@JethOrensin You have demonstrated either an inability or an unwillingness to engage with the topic seriously. Since this only seems to be getting worse, despite the fact that I engaged with your points in good faith and responded politely, I think I’ll leave it here.
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IMO if living in some place is valuable, and if there are fewer houses than people interested in living there, then rent prices won’t change (or if they do, please explain why).
Buying houses could become cheaper, but because of the tax, it would still be expensive in the long run.
All kinds of investments (real estate or stock market) are approximately equivalent in the long run because if (for instance) the stock market were more profitable, then people would only invest in the stock market and not in real estate.
Let’s say you can expect to make 5%/year in the stock market. Currently, an apartment costs 1 million (800k land, 200k construction cost). The rent is 50k/year (5%).
Now the governement applies a tax of 5% on land, i.e. 40k/year. The house price will go down to 200k. So the investor who buys the house only pays 200k, still earns 50k rent every year but pays 40k taxes, so the net profit is 50-40 = 10k, still 5% of the initial investment. But the difference with the old system is that
- Ordinary people who buy their house will still have the burden to pay a yearly tax, even after they retire and their income gets lower
- Investors who would formerly invest 1 million in real estate would invest 200k in real estate and 800k in the stock market.
I’m not sure it’s an improvement compared to the current system.
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With a high tax on the unimproved value of land, and no taxes at all on improvements, we strongly encourage the improvement of land. Rent prices would change because the supply of rental units would increase.
More importantly, due to the increased revenue from the LVT, the state can lower income taxes which means tenants would ultimately be much better off.
Ordinary people who buy their house will still have the burden to pay a yearly tax, even after they retire and their income gets lower
By then, they should have been able to save up by investing what they gained from paying less income taxes. Retirees who weren’t able to save enough money to live off of will rely on assistance from the state. They will get what they need. Now, they get much more than they need, because they’ve benefited from increasing land rents throughout their lives. As explained, this is unjust and inefficient. I’m not saying they’re doing anything wrong, by the way. We can recognize the macro-economic consequences of this status quo without judging its participants.
Investors who would formerly invest 1 million in real estate would invest 200k in real estate and 800k in the stock market.
And an investment of 800k in the stock market is infinitely more productive than 800k in land speculation. Not all speculation is created equal.
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If they bought their house, then they have paid a high property tax instead of income taxes.
Anyway I prefer the idea of buying a house in my 30s, finish paying it in my 50s and not have to worry about it when I’m retired. Retirees may have other things to worry about, like medical expenses, need for assistance, etc.
In addition, saving money throughout your life means investing in the stock market, which may be risky in case of a crash.
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As Thatcher put it: The trouble with socialism is that you eventually run out of other people’s money.
Seizure of private property by the government (i.e., 100% tax) is a key step toward collectivism, fascism, communism and totalitarianism. Not recommended.
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Thatcher was a politician. No politician has ever said anything useful about economics. Of course, her quote betrays a fundamental misunderstanding of what socialism actually is.
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Henry George was a strong believer in markets and their ability to allocate resources. I am too. But private ownership of land, specifically, is very destructive, as I hope I was able to explain.
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They actually pay a tax for the location only, not for the whole property. That is what is meant by taxing the unimproved value of land. Do you understand that part?
Also, don’t forget that because the market price of the land is extremely low, they would have a much smaller mortgage.
Anyway I prefer the idea of buying a house in my 30s, finish paying it in my 50s and not have to worry about it when I’m retired. Retirees may have other things to worry about, like medical expenses, need for assistance, etc.
Of course everyone prefers the idea of being comfortable after retiring. The more comfortable, the better, right? Well, who is losing in that equation? The young and the productive, and retirees who were never able to afford buying a house.
What you are supporting is a status quo where the rich get richer in a way that doesn’t help the economy but burdens it, by pocketing the returns from increasing land rents. So if you’re one of the lucky ones who bought a house young, congrats, you’re one of the rich getting richer.
Do you care who is drawing the short end of the stick? Does it cross your mind at all?
In addition, saving money throughout your life means investing in the stock market, which may be risky in case of a crash.
There are plenty of safer investments with less returns if you want to take less risk.
