WEBVTT - Daryl Fairweather On the Tax That Could Solve the Housing Crisis 0:00:10.760 --> 0:00:14.520 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.600 --> 0:00:19.200 I'm Joe. Wasn't all Tracy. You know, It's like, how 0:00:19.280 --> 0:00:21.720 is it when housing it's booming, it seems to cause 0:00:21.840 --> 0:00:23.639 people a lot of stress, like they want to like 0:00:23.720 --> 0:00:27.320 get in on a home, and then when housing tumbles 0:00:27.360 --> 0:00:30.600 that also closes people stress. Maybe if you recently bought 0:00:30.600 --> 0:00:33.519 at home or something like that. But either way, wherever 0:00:33.600 --> 0:00:36.240 we are on the cycle, it feels like in the US, 0:00:36.360 --> 0:00:39.479 like housing is just this like huge source of stress. 0:00:39.479 --> 0:00:42.159 Like sometimes I go on the real estate subredbit and 0:00:42.200 --> 0:00:45.040 it's just like all these people clearly close to like 0:00:45.120 --> 0:00:48.760 having nervous breakdowns over the travails if either trying to 0:00:48.800 --> 0:00:52.360 find a home to buy or sometimes even to rent. Yeah, 0:00:52.400 --> 0:00:55.560 I mean you will have very different sources of stress 0:00:55.600 --> 0:00:58.200 depending on whether or not you're a homeowner or whether 0:00:58.240 --> 0:01:01.000 you're trying to become a homeowner and and source and 0:01:01.120 --> 0:01:04.600 actual house in the current market. But yes, it seems 0:01:04.640 --> 0:01:07.680 like an endless struggle in many ways. You know, one 0:01:07.720 --> 0:01:10.920 thing that I just, um, I just learned about and 0:01:11.319 --> 0:01:14.240 you know this is maybe naive on my part, but 0:01:14.280 --> 0:01:17.600 as a new homeowner, can we talk about property taxes? 0:01:17.720 --> 0:01:21.520 And the fact that if I, if I improve my house, 0:01:22.040 --> 0:01:25.520 I will pay more. That's crazy. So don't just let it. 0:01:25.560 --> 0:01:27.720 Just let it deter it, just like let the yes 0:01:28.000 --> 0:01:31.880 come in, let the foundation crack all that stuff. I mean, 0:01:32.120 --> 0:01:36.800 that's the incentive that I have now, although well resale value. 0:01:36.840 --> 0:01:39.240 But yeah, anyway, there are all these things you discover 0:01:39.520 --> 0:01:43.000 once once you actually own a property. No, only a 0:01:43.080 --> 0:01:45.920 property is the worst curse because like you think, it's like, oh, 0:01:45.959 --> 0:01:47.560 I finally got a house, and all these people are 0:01:47.560 --> 0:01:50.160 competing and entering bidding wars, and then if you win, 0:01:50.640 --> 0:01:53.160 you actually kind of lose because then you're like stuck 0:01:53.200 --> 0:01:56.880 to this thing and you realized like how much houses? 0:01:57.000 --> 0:01:59.760 But yeah, bottom line is like everything about real estate 0:02:00.160 --> 0:02:03.120 ups or downs just seems to be a permanent source 0:02:03.160 --> 0:02:07.040 of stress. And okay, like mortgage rates go up and 0:02:07.080 --> 0:02:09.760 maybe that clols buying, but it doesn't feel like anyone 0:02:09.880 --> 0:02:12.040 has any sort of like it doesn't feel like there's 0:02:12.080 --> 0:02:16.880 a long term plan to address this. Like yeah, at times, 0:02:16.919 --> 0:02:18.840 maybe things soften up a bit, but maybe if things 0:02:18.880 --> 0:02:21.160 are softening up a bit, it's because the economy is 0:02:21.200 --> 0:02:23.120 down and people are getting laid off, and then it 0:02:23.120 --> 0:02:25.800 gets harder or impossible to get a mortgage or be 0:02:25.880 --> 0:02:29.640 in a position to buy a house. Structurally, it's just 0:02:29.840 --> 0:02:32.760 it's just it seems like a nightmare. Well, I would say, 0:02:32.800 --> 0:02:36.079 the other big thing is it feels like no one's 0:02:36.120 --> 0:02:41.320 decided what role housing is supposed to have in the economies. 