Another one that has been bugging me for a while is the notion that, with LVT, land prices would be permanently low and so 'property developers' would have no incentive to build anything because they can't participate in any land value uplift (mainly that triggered when planning is granted)*
This must surely be nonsense. Imagine that house prices and rents are stable. Sure, they will drift upwards with real wage increases and economic growth generally, but overall flat-ish. Construction costs will also increase in line with wages generally, so actual land values would be even more stable. This would put a dampener on NIMBYism and land speculation. No village is going to be swamped overnight so no grandiose plans to oppose. Instead of a hundred landowners putting in planning permission applications and one or two lucky winners getting it, it would be just one or two builders putting in planning applications, which get nodded through.
So land prices would be stable. They might be low and stable or high and stable, but there wouldn't be much planning uplift; actual builders would pay the existing owner for the likely planning gain when they buy.
If the population is stable or growing, and the economy is growing, there will always be demand for more buildings (moving into something bigger and nicer, or renovations or home improvements, old buildings to be knocked down and replaced etc), so builders will have enough to do. Most of the people in construction just get paid for the work they do, architects, brick manufacturers, chippies and sparkies. As long as there is work and they are being paid, they are happy, even though they don't get a penny of any land value uplift.
There would still be plenty of profit to earned by the 'property developer', the one who plans and oversees everything, takes the risks, raises the finance. That has to be rewarded or nobody would do it. Even if this incentive were eroded, so what? There would be less competition for new sites, land prices would be lower and it would be like olden times where architects, brick manufacturers, chippies and sparkies club together and organise their own developments and just earn an honest crust for work done.
* The Homeys are so stupid, having said that there would be no more developers if we had LVT, they then advance the KLN "Farmers won't be able to afford the LVT and will be forced to sell all their land to developers." Which developers, you twats? You just claimed that there wouldn't be any developers left.
Friday, 6 May 2022
Killer Arguments Against LVT, Not (492)
Subscribe to:
Post Comments (Atom)
9 comments:
There are two rebuttals to that one:
1. How do you think anything got built before you needed permission to build?
2. It is already the case that "developers" i.e. land speculators don't build anything. All they do, by and large, is get planning permission and bank the uplift. The actual building is done by someone else.
B 1. nice one.
2. Well, somebody has to show a bit of initiative and organise it. In the normal world, that's the actual main builder, or maybe an architect, but it is still work and risk. In today's insane world, it's land bankers. Barratts have a core staff of a few directors and a tea lady, everything else is sub-contractors.
"Farmers won't be able to afford the LVT and will be forced to sell all their land to developers."
Two-word rebuttal to that one: "tenant farmers".
B, you forget Homey logic.
1. LLs will pass on LVT to tenants.
2. Tenants won't be able to afford it and will leave.
3. For lack of tenants, LLs will be forced to sell to developers.
4.... who will all have gone bankrupt by then.
5. Result, choose any combination of
- Fields will lie barren and become wasteland, we will all starve and/or
- the whole countryside will be concreted over with houses that never get built and nobody can afford to buy.
I've said this before, so I won't put it into a post, but Planning Control is simply a restrictive covenant in favour of the state put on all land except building land. There is no difference between the need to get PP on farmland and the need to lift the covenant from a piece of land that states that the land shall never be built on, e.g. a area of green space in the middle of a town, donated by a charitable landowner for the "enjoyment of the publick". In the first case the uplift from the removal of the restrictions is banked by the current landowner, but in the second case and all other similar cases, the uplift is banked by the original landowner who created the covenant or their heirs. Thus it would be perfectly logical to have the entirety of the uplift in land value caused by getting permission to build being paid either to the state or to the original landowner at the time of the Act that introduced the restrictions, but not the current landowner, unless they are the heir of the original one.
This KLN is just a lack of faith in the price system. Without speculative profits, developers will just have to make a normal profit like everyone else. If this leads to less development (unlikely), so be it.
B, you've said you'd like a windfall tax on PP. LVT is that tax, just payable in easy annual instalments by future owners.
JJ, aye. Unlikely, because if the demand is there, supply will be there to meet it.
"Most of the people in construction just get paid for the work they do, architects, brick manufacturers, chippies and sparkies. As long as there is work and they are being paid, they are happy, even though they don't get a penny of any land value uplift."
The same is true of resource extraction, mining, and the like. This was Caplan's error with his old paper on 'Searching'. People search for resources because they want to extract them for some purpose, the purpose of a 'rent' price is to establish who is going to do the work.
Andrew, that's the point. RENT is just the profits left over after workers have been paid. It reflects the 'free gift of nature' or pure demand for stuff that might go into or out of fashion.
Two hundred years ago, striking crude oil on your land was a curse. The clever car people and chemists had to find a use for it first.
For example, I get extraction rights in Area A, you get them in Area B. We both employ our geologists, drillers, chemists etc (for the same pay). Turns out my area only has a few traces of [whatever we were looking for] and yours has rich seams. You can then collect a load of RENT (for nothing apart from winning the rights lottery) and I get little or nothing.
If you then offer to sell your mine to me, you sell it for the value of the future rental income (minus my costs and minimum profits). I then pay wages out of sales, I keep a bit as profit and the rest goes to you as rent. It is the same if the govt. collects the rent.
Or consider, the govt. hands out north sea exctraction licences on the basis that the drillers sell the oil or gas back to the government for an agreed price of costs + reasonable profit margin. People would still extract, and the govt get the super-profits (instead of windfall tax). If oil and gas prices slump, the govt is taking the losses and the drillers don't care. Win win.
Post a Comment