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Yes I understood that from the beginning. Note that the unimproved value of land can represent something like 70% of the property in metropolitan areas. But let’s make some eyeball calculations. Suppose that there are 3 people A, B, C and three properties. Person A has two properties, lives in one and rents the other to C. Person B has one property and lives in it. The tax on (unimproved) land is 3k per property and per year. Since the government gets 9k more tax revenue this way, everyone gets 3k tax breaks. So nothing changes for B, while A becomes less rich and life becomes easier for C, so the effect is equivalent to subsidizing C. In France we have something like this, called “aide personnalisée au logement” (APL). While this is useful for people with low revenue like students, it is said to drive rent prices up.
It is estimated that 57% people in France own their home. Among the remaining 43%, a significant proportion will buy a house/apartment in the future. So let’s say that two thirds of the population eventually become homeowners. If you say that two thirds of the population are rich and getting richer, then that’s good, it means we live in a very wealthy country, which is not wrong if we compare to the world’s average, but that’s probably not what they feel. In France, being among the 2/3 richest means earning above 1700€/month net salary, and the median salary is aout 2000€/month, I don’t think people earning 1700€ or 2000€/month consider themselves as “rich and getting richer”.
The young and productive can save and plan to buy a few years later. When I first bought a cheap and small apartment in the 1990s after having saved money for several years, my salary was like 7600 FRF. Adjusted for inflation, that’s about 1900€/month of today’s money. Was I rich and getting richer?
Of course a fraction of the population cannot afford to buy a property. France has 5.4 million “logement sociaux”: 5,4 millions de logements locatifs sociaux en France au 1er janvier 2025 | Données et études statistiques
Social housing accounted for 15.9% of all primary residences. The average rent as of January 1, 2025, was €6.76/m²
In addition, as said above people with low revenue get subsidized: CAF - Barème Aides au logement
So there is a lot of government help, most poorer people are not left alone.
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That doesn’t follow. You’re going to have to explain how you got there.
In France we have something like this, called “aide personnalisée au logement” (APL). While this is useful for people with low revenue like students, it is said to drive rent prices up.
That’s not in any way similar to the LVT proposal, and yes, it would indeed drive rent prices up because rent prices are determined by what tenants are willing to pay. When you subsidize them, they will be willing to pay more.
Some places in the world are doing something like the land value tax, though they are still far from George’s ideal. China and Estonia are examples. France is not.
It is estimated that 57% people in France own their home. Among the remaining 43%, a significant proportion will buy a house/apartment in the future. So let’s say that two thirds of the population eventually become homeowners. If you say that two thirds of the population are rich and getting richer
I didn’t. Beneficiaries of this status quo are existing landowners, companies that invest in real estate, banks, and people who buy a house young. 57% of people in France own their home. Okay, what is that number for people aged <35?
In France, being among the 2/3 richest means earning above 1700€/month net salary, and the median salary is aout 2000€/month, I don’t think people earning 1700€ or 2000€/month consider themselves as “rich and getting richer”.
Indeed they don’t. And one of the major causes, if not the primary cause, is that they are spending a significant portion of their salary on just having a place to live. Then another big part goes to income taxes. Both of those costs would be reduced under LVT conditions.
The young and productive can save and plan to buy a few years later.
Spoken from a position of privilege. Not true for everyone.
When I first bought a cheap and small apartment in the 1990s after having saved money for several years, my salary was like 7600 FRF. Adjusted for inflation, that’s about 1900€/month of today’s money. Was I rich and getting richer?
Well, I’m sure your investment paid off in a big way, has it not? You are benefiting, like all long-term landowners, from perpetually increasing land rents. That’s good for you, but we shouldn’t pretend everyone has that option.
In addition, as said above people with low revenue get subsidized: CAF - Barème Aides au logement
So there is a lot of government help, most poorer people are not left alone.
Yes they are subsidized, pushing up rental prices. And that money has to come from somewhere. It means taxing income, which is economically inefficient and unjust, as opposed to taxing land value, which is efficient and just, and would go a long way in reducing the need to subsidize people’s cost of living.
Band aid upon band aid keeps society going. But we all know something is wrong.
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Some stats here: Détention de la résidence principale − Les revenus et le patrimoine des ménages | Insee
Households are classified by the age of the “person of reference” (the one who earns the most).
Under 30, 16.7% own their home.
Between 30 and 39, it’s 47.3%.
So I’d say that by the age of 35, roughly half of the population have become homeowners. I don’t think that a position that can be reached at 35 by half of the population can be considered as privileged.
