Why you can't afford to buy a house and how to fix it | Laurie Macfarlane | TEDxTotnes
ฝัง
- เผยแพร่เมื่อ 12 มิ.ย. 2017
- The UK is facing a major housing affordability crisis. A whole generation finds itself priced out of the market. For many homeowners, however, ever increasing house prices has provided a major source of wealth. In this talk Laurie offers a ground-breaking account of how we got here, and how to fix it.
Laurie Macfarlane is a Senior Economist at the New Economics Foundation, the UK’s leading think tank promoting social, economic and environmental justice. His research focuses on reforming the economy to align with long term interests of society. He is an Associate Fellow at the Institute for Innovation and Public Purpose at University College London, which focuses on how public policy can be used to direct innovation to tackle societal and technological challenges.
He is a regular media commentator on UK economic issues, and is the co-author of the book ‘Rethinking the Economics of Land and Housing’, which was described by the Financial Times as “a lucid exposition of the dysfunctional British housing market”.
This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at www.ted.com/tedx
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Getting a house is one thing, the second problem is keeping it. Constant recessions, cost of living, and joblessness during a 25 year period makes owning a property a real risk.
Adam Spark here in Australia we’ve gone 28 years without a recession but houses are unaffordable as ever.
If you have all the houses on the monopoly board, and money piled up, and a new player arrives, how does that new player, with 0 assets stands a fair chance, or even a chance?
Then blame the poor player for not being a success?
The rich loan their monopoly money to the new player so they think they have a chance only to demand it back with interest
Great lecture. We have that tax in my country (I.M.I. - Imposto Municipal sobre Imóveis), but it goes to the polititians' pockets. Rents should be indexed to 1/4th of the minimum wage.
So, I would be able to rent a mansion for that money? Oh wait, they wouldn't exist.
Superb. Wonderful to see young people seeing the light.
The first problem I have with any sort of taxation by the US government to help people, is that the US government is less solvent and financially responsible than my month old niece.
this video is about the UK
😆😆😆
Tl;dw: There are lots of homes (some are lower-cost), but most are in the middle of nowhere; locations where you have to drive 20 minutes just to get groceries. We need better urban planning, to make our cities & towns great again.
The truth is you could buy a house, it just might not be where you want it. For a month rent on a 1 bedroom flat in London you could buy a 4 bedroom house in Detroit. The problem isn't the cost of housing the problem is where you are looking to buy.
All commenters seem to be assuming we have no property tax in the UK. We do! It’s called Stamp Duty and it was dramatically increased in 2014 to help cool the housing market. It has worked slightly, but house prices in certain areas in London are still wildly unaffordable for most.
I missing something or is he talking about property tax? That's already a thing.
i know he's not saying anything i don't already know this simple facts of life ta dah !i love life with a passion ...
I came to the comments to ask the same question
yes. we are already taxed, but the taxes aren't being used for basic necessities. the money is only being used to give to the politicians, while the rest suffers.
idk but hes right that theres a problem. eventually our culture will be affected and poor people will live together in the same homes for generations like we've seen in India. homes have been increasing faster than incomes have so if that continues forever eventually home ownership will be only for the extremely wealthy all over the world and most people will only be able to afford to rent. all other facts aside i cant see why what i just said is not true. and thats a scary thought considering im 25
Our current property tax system taxes both the land value AND the value of any structures made on that land (called "improvements"). A strict Land Value Tax (LVT) system would only tax the *rental value* of the land and NOT factor in the value of any improvements. For example: the price of a lot may be on sale for $100,000, but according to LVT, this is *not* the true value of the land--it's the price to *monopolize* that land for life. True value of land is its *rental value*--ie. how much is the market value of renting that piece of ground per month. THAT is the value (the rental value) that is taxed at a certain rate (2-5% on avg. in countries that utilize LVT), and any improvements go untaxed as a way to incentivize productivity.
In Islamic System of taxes, every property not being used by owner for one year need to pay zakat @2.5% yearly each year. But influenced people got it confused with productive/agri land and said there is no tax on land. Although its clear n obvious that productive land and land for housing are 2 different things. Housing beyond ones use is a financial asset and comes under zakat.
Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers.
- Winston Churchill
Woah your name is my name!!
I just bought the book
spot on assessment we've been sold a lie and it keeps us suffering
What he’s recommending is simply another method of taxation to redistribute wealth.
You can still buy cheap land - but it’s not as convenient to live there. The value of the land is dependent on the services and opportunities available in proximity to the land. Government hasn’t done anything to improve the value of the land - the home owners and businesses have - by paying for municipal infrastructure and by creating services and opportunities in those areas. They provided capital and invested to improve those areas, so why shouldn’t they enjoy the increase in value they created and paid for?
If you want to slow the rate of property value increase - encourage development elsewhere.
no i dont think that would work. imagine forming a new community with no services. its cheap at first, but once you hire politicians, firemen, police, clinics, etc., the taxes would come in, and then it would be unaffordable all over again. i've personally seen this happen, and it is even worse than the old community because the cost to build things like electrical and sewer cost much more today than it did before.
Currency used to be backed by gold, inflationary pressures have forced people to seek a better hedge - land
*Reminds of college. The southern half of the neighborhood is a slum of decrepit buildings that should probably be condemned, but landlords make money hand over first charging premium rents for tiny, poorly-maintained apartments thanks to the massive housing demand generated by the University.*
As Laurie suggests, it's not high land values that are the problem(in fact they are a good thing), but only their capitalisation into selling prices/rental incomes.
We should not therefor seek to reduce that capitalisation by lowing land values, but end it completely by a tax, thus solving the "housing crisis" instantly and permanently.