0:02:41.360 --> 0:02:45.000 So yes, I think most people would agree that if 0:02:45.000 --> 0:02:47.520 you can get on the housing ladder, it's probably a 0:02:47.560 --> 0:02:51.160 way of building wealth. But at the same time, no 0:02:51.200 --> 0:02:54.240 one wants house prices to go up so high that 0:02:54.320 --> 0:02:57.280 everyone starts to get priced out in the market. And 0:02:57.360 --> 0:03:00.000 so it feels like we have yet to decide exactly 0:03:00.280 --> 0:03:05.720 what role housing should play in in the American economy. Certainly, 0:03:05.840 --> 0:03:08.760 why do we want houses to be this key asset 0:03:08.880 --> 0:03:12.440 where your your ability to retire, your ability to have 0:03:12.520 --> 0:03:15.680 some sort of like comfortable economic existence is predicated on 0:03:15.680 --> 0:03:17.880 buying How's it like? You know, how's inclusions be like 0:03:17.919 --> 0:03:21.440 a consumption good You're like, buy shelter and the just 0:03:21.480 --> 0:03:24.320 the shelter component. But it has become this thing where 0:03:24.320 --> 0:03:27.600 everyone feels like homeownership is such a key to what 0:03:27.639 --> 0:03:30.280 we think of as you know, the American dream or whatever, 0:03:30.680 --> 0:03:34.399 having a comfortable life that you'll like pay a fortune 0:03:34.800 --> 0:03:36.920 just as you put it, like get even the term 0:03:37.000 --> 0:03:39.320 the housing ladders, like we all have like climb up, 0:03:39.440 --> 0:03:42.040 we have to grab a rung. It's also it all 0:03:42.080 --> 0:03:47.120 seems so perverse. Well, it also immediately creates that fomo feeling, 0:03:47.280 --> 0:03:49.160 that sense of missing out, like, oh my gosh, I 0:03:49.200 --> 0:03:50.800 have to get on the ladder because if I don't 0:03:50.840 --> 0:03:53.320 get on it as soon as possible, I'm gonna be 0:03:53.320 --> 0:03:56.040 behind everyone else for the rest of my life. But yes, 0:03:56.120 --> 0:03:58.680 this is a peculiar model. It is not the model 0:03:59.160 --> 0:04:02.160 used by everyone in every country, by the way, and 0:04:02.200 --> 0:04:05.800 Europe in particular is quite different in its approach to homeownership. 0:04:06.000 --> 0:04:08.120 So it definitely seems a little more saying all right, 0:04:08.520 --> 0:04:12.240 lots of very pessimistic intro to this episode, talking about 0:04:12.240 --> 0:04:15.680 how much stress. But maybe there's a maybe, maybe there's 0:04:15.720 --> 0:04:18.159 a way out, Maybe there are policy moves that could 0:04:18.160 --> 0:04:20.880 actually address some of this. But to sort of understand 0:04:20.920 --> 0:04:23.240 more why how's it going such a source of stress 0:04:23.279 --> 0:04:25.720 and all of this that we're talking about, we are 0:04:25.720 --> 0:04:28.320 going to be speaking to Darryl Fairweather. She is the 0:04:28.400 --> 0:04:32.400 chief economist at the real estate website redfin. She might 0:04:32.440 --> 0:04:35.040 have some ideas on how you can alleviate things or 0:04:35.040 --> 0:04:39.279 at least understand the roots of this tension. So, Daryl, 0:04:39.360 --> 0:04:41.920 thank you so much for coming on odd lots. Thank 0:04:41.960 --> 0:04:43.360 you for having me. I'm so happy to be here. 0:04:43.520 --> 0:04:46.120 We're really psyched to have you here, you know, are 0:04:46.160 --> 0:04:48.440 we right? So people talk about there being a housing 0:04:48.560 --> 0:04:52.680 crisis in America ornament of housing shortage? Is there a 0:04:52.680 --> 0:04:55.680 housing crisis in the US? Like can we? Is their 0:04:55.800 --> 0:04:59.000 data that's beyond just all the anecdotes of stress and 0:04:59.040 --> 0:05:01.440 comments on red it and stuff like that that points 0:05:01.480 --> 0:05:04.800 to it, like we have a serious like mismatch with 0:05:04.880 --> 0:05:07.080 the demand to own a home or the demand to 0:05:07.120 --> 0:05:10.680 have shelter versus what's available. Yes, we are in a 0:05:10.720 --> 0:05:13.400 housing crisis. It's not just me