Why America's Biggest Cities Are Littered With Vacant Lots | WSJ
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- เผยแพร่เมื่อ 2 มิ.ย. 2024
- From New York to Austin, America’s biggest cities are littered with vacant plots of land because property tax bills can skyrocket once vacant lots are developed into homes and apartments.
WSJ explains the unseen role property taxes play in the country’s housing shortage and explores the merit of a land-value tax.
Photo Illustration: Amber Bragdon
0:00 What’s wrong with the current U.S. property-tax system?
0:41 Why taxes go up when property improvements are made
2:22 Analyzing the scale of vacant land in Austin
3:52 The pros and cons of a land-value tax
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#PropertyTax #Housing #WSJ
They glossed over “restrictive zoning laws” for developers. If you want to improve the development of cities with the benefits of increased economic activity and city tax revenue, reduced congestion, improved energy efficiency etc. then legalize mixed use housing and improve public transportation. Detroit may see changes from a land value tax, but until it stops being the motor city so dependent on cars, then the city will have limited options. It’s honestly insane that in the majority of areas it’s illegal to build housing that aren’t suburban single family homes. They’re bankrupting our cities
^This guy knows what's up
I'd rather live in a small single family home than in a condo. I like to see the sun and hear the birds. When my area will be converted to condos or apartments, I am going to move elsewhere. Other people fight to stay where they are. I understand the housing issue, but I don't understand why the solution is always to pile up people like termites vs living in smaller homes and putting a limit on mac mansions. Higher density shortens commute distances but also slows traffic, see Manhattan for example. When the new housing is built, it goes for $900/sq ft. or rents over $5000 (SF "suburbs" numbers). How does that solve anything? There are people with a lot of money that are willing to pay for large homes in premium locations and they put the rest of the people out of the market. If the population is actually decreasing in SF how do you explain demand for housing exceeding offer if not with people demanding more square footage per person? Media rooms, walk in closets, dedicated offices, home gyms, that's what you are supporting when you support more housing development. Not more affordable homes for the homeless.
@@luciustarquiniuspriscus1408 let's not forget there are also multifamily homes. Manageable density, without overcrowding. But indeed, such neighborhoods cannot be serviced only by cars. That's why improved public transit is so important too. And mixed-use, to reduce daily urban trips.
@@luciustarquiniuspriscus1408 I think people are forgetting the missing middle housing. The US needs to build more types of housing. Increasing density doesn't mean going from a single family homes to Condo towers. Also when public transportation isn't built as well... because not everyone can drive so of course you'll have more traffic.
@@luciustarquiniuspriscus1408 what's your alternative? sprawl into infinity? that just causes exponential traffic.
If we actually build enough housing to match demand you would see rents fall drastically (i.e. 1000 units when the demand is 300k isn't gonna do anything)
It’s been more than a century in the making, we’ve seen what Henry George warned us of and only now are finally taking the Land Value Tax seriously.
Yes! Henry George! People should be taught about him. He figured this all out in the 1800s. He read the literature on economics in his day Smith, Marx, etc and proposed LVT. Land Value Taxation is the key!
🥳
God made the land for the People
@@rimfire8217 God told the people to work the land, not use it as an investment vehicle, lazing around, gaining a profit because other people make it valuable by proximity because they are working hard nearby.
Cities also need to look out for abuse of land covenants. In New Zealand, we have a duopoly of supermarkets. For years, the two companies have been playing a game of buying up supermarket-sized properties, then putting covenants on them that prevent anyone else from building a supermarket. The government has only recently taken action against this practice.
Don't break covenant that would be injust, instead put a heavy tax on companies that have exclusive covenants, so the company will agree to end the deal
@@juanhaver6584 mate, not offense but our rules are so different here you don't really understand what you are saying.
I’m curious how your covenants work that this is successful. The way you describe it, it would not work here. They would need to divide the land and sell it to people such that a majority would not vote to remove the restriction.
Also, interested in how this wasn’t seen as blatantly anti competitive and simply deleted by government, maybe it will be. Or, were they more circumspect than you described?
@nunyabidness3075 in regards to anti competitive.. the problem is we are a small market of 5 million people, we aren't on the way to anywhere so everything has to be shipped here just for us. So many companies don't bother to set up here.
This means we just don't have room for competition against an established duopoly.
@@wigrammartialarts Interesting, but doesn’t answer my question. My insufficient knowledge on NZ won’t allow me to argue with you, though I find a duopoly to be no better than a monopoly in most cases.
This is an enormous problem in Detroit. The Illich family (Little Caesars, Tigers, Red Wings, MotorCity Casino) has been sitting on vacant lots, parking lots, and derelict properties for DECADES. I honestly doubt the law to tax more will pass because the Illich family's influence is massive. But, fingers crossed.
I think Detroit has other problems, maybe lack of people who desire to build
@@justauser And abundance of those who desire to destroy
@@gre894 Unfortunately that too
@@gre894 You destroy if you don't have a stake in it, like a tornado red air and blue air spun you to simulation.
