Killer Arguments Against LVT, Not (172)

What makes life so difficult when arguing with Home-Owner-Ists is that while home owners and estate agents are happy to explain (or boast about) the factors that creates land values, they then go into complete denial mode when a Georgist points out that it is these self-same factors which create land values.

For example, the Home-Owner-Ists state that:

Houses close to public parks or open spaces now cost up to £21,000 more, revealing a “green premium”

Parents pay a £77,000 'premium' for homes near top state schools

the availability of good broadband internet access really can add value to your home

Every 60 seconds saved on the commuting time [from London] increases a home’s value by £1,300

One minute nearer the station adds £4,000 to the value of a home in London

and then there's the general observation that local wages are the main driver of local house prices or local rents. Of course, this is reinforced by the fact that in any geographical area there are higher earners who live in 'nice' areas and low earners who live in 'not so nice' areas, but that just illustrates that housing is a consumption good like any other.

So far so good.

It's interesting to filter out the impact of any individual factor, but they all overlap - a house in a high wage area may be nowhere near the station or the park, but might be near a good state school, and another house might be in a low wage area but near the station, the park and a good state school etc - suffice to say, all these factors overlap and we can tell what the net overall benefit of living in that area is by simply looking at local rents or local house prices.

And yes, there are negative factors as well, I wouldn't fancy living next to a nuclear power station, a prison or a sewage works, for example, but in most urban areas, land values are very much positive.

Now, there are those such as Longrider, who make bald and entirely unsubstantiated claims like this:

While one is living in a property, the “profit” does not exist – it is imaginary money and cannot, therefore, be at the expense of anyone.

The Homeys themselves do not dispute that the value of any location is made up of some combination of services or benefits provided by 'society in general' (see list above). And clearly, if you occupy land it is very much at the expense of 'everybody else' because you are excluding other members of society from things which they have provided (unless you are a subsistence farmer in the most inhospitable part of the Outer Hebrides, and in which case your potential Land Value Tax bill would by definition be precisely £nil).

Here's the bit with logic, hard facts and a bit of maths, to ignore at your leisure

i. We can do the same exercise with any factor that drives land values (a nice view, a good state school, local wages etc) but the example with London train stations is easiest to imagine. Let's assume that the landlord of a house which is half an hour's walk from the nearest station cannot charge any extra rent for 'being near the station' because frankly, the house isn't, I'm pretty sure that there is nowhere in London more than half an hour from a station, so this is our marginal land, the element of the rental value owed to the station is to all intents and purposes £nil.

ii. Between that marginal house and the station is thirty minutes walk, so our commuter would have to walk past (say) a thousand houses or flats to get to the station (one every two seconds, but there are houses and flats on each side of the road).

iii. We know from the list above that the rental value of a house near the station will be (say) £4,000 more than our marginal house, so we could also say that House 1 nearest the station owes £4,000 of its rental value to the station, House 2 the next one along owes £3,996, House 3 the next one £3,992 and so on.

iv. If the landowner of House 1 had not bought that site first, then the current owner of House 2 would have been able to build his house a few yards closer to the station and would be able to charge an extra £4 a year in rent, as would the owner of House 2 etc, all the way down to the owner of House 1,000 who can currently charge nothing extra, but would be able to charge £4 if he'd been able to build on Plot 999, and somebody else would have been able to build House 1,000.

v. So from the point of view of the owner of House 1, that extra £4,000 which he can charge is precisely equal to the reduction in rents of £4 each which each of 1,000 other owners has to accept. So the benefits accruing to the owner of House 1 is precisely equal to the sum total of the burden placed on 1,000 other houses of £4 each.

vi. The usual Homey get-out is "Yeah, but I am not a landlord, I am an owner-occupier and I am not collecting rent"; well clearly you are, the fact that no cash changes hands is irrelevant, it's like the owner of an apple tree who eats all his own crop claiming that the apple tree is of no value to him. Even if all the 1,000 houses in the above example were owner-occupied, the owner of House 1 is enjoying benefits which are equal to the burden placed on the owner-occupiers in houses 2 to 1,000.

vii. And if any of these owner-occupiers does not use the train (or send his kids to the local state school, work locally, use the local park, enjoys the view, whatever) then why is he so desperate to destroy value by denying others these opportunities? it's like the owner of an apple tree claiming that the tree has no value because he throws all the apples on the compost heap. For clarity: I do not propose taxing apple trees, or the income from growing or selling apples, merely the land on which they stand.

viii. And the usual Faux Lib get-out is "If house prices and rents are too high, then let's allow more houses to be built" which is:

a) Rank hypocrisy, because they are all NIMBYs when it comes down to it, and wail on about 'other people infringing on my property rights',

b) Completely ignores reality: there is clearly no point building House 1,001 as the rental value of Plot 1,001 will be negative - there is only any point building a house where the rental value is positive - there is only any point building something somewhere if you are placing a burden on 'everybody else', for example by knocking down Houses 1 to 9 and replacing them with a block of fifty flats, in which case the owners of Houses 961 to 1,000 will find that they do not get a seat on the train in the morning and their rental value falls accordingly.

c) Seriously completely ignores reality: if all young, hard working, well qualified people were allowed to build their own New Towns, then rental values in those New Towns would soon rocket, so this would only help the first wave of arrivals, and what would happen to all the existing towns which turn into ghettos full of all the left over civil servants, dole scroungers and pensioners? What have we achieved from this apart from wasting oodles of public and private investment and shoving the problem elsewhere?