Fixing retail with land value capture

> If we let property taxes just be whatever they "should" be without penalizing home-buying in the process you could at least know what you'd be paying rather than having to factor in a 3-5x increase.

I wouldn't be surprised to hear this varies by jurisdiction. In CA, which has large property tax jumps on sales thanks to Prop 13, it seems like you can know the annual property taxes in advance. The sale price is the taxable valuation* and you can find what the local tax rate is (or you can infer it pretty closely from another recently sold home's public municipal taxes paid).

So solves one problem, but is still problematic :)

*I assume this is the general case, anyways; maybe there's details I'm forgetting about separate tax rates on the land and the improvements; the split of the overall proper value between those two categories was mystifying when I bought...

Where is this?

As far as I know, my area doesn’t do that. The assessments go up over time, but there’s no large jump on transfer of ownership.

It's absolutely the case that poor residents get priced out and do not necessarily benefit from a neighbourhood becoming hip.

The cool new retail is tangentially to blame through second order effects, but the real problem is the inflexibility of the system in responding to change which results in a shortage of housing, which means that the disruptive impact on low income persons is really severe as they have no where to move to when things become more expensive or they are evicted.

Much like how the solution to increasing retail rents is more flexibility in retail zoning, so to is the solution for increasing rents.

It's less of a big deal if a cheap lame neighbourhood suddenly becomes cool if you can easily bail out because there's plenty of affordable apartments elsewhere. The problem we're in is that there's a general shortage and so in many places, losing a long held apartment is like an existential crisis because everywhere else is even more expensive and there's a shortage.

Another approach is that in redeveloping "cool" areas we could increase land/property taxes and developer fees so as to recapture the land lift and divert toward public realm projects that benefit existing long time residents. The area becoming cool and getting new condos pays for the new pool and new below market housing.

Should be mentioned as an aside that the actions themselves of poor people can ultimately gentrify a neighbourhood just as much as retail. A neighbourhood can become known for a vibrant arts/music scene that ultimately gentrifies it not just because it has some bars, but because the working artist residents are they themselves creating the attracting works in putting on events and shows. They earn a meagre income as working artists but ultimately may displace themselves as condos come advertising themselves on the scene that they've created.

Cyclical neighbourhood change I think is inevitable so I think what we really need to focus on is not necessarily finding ways to keep neighbourhoods the same, but giving people and retailers options so that when change happens, it's not disruptive and painful.

Depends whether or not the city allows other neighbourhoods to exist/grow/change. If the total floorspace in the city is fixed in regulations, then ofc anything done to improve conditions will hurt people on the bottom. The people who can afford a "revitalized neighbourhood" would happily live in brand new housing built on top of land in the nearby mansion district, displacing no one, but city planners do not allow that - new apartments can only be added to the city stock by destroying old ones, new store floorspace can only be added by destroying old etc. This forces everyone to play musical chairs with too few chairs and the only winners are those who own the chairs.

Long term residents may own their properties, protecting them from rent increases and letting them share in the wealth should they sell up and move.

For various reasons it’s extremely rare for retail businesses to own the buildings they operate out of.

A hero. It's pretty simple. No need to complicate things.

Just like saving a (healthy) life is a good thing, even if you can spin some stories about the dignity of death or whatever.

By that logic making an area worse deliberately is a win for affordability.

In truth, retail is a pretty awful business. People love the romanticism of it and the "simplicity", but really it's a shit way to make money the vast majority of the time.

$100k of money sitting on shelves depreciating. Narrow hours when most of your business comes, but need to hang around all those other hours for the trickle of other customers. Dealing with theft. Dealing with bottom tier workers. Dealing with the general public

It's really best when you are already retired and just want something to do for fun.

There is risk in choosing tenants for sure, though it is usually the case that the retailers themselves are putting in the expense and sweat equity into renovating a space. Sometimes this is cost shared, often it isn't.

I know my retailer friends painted their store themselves.

It is in the scarce retail environment where landlords have the least amount of risk around choosing a tenant because if one fails they can easily get another. So a city adding more retail zoning would increase vacancy, increase risk to landlords and hopefully reward good retail tenants.

>This isn't really accurate. It actually takes a decent amount of work and capital input to get a set of retail buildings into usable shape and keep them that way. The internet caricature of landlords is that the buildings just popped into existence one day and the landlords rent them out, but there's obviously more to it. I know several attempts at retail real estate development that flopped and lost investors a lot of money.

Nobody develops the sort of organic small scale anything anymore because the caricature informs the local government who then sink their teeth in at every turn and the end result is that the only people doing new development or refreshing stuff at great expense are corporations capable of fending off the government or rich enough to play along.

That's a nice just so story for the cases in which a landlord benefits due to the success of his tenant. Now do the ones where the property value goes down because of any of a zillion other factors.

They aren't selling in urban places.

Spitballing solution: In addition to LVT, rental tax? Nah, that just drives the purchase price to a higher level. Hmm. Also it drives up the cost of the minimal viable business (hence the coffee sheds in parking lots).

Allowing more supply is the only good answer.

The physical store is not the "means of production" in urban areas, but a closer analog is the piece of paper that allows a given square foot of floorspace (for any use) the right to exist within the city for a given period of time. You could call this piece of paper a floorspace factory, since it's the limiting factor. Somehow we have decided it's best to have as few floorspace factories as possible.

Too late in certain markets like LA. They already built out all the flat land for the most part by the 90s. Only way to go now is to go up. There is no more land to go out. Look at the satellite map, development from ocean to mountains.

