Walking the picket line today, some of my colleagues were simultaneously griping about their property taxes and rejoicing that they would be able to retire with a nice cushion when the time comes (a reasonable house in the $300-500k range 1-15 years go now commands a high 6 or even 7 figure valuation).
I wonder how many of them understand that the valuation they are seeing is not from their loving cared for home or the carefully curated plantings they have invested in but the land itself, the coordinates they own exclusive rights to. I further wonder how they would handle it if their property taxes/property value dropped. Again, the value is in the land: their house is the same house today as it was yesterday or last year. But the value today is much higher than it was a year or five years or ten years ago. And none of that has to do with any expense or effort on their part.
I doubt there are any plans to upzone or increase the density of any land near them, like the commercial land along the arterials that is often occupied by single story strip malls or single family homes. But if there were and they were promised a lower tax bill that didn’t require a lower valuation, I wonder if they would accept it? What if commercial property, either multifamily residential or pure commercial was taxed at a different rate to force more dense development and what if the resulting increase in tax revenue meant that residential property — non-remunerative property — could now be taxed at a lower rate, less than the 1% that every property owner pays now?
Right now, we have the perverse incentive of families investing in their shelter as their retirement fund, paying higher and higher taxes on it, in the hopes of a payback. A low risk bet, to be sure: they’ll get their money but what are they forgoing on both a higher purchase price/higher mortgage payments and the rising taxes that are both driven by the finite nature of land, the artificial scarcity of limiting development, enforcing parking minimums, keeping building heights down, etc.?
The perverse incentive of paying too much for artificially scarce land to pay into a retirement fund while keeping housing prices out of reach seems like something we should address. Conflating housing and land as housing is part of the problem, mostly due to the single family home as the only option for buyers, especially if they have a family. But taxing commercial land at the same rate as residential land is also part of it. Why should we tax land used purely as residential land at the same rate as the land under a store or restaurant? Are commercial and personal auto registrations taxed at the same rate? Is electricity sold to homeowners at the same rate as businesses?
If a parcel of commercial land commands $1 million per acre per year, as we have seen offered, what is that land worth? At 1% that’s $100 million. But the assessment didn’t reflect that. The developer said it was worth that much to rent, and buyers set the price in every market, as sellers eventually discover.