This is an extremely good presentation and excellent insight into the housing market. I agree with much of it - especially the mortgage affordability and the belief that house prices will also always go up. However, things are not as bad as they may seem on the surface everywhere. Yes London, H arrogate, Bristol etc it is tough to purchase. However, rents cannot rise in excess of wages, so there is a cap. Rents rise in line with wages, not house prices. As such, rents in the South/South East barely now earn a landlord any income (they do though earn good capital growth). In other areas such as Nottingham where I am from, we don't see house price growth at the same rates. In fact many properties still sell for less than they were bought for 10 years ago. First time buyers numbers are interesting too. The biggest fall from 2006 to 2016 was in London - 30% less FTBs. No surprise. But, it is a surprise that the next biggest fall in FTBs is the North East, numbers have fallen by 22%, yet prices have hardly recovered to levels seen 10 or more years ago and there are nearly 400 homes for sale for under £70,000, perfectly affordable for many. I think any ideas like these should be looked at, but first we need to identify the areas where a real housing crisis does exist, rather than say 'its everywhere' . For me, the solution is matching demand to supply - the latter is the job of government, local authorities and indeed planners. And the latter need to work with developers/land owners to encourage supply, rather than what seems to happen currently, see developments as 'bad news' or times to 'negotiate' so hard that it's not worth sites being developed at all. We also need much more stock from councils and housing associations to protect and house those on benefits - 18% of whom due to council house sales have been forced into an unregulated Private Rented Sector. The government need to work with people that genuinely want to make a difference and are determined to identify and solve the housing crisis where it exists, like Laurie, rather than those that seem convinced it will never be sorted or haven't the incentive to see house prices stall long enough for wage growth to catch up.
I don't understand when you say "...rents cannot rise in excess of wages, so there is a cap." Could landlords request additional favors from tenants who cannot pay to play? I'm guessing you live across the pond while I somehow got stuck with another celebrity president... the Don, King Con, a land baron.
Rents rise in line with wages?? HA!!
I'm assuming that not all homeowners are wealthy investors sitting around and waiting for house prices to rise. In fact, I'm pretty sure most homeowners aren't institutional investors, well, at least, in my country they aren't. That extra tax burdens on families will do more harm than good. Not to mention that they are simply a form of theft.
I also know that, in my country, investors pay capital gains tax when selling an investment property at a higher value than the purchase value. This pretty much has the same effect as your suggestion but only affects investors, not homeowners who live in those properties. And estates are taxed upon inheritance so families pay an additional tax when inheriting property. This is in addition to the transfer duty levied upon purchase which is also based on the home value.
Property values also fluctuate based on externalities. Some areas lose value. Will society be happy to pay the homeowner for any value lost? I know that the idea of getting free money sounds lovely but the reality is that property values don't increase in a vacuum and sometimes homeowners have to actively reinvest into their properties to increase the value. They also need to maintain those homes in order to ensure their value.
Furthermore, homeowners generally pay property taxes in perpetuity based on the value of their homes. In the short term, your suggestion, will actually harm homeowning families and reserve homeownership and property ownership only for the richest people in the community.
Clearly, your suggestion doesn't take into account the negative effects thereof and the positive effect that homeownership has on the community and society. It seems, to me, that the ultimate goal here is to remove private property ownership of land altogether because such a suggestion would eventually disincentivise property ownership in the long-run, making everyone more, not less, reliant on the state for housing and ultimately, chipping away at the liberty of the individual. This is not a solution but a problem.
ROYALT1
_"Property values also fluctuate based on externalities. Some areas lose value. Will society be happy to pay the homeowner for any value lost?"_
No. Land Value Tax is _auto-correcting_ based on an annual assessment of the land's _value._ Not the bricks, which is the house, the land's _value._ If the land value drops then the levy drops. LVT is a _zero_ tax on the house.
LVT disincentivises harmful land speculation and land hoarding - root of 2008 crash. Land prices will drop to affordable levels. Banks will not be too flippant in lending for property (land), because it always rose like kite each year. If the mortgagee defaults they do not care, as they foreclose and the asset is worth more to sell to cover the debt. Wells Fargo were giving mortgages to people they knew would default.
John Burns Is this guy suggesting a tax on increasing land value, not top structure value? It sounded to me like he wanted tax on appreciation of top structure and land. Tax on land is paid to local government in perpetuity based on value. This is what I mentioned. What more is required. It's hard to look at land only when there's a top structure upon it. Land value is arguably based on what can be built upon it as well. At the very least, its zoning rights.
Excellent comment. This TEDx video oversimplifies the current status quo and overemphasizes the current price discovery cycle in order to propose a weird communistic system where he doesn't have to do any work to think about the market forces that affect his life. In many cultures this is called eutopia, elysium, heaven or just plain laziness. 😉
R0YALT1 very well said.
"I'm assuming that not all homeowners are wealthy investors" actually there are. They are called foreign investors. They buy it because they see London as a safe haven and sometimes it's cheaper than buying in their own mega cities. London properties has been seen as gold bars for foreign investors.
Land costs more to buy because it is finite but people are increasing so that land (like oil) is a diminishing resource. Also, because people generally like to live together and thus produce greater scarcity of land in certain area (cities) thus causing the price to rise. The reason houses were cheaper many years ago is because there were less poeple many of whom lived in much worse conditions than we expect to live in today. For example it was not uncommon for a family to live in 1 or 2 rooms in a house, in Britain, as recently as the 1950's these people had no chance and no expectation of owning a home of their own. Also there are more single person households these days.