saying this. Starting MAC 0:05:13.440 --> 0:05:16.320 has estimated that we're almost formally in housing in its 0:05:16.360 --> 0:05:18.760 short If you just look at California, it's even higher 0:05:18.760 --> 0:05:21.599 than that. I think maybe some of the confusion is 0:05:21.640 --> 0:05:23.960 that it's much worse in certain parts of the country 0:05:24.320 --> 0:05:26.120 where housing crisis have really gotten up and up for 0:05:26.160 --> 0:05:29.000 the last decade, and there are parts of the country 0:05:29.040 --> 0:05:31.480 that have not seen that. So maybe people just don't 0:05:31.520 --> 0:05:33.480 see it where they are. But as a whole. We're 0:05:33.480 --> 0:05:37.640 definitely in a housing crisis. So how did we get here? 0:05:37.800 --> 0:05:40.320 Because again, as Joe and I were talking about in 0:05:40.360 --> 0:05:44.360 the intro, you know, housing kind of looms large over 0:05:44.480 --> 0:05:47.840 the American psyche, and it's part of the American dream. 0:05:47.920 --> 0:05:50.760 Everyone wants to become a homeowner at some point, so 0:05:50.839 --> 0:05:53.880 you would think that there would be a massive industry 0:05:53.920 --> 0:05:57.560 that is geared towards producing a good that everyone wants 0:05:57.600 --> 0:06:00.080 and will pay a lot of money for. So it 0:06:00.160 --> 0:06:03.679 happened we stopped investing so much in housing or really 0:06:03.720 --> 0:06:07.200 seeing it as this savior. Before the housing crash, there 0:06:07.279 --> 0:06:09.880 was this idea that if we just made everyone a homeowner, 0:06:10.200 --> 0:06:13.320 then everybody could achieve that American dream and build wealth. 0:06:13.480 --> 0:06:16.440 But making everybody everyone a homeowner came with a lot 0:06:16.440 --> 0:06:20.680 of consequences. Not something can just magically produce produce that 0:06:20.760 --> 0:06:22.760 kind of wealth. So there are people who were getting 0:06:22.760 --> 0:06:25.320 homes that they actually couldn't afford, and there was a 0:06:25.360 --> 0:06:28.160 financial system that was supporting that as well. That all 0:06:28.200 --> 0:06:32.680 came crashing down. So from the crash onwards, we kind 0:06:32.680 --> 0:06:35.640 of ignored housing, didn't see it as something that we 0:06:35.640 --> 0:06:38.839 should be promoting. We built fewer homes in the twenty 0:06:38.880 --> 0:06:40.880 tents in any decade going back all the way in 0:06:40.880 --> 0:06:44.560 the nineteen sixties, and Millennials the biggest generation. They're entering 0:06:44.560 --> 0:06:46.720 into home buying age. They need places to live, and 0:06:46.880 --> 0:06:48.839 we just haven't been building for them, or really trying 0:06:48.880 --> 0:06:52.680 to grapple with why we don't build enough homes to 0:06:52.800 --> 0:06:56.920 meet seemingly this excess of demand. It's interesting we talked 0:06:56.920 --> 0:06:59.719 about this with commodities all the time, like natural gas 0:06:59.720 --> 0:07:02.360 and oil and lumber and all these about the twenty 0:07:02.480 --> 0:07:06.520 tens being this year of under investment, and of course 0:07:06.600 --> 0:07:10.320 housing is not a commodity strictly speaking, but there's an 0:07:10.360 --> 0:07:13.840 interesting like parallel of this, likes is sort of like 0:07:14.040 --> 0:07:17.320 the decade of under investment and everything, and now we're like, 0:07:17.520 --> 0:07:20.440 now we're paying the price for it. It was a 0:07:20.560 --> 0:07:23.920 very destructive recession and we're certainly still paying the price 0:07:24.000 --> 0:07:27.880 for that. And we also just didn't we didn't do enough, 0:07:27.920 --> 0:07:30.120 I think, to get out of that recession quickly enough. 