> ... extremely wealthy landlords ... killing LVT
LVT would not be an appropriate method for targeting tax extraction from extremely wealthy landlords. They would (probably) make up their losses through rent increases and additional service charges - effectively passing on the tax to renters and leaseholders. If you want to target the rich you need to use tools that target their personal and/or business income streams - in the UK, for example: Income, Capital Gains, and Corporation taxes.
Seriously?? If your inquiry concluded this then it certainly was being run on behalf of landlords.
They would no more be able to make up their losses through rent increases than I could make up the loss of being charged extra for a loaf of bread at the supermarket by unilaterally raising my wages. One does not drive the other.
When the supply of housing remains constant and the demand of housing remains constant then prices remain constant. LVT changes none of these variables directly.
Doesn't LVT increase the cost of providing the already existing housing and wouldn't that decrease the supply of housing? This would apply one time when the LVT comes into effect.
No, it just shifts where the land rents go.
Depending on how it was implemented it could lead to a wave of property developers going spectacularly bankrupt and a lot of mortgages secured on the value of land would be defaulted on. Stock market would likely take a hit/tank.
If anything, it encourages building more, so that the income from the rent can be used to the pay the LVT.
Do you have research, or an evidence base, for this?
> [...] it certainly was being run on behalf of landlords.
It certainly was not.
Economics by Paul Samuelson: https://archive.org/details/economics00paul/page/603
Do you have research that indicates the opposite is likely to be true? I'd be really interested in seeing what that is based upon.
>It certainly was not.
It's not unusual among for economists to do this subconsciously due to the incentive structure of the profession.
Since no land can be created or destroyed, the supply-demand curve is fixed. This means that the land tax cannot be passed onto the renter, because the market conditions haven't changed. The rent is not calculated based on the landlord's costs plus some extra, but instead is whatever the market equilibrium price is.
Another way to think about it: if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed?
Exactly. Because they hold monopoly pricing power over tenants they could in theory increase the rents 10 times even today. They don't do that, because better strategy for a parasite is to maximize profit and not to kill the host.
Now, if you abolish zoning or rezone places in addition to a land value tax, it could work as the investor could build more housing for the same land thus splitting the cost over multiple renters which I'm sure is the intended affect but a land value tax won't work without changing zoning laws and at the end of the day, it's all passed onto renters.
That logic only works in a non-competitive market. The reason they don't raise rates is obvious: There are other landlords around and any one landlord raising rates would lose business to the others. If you raise costs for all landlords, however—for example, by imposing a LVT—then there is no risk of defection. Landlords either raise their rates or lose money with every rent payment. Any that don't raise their rates will go out of business to be replaced with others who do. And if you use price controls to prevent them from raising rates despite losing money then they would go out of business without being replaced, leaving individuals and businesses to buy their own property outright rather than renting, in which case they will be paying the LVT along with all the other costs formerly handled by the landlord.
TL;DR: Don't assume that the market equilibrium price is fixed and independent of cost!
City rent is an aggregate monopoly - there is not enough supply of housing to have effect on downward pressure for rents. Demand is overwhelming supply.
Landlords' rent prices are not driven by competition but determined by what the market can bear.
"The producer is unable to pass the tax onto the consumer and the tax incidence falls on the producer. In this example, the tax is collected from the producer and the producer bears the tax burden. This is known as back shifting."
From section "Inelastic supply, elastic demand" https://en.m.wikipedia.org/wiki/Tax_incidence
If the landlords decided to increase rents expecting tenants would foot the bill, they would find out tenants to leave the location because it would be unlivable for them at that cost.
More likely scenario is by introducing LVT the landlord would be forced to do the opposite - ie decrease rent - as other landlords would dump their uninhabited properties back to the market.
Being a landlord is not some easy path to free money. It is a great deal of trouble and expense for (usually) marginal profit, and yet somehow people manage to be uniquely ungrateful for the services being performed on their behalf even as they freely choose to rent rather than own.
Now, if you abolish zoning or rezone places in addition to a land value tax, it could work as the investor could build more housing for the same land thus splitting the cost over multiple renters which I'm sure is the intended affect but a land value tax won't work without changing zoning laws.
Yes, tenants will be better able to afford to purchase a home -- and will be able to sell it more easily should they choose to, either to upgrade to a fancier house or a better location within the community, or to move to another part of the country.
Yes, they will be responsible for replacing the refrigerator and other appliance, and doing the maintenance (said to be estimated at 1% of the cost of the property, but of course that would vary a lot according to whether land value is 20% of the total, or 80% of the total value of the house-plus-land or condo-plus-share-of-the-land.
And for first-time homeowners, there are always some rude shocks.
Those landlords will have to find productive uses for their money, perhaps investing in young entrepreneurs, or developing land to meet the needs of their community for housing.
The problem it targets is not the wealth of landlords. The problem it targets is land owners who are not landlords making money, often as a by-product of consuming a luxury good (a home in a city center), without actually providing the social functions which in principle justify their compensation (anticipating demand, managing housing at scale, high-quality construction on a budget, etc).
