🤔 a market alternative to land value assessment
a challenge of LVT is determining the correct LVT to charge
LVT is the government effectively "becoming the landlord" (ie. "charging rent") for the "land" part of every property
existing property taxes are already set by assessors (ex. MPAC in Ontario https://mpac.ca/)
based on a sophisticated statistical model
based on many factors
and updated with market information
sales of properties
cost of new construction
but, there are concerns
difficulty of estimating value of
"unique" properties
rarely traded properties
ex. Disney Land's land
risk of bias
ex. rich are better able to challenge assessments
ex. there are less mega-properties, so they are exchanged less, and so they are harder to price accurately than less expensive but more common properties
risk of corruption / "capture"
ex. bribing an individual assessor employee to underestimate a certain factor
ex. lobbying by interested entities to affect the policies of the assessor
a properly set 100% LVT on an undeveloped property would result in that property selling for 0$
after an LVT is introduced, this can be used to re-calibrate the rent charge
instead of assessors, perhaps a market alternative:
the government would establish a new type of regulated entity, let's call it a "Land-Bank"
Land-Banks would be the only entity permitted to "own" land
with, say, a 10 year transition period (ie. within 10 years all existing land owners would have to transfer the land portion of their property deeds to a Land-Bank)
Land-Banks would charge whatever rent they want for their land
Land-Banks would only be allowed to keep, say, 0.5% of the rents they collect to fund their operations
from government point of view, this is a 100% tax on land rents, with a 0.5% expense (paid to the Land-Banks) for the cost of assessing rents
Land-Banks would be able to exchange land titles between each other
(maybe) forced to be at $0
open question: what incentive would they have buy/sell?
differing opinions on the value of the land
different operational efficiencies
different relationships with local zoning boards
(for a more extreme version, could "Harberger"-ize this, and say, all deeds held by Land-Banks must be exchangeable at 0$ to each other)
some extra regulations:
all land-renters would need to be arms-length from their Land-Banks
ie. you can't work at the Land-Bank for the properties which you own
presumably some "renter" protections (to provide stability, limit fear of being "price-evicted" frequently)
"rent control"? say, a 5% annual rent increase limit for land with residential properties?
controls on rapid price re-adjustments?
Land-Bank allowed to increase rent by anything, BUT, if they lower the price by some margin within some time period, they must pay a penalty (goes to previous renter)
ie. if Land-Bank doubles the rent, their renter "opts" to leave, but then, 1 month later, they bring the rent back down, then they must
limits on monopolizing
ex. a single Land-Bank couldn't own all of a town or neighbourhood
some other thoughts:
the optics would need to be managed, probably by changing terminology
many "owners" are sensitive to having their "ownership" "taken away"
people can still be said to "own" their property
the "Land Banks - to - Land" relationship could be called "right to rate setting"
Land-Banks would interact frequently with zoning boards, because one of the easiest ways to increase rent is to change zoning
there is already a trend of private equity purchasing homes (and rise of REITs)
this proposal is effectively: "lets accelerate that, BUT, tax it at 99% (the land part)"
this proposal may be more palatable to pro-capitalist/pro-market circles (than government assessment), and may be "better" overall
better being:
accuracy - land rents charged closer to real land rents
cost - lower cost of administration
the tax rate on Land-Banks could be adjusted based on their aggregate performance
(ex. they're doing fine with 99.5%, how about 99.55%?)
how would the transition from "current state of affairs" to the proposed work?
Land Banks would just take out loans and buy properties at market prices?
benefits over government assessors:
high level: multiple competing entities with profit incentive (potentially many hundreds), likely "better" than a single non-incentivized assessor
(analogy: existing governments could perform the lending role of private banks, but prefer to have private banks, because they are better incentivized to loan/invest responsibly/effectively)
the Land-Banks would develop their own models and would be incentivized to model supply and demand correctly
the Land-Banks would be incentivized to keep costs low (because more profits for themselves)