That's the whole point. They're sitting on vacant parking lots because there are no taxes. If there was a tax they would develop it.
This is the primary reason why California started allowing ADU and allowing multiple homes on a single lot.
You gotta pay tax on the land AND the increased sqft
Thank god for prop 13 - I’m in my 60s and I earned the right to pay my current tax rate - about $6000 / yr for my 1.5 million dollars house
@@MrJohndoe845 Prop 13 is a way for young people to subsidize boomers, at the expense of our education system.
@@MrJohndoe845 Prop 13 completely goes against sensible tax policy. It's one of the main reasons why CA is so unaffordable
If they are doing this - then that's a smart move.
@@humnnn LVT is a very old idea. Henry George was famous for supporting it back in the late 1800s. It's not talked about nearly enough, considering how genius it is.
Yes! Finally! Someone is pointing out what I've been observing this whole time. I lived in downtown San Jose. It would infuriate me to no end to pay 3.2k for rent due to a housing shortage and literally outside of my window I would see vacant lots. I would scream in my mind: why is this land not being put to use! Build an apartment on the dang thing. That will help lower costs. I blame NIMBYs and local governments for effectively making construction illegal.
Wishful thinking. Even if the property taxes were changed the building would be luxury condos. Just because the govt try to change this won't mean anything if the banks rarely loan money for starter homes, developers prefer to build larger homes and luxury apartments and residents of such building prevent future construction to keep their property values high.
Agreed with the comment below. New buildings are not going to be affordable
@@guardianoffire8814 correct but their isn't an endless supply of buyers for luxury units they will move out of units which will become more affordable
@@dstblj5222 there you go original thread your rent will be 3k instead of 3.2k Laissez-faire
"I blame the local government"... The one *you* voted for?
Somebody, maybe a guy named george, should propose a tax system based on land value. Just call it georgism or something like that
Henry George was genius but rich on both sides wanted none of it
It's pretty simple your assets (land, stocks/debt products, companies, personal freedom) is defended by government you pay for that protection, right now we only have a small tax on land (property) and large tax on personal freedom (income tax) and tiny tax companies (inventory tax), and no tax on stocks. It would make sense to have some tax on stock ownership (no the selling of it but the holding of it since said stock contract would be worthless if government wasn't upholding that contract) and larger taxes on assets as a whole while much smaller taxes on personal freedom (if government wasn't enforcing rules a stronger militia could capture you as a slave).
George what - George Henry? Anyway, some day he'll get his due. His only problem was that he oversold the idea as the solution to everything.
Yaaaaassssss, all I could think of watching this video.
@@climatebas It would solve a surprising number of things, if not greatly alleviate them (prime among those, for example, inefficiency, deadweight loss, inequality, and resulting from the latter: the racial wealth gap), but “everything” is definitely a stretch.
This tax reform combined with changing our absurdly restrictive zoning laws is desperately needed. While they were correct in pointing out rising material costs, those other 2 steps can be taken as quickly as we can gather the political will to do so. In the least, I'm glad people are realizing how ridiculous the "blame the developers/builders for the rising costs of homes" mentality of the previous generation has been. In terms of the housing affordability crises, we have been our own worst enemy for many decades now
Based!
Exactly I propose a density targeted tax, if the land is in a place with a high demand of shelter and services then the land should be used in a higher density manner or pay heavy taxes until someone does use it in a higher density manner. We should just get rid of zoning laws that aren't directly related to health like not putting a plastics factory next to a apartment complex. With the density based tax if a landlord has unoccupied units those would not count towards his density only occupied units would help, but if someone has really well used land then they could even be receiving money, but the target would be adjusted to prevent too much of that. The cities would quickly look a lot different.
@Juan Haver property tax can simply be charged on land area rather than property value.
Or let small suburbs pay for their own electricity heating sewage police etc. without state or federal governents support. That will force huge tax bills to the suburban property owners
Regarding materials costs, it's especially worth noting that housing construction rates plunged after the '08 financial crisis and haven't recovered since. The recent increase in materials costs is only a very small factor. It's worth noting, too, that we have various regulations on multi-unit housing designs that making building possible only for large developers, despite other designs proving safe after decades in East Asia and Europe. There are so many small pieces to this giant puzzle of affordable housing; it'll be crucial to catch as many of them as we can going forward.
Before watching the video, just from the title I chalked it up to two reasons: Stupid zoning (as you mentioned), and environmental review/restriction laws. San Francisco lets other people object/holdup developments for all sorts of reasons (Reason magazine has done some excellent articles on guy who owns a laundromat and replace it with an apartment building and keeps getting blocked).
Let property owners actually control what they want to do with their property, get out of the way, and we'll see lots of new development. And I guess adjust the property tax laws. No government subsidies needed.
Great that this is getting more attention. Thanks WSJ! What the video didn't mention tho: the current method of taxing also incentivices knocking down old/historic buildings as doing this would reduce your tax burden. If you ever wonder why old buildings get torn down for parking lots, this is a big reason why.
