[jjoonathan]

Has someone written up a comparison of LVT vs Rolling Leases (i.e. perpetual land ownership is replaced by 30-40 year leases)? Rolling leases just seem to have more good flexibility and less bad flexibility.

By "good flexibility" I mean options to convert from perpetual ownership without screwing current owners -- our perpetual ownership model involves extremely favorable tax treatment at certain stages (capital gains forgiveness, like kind exchanges, cost basis step up) and you could make these benefits contingent on a conversion to a 99 year lease or something. I believe there is data that shows people have a stated preference for perpetual over 99 year, but they have a revealed preference that is neutral between the two, and this is how you could achieve the conversion without seizing land.

By "bad flexibility" I mean that LVT calculations seem easier to sabotage to blatantly favor the upper crust. If they can do it for income / capital gains tax, they can do it for LVT. Rolling leases, however, have a pretty transparent periodic price finding mechanism. Nothing is perfect, the treatment of improvements at renewal/auction time is a likely vector for skullduggery, but to my intuition it still seems better than LVT due to having more eyes and competing interests focused on the process.

Anyway, this is a "butterfly idea" where I haven't put enough thought into it to have a strongly informed opinion one way or the other and I want to know if someone knows of scholarly work on the subject.

[zozbot234]

The problem with rolling leases is that policymakers have a big incentive to break the leasing arrangement and sell the land outright/give it away to their corrupt cronies, because this lets them capture value for themselves that would properly belong to future generations. Leases may work if they have strong, quasi-constitutional protections though.

[jjoonathan]

Right, but if we let "rich people want to be paid for being rich" stop us then we can't accomplish anything because that will never change :)

[zozbot234]

I'm just saying that rolling leases have a very real incentive problem compared to other approaches. So ongoing taxation (i.e. LVT) may be a better all-around solution. Policymakers can also monetize future tax revenues, by taking on more government debt; but this tends to be a lot more visible and make bond investors more upset compared to the obscurity of land sales.

[dfxm12]

Do you have more info explaining a "rolling lease"? I assume you're leasing the land from the state... On the face of it, what happens to/who owns the improvements on the land after the lease is up or you have to move? What happens with the lease if you have to move?

[jjoonathan]

You sell the lease if you want to move. As for imprevements, we already deal with pricing and depreciating them for tax reasons. The new leaseholder would have to compensate the old leaseholder. This process will be imperfect, but the imperfections seem mundane compared to the imperfections caused by tying a financial asset to shelter and especially mundane in places where land value trumps improvement value or where depreciation schedule matches lease duration (both of which are common). We are trading big problems for small problems.

[orwin]

Rolling leases seems to be superior, and more logical than a land tax. You'll have to be able to factor in lease reduction (for primary homes, non-market housing, farming and strategic industry), but it seems easier to set up.