0:07:30.240 --> 0:07:32.560 We may be over corrected in this last recession and 0:07:32.560 --> 0:07:34.160 did a whole lot, and now we're grappling with the 0:07:34.280 --> 0:07:36.440 with the flip side, which is inflation. But I think 0:07:36.440 --> 0:07:39.920 most economists agree that that that that the fallout from 0:07:39.960 --> 0:07:42.800 the recession was was more harmful than it needed to be. 0:07:43.760 --> 0:07:46.360 So I know we're going to get into things that 0:07:46.440 --> 0:07:50.240 could be done to increase the housing stock, but just 0:07:50.400 --> 0:07:54.480 on the current trajectory, Like, if everything continued as it 0:07:54.520 --> 0:07:59.240 currently is, would you expect some sort of supply response 0:07:59.320 --> 0:08:02.320 from home builders, Like would you expect them to ramp 0:08:02.480 --> 0:08:05.480 up production enough that it would start to fix some 0:08:05.520 --> 0:08:08.240 of the imbalance between supply and demand. I don't think 0:08:08.240 --> 0:08:10.480 that builders on their own are going to be able 0:08:10.560 --> 0:08:12.840 to build enough to meet demand because they only really 0:08:12.840 --> 0:08:17.080 started getting ramped up on production when demand was exceedingly 0:08:17.200 --> 0:08:20.000 high during the pandemic, and now that interest rates are up, 0:08:20.040 --> 0:08:23.040 there already starting to see that decline demand and they 0:08:23.080 --> 0:08:25.600 want to pull back. Because of the cick locality of 0:08:25.720 --> 0:08:29.400 housing market, builders, they only really ramp up at the peak, 0:08:29.440 --> 0:08:30.880 and then right after that they pull back, and then 0:08:30.880 --> 0:08:32.760 they don't want to ramp up again until there's another 0:08:32.800 --> 0:08:35.079 peak coming. So I think we do need some kind 0:08:35.080 --> 0:08:38.840 of government intervention or more policy making to support home 0:08:38.840 --> 0:08:42.800 building that actually meets demand. So before we get into that, though, 0:08:42.880 --> 0:08:46.120 you know, Tracy said something important in the intro, so 0:08:46.200 --> 0:08:49.360 you know, like Tracy talked about this in the beginning, 0:08:49.679 --> 0:08:54.400 that you know, not all countries have the same approach 0:08:54.440 --> 0:08:58.680 to housing where housing is so central to their conception 0:08:58.679 --> 0:09:02.560 of economic life once per little finances. What is it like? 0:09:02.600 --> 0:09:05.160 Where did it come from? In the US? This idea 0:09:05.240 --> 0:09:08.120 that like housing we placed at the center of this 0:09:08.240 --> 0:09:10.400 and that it became like the sort of home ownership 0:09:10.440 --> 0:09:14.000 became core to the American dream. Oh, I think it 0:09:14.040 --> 0:09:16.360 goes back to the founding of this country if you 0:09:16.360 --> 0:09:17.560 want to go, if you want to look at the 0:09:17.600 --> 0:09:21.040 real route, property rights are are really part of how 0:09:21.080 --> 0:09:24.120 this country was built. I mean the the denial of 0:09:24.160 --> 0:09:27.240 property rights the Native Americans, uh, and the idea that 0:09:27.320 --> 0:09:30.120 an individual can own property is part of how this 0:09:30.200 --> 0:09:32.520 country was was founded. So I think that that is 0:09:32.559 --> 0:09:36.920 deeply embedded into this country, the idea that you own 0:09:36.920 --> 0:09:39.959 a piece of property and it's yours and you can 0:09:40.000 --> 0:09:41.600 build what you want on it. The government can tax 0:09:41.640 --> 0:09:44.240 a bit, but I think America resists taxing too much 0:09:44.280 --> 0:10:01.319 because the idea that you own the property. So why 0:10:01.320 --> 0:10:06.040 don't we talk about potential fixes or policy solutions, but 0:10:06.360 --> 0:10:10.640 what what could be done? Well, one thing that is 0:10:10.720 --> 0:10:12.800 kind of straightforward at least when you say it, it's 0:10:12.800 --> 0:10:15.640 a lot less straightforward in practice is to have a 0:10:15.720 --> 0:10:19.959 land value tax, which means that you essentially pay rent 0:10:20.120 --> 0:10:22.880 to everybody because you don't own the land. You didn't 0:10:22.920 --> 0:10:26.000 create the land. Land belongs to everyone in your area, 0:10:26.080 --> 0:10:29.160 in your country. So having a land value tax corrects 0:10:29.160 --> 0:10:31.160 for that, and it turns the value of the home 0:10:31.200 --> 0:10:33.800 really just more into a commodity the actual property that 0:10:33.800 --> 0:10:37.000 sits on top of it. You're not getting some excess 0:10:37.040 --> 0:10:39.600 of wealth just because the land value goes up. That 0:10:39.600 --> 0:10:42.319 would mostly be taxed. Okay, so how is that difference? 