I agree! Back in the eighties during an economic slump, a large portion of downtown Terre Haute Indiana was demolished for this exact reason
It’s called Land Banking, every large scale developer does it.
Since it’s bankruptcy, Detroit has been innovating and improving very rapidly. The fundamentals were already there- Detroit has near universal name recognition, world class cultural amenities like the DIA and Belle Isle, and is home to the headquarters of quite a few large companies (Rocket Companies, General Motors, and Little Caesar’s Pizza- just to name a few). Decades of white flight and governmental ineptitude held it back, but between discharging debts through bankruptcy and having a mayor with better managerial skills than those before him it seems like things are really looking up. I hope is innovative tax proposal boosts growth even more!
"You can always count on Americans to do the right thing - after they've tried everything else." - Churchill
Well he did have that French passport for all that retreating he was doing.
Chruchill and De Gaulle. Great guys. Just some leaders who my American countrymen had to save from Nazis and communists. Glad we did the right thing.
"america"
-america
Pretty sure Americans learned this from the British to begin with.
Read the comments--this is not restricted to the US
In Japan they solve this problem quite simply. Any land that is zoned for building (in residential or commercial areas, not farmland etc) that is left undeveloped for more than two years automatically incurs double the annual tax rate that's payable (in Japan it's called fixed asset tax). This helps deter hoarding of land in cities which is left undeveloped. In addition, capital gains tax on land that is flipped within 5 years of purchase is doubled as well (to around 48%). If you sell land more than 5 years after buying it, capital gains tax is mid-20s percent. These two simple tax policies help prevent a lot of real-estate related speculation, and were a result of lessons learned during Japan's insane property bubble of the 1980s.
That also has an unintended side effect (combined with another cultural problem) where old houses just rot because it is cheaper to just leave it be instead of trying to improve it or tear it down. (or so I have heard)
@@studlytheknight Yes, some old houses are not torn down due to the land owner not wanting to get slapped with property tax. Not just that, I think tearing down old homes is a costly process. On the other hand, land in Japan keeps its price, but not the homes. The land price are generally high due to low interest rate, aftermath of the bubble, short supply etc..., more to the point the home itself does not hold the same value we treat it as in the West. Japanese homes are not build to last, and they probably won't due to earthquake. Therefore, there's this famous trend in Japan to build some outlandish home with whacky design after moving into a plot. Thus, 80s houses are tore down all the time.
But of course, tangentially related is the fact that zoning laws in Japan is very lax compare to the nightmare that is North America. You can build whatever you want without having to adhere to strict "aesthetic of the neighbourhood" unless your house is in a historical district.
Happy to see Detroit innovating
Americans will keep living in denial about the need for allowing more than just single family housing in residential areas along with permitting commercial spaces there. Until that happens, Americans will continue facing this issue.
"Zoning" has killed much of the future of America. All over, even in little-town fiefdoms.
In Brisbane in Australia, I remember there was a building that got demolished with the intention of being redeveloped, but the owners, for whatever reason, were not able to immediately redevelop. The city made them turn the lot into a mini park in the middle of the city and allow public access. Of course, people then complained when the building finally did proceed.
It should also be brought up that these huge undeveloped surface lots have detrimental effects in suburbia as well as in the urban cores. For example, once a big box retail store goes out of business what will replace it? Chances are in your city the old Sears, K-mart, Macys, or JC Penny has sat empty for decades. That is because poor land use and tax policies pretty much encourage these places to remain empty.
You want to know how Big Box retailers like Walmart destroy small businesses? They buy up huge swaths of land and insure that these places never become anything other than big box retailers. Effectivly holding communites hostage for decades on end. The worst part is how many people in all levels of Government refuse to change the policies to stop this from happening.
That’s almost Shell levels of evil there, if only it produced even worse negative externalities.
Good. Walmart and stores like it are necessities
@@universenerdd Monopolies are economically problematic actually, controversial take I know. Natural monopolies such as utilities are exceptions. No Patrick, Walmart is not a natural monopoly.
@@wildfire9280 You are saying you'd willingly live in a place without a retail store? Also, I don't see how monopolies are involved with this
@@universenerdd “Destroying small businesses” and “effectively holding communities hostage for decades on end” is the hallmark of a monopoly. I’m not sure you read the original comment.
The people who owned the lot across the street from my house were paying like 6$ a year in taxes because they had one tiny improvement. Then they built 15 million dollar subdivision on the land. The system is messed up.
So does Eminent Domain only apply when they want to steal poor peoples houses, not rich developers empty land?
@@mikegrin2323 thank reaganomics
Eminent domain ironically got gutted by the same activism that stopped highway construction. It's a big reason why new mass transit is so hard to build. People use protections enacted against building highways to build much of anything.
Eminent domain isn't used to take empty lots away from property owners and build housing. It's used for things like space needed for highways or other infrastructure. It can be used to take land in that scenario from wealthy or poor land owners, it has nothing to do with personal wealth.
