Home Equity

Many homeowners on the two ocean coasts have more net income from rising land values than they do from their own labor.  They can borrow against this increasing home equity, giving them many more options than their neighbors who rent or than their fellow homeowners in the red counties between the coasts.

Mason Gaffney, correspondence (used with permission)

Lindy Davies: Land and Justice

Wealth — products, widgets — these things are made by human beings. If customers are willing to buy more of them, then manufacturers will make more of them. But human beings can't make land. The supply of land cannot be increased. If the demand for land increases, only one thing can happen: its price will go up.

The owners of land see population and production go up, up, up — and no more land. So, they will only put their land to use if they have an immediate need for the cash. If they can afford to wait, they will wait, because they expect the land's value to increase with time.

That, in a nutshell, is the key to the land problem — the problem of poverty.

That is why millions upon millions of people who are willing and able to work cannot find work, even while millions upon millions of acres of useable land (city land, industrial land, farm land, you name it) are held idle.

This leads to no end of problems. In the United States, it brings urban blight and suburban sprawl, which disrupt communities, and waste energy and resources. You don’t think under-use of land is that big a deal? Consider the fact that in the five boroughs of New York City, 7.5% of its land, or 18.6 square miles, is vacant. That’s buildable land, not parks or streets. And, of course, a great deal more land in New York, as in every other city, is used somewhat, but far less than the local economy would support. New York City has about 80 people per acre of residential land. That means that New York’s vacant land could house another 956,000 people at current density levels, without even starting to use its vast stock of under-used land.

Even though downtowns are underbuilt, people want to move away from the high prices and high crime rates they often find there — so development leapfrogs, using far more land than is necessary, jacking up the price of farmland near the city — so that local farms can no longer compete. All this sprawl creates more and more need for roads — provided by tax dollars, of course. With all these roads, and all these cars, public transportation systems become less popular and harder to finance. This chokes the cities with even more traffic, making them even less desirable places to be. Meanwhile, all these subsidized highways are just great for the big trucks, burning subsidized fuel, carrying imported merchandise to all the big-box stores and franchise restaurants of suburbia. In other words: two of the hugest problems that progressives are trying to address today — the decay of communities and the rise of the corporate big box — are all about the land.

Around the world, it gives too much power to the banks, for land is by far the greatest source of collateral for loans, everywhere. The more money we have to pay for land, the more power we give to the banks. Although 66% of American families own their homes, the overall net equity of American home “owners” is only 18%.

It’s all about treating the land as an “asset.” ... read the whole speech

Mason Gaffney: Unearned increments and reality in California's recall election

California homeowners are wallowing in unearned increments beyond the dreams of avarice, while its governments are courting bankruptcy. Warren Buffett dared point this out, and overnight changed from the Oracle of Omaha into the Numbskull of Nebraska because he does not understand the "reality of California politics," the oxymoron du jour.

Most candidates for Governor fled like startled deer. Buffett's sponsor, well-tailored Mr. Muscles, recalled meeting a tearful widow who said she would have been taxed out of her home were it not for Prop 13. Poor thing, her home had risen in value. No one asked her name, or whether she knew what she was talking about, or had her claims audited - being a tearful widow "on a fixed income" insulates one from reality checks. The press chimed in with pix of poster oldsters, gazing from their multi-million dollar perches over the blue Pacific, fretting about Buffett's solecism and its possible effect on them, never mind anyone else.

• No one has said a word about a severance tax on oil and gas, although California is the only major producing state without one. 
• No one has crusaded for a severance tax on water withdrawals, although it would solve both our revenue and water crises in one stroke.
• No one has said word one about taxing the taboo lands used for golfing, timber, or farming. ... Read the whole article
  

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)

Jeff Smith: Sharing Natural Rents to Sustain Human Society

Construction - Sprawl vs. Eco-City

• Rent. This social surplus is why developers build sprawl, not car-free villages. Rent, so-called "equity," is what homeowners borrow against for a bout of consumeritis.
• Taxes. The property tax assessment is skewed toward the building, away from the land, benefiting speculators and developers, not owners. Localities often abate the tax for years for developers and major corporations who sprawl on new campuses.
• License: The price of new homes too close to streams or on freshly cleared hillsides does not include the cost of washing out the homebuyers or their neighbors.
• Subsidy: Where new homes go in, localities pick up the tab for new schools and infrastructure, saving developers $25,000 per home (Better Not Bigger, Eben Fodor, 1999). When people build on floodplains and get flooded out, the federal government bails them out (National Wetlands Newsletter, 1993, Scott Faber). ...

Henry David Thoreau said the best thing government can do for business is get out of it. Nevertheless, some hope to shift subsidies from grey bads to green goods. Yet the state need not subsidize at all. It's dauntingly difficult to know whom to fund; a solar steam generator may be the most promising idea one day while photovoltaics are the next. Efficient alternatives don't need largesse but fairness. A handout shields new industry from the forces that compel efficient growth. The best thing government can do for the environment is exit environmental enterprise. ... read the whole article