Now let me give you the facts.....In 1986 the average uk wage was £8K per annum. That was what I was earning and I saved up to buy my first home which was the cheapest home available. That house was 3.75 x my salary. In 2017 the average uk wage was £27.5K. The cost of the cheapest homes in my area are still 3.75 x the average salary. So nothing has changed there. So what has changed to make it seem impossible for young people to buy their first home? PRIORITIES!!!! and unrealistic expectations. I didn't spend my money on a mobile phone, weekends binge drinking, wine and beer in my fridge as a standard, eating out, eating junk food from takeaways, new designer clothes, fancy cars, fancy coffee, entertainment gadgets, going to the cinema, etc etc etc. The list just goes on and on. I bought second hand clothes from charity shops and made my own clothes from second hand clothes that were too big. I never went out to eat or drink. I walked or cycled everywhere. That was just to save for a deposit. When I had the money to buy my house I then had no money to furnish it. Everything in my home was second hand and donated by friends and family. I made my own wine from fruit, dandelions etc that I picked from fields. I didn't own a tv. Interest rates were 8% when I bought the house and rose to 15% within 2yrs. Interest rates are at an all time low now. I didn't have the heating on and it was 5yrs before I could afford to buy anything new for that house. The young people of today need to wake up from their pathetic self pity and face up to the fact that they don't want to take responsibility for their own actions and inability to give up all the luxuries they have become accustomed to. And to also realise that they can't expect to move straight into a luxury home. Rant over!!
*Urbanization* is 100% connected to the rise of the prices of rent and flats in the city.
The solution to that would be fast, and automated shuttle buses, and trains that bring people to live slightly outside of the city center that can be used for offices, entertainment and common ground areas that are connected with an automated public transport that runs 24/7.
I'm confused
Isn't this what the home owner's taxes are? Our home taxes are super high for small plots with medium houses & the schools & services these emence amount of taxes pay for have had substantial cuts in resources
Great talk, just need to fix the spelling of the word "buy" in the title.
A lot of comment are clear there is a lack of understanding.
Those who are rich appropriate _economic rent._ Economic rent is where is there is no enterprise or costs of production - in short, _we_ created the wealth. It is _unearned_ income. Economic rent comes in many forms, one is the _values_ of land. Land is unique, it absorbs the economy of the surrounding community. It cannot be reproduced at any location. You can make as many washing machines as you like.
The economic activity of a community soaks into the land and chrysalises as land values - it is not manna from heaven. LVT reclaims that _commonly_ created wealth, to use for common purposes, leaving private wealth in private pockets. It is auto-regulating as the levy is assessed annually. If the land value rises, so does the levy. If the land value drops, so does the levy.
So, what does this give us? Well as land does not become a wonderful easy earner accumulating in value continuously, banks will not eagerly, and recklessly, give loans for land (property). They will be as discerning as lending for depreciating plant machinery. The _root_ of the 2008 crash is then removed. The business cycle follows the land cycle which is approx 18 years. LVT when implemented properly will eliminate the land cycle giving economic stability. Booms-busts are then just a mild ripple.
LVT is paid only by the landowner. All land in the country is subjected to it. If you do not put land to productive use it becomes uneconomical, and then selling time, to someone who can put it to good use. LVT naturally redistributes land. LVT stops land speculation and land hoarding.
LVT lowers land values making homes affordable without HMG interference. Note: the bricks on land, the house, depreciates, It is _Capital_ like a car, it is the land that appreciates.
LVT is easy to collect as you cannot take it to an off-shore haven. ;)
Thank you. This is very helpful. It really does highlight the ludicrously unfair situation
What's unfair? Did someone prevent you from buying land?
The concern isn't whether land can be bought or not, as we live in a free-market so we know the answer, but the level of opportunity to do so is limited to the majority of people.
There are a couple of practical flaws in this argument. First, it assumes that the increase in the value of property is solely dictated by the increase in the value of land. In that case, the leasehold interest I own in my flat, which involves no ownership of land, should never increase in value, which is clearly not the case. Second, that the increase in the value of property is the same as cash income which can simply be taxed as it is received. The increase in property value is only ever manifest when it is sold. If the property is never sold, but simply passed on from one generation to the next, the value increase is never realised in monetary terms at all.
How, exactly, to "capture" this value from land though? The value under the present system is represented in rent, in the money gouged out of people for occupancy. If we stop doing that, whence cometh the money?
Don't get me wrong, I love the idea of doing away with the rentier system. He's actually quite generous towards it, emphasising its role as a founding stone of capitalism (as a means of extracting wealth from capital). The abuses and problems of the rentier system are far worse than he describes, though, and have arguably never been worse than today. Arguably.
But... if we cease to generate wealth through rent, how do we then access the inflated values that the rentier system produces? How does that value even exist outside the rentier system? If wealth is air, and the rentier approach is a balloon, it's easy to see how the wealth is captured and extracted (and indeed much of what he said about the mechanics of the system is clarified by that analogy). But... he cannot be saying that if we remove the balloon, we could still use the air. What air? You burst the balloon.
So I'm at something of a loss as to see what solution is being offered here. Interesting thoughts, certainly. Definitely got my brain going.