@M K that's not reganomics lol. Are you just saying random catchphrases hoping that's actually what the problem is? In fact in the US eminent domain has been used much more often to buy huge swaths of land from corporations and ranches. Especially when building large public works projects like interstates, airports, and rail lines.
“When you’re taxing improvements, you’re signaling to the market that you don’t want improvements.” - Josephine Foss
And there ya have it! Look in your city and see if this applies because I’m visiting in Burlington, VT right now and it’s the issue up here.
Great quote.
Tax behavior you don't want, subsidies behavior you do want. Thats why up skilling and earning more money means you pay more tax. Because the government want's you to stay poor.
If you tax you destroy. We don't want it and we tax to reduce the demand. Industries are taxed to reduce businesses. When it's no longer affordable people give up and do something else.
Thank you for covering this! I notice this same issue upon moving to my moderately sized city in the South. That is - empty surface parking lots in some of THE most coveted areas (waterfront, CBD).
Another issue we see here (which would also be slightly more controversial to address) is non-profits, and predominately churches in dense neighborhoods, owning large, undeveloped lots at even lower and sometimes zero tax rates.
I understand but will have to disagree with you on churches. They generally serve their community so as long as they don't own an excessive plot I understand their nontaxable status
@@maYTeus Church can serve community without owning land. Just the building the church on. Tax equally
In Canada the private parking lot business model is basically a racket.cost a fortune. If you get a parking ticket they also try to make people pay damages on it too. Lol I mean you don’t have to pay, and they have had huge government fines for their behaviour. Biggest drain on our cities. Worst part is that they contribute to massive heat within cities too. They should all be underground and have buildings/green space on them.
In my city (a suburb of Montreal), you get taxed on your empty lot the same as if it had building on it. A neighbor kept an empty lot next to his house, in hopes his son would eventually build his house there. For the last decades, he paid the same taxes on this lot as if he would have built a house there.
Property taxes shouldn’t exist… paying taxes for what you already own.
This is also a symptom of car dependant infrastructure.
and now AirBnB
What is?
@@chrispychip6569 the example used in the video of a vacant lot being used as a parking lot.
It's the main cause, the video is more of "why they remain vacant." Most of what was there was torn down for parking/car accommodation to start, along with strict zoning.
We've got a similar problem in Ireland. The government is planning to bring in a 3% tax this year, although lots of land hoarders are taking court cases to oppose it.
3% per year is insanely high
As a Parisian this is insane ,imagine if there were an unused giant plot in the middle of the city, it's like throwing Billions
Seems cities will only consider changing their tax policies after they’ve pretty much failed.
Explains why Detroit’s the first major one to try. And why the smaller ones were in rust belt Pennsylvania.
I never considered vacant land as part of the housing issue before. Good job WSJ, not much media these days offers anything the think about at all. This was a good spot by your crew, bravo.
There are many factors contribution to costs: Massive amount of parking spaces; zoning laws prohibiting 2+ story residential houses or buildings including banning duplexes, lofts, apartments in residential and commercial zone; companies buying out houses driving up the housing costs for the poor/middle class; NIMBYism; gentrification; typical US conservative views of making housing affordable = "communism" ALL contribute to rising housing costs.
a parking lot is not a vacant lot. Its a revnue generating parclet with low overhead. But hey, you are experts.
The other extreme of the housing crisis is hundreds of thousands of vacant apartment/condo units in the over developed cities in China! They sit empty due to the high cost of renting or buying. Such a waste of money, materials, and labor. 😔
Exactly. Build apartments on vacant land that the average person can’t afford. Sounds like a good solution.
The problem is when you add dense housing, you'll need to build for walkability. Of course, a parking garage will do, but incentivizing different ways to get around will increase more space for housing.
While this is true, one of the cited examples is NYC which is really quite walkable!
Doesn’t sound like a problem. Sounds like an opportunity.
How is Dubai building 100s of skyscrapers without making it walkable then ?
@@ahmedzakikhan7639 Because most of them are empty.
@@neeljavia2965 No its not. If most were empty they wouldn't build 100s of them.
The whole reason they tax development more than land is because development creates costs for the city and empty lots mostly don't. I mean empty lots don't have students living on them that then make use of the schools. They don't have anything that can be stolen or enflamed - thus making use of the police or fire departments. The only thing empty lots do is make the road and sewer systems more spread out.
Property tax is immoral in principle and should be abolished nation-wide. Why should only property owners be taxed (penalized) to pay for school systems, and not everyone in the country? Why should only property owners be forced to pay for the free schooling of millions of illegals? It is plain stupid to think that raising property taxes on some partial segment of property owners is a fair, moral, or constitutional principle. Furthermore, it is the so-called "zoning" itself that is causing problems and limiting the marketplace. If "zoning" prohibits you from building what you want on your own property, then you don't have any property rights. If you don't have property rights under the Constitution in the "land of the free," then you are nothing more than a slave.