People under 30 may not have bought their home yet for several reasons like
- they plan to move to another city
- they are not yet in a stable relationship
- they haven’t yet saved enough money
You may say that the lower half never become homeowners, or only late in life. Is that unfair? Not all salaries are equal, so it’s kind of expected that people with higher salaries get a more comfortable life.
Note that people don’t necessarily buy a big house from the very beginning! My first apartment was 20 m2 (when I was single), I used like half my salary to pay it. The next apartment when I got married was 42 m2. Now we live in a house.
If my scenario with three people A, B, C doesn’t correspond to your idea, please provide an alternative concrete scenario that would happen to those three people after your proposed reform.
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That’s slightly misrepresenting the numbers. Since the percentage under 30 is only 16.7%, I’m guessing homeowners between 30 and 39 are heavily weighted towards people older than 35. It seems safe to assume that much less than half of 35 year olds are homeowners. But that’s a minor thing.
Regardless, what we are essentially arguing about here is at what point in their lives people can start to benefit from an injustice that they have been a victim of until then. At what point they actually break even compared to a situation in which they were never a victim in the first place, that’s a very different question. Even people who become homeowners before 30, which we now know is only a sixth of the French population, are not likely to become a net beneficiary of this status quo until they’re at least 45. People who buy a house later in life are net losers, or only start being net beneficiaries at a point in their life when it doesn’t help them much anymore. People who never buy a house are are trampled on. Again. Of course they are.
Would it not be strictly better if no one was a victim of this injustice at all, ever?
And what of the massive benefits to economic efficiency? This is something you have largely ignored so far. When we replace inefficient taxes with an efficient one, we stimulate economic growth. By lowering taxes on labor and production, we reduce the amount that we discourage them, which will lead to lower consumer prices of most goods and services. And by taxing land rents, we stop encouraging unproductive investment of capital in land speculation, which means it will be invested more productively. This, too, will stimulate economic growth.
If my scenario with three people A, B, C doesn’t correspond to your idea, please provide an alternative concrete scenario that would happen to those three people after your proposed reform.
What would happen to a run of the mill homeowner, a landlord, and a tenant? I’m assuming the former two have mortgages.
First of all, see the paragraph about improved economic efficiency and growth. That benefits everyone. Economic growth is the single best predictor of higher standards of living.
The homeowner will be better off because their direct cost of living stays roughly the same, and their income taxes are down.
The landlord will be roughly break even because their cost of holding the property stays roughly the same, they will be able to charge less rent, and their income taxes are down.
The tenant will be much better off because rents are down and their income taxes are down.
“Who loses?”, you might ask. The banks, and landowners who own their properties outright. They will see their total costs of holding the property increase, rather than stay the same, because their tax burden increases without their mortgage payments decreasing to compensate.
So who wins the most? The poor. Who loses the most? The rich.
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It’s more than one sixth, probably closer to one third. Let’s say the population is divided into 6 categories A, B, C, D, E, F, each representing 1/6 of the population at every age, and that all age classes between 20 and 80 have the same population.
In these respective categories, people become homeowners exactly at ages 23, 27, 35, 50, never, never. Then in this scenario,
- the percentage of homeowners between 20 and 29 is (0+0+0+1/6+1/6+1/6+1/6+1/3+1/3+1/3)/10=16.7%.
- 1/3 of the population become homeowners before 30
- The percentage of homeowners between 30 and 39 is
(1/3+1/3+1/3+1/3+1/3+1/2+1/2+1/2+1/2+1/2)/10=41.7% - One half of the population become homeowners at 35 or before.
Concerning your last paragraph, I gave you a scenario with three people A, B, C and provided numbers. These numbers are not meant to be accurate or realistic, but their purpose was to understand concretely your proposal. You said my scenario was wrong but didn’t provide alternative numbers, how much would they pay for the tax on land, by how much income taxes are down. Until you do that I consider that I don’t understand your proposal and can’t comment further.
And also you assume that rents will go down but I’m not convinced. I’d need precise numbers (like I said in the above paragraph) to figure out.
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If there is ever a poll about the funniest topic in OGS, I am voting for this one, hands down. Even the ones with the Go memes pale in comparison.
I’m just going by what you said: “Under 30, 16.7% own their home.” I don’t understand French myself. 16.7% seems plausible to me because I know very few people in their twenties are homeowners pretty much everywhere. Anyway, these are details, let’s not spend too much energy on it.
