| There is a basic accounting truth at the heart of this: If land and housing are good investments -- that is, they return any amount greater than wage growth -- then at some point in the future, wage income workers will not be able to afford housing. There is no getting around this truth. If housing and real estate are a good investment, eventually all wage income workers will be homeless, or will be forced to leave a region. So we need to make sure as a society that housing and real estate are _not_ good investments. Prior to the 1980s, real estate was not a very good investment. There might be areas that were great investments, but there was no generalized appreciation in land and housing. In particular, it's an obvious sign of a broken market when structure prices are appreciating. In a functioning market, structure prices should largely decrease in value over time, with the only exceptions being actual improvements to the property. All of this is the same point as the article, that the basic issue is supply and demand of housing, and that supply problems are exacerbated by homeowners that have a large financial interest in restricting supply, and lots of tools at their disposal to prevent new housing. Another important point is that while individuals might be responsible for improvements to structures which increase their utility, aesthetics, or value, in almost every case _land_ value increases are the result of large-scale societal factors, and nothing at all to do with any individual actions. The question becomes, why as a society should we allow land value increases to be captured by individuals? The land has gained value because of societal changes. If a new light rail line is developed by local government, land values soar within 4 blocks of the new rail line. Why do we allow that value to be captured by individuals? If a region has great public universities, and high-paying companies flock to the area to hire those workers, land values soar. Why should individuals capture that value? Rather than taxing property, we should tax land. Taxing structures creates a perverse incentive against improving structures. And land is the thing that is actually scarce. Taxing land would naturally encourage landowners to build higher densities where land values and demand are high. And when land is sold, we should tax a very large amount of the appreciation in that land value, perhaps 90%. Society is what earned those gains, and society should reap the reward. Individuals can capture the value of increases on improvements to structures, but there's no reason they should earn a windfall from the societal actions that increased the value of the land. |
It's crazy how we normalized just sitting on a empty land downtown as a way to accumulate wealth. And not just that, we encourage it as this could very easily outrun any gain you would have by doing constructions on that plot of land. And the cherry on top is that this "investment strategy" is good not just for the owners of the plot of land, but also for all the neighbors that also own land around the area, which make their NIMBY argument a very conflicted one. So I agree that making sure there's no money to capture on this situation is really important.
Another thing that's important to understand is that the use of land also should be adjusted according to the population growth expected. It's ok if you could have a single family home downtown with a huge backyard 50 years ago, it's not ok to have it now while people on the top 1% income struggle to find a place to live with a commute time lower than 60 minutes. If you do want to maintain it you should probably have to pay the difference on taxes based on whatever could be built on that area. You want to have a small house on a place where a 40 apartment building could be built? Fine, pay a property tax for 40 apartments and you're good to go.
Overall I think we approach home ownership as something that should never change after you built it but the very simple fact that lots of these plots of lands we know live on were one day just farms tell you how this is simply not true.