Monday, 10 November 2014

The Good Developer

What really hacks me off about all this anti LVT stuff is the claim made by many antis that applying LVT would kill 'development' stone dead.

Well peoples, let me tell you about one developer. My dad. He railed against land price inflation and objected to being taxed on it, because all such increases he then spent on buying his next site.  That is he never factored land price increases into his profits.  He realised that this was not actually a 'profit' but a result of 'inflation' that in fact made his job much more difficult. Not in the least because it made all sorts of idiots think that being a developer was an easy way to big money.  He actually ran a development business - not a rent seeking operation.

I reckon he'd have loved LVT.


Ian Hills said...

Reminds me of Mike Nattrass, only in reverse. Whilst a UKIP MEP he got the manifesto to promise no business rates would be charged on unlet property (at the moment it's half rated). That way owners wouldn't have to damage their buildings deliberately to get zero-rated.

Unsurprisingly he owns quite a bit of commercial property in the West Midlands.

Mark Wadsworth said...

"developing" consists of

a) somebody deciding what to build where

b) people doing the actual work, bricklayers, plumbers, architects etc.

The a) is the easy bit, you just copy what the neighbours are doing. In the centre of town you build an office block, in the suburbs you build houses. This decision making process requires little skill or effort.

The people who do b) are quite happy to be paid for actual work done.

So there is no need for the land value gain uplift rental value to accrue to anybody in particular.

Or else no new Crown Estate building or council estate would ever have been built.

The planners and architects enjoyed planning them and being paid for it, and the bricklayers and plumbers got paid the same, whether they were working for the Duke of Westminster or the local council.

Bayard said...

Mark, there's more to it than that. Someone has to finance the operation. That is the developer. Who do you think pays the "people doing the actual work, bricklayers, plumbers, architects etc"? OK you can sell houses (and probably office blocks) off plan, but the bulk of the money comes in at the end, after all the above have moved onto the next job.

Mark Wadsworth said...

B, OK, add c). Somebody has to finance it.

Could be the developer, a bank, purchasers who pay in advance, suppliers who accept delayed payment. It's only fairly short term finance, a couple of years, tops.

But the maths and risk of such short term finance is not too difficult.