You said my scenario was wrong but didn’t provide alternative numbers
I asked how you got there, you never explained. But okay, if you want me to use numbers, I can. Of course, the best I can do is rough estimates. Modern economies are very complex, and results depend a lot on how the government decides to spend its revenue. Switching the tax burden like this would significantly change a country’s economy, and the way the government allocates their resources would also change. How exactly it would change is impossible to predict accurately. On top of that, the impact of the improved economic efficiency and the removal of unproductive land speculation is equally impossible to predict. Therefore, I will leave all of that out. Please note that this means my predictions are necessarily conservative. As I said, economic growth is the best predictor for improved standards of living.
What I am really here to communicate is the injustice and economic inefficiency of private ownership of land, its burden on the economy, and a way we can take that problem away. It’s ultimately a qualitative argument. I’m hoping that readers who understand the argument will be able to agree with me that it would be better. Only then it becomes worthwhile to start estimating quantities (just how much better). But since you asked:
A homeowner scenario is included in the OP. It’s the one with the two images. It illustrates that, under LVT conditions, a homeowner with a mortgage is directly better off and the bank loses. For convenience, I assumed there that this is a sort of median homeowner whose income tax would be reduced by the same amount as what they would owe in LVT, but this would obviously not be true for everyone. Some would gain more, some less (most less, I’ll admit).
When it comes to landlords and tenants, first we have to consider what would happen to rental prices. They would come down, not immediately but long-term, due to the LVT encouraging improvement of land and the resulting increase in supply. How much they would come down is hard to estimate. I asked ChatGPT for an estimate for France and it comes up with 5-15% nationally, and 10-20% in high-demand cities. Seems reasonable. Let’s say 12% average.
So the landlord, whose cost of ownership would stay roughly the same (assuming a similar property as the homeowner, 35k of mortgage interest becomes 10k of mortgage interest + 25k LVT), would see a 12% reduction in their pre-tax income. Since income taxes are lowered, they will probably break even or come out slightly ahead because income tax rates would probably go down more than 12%.
The tenant would be the happiest of the bunch. This makes sense, because they are being screwed the most by the current status quo. Their rent would come down 12% as we estimated, and then their income tax would come down as well. They can expect to gain some 20-40% purchasing power compared to the current situation.
Again, I really want to stress this: This is without taking into account the improvements in economic efficiency, and the more productive investment of capital after we take away land speculation as a viable investment.
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The bank is not an abstract entity that grabs your money, it can pay employees, invest in the stock market, provide insurance services,… In your scenario, part of the money goes to the governement instead of to the bank, perhaps you think that the goverment makes better use of the money than the bank but it’s not obvious.
Concerning ChatGPT’s answer, I’m not convinced that rent prices would go down because if renting becomes more interesting than buying, then more people will compete to rent an apartment, which may drive prices up.
Another point raised by ChatGPT is that " LVT penalizes vacant lots". That’s true, but currently there is a Taxe sur les logements vacants (TLV) et taxe d'habitation sur les logements vacants (THLV), qui est concerné ? | impots.gouv.fr which represents 34% of rent value the second year of vacancy (e.g. if the apartment can be rented 30k/year, then the tax is about 10k, which is already pretty high). Despite this tax, housing is scarce for many reasons. I won’t list them all but the most obvious one is that space is limited. People want to live in center city and close to public transport, not in the middle of nowhere, a land value tax won’t change anything to that fact.
I won’t comment the rest of ChatGPT’s response, just saying that it fails to convince me.
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False. Government revenue stays the same. The bank loses and the homeowner gains.
Concerning ChatGPT’s answer, I’m not convinced that rent prices would go down because if renting becomes more interesting than buying, then more people will compete to rent an apartment, which may drive prices up.
This is not a valid argument. If 100 households which would have bought their house before are now interested in renting instead, that means 100 extra properties are now rental properties. The supply of rental properties would increase the exact same amount as the demand would, so price would be unaffected.
Another point raised by ChatGPT is that " LVT penalizes vacant lots". That’s true, but currently there is a Taxe sur les logements vacants (TLV) et taxe d'habitation sur les logements vacants (THLV), qui est concerné ? | impots.gouv.fr which represents 34% of rent value the second year of vacancy (e.g. if the apartment can be rented 30k/year, then the tax is about 10k, which is already pretty high).
