Yeah, if we could make it denser overnight that would be a great option. Actually, even gradually it’s where we need to go. I’m not sure if I mentioned that Calgary abolished single-family zoning in the last year. Buying lots hasn’t been the problem so much as labour, and just everyone trying to time interest rates, but I dunno, maybe it will be.
The cost of those lots IS a problem though, both in terms of carrying costs for developers during construction and in terms of final sale price for the purchasers.
Buying 16 properties to build an apartment in Vancouver is going to set you back $50 million or more before you even start planning the building. If you can get 100 units in that space, that’s $500,000 per unit in land price alone. Even at 200 units, it’s still a quarter of a million dollars prior to constructing a damn thing.
So if you have say $2 million a year in land value taxes between the 16 homes would mean each family is paying $124,000 a year PLUS the regular property tax. For 100 apartments, it would be $20,000 a year each though, and for 200 apartments it would be $10,000 a year for each unit.
You aren’t going to have too many people wanting to stay in their detached home with yearly costs like that, they’d be abandoning the properties in droves, that makes the cost of the land go to almost nothing. Developer swoops in, builds a condo and the new units are almost solely priced based on the construction costs with a bit of profit for the developer rather than the land values. Condos that start at $300,000 instead of $700,000 sound real fucking good, even if they’re attached to $10,000 a year in extra property tax (that most working people would get completely covered by a larger drop in their income taxes)
Sure, but a lot of them already are in the lowest tax bracket and owe nothing to start - especially the ones on government programs, which you skipped over. It’s worth considering that if there’s any inflation that happens as a result they’re in trouble, so maybe you want a negative tax as well.
A negative tax on the lowest bracket would also probably work, that’s just a minor adjustment though. The big goal is to refund the land value taxes so that the net change for an average family taking up a reasonable amount of land would be $0. Use more land, pay more. Use less land, end up better off than you are right now.
Less “lucrative” than “more convenient”; a mortgage kind of forces you to save. It’s also been pushed as a cultural ideal. I’m not that rich, but if I was I’d still rent rather than buying, because I’ve always been a borderline-problematic saver anyway. What little I’ve scraped together is in an index fund.
Yes it is a forced save, and it’s been culturally inflicted. It’s still bad. We need to stop that entirely with these taxes. That being said, given we don’t have those taxes you would be stupid to rent if you could afford a mortgage. You have to play the game with the current rules, and you’d be losing. I want the rules to change, but that doesn’t mean I’m going to make poorly optimized decisions and put my family at risk while I try to get the rules changed.
Congratulations on living in Vancouver or Toronto. Assuming that means it doubled, it comes out to almost exactly 5% per annum. Meanwhile, the stock market has gotten 10% over the last century.
I actually don’t live in either of these cities.
You’re also missing how mortgages work. The return was 5% on the property value, but not 5% on my investment. In the first year of my mortgage of my first house, I invested only around $45,000 including the down payment for 10% and the first year of mortgage payments. Lets say the property went up 5% in that time, which would have been around $15,000 on that first starter house I owned. So on an investment of $45k, I made $15,000k, that’s a return of 33%. But it’s worse than that, because the 45k is only my cash output value, not my actual costs. The whole down payment of $30,000 went to my principal, and is essentially 100% equity. Given it’s my first year of my mortgage, almost all of the monthly payment is for interest, equity from my monthly payment was only like 20% or something, so that’s another $3000 paid off on the home as equity. Of course there’s insurance, maintenance, etc. costs, a few thousand dollars so that pretty much eliminates that amount. So my actual investment costs is actually closer to the mortgage payments of $15,000, which gave me a return of $15000 (5% on the property value) for a 100% return on investment.
How’s your stock doing against that kind of return? Now of course that value changes, but any time there’s a difference between my mortgage interest rate and the inflation in the home cost, I’m making a lot more than just the 1-2% difference because of that leverage factor.
This is how home owners have gotten so rich in the last 30 years.
A negative tax on the lowest bracket would also probably work, that’s just a minor adjustment though. The big goal is to refund the land value taxes so that the net change for an average family taking up a reasonable amount of land would be $0. Use more land, pay more. Use less land, end up better off than you are right now.
Ah, well that’s more reasonable. It’s a low-density tax. Wouldn’t you want to calculate by (residentially-allocated) area rather than property value, then?