Chicago had a program recently to evaluate environmental concerns on city owned vacant lots to try to sell them. Majority them were residential on the south and west side where there has been disinvestment/little support from the city. We have already seen a few ‘mini parks’ developed on these parcels
Well that’s terribly inefficient of landownership. And yet, the immense cost of that deadweight loss is carried by these communities rather than them.
And they’re still pocketing from socially produced values what should be due in economic rent. That’s unearned income.
4:14 that dude just blows that stop
I appreciate WSJ bringing these issues to light but they failed to recognize that many of those same real estate developers lobby local governments not to pass new tax or zoning reforms. Just look at any major city council elections and who are the main funders of those candidates.
There should be a standard lot tax (tax on land area occupied). And a sales tax on land and property sold (the more you sell the land and the building for the more revenue the government receives during the transaction). This would provide property owners with incentive to want to improve the lot of land that they own without penalty.
I believe the sales tax could unfairly burden landowners in the event they cannot actually afford improvements and would sell to more efficient landowners or developers. In addition they could still shoulder this ‘standard lot tax’ so long as it is offset (in part or in full) by unearned income.
A 100% land value tax is advocated because it *necessitates* landowners make optimum efficient land use to not incur losses. In addition, both the full unearned income they receive from society’s valuation and the social cost society incurs is paid off.
Any deadweight loss would fall on the landowner and not the community. The revenue generated would then work to reimburse the community for *all* deadweight loss in the form of citizen’s dividends or UBI.
In Sydney, Australia - indeed in the whole of the state of NSW - there is a land value tax. Property taxes are based on the unimproved land value. There is no property tax on any buildings on the land at all. I mean sure, there are other taxes that apply such as capital gains tax and income tax, but there is no tax based on the value of the buildings. And yes, I have seen it written that combined with zoning, it is explicitly to encourage the maximum use of the land.
The reason why property tax is levied is for the upkeep of civic amenities like roads, street lights, pavements, parks, police, firefighting and other infrastructure which is useful for the residents and commuters. Considering the fact that no one 'lives' in an empty plot, it doesn't make sense to tax a land, higher than a building. What is services is government giving in return for empty plots? Nothing.
There should be a reasonable nexus between tax collected and benefit derived in return.
But tax systems are not only to raise money. Tax systems can also be used to encourage or discourage certain behaviour - think taxes on tobacco and alcohol. Also, more often than not, taxes are not generally hypothecated, it just goes into general revenue.
@Sean Anderson If only cities have an inexpensive, efficient, and extensive public transit system, people wouldn't live in the heart of a city. It is unfair to tax individuals and corporations for just having empty land. What stops cities from investing in public transit?
Parking lots rely on those services too
Solid plan! solve a problem increasing the taxes, what can go wrong?
What if instead of doing that we incentivize them by doing the opposite? Something like keeping their current taxes frozen for 5 years if they build.
Cities should also consider taxing vacant land, especially prime locations, not based on current usage (which is nothing or just parking), but based on potential usage, eg, condo building... that'll get the land speculators moving...
That's exactly what they're arguing for in this video.
What/who determines "potential usage"? It seems like a highly political process that could get bogged down by competing interests. For example, homeowners could push for lower density of buildings, while apartment renters across the street would call for higher density.
In California, some cities are fighting the state over this issue (e.g.: Huntington Beach and affordable housing mandates).
better yet, just get rid of property taxes entirely!
Japan for example does this.
Vacant lot tax basically
Y'all just wanna steal everyone's money don't y'all.
Property tax is like a subscription service to own land in this country.
Just as it should be. You didn't make the land, why should you wholly own it? Land value tax makes more sense than income tax. Keep what you make, share what no one makes
Yes and it's critically important for property taxes to continue to exist. The land you own doesn't exist in a bubble. Roads needed to be built, pipes needed to be laid, electrical poles needed to be installed and strung, all to support the land you own to make it usable. None of that comes for free, and all of it needs to be maintained. The whole point of property tax is for the state to generate revenue to build and maintain that infrastructure, and it makes sense that the land owners should foot the bill since they're the ones who benefit from it.
The big lie is you dont own the land.
The government owns it.
You simply have payed for the rights to occupy it and you can sell those righta
Tax is the rent.
@@daved6464 you can say the same thing about your labor regarding income taxes. Yet we'd all be better off if we kept 100% of our income and had to pay land value taxes instead.
@@abarbar06 Taxes are just part of life. Im just saying you really dont own your property. You are just renting it
Home ownership can be a good investment most of the time.
It is strange that some of the richest people pay almost no taxes.
Maybe the tax system needs to be much more simple.
In Denmark we have exactly that. Land value tax, grundskyld, directly inspired by Georgism. Though the Danish "IRA" has massive problems with its value estimates and infrastructure, the basic idea works quite well. The value of the land value tax is estimated based on surrounding value estimates. This means that if somebody around you improve the land, by investing into it, the value of the area increases. This means that you as a land owner is required to invest into your own land as well, if you want to be able to make a profit, so you cannot sit on large pieces of land in cities without developing it, as you are "negatively" impacted by the investments into the surrounding area, as their land investments cause your taxes to increase as well.
