need tax cuts to encourage development of this, when we're literally paying office buildings to stop being office buildings.
The arguments for land value taxes (and the few examples) seem to come from places like Detroit and Scranton, where there is no growth happening. We're a completely different place. If we want to discourage land banking, we need to target that specifically -- tax empty lots and parking lots (after a few years of grace) as if they've been built to the allowed density, for instance.