0:10:42.360 --> 0:10:45.120 So Trace, you mentioned that when after she became a homeowner, 0:10:45.200 --> 0:10:48.880 she discovered the awful world of property taxes. So can 0:10:48.880 --> 0:10:51.160 you talk a little bit further, like what is the 0:10:51.200 --> 0:10:56.120 difference between a property tax and a land value tax? Yes, 0:10:56.400 --> 0:10:59.600 so your home consists of the land, but it sits 0:10:59.600 --> 0:11:01.320 on top of it, you own and you can do 0:11:01.360 --> 0:11:03.400 what you want with it. And then there's also the 0:11:03.400 --> 0:11:05.760 property that is a structure, that's it's that's it's on 0:11:05.800 --> 0:11:09.000 top of that land that can be modified. The land 0:11:09.200 --> 0:11:12.400 value separates that from the property tax. So a property 0:11:12.400 --> 0:11:15.040 tax is really a combination. It taxes both the land 0:11:15.280 --> 0:11:16.959 and the value of the property. But you can think 0:11:17.000 --> 0:11:20.240 of it as two different parts. The reason for having 0:11:20.240 --> 0:11:23.040 a land value tax from an economic perspective is that 0:11:23.559 --> 0:11:26.200 land is immutable. You can't change it. If you tax it, 0:11:26.200 --> 0:11:28.199 it's not going to change anyone's behavior. So it's a 0:11:28.240 --> 0:11:32.160 really efficient tax to impose when just trying to raise 0:11:32.200 --> 0:11:35.120 tax surpluses. Also, there's there's just the idea that you know, 0:11:35.160 --> 0:11:37.520 you didn't create the land, so the value should go 0:11:37.520 --> 0:11:40.400 to everyone. The property tax part, I think is more 0:11:40.520 --> 0:11:44.160 motivated by having a progressive tax. That if you have 0:11:44.240 --> 0:11:47.040 some mansion, you are a wealthy person and you can 0:11:47.080 --> 0:11:50.000 afford to make that to pay that tax and have 0:11:50.080 --> 0:11:52.440 it redistributed back to people who can only afford to 0:11:52.440 --> 0:11:55.959 build a little one bedroom house or bungalow or whatever 0:11:56.000 --> 0:11:58.000 it is on the property. So I think they have 0:11:58.080 --> 0:12:00.760 different motivations, but they get lumped together and just the 0:12:00.800 --> 0:12:03.680 overall property tax. You know, as Tracy put it in 0:12:03.720 --> 0:12:08.960 her intro, she gets penalized for improving her property. So 0:12:09.000 --> 0:12:11.160 she went a house, and if she makes the more 0:12:11.240 --> 0:12:15.800 valuable that um I would raise her property tax. Whereas 0:12:16.080 --> 0:12:20.040 inferior land value tax, if it's just the land portion 0:12:20.200 --> 0:12:24.040 of the ownership, then nothing she does on the property 0:12:24.080 --> 0:12:26.160 development side. That's why you say it's an efficient tax 0:12:26.480 --> 0:12:29.720 because what her what what Tracy does with respect to 0:12:29.800 --> 0:12:33.839 her house would not necessarily change the underlying vilure of 0:12:33.880 --> 0:12:36.400 the land and a very simplistic model of the world, 0:12:36.440 --> 0:12:38.839 that's true, But I actually want to push back on 0:12:38.880 --> 0:12:43.560 a land value tax being perfectly efficient because land value 0:12:43.920 --> 0:12:46.680 is affected by everything that's around it, whether it's the 0:12:46.760 --> 0:12:50.120 quality of the air or you know, what your neighbor's 0:12:50.120 --> 0:12:52.120 house might look like at the cast of shadow on 0:12:52.160 --> 0:12:54.120 the land. There's like a lot of different things that 0:12:54.120 --> 0:12:56.600 can go into land value, with how the access to 0:12:56.720 --> 0:12:59.720 jobs for that land. So it's not immutable, but it's 0:12:59.800 --> 0:13:03.800 less likely that what Tracy does impact the land value. 