In New York, at that lot next to the UN building, the land would likely be worth so much, that no one could sit on a piece of land like this without developing or improving on it, simply because the land value in Manhattan would make it too expensive to own it while not having any revenue from it.
You're also missing how hard it is to build a building, first they have to go through the approval process where they cut the building in half because it was too tall and too many units. And then everyone gets to be shocked when they have to sell the 500 units for double what they were going to sell the 1,000 for.
More difficult than the buildings surrounding these empty lots?
The only reason nothing's being done is if you'd built an affordable apartment building - the value of surrounding housing units drops. If you're someone who owns several buildings in the area it is in your greatest interest to influence politicians to keep your wealth from depreciating.
And worse methods of speculation being done to existing buildings and homes.
treating housing like a speculative asset is insane
So one thing I sort of interpreted from this is that the government would probably PREFER the housing crisis to stay where it is or get worse without going past some breaking point, so it can keep overvaluing lots to get as much property tax as they can.
Lowering property tax in Oklahoma would be detrimental as our schools are funded with property taxes. That said, we have only 2 really big cities, Oklahoma City and Tulsa, and housing prices are ridiculously high in regards to average incomes. It’s getting that way all over the state with private equity funds buying up tons of properties who jack up the prices.
Private property is not what it used to be.
Wouldn't it be better for these cities to encourage owners of the lots to turn them into greenspaces, plant some trees or community gardens. Could be used as a carbon off set for some of the businesses.
@@cmmartti It woulldn't but it would give normal people usage of the space, until the owner decides to sell.
Yeah I think they should be forced to make pocket parks until they develop. My town is full of vacant lots boarded up, providing nothing. After WW2 the empty lots of London and other bombed cities were used as playgrounds.
@@Rumade This has definitely happened in Brisbane in Australia. I specifically remember a development in the city that remained vacant for a while, boarded up. The city made the owner of the land put in a landscaped mini park until they were ready or able to develop. This is a fantastic idea for the general amenity of a city - far better than a car park.
property tax should be based on land area not property value, thats how it is partially done in Vancouver, Canada - this will incentivize dense development. It's ridiculous that condo owners of 800 square feet in cities pay same tax as big houses in suburbs.
Vancouver is also $2 million for a home with $40k salaries that's not something any city should be striving for
@@seanthe100but that seems to be the trend in north America
@@seanthe100 I agree. But rents are relatively low in Vancouver. There is always a trade-off.
@@ahmedzakikhan7639 Rents are relatively low? I looked at a few sites, and they're easily over 2k a month for basic studios/1bd.
Surely you mean land value over land area? You can't tax manhattan land the same way you tax nevada desert land.
Amazed to see WSJ talk about Land value taxes! Big upgrade from property tax.
Great upload,,thank you for sharing
This was such an interesting video. Always wondered why there were random plots of land in busy areas, where you can easily build apartments and make a profit
Not so "easy."
Sounds like you do not know the process.
@@stanleyhape8427 not easy in the united states but this problem doesn't exist in other top 10 developed countries
I don't know if their video really answers that question. Even with the increase in property taxes, the property owner of that lot could still build a building there today and make more profit than it is as a parking lot.
@@stanleyhape8427 yes there is a process, involves getting permits and permissions, it’s very capital intensive, but you ALWAYS make a profit in the long run. If the building makes it to completion, the units WILL rent, and you will rent them out for more than your operational costs.
@@orrd I think the problem is that they can make the same amount of money (or risk-free money) by just sitting on the land, paying lower taxes, and selling it later on when they need capital. To make apartments, they would need to have a large capital injection, and it may be more effort than they want to put in, certainly more difficult than doing nothing. They would also end up paying higher tax for the trouble.
Wow! I had no idea! I’ve always wondered why my city’s downtown has so many surface pay to park lots
There's also car culture influencing that.
Thise empty lots weren't there originally. They are called parking lot bombs. The US went crazy and destroyed a bunch of old buildings so they could have parking lots because everyone was moving to the suburbs in tye 50s and 60s
@@dfs-comedy EVs won’t change that.
It sounds like the undeveloped land in being appraised incorrectly. I grew up in a VERY expensive area, and the main cost of real estate was the land itself - not the improvements. It’s hard to believe that it’s impossible to appraise land that the owners don’t want to sell at a price buyers want to pay.
The BMW at 4:15 ran the stop sign lol
I don't think this is the answer, it kind of makes sense that a massive Highrise that takes up more city resources (Water, waste, police, parking, road usage, fire dept. etc.) would be taxed more then a bare piece of land . The super restrictive zoning and red tape on doing anything other then building a big home with only 1 or 2 units, on a big lot with a big setback in a residential neighborhood is the real issue, combined with high interest rates and oh, NIMBYs that want to 'protect the character of the neighborhood' at all costs.