That seems to only be about vacant apartments. LVT penalizes all vacant lots of land, not just vacant apartments. If you had a land value tax, you wouldn’t need silly band-aids like that.
Despite this tax, housing is scarce for many reasons. I won’t list them all but the most obvious one is that space is limited. People want to live in center city and close to public transport, not in the middle of nowhere, a land value tax won’t change anything to that fact.
Housing is scarce for many reasons, but it is just a simple fact that encouraging the improvement of land will lead to more improvement of land. You will find vacant lots even in Paris, and we can always build up.
One aspect that continues to confuse me about this scenario is the idea that the “value” of land remains the same regardless of how much building or development occurs.
Phoenix, Arizona, is the fifth-biggest city in the USA. 150 years ago it barely existed, you possibly could buy the whole area for the price of one building in Manhattan at that time.
There is a double bind. Either
(a) the LVT government at some point reneges on its promise not to tax buildings and development, increasing the tax rate by 10,000% percent on Phoenix real estate because its “value” has (magically…) increased; or
(b) one speculator can own the entire city of Phoenix and pay a pittance in taxes because the “underlying land value” is nil.
One could multiply examples of this dilemma.
For similar reasons it is no longer profitable for one family to rent one apartment or house, but it would be immensely profitable for the biggest capitalist to step in, bulldoze the house and garden, and build a 20-story high-rise, still paying the same taxes as a single family who possibly has one tenant to make ends meet.
Thus the economic opportunity presented by the incentive to develop land will go to those who have the capital for intensive profitable development. 99% of people would not have the means.
I think it sounds very nice to be able to wave a magic wand and eliminate the problem of landlordism and wealth asymmetry. However the unfortunate reality is that the people and corporations who are best positioned in the system now, will also be in the best position to game the new system. They will also have the fewest qualms about it.
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Are you saying that
- only homeowners get reduced income tax
or
- Everybody gets reduced income tax?
In case 1) the effect is that only the bank loses. But the bank is part of the economy (hires people, invests, etc), so what is the net effect on the economy is hard to predict.
In case 2), since there are more people getting reduced income tax than people paying the tax on land, then homeowners will lose.
My reasoning was base on the fact that tenants get more purchasing power than homeowners. I said above that this is equivalent to subsidizing tenants, so this will drive prices up. You said the opposite but didn’t give a convincing argument.
Oh I thought ChatGPT was referring to the land underlying the vacant apartment. Still, in metropolitan areas, most land is already used, and shortage of apartments is due much more to vacant apartments than to vacant land.
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An understandable confusion given I haven’t been very clear about how the tax would actually work. The value of land would be reappraised each year. This could largely be automated, I imagine, as it already is in many places where the government charges property taxes.
Phoenix, Arizona, is the fifth-biggest city in the USA. 150 years ago it barely existed, you possibly could buy the whole area for the price of one building in Manhattan at that time.
So to clarify: As a city develops, land rents in it and around it increase, and so would the tax. After all, we are taxing 100% of the land rent. If a location becomes ten times more desirable, the tax would increase tenfold. So the double bind you mention doesn’t apply.
For similar reasons it is no longer profitable for one family to rent one apartment or house
Why not? Rental prices would come down but not by a lot, and their income taxes would decrease as well. Their monthly bottom line would roughly break even, compared to the current situation. Of course, as we discussed earlier, they would no longer be benefiting from increasing land rents, so they would no longer make a ton of return on their investment when they eventually sell their land. But that’s a good thing; land speculation is destructive.
but it would be immensely profitable for the biggest capitalist to step in, bulldoze the house and garden, and build a 20-story high-rise, still paying the same taxes as a single family who possibly has one tenant to make ends meet.
Our landlord family got a good price for the property (else they wouldn’t have sold), and the supply of rental units increased. Tell me, how is what happened here a bad thing?
Thus the economic opportunity presented by the incentive to develop land will go to those who have the capital for intensive profitable development. 99% of people would not have the means.
If your point is that we would be encouraging capitalists to come in and invest in apartment buildings, I agree, and that would be a great thing, because it would fix the massive supply issue in the housing market.
However the unfortunate reality is that the people and corporations who are best positioned in the system now, will also be in the best position to game the new system. They will also have the fewest qualms about it.
Game it how? As far as I can tell, there is no way to “game” this system.