You’re also missing how mortgages work. The return was 5% on the property value, but not 5% on my investment. In the first year of my mortgage of my first house, I invested only around $45,000 including the down payment for 10% and the first year of mortgage payments. Lets say the property went up 5% in that time, which would have been around $15,000 on that first starter house I owned. So on an investment of $45k, I made $15,000k, that’s a return of 33%. But it’s worse than that, because the 45k is only my cash output value, not my actual costs. The whole down payment of $30,000 went to my principal, and is essentially 100% equity. Given it’s my first year of my mortgage, almost all of the monthly payment is for interest, equity from my monthly payment was only like 20% or something, so that’s another $3000 paid off on the home as equity. Of course there’s insurance, maintenance, etc. costs, a few thousand dollars so that pretty much eliminates that amount. So my actual investment costs is actually closer to the mortgage payments of $15,000, which gave me a return of $15000 (5% on the property value) for a 100% return on investment.
It’s a leveraged investment. It earns more in good times as a result, as would leveraged equities. To be fair, I haven’t actually looked into what kind of leverage the average mortgage-holder could get for that, but double the rate of return for the underlying instrument is no joke.
The proper way to calculate this would include the entire period of amortisation, all the payments together, and whatever you finally sell the house for added to the rent you didn’t pay as the return. Risk is also a consideration - where I live, out in the country, the return would have been be a lot lower than that. If you bought a house in somewhere like Detroit you’re just in the hole, because your house is only in one place and not diversified.
As for my own situation, I’m still young and building back up from rock bottom so I can’t really talk about the last 14 years.
Ah, well that’s more reasonable. It’s a low-density tax. Wouldn’t you want to calculate by (residentially-allocated) area rather than property value, then?
It’s not really a low-density tax, because it doesn’t apply to everywhere with low-density. If you were in a rural area, it shouldn’t be a high amount at all.
The property (land) value already calculates the desirability of the area and the specifics of that property (things like views, water access, access to schools, rec centers, etc) in much finer detail than a per-area calculation would do. I don’t see the point of re-inventing the wheel when the existing one works pretty well.
It’s a leveraged investment.
Yes, but it’s a secured leveraged investment, which makes the rate for borrowing stupidly low compared to what you’d pay to do it with equities. Yes there’s still some risk, but I don’t know a single home owner in my province who has lost money in the last 40 years. I’m sure they exist, just absolutely terrible timing followed by a divorce or something, but it’s really rare.
All I’m saying at the core is that we need a land value tax to fix the housing market, probably something that escalates over 40-50 years so as to not absolutely crash the economy while we’re implementing it. Doing it overnight would literally wipe out the majority of equity of every single home owner, and unfortunately due to what’s happened a lot of those people are relying on that for retirement. It would also be political suicide given how many homeowners exist.
The property (land) value already calculates the desirability of the area and the specifics of that property (things like views, water access, access to schools, rec centers, etc) in much finer detail than a per-area calculation would do.
Yeah, too finely. If you tax everything, you tax nothing. If people using too much space is your issue you should tax the space.
I don’t think you should make a distinction between the suburbs and the exurbs; it’s only a matter of degree. Farmers are a different thing, which is why you’d want to make some kind of rule for “lived-in” area vs. area for other uses on the same property. I know families that live in tinyhouses in the middle of a field, and I know of “farms” that are pretty much leisure space for rich guys who may or may not even live in the area.
The cost of those lots IS a problem though, both in terms of carrying costs for developers during construction and in terms of final sale price for the purchasers.
Buying 16 properties to build an apartment in Vancouver is going to set you back $50 million or more before you even start planning the building. If you can get 100 units in that space, that’s $500,000 per unit in land price alone. Even at 200 units, it’s still a quarter of a million dollars prior to constructing a damn thing.
So if you have say $2 million a year in land value taxes between the 16 homes would mean each family is paying $124,000 a year PLUS the regular property tax. For 100 apartments, it would be $20,000 a year each though, and for 200 apartments it would be $10,000 a year for each unit.
