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2024-03-17-lvt-transition-national-land-trust
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lvt transition - national land trust
exploring an idea for how to gracefully transition to a LVT
national government forms "National Land Trust"
offers to "buy" land portion of mortgaged residential properties
in exchange, land of that property is now taxed under LVT in perpetuity
potentially limit to primary residences and limit amount per person
analysis
example:
Alice buys a 1M home, 500k home value, 500k land value
takes out a 1M mortgage at 5%
25 year amortization
5,816 / mth
post take National Land Trust offer:
500k mortgage at 5%
2,908 / mth
land value tax
1,000 / mth (variable, in perpetuity)
(estimate based on ~perpetuity at 2.4%)
"savings"
1,908/mth for 25 years
cost to government
MMT perspective: mortgaged money is already "printed"
the asset (the land) and the asset (debt) are being transferred from the bank to the government, which is actually a transfer of risk
but the structure of the debt is changed (LVT is like a perpetuity, but, one that grows in proportion to land value increases)
to reflect on more....
this approach could also be useful...
in making housing more affordable to young people now
in dealing with a housing market crash (that would otherwise leave people unhoused)
in effect, government is "setting" a very long term interest rate
usually below the current rate
but not really "setting", because LVT is assessed based on market conditions
in effect, government is buying all the land, and becoming the landlord
in effect, government is refinancing all land debt as 100+ year amortizations (actually, perpetual)
will the reduced monthly cost cause Alice to spend more now?
...resulting in inflation
thus, central bank will raise interest (on the improvements part)
or will she realize she isn't building any equity?
should this be limited to primary residences?
for owners who have already paid off their home equity, could offer a reverse mortgage program
...is this just "the final compensation" for rent-seekers?
if fairly compensating for the land, is this just the government bringing forward the cost, and paying it off in the future, with nothing to gain
probably yes if it was a fixed perpetuity, but, b/c the tax can increased on the property with land value changes, then, there is more to be gained
BUT... doesn't the current transaction price of land already capture some expected future increases?
2024-03-17
#public-policy
#economics
#land-value-tax
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