What the kid says is true -- it is a very complex matter to understand. Those that bought a house and got it cheap and have watched the price go up never ever think "Why is my house worth more" it is the same exact house as when I bought it 15 years ago (maybe some updates but bascially same house) but now it is worth double the price. DOES THIS MAKE ANY SENSE? Most home owners don't question whether or not it makes sense because they are the ones that benefitted - Like Warribo's reply below --- these people are unable to critically look at what has actually happened. Instead of earning money by making or creating something (avg. wages have not gone up since 1970's accounting form inflation) the way average person has money is in his house price -- Your house price went up not because of any fundamental reasons -- your house price went up by two things 1. Lower interest rates, take on bigger amounts of debt at lower prices 2. Deregulating loaning requirements - used to be only allowed to lend 25% of ones earnings for a mortgage - now you can lend as much as a bank wants. Households who used to spend 25% of their montly earnings on mortages or rent are not spending 50% of earnings. People are becoming debt slaves more and more to just cover basic needs like housing. Question is now that interest rates are as low as they can be (have been since crash) and private debt is at all time highs, how are young people going to buy these over priced houses??? Answer they can't and they won't, when all baby boomers start down sizing and selling their bigger family homes, there will not be anyone there that can afford to buy them. House prices are going to crash. This is the reality and it will happen because all one has to do is look at the demographics and the math. Question is WHY? In last 40 years rich have becomer richer at avg. workers expense, so average worker wouldn't feel it they made their house prices go up(they feel rich) only thing is that financial engineering is a farce --when everyone goes to sell their house or cash in their 401K you will see that it never had any intrinsic value and it will all sell off for what it's true price is. House prices are not based on intrinsic value they are based on what a bank will loan on a mortage -- my advice Sell now, and buy back after crash. Bankers do this over and over again to people and they never learn.
Wait Brits don't pay property taxes? Got to tell you we do in the states and it ain't much better over here.
A property tax is different from a LVT
It's worth fighting a war over at this point. This usury, plain and simple.
You can't afford to buy a home because interest rates are too low and credit is easy.
This pushed prices into the stratosphere. Again. And it will end the same as 2008 when credit tightens.
Nice talk - timely contribution to the debate re housing and inequality."Housing market is a zero sum game". Largely true (the exception being capital flows - selling property to non UK citizens, and UK citizens buying/selling abroad) . Would be nice if the UK collectively realised this - and that this isn't really a credible engine to drive our economy...Time to tax property assets fairly ? Replace council tax (in which the very affluent get off very light) and stamp duty (which falls disproportionately on first and second time buyers, and which gums up the property market, keeping a lot of empty nesters in unnecessarily large houses long after their children have moved out) with an annual levy of x% of the approx market value of the property ? (with local councils allowed to charge 2x% for vacant properties, second homes, buy to let)
excellent stuff - spot on
Do you know what's MORE spot on? The Non Aggression Principle.
Good talk but I think he misses some important points. In the UK, there is a massive disparity in land ownership with individuals owning large chunks of central London and huge areas of countryside. There is also a problem with landlords and others owning multiple properties some of which are empty and therefore diminishing the available stock of a finite resource. A land tax would be better than a tax on rising values as in an ideal world, value wouldn't rise much (surely that's the goal). Finally, Norway and Libya have and had sovereign wealth funds from oil revenue which weren't just used for payouts but were used to build infrastructure and improve health and education; perhaps a better example than Alaska.
The economic activity of a community soaks into the land and chrysalises as *land values.* LVT reclaims that commonly created wealth, to use for common purposes, leaving private wealth in private pockets. It is auto regulating as the levy is assessed annually. If the land value rise, so does the levy. If the land value drops, so does the levy.
What about those people living in the rural areas? What happens when their tax gets high enough that they cant afford to pay them? Subsistence and small scale farmers would be hardest hit by this idea. If one truly wanted to implement something like that one would have to limit it to the large towns and cities and the tax would have to reduce as you get further away from the economic centers.
Firstly, why does it matter whether land is owned or not. Even if you "own" a piece of land you still have to pay proper tax and you lose the land if you stop paying. So you're effectively leasing it.
Secondly, even if land were "shared" -- there would still be stuff built on it and whoever owns that stuff effectively "owns" the land. Would the value of that stuff be affected? No.
Third, land even in dense places like Hong Kong and Silicon Valley has never been the factor for shortage of homes or housing prices. SV has plenty of vacant land (there's a couple farms near Cisco FFS). And 70% of HK land isn't used at all. Why? Because of corrupted govern policies to limit the supply of houses due to pressure from builders. Another factor is giving too much say to home owners to decide what developments can or cannot happen in their community. In SF for example they could have torn down many old homes and replace them with high rises. But a combination of government policies and "not in my backyard" vetos from the community result in these projects never happening.
Maryland property tax has not been able to stop land speculation or make affordable housing - affordable housing is a more complex challenge and made more difficult by the concentration of wealth via rising levels of inequalities between the haves and have nots.
good luck pitching the idea to the house of (land)Lords. BTW the alaskan dividend ¬10 years ago, as I recall, was only about 1K per year.
runcycleskixc Since 1982, Alaskans have received that yearly dividend. The amount varies year-to-year depending on a complex formula of the returns to the fund. In 2008, the dividend reached a high of $3269 (including a one-time supplement of $1200 financed by that year’s state budget surplus), which comes to $16,345 for a family of five. More often in recent years, the PFD has been between $1000 and $1500 per person, which comes to between $5000 and $7500 for a family of five.
So what's my solution as a 35 year old living in a shared council flat with other strangers?
I'm a little confused by this. Does the UK not have property tax? I find that hard to believe. Where I live in the US, the typical property owner pays several thousand dollars per year in property taxes, whether or not their land goes up or down in value.
In the UK we have business rates which is a tax in business property its quite a large tax and it means goods and services are more expensive.
We also have something called a council tax which is typically about £1,300 a year (about $2000 a year)
We also have something called stamp duty which is a tax on purchase of property but for all intents it is a property tax just paid up front. A £500,000 property has a stamp duty of £30,000.