The high-rise is still going to pay for the resources it uses. Land taxes don't cover utilities
0:51 I'm pretty sure thats a lot more than 0.2 acres
The bigger question should be why are 50% of skyscraper units vacant today.
In a fair nation, you'd have a massive tax on unutilized resources in cities.
Who is to judge what is "un-utilized"?
Do you *REALLY* want the government to make that decision?
@@ricardokowalski1579 in the rest of civilized world, yes, you would want some government and private inputs into deciding which are unutilized and then reinvest and tax the land there
@@ricardokowalski1579 not the gov't, the market. If you have a resource (in this case land) that's what you pay tax on. If you're not using it as well as someone else could, you end up taking a loss. It's very very fair and creates minimal distortions on the free market.
@@TheStrangeBloke how would you "take a loss"?
@@TheStrangeBloke What if it is my choice to "take" this loss?
I understand housing shortage is problem but raising the tax on empty lots will just make it harder for the average person to own land i feel like that will just open another door to a whole other problem
Have you ever lived somewhere that possible lot is full? It's horrible to be surrounded by buildings and people to that level.
I would prefer that no one new move into my local area. Sparsely populated areas with no services are getting hard to find.
Georgism!
This is why we need a land value tax
We need lower taxes
@@acunamg4793 A land value tax would reduce most homeowner's property tax liability.
@@brandonbierbaum9793 Until the Californian roaches and locusts swarm in, buy up all your neighbors, and get the government to evict you because your taxes got raised to unaffordable rates..... by someone else's improvements. Can't wait to see how this pans out in minority communities!
@@sdfasdfadfasdfadfasd Ok, keep paying higher taxes then. 👍
@@acunamg4793 reduce income tax, sales tax, import tariffs, capital gains, payroll, etc. Replace them all with land value tax, and we will prosper greatly
Just blowing through a stop sign @4:15
4:06 - I think this is worth clarifying: Non-ag land owners DON'T profit from the income their land generates. They make (or lose) money by how much they're able to sell the land for in the future.
This explains a lot.
I’m always in awe of how things work in the west. These tax numbers are funny
I think this is a very North American problem, or at least an issue in former settler societies. It is much rarer to see practices like this in densley populated places like Europe.
If you think our tax numbers are funny, wait till you hear how we do our taxes
@@hpsauce1078 The U.S. is the worst “developed nation” in the world.
This is not the way it works. This is the way the story provokes the issue into debate…
Noticed they only showed values, not cash flows or anything that really makes sense, nor did it do any serious financial analysis for affordable housing… A very unthought out story. If these people really understood the issue they would be developers not story writers…
I can see more people losing their property with this land value tax increase. Imagine being a upper middle income person who owns land in the city limits not a rich person or corporation. The tax doubles or triples and you cannot sell you property or pay the increase. Then you lose your property.
"The owners have paid relatively little in taxes".... Taxed at $1.57m per acre..
The real issue with residential real estate in North America is investment groups like Blackrock. Regular people will never be able to compete with pools of wealthy investors. They can overbid for a property because they can expect to make their return on investment in the long run. These groups don't care if half of the homes are left empty because it keeps purchase prices high due to artificially low supply. This is by far the main reason there's a housing shortage! Vacant lots, Airbnbs, foreign purchasers, etc., are such a small part of the problem.
They buy housing where it's hard to build more relative to the wage and population growth it's in there 10K and regulatory changes that make it easier to build more housing represent a significant risk to them
Investment groups are not the issue. They are not leaving tons of units vacant. That just isn't happening.
What about lowering the tax on the buildings...
Why does it always need to be "tax more!"?
I just got my tax bill for my house this year here in Indonesia. It was like 60 bucks. I am not greedy and I would have been fine paying more but over there you got to pay like $5, 000 to $10, 000 a year for your house. It's just too much. Something should be done. Taxes are way too high over there.
They fail to mention that land value property taxes is terrible for lower income people with small houses and a big tax break for wealthy people who have large lavish houses. That's the real incentive for WSJ to promote the idea.
Not to mention rural land owners. "Just imagine how many condos we could build on your small family farm. You're being selfish by not allowing us to develop it."
this is really dependant on situation ngl
It’s based on land VALUE. Larger lavish houses are more valuable so are therefore taxed more.
This is a very good policy.
Not sure if Detroit can be a good example because of rather low demand due to the ongoing decline if the city in the rustbelt
Well it has a LOT of blighted/unused land, particularly close to the city center. I think trying to build that area up makes a lot of sense.
The construction work @ 1:31. That is actually a pretty sick helmet lol. Arrogant, but slick.
Short answer is government overreach, over taxing and over regulating. The other side of that is it is extremely difficult to pay so much money for a tiny piece of land, then build on it and then be able to make money on it.
Taxation is theft. Property tax is probably the most reprehensible form of taxation.
Could you imagine if the railroads had a tax incentive to upgrade their right of way infrastructure instead of decreasing it.
