Wednesday, 25 July 2018

On government "intervention" in the land market.

Lola's comment on Yesterday's post is worth a post in its own right:

I am not entirely sure that government actions like Schedule A taxation and council house buildings are 'interventions' as such.

The formation of the nation state comes about over time where a group of people evolve agreed values within a territorial boundary. By being finite those boundaries mean that land within them is limited. And the value of that land relates entirely to the work of all those citizens with those shared values.

Yes yes I know I know that history is a story of various warlords accreting ever larger territories, but without the help of the people they could not do that and make a success of it. So if we take the libertarian homesteading view what the nation state is is an assembly of lots of those homesteads with shared values.

This circumstance leads automatically onto the need for the two key functions of the 'state' - defence (of the Realm) and a system of justice (to keep one citizen safe from the predations of another). Both of these functions are essentially the defence of property rights, national and individual.

So what is the least worst way that these necessary two state functions can be funded. What tax regime works best?

Well, it is obvious that this is some form of land tax.

As this is a location tax it to a degree automatically taxes highest those who occupy the most desirable locations within the nation state it follows it must be a progressive tax.

Next since the land in this nation state is a de facto monopoly of the state - the ultimate owner of that monopoly being the citizens - how can it be acceptable that a few citizens are enabled to enjoy more benefits from the land monopoly than others?

If you take away the location premium then house builders (I am ignoring commercial buildings pro tem) will have to compete on the qualitative standards of what they build when they compete in similar locations. That might mean that the standard setting and price control function of council housing is not required - as it has been to provide competition for tenants and drive up standards.

These are not 'interventions' as such. Just logical responses to a requirement to fund the protection of property rights.

Of course, all this presupposes that the nation state - if it has a monopoly of money (which I would not support) - makes sure that sound money is available to the citizen. And that it does not engage in various subsidy programs to special interest groups where these subsidies always end up in rents, aka land prices.

Therefore these (non) interventions (LVT) lead to less interventions overall.


Blissex2 said...

«how can it be acceptable that a few citizens are enabled to enjoy more benefits from the land monopoly than others?»

It is not the 1%, not “few citizens”, it is millions and millions of middle class voters who have collected rents and gains of £10,000 to £40,000 per year, usually tax-free, work-free, for over 3 decades, and represent a formidable voting block.
These people have got net compound returns of 60-70% on the cash invested in their deposits, for 3 decades and more. A fairly typical story from a "The Guardian" commenter of £43,000 average gains per year for 23 years running:

“I inherited two properties in 1995 [ ... ] and the value has gone from £95,000 to £1,100,000

As another "The Guardian" commenter pointed out:

I will put it bluntly I don't want to see my home lose £100 000 in value just so someone else can afford to have a home and neither will most other people if they are honest with themselves

Blissex2 said...

As to intervention in the land/housing markets the tory (New Labour, Conservative) governments of the past 3 decades and more have not only intervened heavily to boost rents and property prices, but also effectively and constantly enacted a reverse LVT by spending a lot of money to subsidize property in already congested area, for example:

* The main effect of Crossrail has been to zip up property prices by 30 along its course.

* Massive funding for projects and new infrastructure around Oxford and Cambridge is driving up employment and zipping up property rents and prices in those areas.

* One of the effects of bailing out the fradulently bankrupt City conglomerates in 2009 etc. and this refill their bonus pools has been to bail out and subsidize a lot of buyers all around London.

In every case the biggest reverse land value tax has gone to the more valuable properties in the most congested areas.

Mark Wadsworth said...

B, ta for quotes. We can argue over how many is "a few", but it is clearly a lot less than half.

And agreed on negative LVT. You missed the most important negative LVT, being all the public services paid for out of taxes on output and earnings.

Lola said...

Blissex2. Thanks for backup.

Blissex2 said...

«We can argue over how many is "a few", but it is clearly a lot less than half.»

Sure, it is I guess around 20-30% of voters. But blocks of votes matter if they are essentially synchronized by a single issue, as many can swing on that single issue...

Anyhow that 20-30% of south-east and London propertied voters who benefited from astounding redistribution in their favour are unfortunately complemented by many property owners in the north and southern left-behind areas, or first-time buyers wanting to upgrade.

Those are those who have often paid a big price for that redistribution like renters, and who have often suffered from property losses, yet they think that Labour (or the YPP) are again all property owners, and that only a solid block of all property owners, whether winners or losers, can stop the "communists from confiscating our property". Even if rents and property prices in the north and left-behind areas depend on renters and first-time buyers getting safer and better paid jobs in those places.

Only when renters and first time buyers manage to be joined by northern and left-behind area property owners english politics can change in a way less favourable to redistribution upward to south-east and London tory voters.

Mark Wadsworth said...

B, the number who *actually* gain is very small, the problem is that about 60% of people *think* that they are gaining, even though they aren't.

Mike W said...


'20-30% of south-east and London propertied voters who benefited from astounding redistribution'

I do think that the '1%' battle cry is useful in political terms, even down to slogan utlity. I am thinking about economists and writers such as John Weeks pushing the concept for example. Does it matter that 'the few' tuns out to be 2.3% or 23.44%. Difficult sell!

But, I still appreciate your point about us being clear about the real monster, its actual political demographics and true size of the creature.Plus the tincy problem of the formation of the political alliance needed going forward.

Just one last comment. Some folks here in the past have expressed a hope/ wish/ prediction that the Tories are now running out of ammunition to feed and bribe the 'homeownerist' elite discussed. So Tory ammunition question for the folks here: down to the last clip or plenty more where that comes from?

PS, Blissex, other places, yes 'dimwits' not quite right of course - for some reason I had written 'inbreds' first and cut it as too rude :)