Where I live in the US (taxes very by city, county, state, etc.) we have business property tax, business revenue tax, sales tax, etc., etc. etc. I'm not clear on what the council tax is exactly...do just businesses pay that? If so, it might be like our business licensing taxes.
We also have the equivalent of your stamp duty, called a real estate excise tax (which is significantly lower...maybe 1.75%), but we also have an annual (but paid semi-annually) property tax that, depending on the specific location, might vary from a little less than 1%/yr to 1.5 or 1.6%/yr, which adds up to a lot more than your stamp duty over the period of time many people own their homes. I'm really surprised this doesn't exist in the UK...thanks for sharing.
sleeknub
We don't have an annual residential property tax bases on value.
Our council tax is an annual tax and it is based on value with each property placed into one of 8 different bands. Average property might cost £200,000 and pay £1,300 in council tax. Expensive property would be perhaps £500,000+ and they would pay closer to £3,000 annually.
Due to the banding that means a £1 million property and also a £100 million property could fall into the same (highest) band and both pay the same £3,000. So effectively the £1m property is paying 0.3% and the £100m property is paying 0.003% however because it isn't seen as a property value tax we don't see it like that.
I think an annual property tax based on value like you have in the USA would cause mayhem here. You would suddenly have £5m properties go from paying £3,000 annually to paying £50,000(1%) annually.
We have a very hard left opposition party at the moment. If they get in we may see them introduce a USA style property value tax. I think it would be a big negative if we went down that road. Our council tax is much more reasonable than your property value taxes.
I can't speak for the UK, but in the US, part of the reason that home prices have increased is that the average size of new homes has increased. The average new home size has grown over 60% in the last 50 years.
This is the second vid in a row on the UK housing problem where the comments section is full of people who don't seem to realise it's primarily about the UK. He's right, it's about the land, it's ALWAYS about the land.
a man named Mr. George .. was it Henry George ? had the same idea one hundred years ago .. he used more economics to argue for it as I remember ..
Henry George promoted the Single Tax, only one tax - LVT.
He attributes an excessive amount of good to the Enclosures Act. I'm listening on, but that was a weirdly skewed take on England in the 1600s.
Well what he is describing as the solution is what we call here in the states property taxes. We have had them here for generations. They certainly do some good in providing for schools and roads but it does little to make housing more affordable. In reality the tax ends up making the property even less affordable.
Lars Ulrich Exactly. There are many areas where property tax - not property value - is the barrier to entry. The house itself may be affordable but paying property taxes equivalent to a second mortgage payment is untenable for many. My property tax payments go, primarily, to the local school and public services. Yet this system doesn't reduce housing inequality by preventing heavily increasing values as he suggests it will.
Bingo
Tax the land and oil to pay out "dividends" called "basic income"?
Sounds like he wants more property taxes.
Land value tax (LVT) is an alternative to property taxes. An LVT taxes the value of the limited supply of land regardless of improvements to the property on that land. Property taxes tax possession of built property, discouraging the creation of built property, thereby raising rental prices/reducing housing supply (and the supply of all built property).
1. When you deposit money in the bank, the bank inflate it 17 times and hoard all the houses.
2. Previous generation could buy house with no credit, nor much deposit. Driving up the house price in bubble.
And the credit it self became corrupt. AAA rating for houses bought with $0 down stranger?
Well done.
Sorry, but if you're going to quote figures from 1970 and not figure in inflation, you're pulling a fast one.
According to the UK inflation calculator I found with google, 5,000 GBP in 1970 is worth about 76,000 GBP today.
That means the house has *actually* gone up in value by about 3x, not 5,000x.
Things must work different over there. In the USA, I would say, “my dear jackass, I pay property taxes already.” To the tune on $40,000 a year right now.
rent and land cost should be governed and shouldn't be alowed to go above a certain amount. preferably a low amount.
Then all of the world would go there.
Great presentation and video. I liked it a lot. I will say there are a LOT of fundamental flaws. I already support the social good through my property taxes...comparable to the Alaska payout. I have meet several people from Alaska and they are minimally better off from their oil check. Also people forget the skyrocketing cost of maintaining property... there's work to be done whether the owner is asleep or not. Great video though... Thank you!
Firstly, the speech remains me the war when farm and garden saved millions life. House price rise is because pension system is broken and letting system is opened(check regulated rent, letter house is owned by tenants for generations, of course no banks dear to fund property purchases)
But it's not capturing the value of the land, it's capturing a levy against the landowner, and that would most likely be passed down to the consumer. When everyone gets the same amount of money it essentially means zero as the value of money is based on relativity. I doubt home prices would be reigned in. Since people are generally greedy (wanting to make the most they can on the sale and thus boosting the price as high as possible) house prices would still rise. This just seems like a way that would be beneficial for the government to implement another ever-increasing tax (levy) against landowners, further increasing prices in the long run. It won't reduce prices because the landowner will have renters foot the bill or if the landowner sells they will still want to try to get a leg up and their piece of the pie by selling a bit higher to make a profit. How much does Alaska pay to each individual from the oil production and how much does that extra little paycheck really change these people's lives in the grand scheme of things?
Symbolic Living
It *is* capturing the value of land. Value that was commonly created.
Tedx is reading my comments... Hehe, thx ( lands belongs to earth )
That tax will just be passed on to the renter, buyer, developer, etc. Or you could reduce the government cost to build. Public land has no homes and no incentive to build if anyone can come and go without regard for personal property. I dare the speaker to open his home to the public for all to use fairly.