0:13:03.800 --> 0:13:05.360 It's it's a little bit more out of our control 0:13:05.400 --> 0:13:08.760 and it's more determined by all the factors in the community. 0:13:08.840 --> 0:13:11.800 So it's the idea here that at the moment, we 0:13:11.920 --> 0:13:15.319 have a property tax, which is basically a tax on 0:13:15.640 --> 0:13:18.760 the structure on the land that you own, and so 0:13:18.800 --> 0:13:24.280 you're basically taxing investment. So if I pour money into 0:13:24.640 --> 0:13:27.840 you know, my house, and I make it better and 0:13:28.160 --> 0:13:30.559 bigger or whatever, someone is going to come along and 0:13:30.640 --> 0:13:33.640 charge me more money for that. So if you started 0:13:33.679 --> 0:13:38.840 doing all land tax, the ideas that you're taxing land 0:13:38.880 --> 0:13:43.079 which is in finite supply and kind of exist regardless 0:13:43.080 --> 0:13:45.880 of whether or not you build on it. But by 0:13:45.960 --> 0:13:50.040 doing that, you're trying to better align the incentives so 0:13:50.160 --> 0:13:53.640 that people are going to want to build on the 0:13:53.760 --> 0:13:56.760 land rather than just leave it alone. Is that is 0:13:56.800 --> 0:13:59.679 that how it's supposed to work. Yes, I think that 0:13:59.679 --> 0:14:02.120 that is how an economists would want to design our 0:14:02.120 --> 0:14:07.120 tax system. But in in practice our taxes tend to 0:14:07.160 --> 0:14:11.120 skew towards equity concerns over efficiency concerns. So at the 0:14:11.160 --> 0:14:13.400 same reason, we have a capital gains tax, because the 0:14:13.440 --> 0:14:15.320 kind of people who have a lot of capital gains 0:14:15.320 --> 0:14:19.440 tend to be very wealthy, and from equity perspective, we 0:14:19.520 --> 0:14:21.840 may want to distribute some of that wealth down to 0:14:21.840 --> 0:14:24.640 people who don't have any capital gains to be taxed 0:14:24.640 --> 0:14:26.440 in the first place. So it works the same for property. 0:14:26.720 --> 0:14:29.320 If we're trying to just purely promote economic growth, we 0:14:29.360 --> 0:14:33.000 would not want the structure of the home or improvements 0:14:33.080 --> 0:14:36.880 to be taxed. So what does the land value tax 0:14:37.240 --> 0:14:40.040 theoretically accomplished? Like we talked about, Okay, how is it 0:14:40.560 --> 0:14:43.000 such a big source of stress if we had when 0:14:43.680 --> 0:14:46.520 how does that fix the four million housing deficit, or 0:14:46.560 --> 0:14:49.680 how does that get us towards that that goal of 0:14:49.720 --> 0:14:52.840 bringing supply and demand into balance. So one is that 0:14:52.880 --> 0:14:56.360 if you are taxing the value of the land, then 0:14:56.480 --> 0:14:58.840 people are going to be less likely to stay in 0:14:58.880 --> 0:15:02.560 their property beyond and like the value that they would 0:15:02.560 --> 0:15:04.440 get out of it. So right now we have an 0:15:04.480 --> 0:15:07.600 issue in the country of people just staying in place, 0:15:07.640 --> 0:15:10.720 aging in place. There are you know, baby boomers who 0:15:11.000 --> 0:15:13.640 don't have children staying in their three bedroom home or 0:15:13.840 --> 0:15:17.720 four bedroom home when that house may be more a 0:15:17.800 --> 0:15:20.240 value to somebody who is younger just starting a family, 0:15:20.600 --> 0:15:23.160 But because the older person in the home is not 0:15:23.280 --> 0:15:27.080 paying the full value of the land, they they would 0:15:27.200 --> 0:15:29.600 rather just stay put than to move somewhere else and 