Month: December 2021

1,500 apartments on 2 acres where Seattle had a 55 acre site (the old Northgate Mall) to work with…how many apartments will go in there? And when? The ice center is open, so we got that priority project completed. /eyeroll

Lynnwood’s city center may be about to undergo a metamorphosis, with light rail arriving in 2024 and with more than 1,500 new apartments opening soon or planned, plus new stores and offices.
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Sound Transit hopes to select a developer by the time the light-rail station opens (with a new 1,670-stall parking garage), and the project is almost certain to include some affordable housing.

It’s not clear if Sound Transit is planning to sell the land or hold onto it and under what terms? Would ST be willing to accept a ground rent on that sure-to-increase-in-value land? What would it be able to charge? If an acre in South Lake Union is worth $1M a year, what would land in Lynwood command? And how would a ground rent, rather than a fee simple sale, lower the cost to develop the land?

It might seem counter-intuitive but raising the assessed value of land to its value when put to its highest and best use reduces the incentive to hold unused land as an asset: if a parcel assessed at $10 million a year (about $100,000 in property tax to hold it) is revalued as if it has a mixed-used multistory development on it, a ground rent at that price makes more sense. Rather than finance $10M, a $100,000 rental both pushes that land into development more quickly and remits more revenue to the city. The optimal price to acquire land for development is $0, with the value recaptured through a ground rent.

That land will become more valuable, make no mistake. For Sound Transit to sell it would be a mistake. Seattle was offered more than $1 billion (over 99 years) and chose instead to take 15% of that — a $150 million fee simple sale. Annualized, a rent of $11 million/year would have surpassed that $150M in less that 14 years with 85 years still to run — $935 million left on the table.

No doubt Sound Transit will make money on the sale but the increase in value created by the rail network ST is building should be used to maintain and extend the network. As Henry George wrote in 1868 in “What the Railroad Will Bring Us connecting cities and people adds value to those locations and that value should belong to those who created it. The transit network, on behalf of the people, should take the rents from that land, rather than sell it. We have already seen how land near the existing stations becomes more valuable but the value didn’t go to those who created it.

This could be interesting…

Dallas Mavericks owner Mark Cuban purchased an entire, tiny — and virtually empty — Texas town.
An abandoned strip club and vacant mobile home park are about all that’s still standing in the 76.8-acre community of Mustang, which is about 65 miles south of American Airlines Center, home of Cuban’s NBA franchise.

“Did it to help out a friend. No plans yet!” Cuban said in an email to NBC News on Friday.

If I could buy a town, I wouldn’t sell it off, parcel by parcel: I would assess a ground rent on the land, with the rents going to support continued infrastructure improvements to make the land more valuable, allowing the rents to be raised (as the land becomes more valuable to entrepreneurs). Or will he just speculate and sell it off? He could build a model town without sales taxes or other disincentives to development, proving that as land grows more valuable and more remunerative, there is no need to tax the sweat of working people.

“Sales tax is a regressive form of taxation, and we appeal to you and to our state legislature to find other forms of revenue to address the pressing issues of housing and mental health,” the letter said.

Oh, oh, pick me…! 🙋🏻‍♂️ I think I have a suggestion.

And of course the fly in the ointment here is that the county is now bidding against everyone else for access to land…and what is a county but land?

The proposal also promises 300 new units of affordable rental housing that would be designed for people making less than 60% of area median income, about $48,600 for a single person.

Cities are for people, made of people, more or less, but counties are land, the bits that have not yet been incorporated. So those 300 units at whatever target price they have in mind will never happen at that price, forcing a shortfall in that goal or creating a need for another tax to fuel the speculative cycle. And of course, what income that 60% is pegged to will also change…it’s a losing strategy.

The solution is to tax the land itself, the value of the land when put to its highest and best use, using zoning and the value created by adjacent or nearby land to determine the value. County assessors already tax land as empty/unimproved but often ignore the value created by commercial activity on it or on nearby parcels.

The phrase “the least bad tax” is attributed to Milton Friedman and explained here:

The famous University of Chicago economist Milton Friedman once stated “the least bad tax is the property tax on the unimproved value of land”. Most popular with Georgist economists (followers of famous American political economist, Henry George), the Land Value Tax is the taxation on the value of land separate from the value of the structure on the property. In residential terms, taxation only on the land beneath the house, instead of the combined value of both. Many Americans might simply state: “Land Value Tax is close enough to property tax, and I already pay too much. We need less taxes!” However, it would be a mistake to not explore and understand the subtle differences in the two tax policies, as they have quite different economic implications. As with the review of any tax policy, one must understand the economic impact, unless you want to kill the goose that lays the golden egg.