Just work hard and save and invest its hard but its possible im 37 wit h 5 houses 4 are pay and the 5 half pay
People who own the house they live in with their families are one thing, people or companies that own multiple properties and use it for an ever increasing profit are another, increasing property taxes on rental trade is one thing, increasing taxes to homeowners just for owning a property is another.
What if people are land rich & cash poor? You can’t levy an asset that’s not liquidated. If you tax house sales then wouldn’t people avoid selling their homes & further restrict the supply of property on the market?
Property value always confused me. How can 1 square foot possible make someone $5,000? Only if you believe it can, and not sell it for less. No wonder so many live in their car, a $5,000 used car is much cheaper than the smallest apartments.
Here in California we have "Mello Roos", and I think that is about 80% of his idea in action. Extra tax payments from homeowners used to for the public good (schools, parks, police, etc).
Lockean Proviso
Demand regulates prices. Even so, greed is the main reason why housing is expensive. Have you ever wondered why someone can't get a mortgage because banks want a 10% deposit, yet those same people paying rent are paying twice as much per month as a mortgage would cost them. Estate Agents too are to blame for price increases., as they look to increase their turnover year on year. Here's the thing though, if demographics took a downturn and people repatriated back to their own countries, property prices would tumble. This will happen at some point in the UK. My prophecy is this: Renting will increase to such a level that no one will be able to rent at all. Either enough property will cease to exist to house people, or people will lose interest in ownership, making disposal and moving on a rare occurrence . That will mean selling a property would be near on impossible. Building tiny houses isn't the answer. They are tomorrow's slums. A war, perhaps, would sort out over demand and bring prices back down to sensible levels. As it stands now, we all have to rid ourselves of the idea that property is an investment. It isn't. My mantra has always been - HOUSING FOR HOMES, NOT INVESTMENT.
The levy wont help renters as the landlord will just pass on his/her cost. A one-off levy could be charged when the mortgage is taken.
Bit of wishful thinking that land produces money like oil. Our government operate government housing and it's at a loss cause of the social aspects of it. Operating at a loss is pretty much the motto of government in general.
Your Alaska example to housing is not really correct. When oil is sold it generates revenue and profits, the profits that are paid as a dividend to citizens are from realized gains. As a homeowner, if you don't sell, the appreciation is not realized. Therefore, you're adding an additional tax which then gets redistributed, twice. Twice because your taxes are already redistributed in the first place...
It sounds like he is advocating for property tax. We have that here in the US. If that it what your advocating it does nothing to fix any of the problems your highlighting. We have all of the same issues your highlighting plus property tax ravages our elderly. Put yourself in the shoes of a retiree who has a fixed income. They retired at 62 now 30 years later at 92 their income is the same as it is but the tax they have to pay to live in their own home has increased exponentially. They then lose their home. This has happened to my grandmother just a few years ago. You will find that even if the home prices go down the property taxes go up. Here in the US we use these taxes to pay for local schools police and fire departments. They have ever increasing prices even though the property value may have dropped. As a result taxes go up because it’s “for the children”.
The idea is to abolish taxes on labour and capital and replace them with a tax on land value.
D Bruce then you only have property owners paying taxes. In that case the many who are not property owners can elect officials who could enact policies to tack money from the few. Would it it be better to have a more diverse tax base one where most or all of the population has skin in the game? Our local (town and city) governments are funded by property tax here in the US. It is creating huge problems and some are investigating ways to convert that property tax to an income/consumption tax. The problem becomes that as the property value goes up it usually does not transition to increased cash flow and then the business dies. If the property is not a business rather a residence your making good a family pay more and more to live in the same house. Families do t always get increases in income especially retirees.
The problem is that our current government spends money like an alcoholic drinks (and both sides of the aisle seem afraid to change the situation). As David Crockett pointed out, it is easy for elected officials to be charitable with other peoples money. And some government programs merely make it easier to put yourself in heavy debt in order to purchase a home. That only helps the homw owner - because they are able to charge more.
Home owners already get taxed enough thanks. I was really hoping you’d come up with a workable solution as I worry that my 3 children will never have the chance to own their home or even afford to pay rent without working every hour they can and scraping by.
How about making all mortgages repayment by law, to reign in ridiculous amounts of borrowing and fuelling house price rises?
Do you know what happens to property not ownwed by those living on said property? It is NOT pretty.
"Simply buying land and waiting for the land prices to go up" spoken like someone that doesn't own land.
Land Valuation Tax and relaxation of the planning system will sort out all housing problems.
Planning/building regulations solve housing problems, they don't cause them.
They do cause harm when they create an artificial land shortage, as the UK has now.
The whole purpose of planning regulations/property rights is to create an artificial scarcity, without which there would be a tragedy of the commons.
Most people think that affordability problems are caused by a lack of supply and therefore planning is to blame. However a 100% tax on the rental value of land would end affordability issues instantly.
From which we can deduct that although we need to supply homes for peoples welfare and for the sake of the economy too, supply isn't an issue of affordability(although of course by increasing supply prices drop). To end affordability issues the selling price of land would have to be close to zero. That's would never happen even if we built tens of millions of extra homes, we'd simply be harming the economy.
Just my opinion, which I know not many people share :)
We could build all the homes we need but many will be in new districts/towns with maybe shops, hospitals, parks, schools, transport, etc.
I think what you mean is:
• If there is no work people will migrate to where the work is, leaving these homes empty. New ghost towns as seen in Spain.
• The existing land footprint used for housing would be used more efficiently coping with all needs.