So are we just going to gloss over the BMW @ 4:14 that straight up blew that stop sign
Guy at 4:15 just blew the stop sign it looked like
How about you do a piece on empty houses own by your CEO & Snr management?
thats not the problem
@@sergeantromanovklov4378 How is that relevant? Are reporters not allowed to report on something unless you personally identify it as "the problem"?
@@dand5829 yeah
AAAAHHHHHHH LAND VALUE TAX LETS GO!!!! DO IT YOU COWARDS!!!
And here people outside NYC thought it was super crowded and there were no spaces left. Meanwhile, there are gorgeous massive waterfront plots just sitting there lol.
The planning department & redevelopment entity can write / rewrite the current zoning laws for the district that includes the site along with a boundary. Place the site on a “to be acquired” list for another developer to approach the owner(s) as an incentive to build. Tax reform alone does not protect the investment of the builder & banks…Too often cities dont underwrite investment strategies or provide (re)investment tools that stabilize markets or cities
How could they make this and not mention Henry George?
How about low tax on both?
This is so familiar in China and Hong Kong. The Hong Kong tycoon Ka-shing Li bought property in big city down town with low price back in early 2000, then slowly developed these land and some of them even not has been developed in 2020. And due to the unmature of China mainland tax system, there is even no tax for these undeveloped properties.
In Brazil the taxes over vacant lots are huge.
The consequence is that when the lot is sold or a building is made in a previous vacant lot the price will go sky high to compensate past taxes, and as there is taxes over profits on the selling of such properties the price will go even higher.
We already have a bubble on housing, taxes only aggravate it.
Concluding: Taxes are a problem, not a solution.
WSJ will always advocate for the lower tax solution, but the other way of disincentivizing vacancy is to implement an additional vacant lot tax
Where wealthy corporations are concerned (ie. those who own this very valuable real estate), the WSJ solution always turns out to be carrots, not sticks.
Yeah but the most important thing is to fix our cities. If you go against the real estate developer lobby, your gonna have all this fight and pushback. So the most important thing is to make cities look nice, be walkable, and vibrant. If you want to do this by going against the real estate industry, we may battle them and never see any significant change in our lifetime. But if you team up with them, we might actually see an improvement and a change.
Taxing the land not the improvements would not necessarily be a lower tax solution overall, and certainly would not be lower taxes for all underutilized land.
Pretend there are 10 equivalent lots in a city each valued at $1million, where 5 are vacant, 2 are SFHs, 2 are midrise housing/retail, and 1 is a 30 story high rise. As is they pay taxes based on the land and the improvements. Let's make it simple and say the jurisdiction has 1% tax rate. The 5 empty lots, doing nothing for the community pay $10,000 a year. The SFHs with $300k worth of buildings on each of their properties pay $13,000, the midrise with $1million buildings pay $20,000 and the $5million highrise pays $60,000. In total the jx makes $176,000 in taxes.
If instead they ONLY tax the land, and they raise it to 2%, now the jx makes more in taxes overall ($200k) but only the empty lots and underutilized SFHs have taxes raised. The high rise comes down in taxes (still a big investment to build, so if the market can't support the occupancy needed to keep the high rise filled, they won't be built) and the midrise taxes stay the same.
In rural areas where land value is low, empty lots and SFHs will not have a disproportionate tax burden, but in denser areas the taxes will rightly reflect what the area actually needs.
"tAx PeOpLe" you've been living in a socialist country thats been socialist for 50 years and are still afraid to view it as that. taxes on debased currency have no value. you can just print money. you don't need to tax other than to restrict inflation at that point. It;s a unique issue for debased currencies. No nation has stood the test of time after debasing their currency. The American dollar is not gold based money, it is just fiat currency. It is not capital it is fiat.
@@griffithf.k.4136 This would be a massive stick though. It would force landowners to develop their land.
This "solution" sounds like a great way to have lots of skyscrapers and no parking lots.
And that’s bad why?
Get rid of property taxes
The lack of affordable housing is hardly because of vacant lots. It’s because of lack of any rent controls!
Parking reform is essential too. Off-street parking requirements drive higher development costs which influence some of this land banking behavior.
I think a lot of those “vacant” parcels are actually just the statutorily required parking lots for whatever is next door.
I guess most strategic properties are owned by large corporations, such as BlackRock and Vanguard
It doesn't matter who owns them. What matters it our tax systems are set up to incentivize them to keep doing what they're doing. Implement a land value tax and watch how fast they sell or improve the land they own.
Anyone else catch the bmw running the stop sign at 4:15? 🤣
I'm confused, when a home adds two new rooms for occupants, the property automatically uses more resources like water, electricity and refuse disposal. Not only that, just like profit on stocks, it's value increases so you have to pay capital gains on that. The policy is that simple, if you really want to have a direct impact on how land is used, approach the land owners and give them a proper incentive, I suspect it's easier to write new policy then to edit the old ones since they're already locked to established "code".
The perverse incentives of property taxes.