0:15:29.640 --> 0:15:32.360 potentially have to bear more of the cost, or to 0:15:32.440 --> 0:15:34.400 rent and bear more of the cost. So there's there's 0:15:34.400 --> 0:15:36.400 a bit of a problem in terms of allocation of 0:15:36.400 --> 0:15:39.240 real estate. If you're not taxing the land, there's revenue 0:15:39.280 --> 0:15:40.920 to be gained from taxing the value of the land. 0:15:40.960 --> 0:15:44.400 You could put that money towards building more properties. If 0:15:44.400 --> 0:15:47.200 somebody is being taxed the value of the land, they're 0:15:47.200 --> 0:15:49.240 going to want to get more out of that land 0:15:49.280 --> 0:15:51.520 in order to make a profit. So instead of building 0:15:51.520 --> 0:15:54.400 a single family home, you might build a multifamily home. 0:15:54.400 --> 0:15:56.960 Instead of having a land just sit as like a 0:15:56.960 --> 0:15:59.200 golf course or something, you might try to have that 0:15:59.320 --> 0:16:01.600 be commercial space will be of more value to the 0:16:01.760 --> 0:16:05.960 entire community or to the economy. So just on that note, 0:16:05.960 --> 0:16:08.400 I mean you mentioned the value of the land and 0:16:08.600 --> 0:16:12.360 the potential thing that could be built there. How do 0:16:12.400 --> 0:16:17.240 you actually measure land value for the purposes of a 0:16:17.360 --> 0:16:21.840 land tax and would you would you incorporate like potential use, 0:16:21.920 --> 0:16:23.760 So would you look at a site and be like, well, 0:16:23.840 --> 0:16:27.239 you could build you know, a massive, um multi residential 0:16:27.280 --> 0:16:30.080 building here, and so it's going to be a lot 0:16:30.160 --> 0:16:33.000 higher than a different type of land, Like how do 0:16:33.040 --> 0:16:35.640 you do that exactly? Because that, on the surface would 0:16:35.640 --> 0:16:40.360 seem to be quite tricky. Potentially, Yes, it's quite tricky, 0:16:40.400 --> 0:16:42.840 And I think that is um is lost a bit 0:16:42.880 --> 0:16:44.800 when we talked about land value tax, because in theory 0:16:44.840 --> 0:16:46.840 it seems great, like, oh, just do a land value 0:16:46.840 --> 0:16:49.440 tax and everything will be efficient. But I think actually 0:16:49.440 --> 0:16:52.680 assessing the land value tax and of itself would have 0:16:52.680 --> 0:16:56.200 would necessitate au bureaucracy of appraisers who determine what the 0:16:56.280 --> 0:16:59.960 value is in any time you're doing an appraisal. I mean, 0:17:00.080 --> 0:17:02.960 it's basically an algorithm that might determine the value of 0:17:02.960 --> 0:17:06.960 the land, and there's always algorithmic bias. So one issue 0:17:07.240 --> 0:17:10.640 with the current property tax current property taxes in America 0:17:10.760 --> 0:17:13.760 is that black people sometimes are paying more property at 0:17:13.840 --> 0:17:17.200 tax than white people because white homeowners are more likely 0:17:17.320 --> 0:17:21.520 to uh to debate what the actual appraisal is, go 0:17:21.680 --> 0:17:25.000 fight that and try to get appraisal that gets them 0:17:25.160 --> 0:17:28.000 a lower tax burden. So there's room for this kind 0:17:28.000 --> 0:17:30.040 of bias to crop up just in terms of who 0:17:30.160 --> 0:17:33.000 is pushing back on what the appraisal might be or 0:17:33.040 --> 0:17:35.359 what the appraiser is saying is a valuable land. They 0:17:35.440 --> 0:17:37.399 might introduce their own bias if part of that is 0:17:37.440 --> 0:17:41.440 a human error or algorithmic This interesting. I hadn't realized 0:17:41.480 --> 0:17:44.120 that about, but it makes total sense about this sort 0:17:44.160 --> 0:17:48.520 of asymmetry or inequality of who has the resources to 0:17:48.760 --> 0:17:52.200 fight their appraisal. Those same issues would they would theoretically 0:17:52.880 --> 0:17:56.200 arise in either one either a property tax or land 0:17:56.480 --> 0:18:00.080 value tax, or these issues of subjective human judgment, and 0:18:00.520 --> 0:18:03.000 or is there a way because you don't have to 0:18:03.240 --> 0:18:06.240 gauge the actual value of the structure, is there a 0:18:06.280 --> 0:18:09.400 way to make a land value to act somehow more 0:18:09.440 --> 0:18:13.720 equitable and less less able to be gained. I think 0:18:13.720 --> 0:18:15.639 we have to look at look at it on whole. 