That means denser housing, which means making the existing infrastructure bigger, such as public transport, gas, electricity, sewers, etc. A new 50 floor building in an existing city will need the water, sewers, gas, electricity, comms, all uprated to cope with just that one building. Some tall buildings in London have been refused because there transport provision near is not good enough.
But! Homes will become smaller if density is increased as landlords attempt to maximise the potential of the land footprint. The UK already has *exceptionally small homes as it is.* Building regs would need to ensure minimum sizes of homes to prevent exploitation with Land Value Tax having a negative effect. People will blame the LVT for shoebox homes. This means the planning system needs to be relaxed to use more greenfield land as the existing footprint would not be big enough.
No I'm saying that affordability issues aren't caused by a lack of supply. Other issues maybe, but even then its hard to say because the market is dysfunctional.
Owner occupiers already over consume >12million bedrooms compared to those that rent on a pro rata basis. So I think it's more likely the UK has a chronic over supply of housing. Point is, we cannot say anything about supply until the demand side is fixed first with a 100% LVT. Which would in and of itself solve affordability issues (by ending the capitalisation of land values into selling prices/rents) and also allow the market to optimally allocate immovable property, rationalising our existing housing stock.
I think people automatic think "prices are high=increase supply" therefore planning to blame. But supply and demand make prices. So what happens to prices, affordability and supply if we move the demand curve £200bn per year to the left with an LVT? For a start prices and rental incomes drop by 2/3rds yes?
In other words the elephant in the room is the fact than freeholder implicit subsidy worth £200bn pa is responsible for all these issues. Blaming planning is ridiculous, although I perfectly under why people do it.
Real estate taxes rising on home owners (siting in their houses and waiting for the values to go up) are just another burden on the poor people who worked all their lives to finally own a place to live.
When you cannot longer work and can not afford to pay the rising taxes, the city will foreclose on you and take your house.
Right! Great Economics little fella!
Why would anyone do that? If you are no longer working you could live anywhere. So why not sell and move to a cheaper location?
So who decided that land was property of anyone to sell?
He is suggesting some kind of property tax. This is already common. And it is the worst kind of tax. Because everyone needs land to live, it is essentially a tax on living. They may just as well tax the air we breath.
If you want to reduce the cost of land,
1) stop taxing it. Governments create policies to cause prices to rise, so they can get more tax revenues.
2) Get rid of the central banks, who are forcing such low interest rates, which pushes housing prices up.
3) Telecommuniting should be encouraged more, as it allows people to live where land is cheap, and allows employers to higher people any where in the world.
Well, The more tax that land owners must pay the more expensive the rent. Supply and demand. The better an area is the more people are willing to buy and the higher the price. Those who are lucky and or early in a young market will benefit over many many years if they can survive the risk of the initial investment. Someday a new system of equivalent return may exist. The premise will be based on natural population dynamics. As natural resources become restricted a species normally suffers a loss in population. Future governments will seek to encourage or discourage breeding to match the areas maximum resources. I think before that point, people may just stop breeding as rapidly due to less intrest in propagation. It's already happening in developed nations. Perhaps the solution is written in our Gene's already and population will reach a natural equilibrium. Markets should be designed to do the same.
Tax landlords more and they will be less landlords and the rent would go up the answer is for a national government program of house building supply would go up prices will come down
Tax them even more and they will not want to be landlords. Nonprofit rental housing is the.future !
The difference between oil and land is that most common people don't own oil wells. A poor widow left with a $ 300,000 house sees it go u'p to $ 400,000. Is she supposed to write a cheque for $ 100,000 to the government? What's the government going to
do with the money? Spend it like an alcoholic drinks whiskey and drive the national debt further above $ 17 trillion with their new reckless spending habits? How much money is going to be sent back to the widow in dividends? What about a council that
takes a $ 10,000,000 lot suitable for housing and degrades it to industrial worth $ 100,000? Aren't they stealing from the landlord
who pays property taxes, is not permitted to build a home on his own property and is then told to join the army to fight for 'his' country and 'his' freedom? The government should release land and let people build their own homes even starting with a
'micro-home' and then work their way up using their new equity.
Tom Nicols
_" is not permitted to build a home on his own property and is then told to join the army to fight for 'his' country and 'his' freedom? "_
I cannot build a nuclear power station on my land either. How unfair, as I could be drafted into the army and made to fight.
_"The government should release land "_
Some sense here at last. That means changing the planning laws. Do planning laws and Land Value Tax means the government need not interfere, then the free market will solve housing.
I agree. That concept makes absolutely no sense in this context.
I must agree with this much at least - giving the money to the current US government is like giving a pound of sugar to a five year old.
Abolish the economic Landowning Statists!
Great idea but how is an oap with a large house and a small pension meant to pay out every year? The value is locked into the property and is not realisable monetary like oil on a yearly basis.
I was with him until he got to the solution. A landowner gets taxed for owning the land in which the taxed is used for redistribution. This will only punish landowners, this doesn't solve the problem of high value. The high cost is the barrier to entry, you have to address the appreciation of the land. If you pay 2000 for 10 years for a 200,000 dollar house you are paying 10% of house value.
Just one recommendation to anyone discussing this subject. Since we know that "housing" prices do not increase because housing is a capital good that depreciates, try to talk about "residential property prices" instead. Then, highlight the fact that it is the price of "land" that increases even as the value of a house falls. The value of a housing unit is its replacement cost, less depreciation.
it could also be used to make rich people richer because thats what government is best at
No, no, no .... Oil is (quite literally) a liquid asset and can be divided up and sold at will. Land's value is only realised monetarily when sold. Where exactly are landowners going to get the money to pay the tax - to be taken when they die? As for 'how we got here' - as pointed out it's about the difference between property price growth vs wage growth. This difference has been driven by the lax lending rules and decreasing levels of interest rates. Both of which rules over governments - those same governments that we are supposed to trust with this revolutionary land tax grab - not in my name !!