You aren’t going to have too many people wanting to stay in their detached home with yearly costs like that, they’d be abandoning the properties in droves, that makes the cost of the land go to almost nothing. Developer swoops in, builds a condo and the new units are almost solely priced based on the construction costs with a bit of profit for the developer rather than the land values. Condos that start at $300,000 instead of $700,000 sound real fucking good, even if they’re attached to $10,000 a year in extra property tax (that most working people would get completely covered by a larger drop in their income taxes)
A negative tax on the lowest bracket would also probably work, that’s just a minor adjustment though. The big goal is to refund the land value taxes so that the net change for an average family taking up a reasonable amount of land would be $0. Use more land, pay more. Use less land, end up better off than you are right now.
Yes it is a forced save, and it’s been culturally inflicted. It’s still bad. We need to stop that entirely with these taxes. That being said, given we don’t have those taxes you would be stupid to rent if you could afford a mortgage. You have to play the game with the current rules, and you’d be losing. I want the rules to change, but that doesn’t mean I’m going to make poorly optimized decisions and put my family at risk while I try to get the rules changed.
I actually don’t live in either of these cities.
You’re also missing how mortgages work. The return was 5% on the property value, but not 5% on my investment. In the first year of my mortgage of my first house, I invested only around $45,000 including the down payment for 10% and the first year of mortgage payments. Lets say the property went up 5% in that time, which would have been around $15,000 on that first starter house I owned. So on an investment of $45k, I made $15,000k, that’s a return of 33%. But it’s worse than that, because the 45k is only my cash output value, not my actual costs. The whole down payment of $30,000 went to my principal, and is essentially 100% equity. Given it’s my first year of my mortgage, almost all of the monthly payment is for interest, equity from my monthly payment was only like 20% or something, so that’s another $3000 paid off on the home as equity. Of course there’s insurance, maintenance, etc. costs, a few thousand dollars so that pretty much eliminates that amount. So my actual investment costs is actually closer to the mortgage payments of $15,000, which gave me a return of $15000 (5% on the property value) for a 100% return on investment.
How’s your stock doing against that kind of return? Now of course that value changes, but any time there’s a difference between my mortgage interest rate and the inflation in the home cost, I’m making a lot more than just the 1-2% difference because of that leverage factor.
This is how home owners have gotten so rich in the last 30 years.
Ah, well that’s more reasonable. It’s a low-density tax. Wouldn’t you want to calculate by (residentially-allocated) area rather than property value, then?
It’s a leveraged investment. It earns more in good times as a result, as would leveraged equities. To be fair, I haven’t actually looked into what kind of leverage the average mortgage-holder could get for that, but double the rate of return for the underlying instrument is no joke.
The proper way to calculate this would include the entire period of amortisation, all the payments together, and whatever you finally sell the house for added to the rent you didn’t pay as the return. Risk is also a consideration - where I live, out in the country, the return would have been be a lot lower than that. If you bought a house in somewhere like Detroit you’re just in the hole, because your house is only in one place and not diversified.
As for my own situation, I’m still young and building back up from rock bottom so I can’t really talk about the last 14 years.
It’s not really a low-density tax, because it doesn’t apply to everywhere with low-density. If you were in a rural area, it shouldn’t be a high amount at all.
The property (land) value already calculates the desirability of the area and the specifics of that property (things like views, water access, access to schools, rec centers, etc) in much finer detail than a per-area calculation would do. I don’t see the point of re-inventing the wheel when the existing one works pretty well.
Yes, but it’s a secured leveraged investment, which makes the rate for borrowing stupidly low compared to what you’d pay to do it with equities. Yes there’s still some risk, but I don’t know a single home owner in my province who has lost money in the last 40 years. I’m sure they exist, just absolutely terrible timing followed by a divorce or something, but it’s really rare.
All I’m saying at the core is that we need a land value tax to fix the housing market, probably something that escalates over 40-50 years so as to not absolutely crash the economy while we’re implementing it. Doing it overnight would literally wipe out the majority of equity of every single home owner, and unfortunately due to what’s happened a lot of those people are relying on that for retirement. It would also be political suicide given how many homeowners exist.
Yeah, too finely. If you tax everything, you tax nothing. If people using too much space is your issue you should tax the space.
I don’t think you should make a distinction between the suburbs and the exurbs; it’s only a matter of degree. Farmers are a different thing, which is why you’d want to make some kind of rule for “lived-in” area vs. area for other uses on the same property. I know families that live in tinyhouses in the middle of a field, and I know of “farms” that are pretty much leisure space for rich guys who may or may not even live in the area.