Except regulations are what got us here in the first place? At least in the US, zoning is a recent invention with racial motivations. Cities want to be dense because that is the cheapest way to build. That is why basically every city older than a 100 years old that hasn't been wrecked by zoning is dense. Suburbs are an unnatural product of abundant land in the US, the invention of automobiles, and zoning.

That works if you sell something exclusive. It is less easy if you sell things that are for sale on Amazon.

It is difficult to simply raise prices when your business is not a necessity but a luxury, because there is a tipping point where customers will decide they can just do without whatever you have on offer. Customers can be awfully price sensitive beyond even what would be economically rational. They might balk at a pint of beer going up by $3 while they pull down four or five figures of income a month.

In the immediate order of things yeah, tenants aren't going to receive any relief from taxing land. The benefit lies in the second, or maybe even third order of effects that LVT produces.

Do we want the landlords to just sit on all of that value they're accumulating or do we want to take in more tax revenue (not a higher tax rate) as their land value increases and then do something for the common good with that additional tax revenue? Maybe tax relief for businesses, or social programs that reduce the cost of living for the workers. Or even better, encourage the landowner to further develop their land to get a better return, potentially benefitting tenants and the nearby community? Because that's what LVT does, or at the very least enables.

The trick is that land alone can command higher tax rates than land+buildings without negative economic effects, due to land having an inelastic supply. A community could therefore tax land value at ~100% and capture the entirety of the value increase that'd otherwise end up in landlords' bank accounts. Combine that with UBI or some other means to redistribute that captured value and literally the only “losers” in this scenario are the landlords (and only to the extent that they'd no longer make money on renting out land; slashing the building tax to zero would make those landlords less disincentivized to maintain and upgrade their buildings).

LVT would increase supply of rentable spaces by forcing landowners to utilize their land as the market demands.

So it directly solves for this problem by giving store owners more power in negotiations (I’ll just move across the street)

It does capture the increased value of the land around the shops though. Transferring that to the retailer is harder, as you say

Apres moi, le deluge.

Revolution has never changed this status quo. Just results in violence, then once the ship rights itself the social order is back to how it was with an oligarchical elite extracting value from labor. In fact I don't think there has ever been a single case of labor unshackling itself from the yoke of the oligarchy.

If there is a natural human condition, it must be this, just because of how sustained this pattern has been over the course of what tens of thousands of years to today, even in the face of modern technology and more universal awareness that this is how the world actually works.

I think the argument is that governments don't fund public goods through taxes but through issuing currency, while taxes guarantee a demand for currency and prevent its devaluation. Hence the 'function' of taxes really is to 'destroy' money to prevent oversupply.

Not sure I disagree, though of course that's not how the system works formally.

I think you've misread the OP's point. It's not that the government doesn't provide the police (although it doesn't - the taxpayer pays for the police and staffs it). It's that government policies and regulations to try and change fundamental market forces create extremely obvious problems, although they aren't always obvious to the myopic voter.

Value creation not captured is the definition of a positive externality, and landlords being able to extract that value despite not creating them is an example of rent seeking. Aiming to address these does not somehow question capitalism.

Something to be said about the number of vampires out there. I think about my own apartment complex. Less than half a dozen units owned by a single landlord. They pay a handiman probably less than $1000 worth of work on the property a year, really nothing major every happens. They pay a crew to come by once every other month and trim the bushes and blow everything out, mostly because the city has fire code saying the bushes cannot touch the structure. Whatever the cheapest two man crew for that costs I guess.

And for that couple hundred in upkeep maybe they pay a year, my landlord clears probably between 150k to 200k in rent doing nothing at all. I think they actually own a couple more similar properties so its more than that.

So here is this couple in this city, that has found for themselves a way to pull out at least 200k from the local economy, and contribute basically nothing back at all. They don't otherwise work. They just cash checks pretty much and text the handiman when an tenant texts them. Imagine how cheap my rent would be not having to pay for these vampires considering actual costs of this building. Probably like $50/mo each between all of us tenants would be plenty to cover typical yearly overhead. I'd certainly go out to eat a ton more and heavily support local economy if I was only losing $50 a month of my pay to rent. I'd probably get away only having to work 10 hours a week. But no I work 40 hours and give them like 30% my gross because my landlord needs 200k to do nothing. Literally all they do is suck my blood. Their whole existence based on sucking my blood.

But currently, most of the high intensity retail areas tax the landlords on the value of the land PLUS the value of the building ( "improvements" ). They owe this tax even if the building is empty.

How does switching to a land value tax, which only taxes them on the value of the land, help at all ?

This feels like a solution at the barrel of a loaded gun.

He is including restaurants, bars, and coffee shops in “retail”. Amazon doesn’t replace those spaces.

> it would lower housing prices

Moscow did just that in 90-s. They allowed densification without any regard for parking spaces.

Guess what happened? I give you three guesses.

Large dense cities are inherently awful. And attempting to fix them results in a slow-moving societal collapse.

Smaller cities, sparse cities like Houston, and special-purpose dense cities (like college or military towns) are fine.

A lot gets done when you know your ass is getting calloused for littering

Singapore's culture is completely incompatible with western values

BS. European cities are just as bad.

And the US cities resisted the urbanism blight for longer than Europe thanks to a much better design.

And Europe is now paying price for its density obsession. You see it as a rising tide of far-right movements in Europe.