Ya, I also could not afford a house, i neded to get creative. guess what, i own a house now.
It's called, "property tax" and it's not the silver bullet you think it is.
when prices go down will people pay others back then? What if i do not have money to pay that money that my house has risen i have to sell my house and by smaller to get that money....
The bottom line is that Earth has a finite amount of land, and a finite amount of fuel.
The American Dream is dead. We can't all have big houses in suburban neighborhoods where everything requires driving.
It's time for compact, efficient homes in walkable neighborhoods.
We had that already in the 50's, 60s, and early part of the 70's. General motors and Big Oil didn't like it, so here we are. Also when you ship +70K factories to China, kinda makes that walk to work thing go out the window.
How about not paying property taxes for the place you live in most of the year? If its a your mansion or your lil 2 bedroom appartment you don't pay for it if you live in it you pay for all your INVESTMENT PROPERTIES, wouldn't that be fair for all of us? Rich and poor?
The Robot That Stole Your Jawb!!!
How about taxing the value of land as suggested in the video - *all land.*
Property tax is the most wicked kind of tax. If I worked to buy a piece of property, I could theoretically use the natural resources to build a home and garden, feeding and sustaining myself indefinitely. But the property tax bars me from living this way. I must make enough money, to pay the government rent for the property I "own". I can never escape this system. I have no right to live freely and simply and self-sustainably on land I bought and paid for.
There is no land ownership in the United States. The government owns it all.
I understand how, intuitively, it feels unjust. However, economically, Adam Smith recognised it as an efficient form of taxation and even Milton Friedman believed it to be 'property tax on the unimproved value of land' i.e. LVT to be ''the least bad tax'.
The facts are that none of us made it, we all need it (on which to exist and from which our food comes) and its value (excluding improvements / buildings) arises both from nature and increasingly from the human activity around it - none of which are attributable to those who occupy it. To me, the only sustainable model for the human use of land is that we all pay ongoing for it its full undeveloped rent value (to such an extent that you it has no purchase / sale value because we acknowledge we can't 'own' it in the same way we can a house or a car or a pencil because we didn't make it! For a fuller explanation, read Henry George!
I don't necessarily have an issue with property taxes if the taxes are being used for improvements and maintenance of the community. In theory, property taxes pay for things like schools, parks, libraries, sidewalks, etc.
Land value tax, unlike a property tax, is based on the idea that land is a fixed supply that should belong to public as a whole. If someone owns land, they should pay the public for its use. Because the tax is tied to the land itself and not improvements made to property on it, it’s supposed to also encourage land owners to fully utilize the land as much as possible.
so he wants more taxes, we already have capital gains tax due upon selling. If we penalize landlords who's going to take care of tenants?
its all about GREED.
couple of items of context that pretty much negate what was proposed....
First, you cant print land (ok Dubai have had a creditable go at that..) anymore than you can transmute lead into gold so land, like gold, is a store of value.
If you look at oz gold/acre anytime in the past to the same now it will be pretty similar.
when gold was about £250/oz my house cost nearly £50k , now at around £1k/oz and the house valuation is...around £200k.
the SE will be skewed by sheer population pressure while further north you can buy a house for £50k and even less...
The second is...where is all this new money coming from? The money tree in the garden?
If you have been paying a mortgage then you have also been paying tax which goes into the sovereign wealth fund a.k.a HMRC.
You also pay council tax which pretty much goes to the same place but more locally.
If you are a landlord that will be a 'cost of business' which will be deductible and the rest will force rents up...guess who pays...
If you want to level the housing market out then get the government to stop printing bloody money! (a.k.a. 'quantitative easing')
nice presentation + good and hot presenter! Agree??
YES!!! Land and any ‘real estate’ (resources) is used for ‘quality control of enfranchisement’ ...to the detriment of whoever finds themselves as the disenfranchised
Wonderful info, but please don't pause for three seconds between every sentence. It makes listening incredibly tedious.
You are only wealthy if your house is payed for or you inherit. Very interesting your ideas are good. But there are a lot of variable that would need to be looked at. Not every one who owns land is rich. They are working land to make a living and many are struggling. So to put taxes on the land could be a burden. I think you would have to look at land owners who are very wealthy and exceed an amount that could be taxable.
Also government is at fault. We give millions to countries who use it to make rockets, buy football teams. Corrupt governments who pocket the money and it doesn’t get to the people who need it.
We are a rich country. But we have a lot of people who are so privileged. We are paying taxes on estates that royalty own and all the hangers on.
People coming into the country who think that the British tax payers should enhance their life style, while many British people are in poverty and homeless. This is down to Government. They need to get control of private land lords who are making people homeless through their greed.
I could go on and on. But it should not be about people owning homes. It’s about building affordable properties to rent.
No. His solution is already being done. High Real Property Taxes are already being collected from home owners and/or land owners, to be "distributed" to everyone in the community in the form of government services. Landlords and/or Lessors are being taxed on their income from rental properties, again, to finance government services for everyone in the community. What the speaker is proposing is to unduly impose greater burden on home ownership. Not all homeowners or landlords are vastly wealthy. A lot of homeowners are struggling with mortgage payments for decades. They skimp on personal luxuries in order to pay up their home loans.
Wow, this is pretty terrifying!! He's suggesting an ENORMOUS new property tax! So as the rest of society deems my property "worth more"...I have to pay them money based on that assessment? And he calls others "radicals".