0:18:15.760 --> 0:18:17.960 Having a land value tax in the first place, I 0:18:17.960 --> 0:18:21.800 think would promote equity because it's it's taxes that would 0:18:21.800 --> 0:18:24.280 be collected more efficiently and could be distributed back to 0:18:24.320 --> 0:18:28.120 a community and possibly help people who are lower income 0:18:28.400 --> 0:18:32.239 or have socioeconomic disadvantages. But it's not going to be 0:18:32.240 --> 0:18:35.120 perfect in terms of collecting that money. It's not perfectly efficient. 0:18:35.200 --> 0:18:36.359 So I think you just have to look at it 0:18:36.400 --> 0:18:39.080 from both sides and and make it a termination. As 0:18:39.080 --> 0:18:41.040 to whether it would be good for society as a whole, 0:18:41.160 --> 0:18:43.400 I think it would be, but I think we would 0:18:43.400 --> 0:18:45.680 have to really have a lot of transparency and how 0:18:45.720 --> 0:18:50.520 appraisals are made and make it easy for anybody to 0:18:50.520 --> 0:18:52.640 to fight an appraisal that they feel like they've been wronged. 0:18:53.359 --> 0:18:55.119 There are ways, I think, through the court system to 0:18:55.200 --> 0:18:57.199 make it fair or make it fair as long as 0:18:57.240 --> 0:19:01.879 we're paying attention. So land taxes do already exist in 0:19:02.040 --> 0:19:05.000 other parts of the world. Can you talk more about 0:19:05.040 --> 0:19:10.480 those existing systems and what impact it's had on house prices, um, 0:19:10.520 --> 0:19:14.439 And I guess society as a whole. So one example 0:19:14.480 --> 0:19:16.920 that comes to mind is Israel. It actually they call 0:19:17.000 --> 0:19:19.439 it a hundred year lease, so you lease land from 0:19:19.480 --> 0:19:21.400 the government. But it's effectively the same as the land 0:19:21.400 --> 0:19:24.160 tax because you're paying this money monthly to the government 0:19:24.400 --> 0:19:27.720 and just you have to pay it regardless of what 0:19:27.840 --> 0:19:29.280 the size of the property is. You can still do 0:19:29.320 --> 0:19:31.639 whatever you want on the property. UM. So it works 0:19:31.680 --> 0:19:34.160 in in effect the same as the land value tax. 0:19:34.720 --> 0:19:37.199 I'm not actually I should look a little bit more 0:19:37.200 --> 0:19:40.000 into housing affordability. In Israel, they have their own land 0:19:40.040 --> 0:19:43.919 issues because a lot of the country is desert, and 0:19:43.960 --> 0:19:45.880 there are other land issues there that I won't even 0:19:45.880 --> 0:19:49.000 get into, but that is one country that comes to mind. Um. 0:19:49.080 --> 0:19:54.480 But yeah, it's interesting though, And I think like Singapore 0:19:54.680 --> 0:19:58.439 also has the has this system where a lot of 0:19:58.480 --> 0:20:02.080 people don't actually technically own their property, but they're in 0:20:02.119 --> 0:20:05.879 these like ultra long term leases. But I guess like 0:20:05.920 --> 0:20:08.320 one of the implications and you sort of hinted at 0:20:08.359 --> 0:20:11.560 it in the very beginning, which is it. It's sort 0:20:11.560 --> 0:20:14.719 of muddies our concept of property ownership a little bit. 0:20:14.760 --> 0:20:17.879 If you're always paying, whether it's a monthly or a 0:20:17.960 --> 0:20:22.800 yearly land value tax, then to some extent implicitly like 0:20:23.040 --> 0:20:25.520 you're always sort of renting your land, and I think 0:20:25.560 --> 0:20:27.320 you even use the term rent, but it's sort of 0:20:27.440 --> 0:20:30.639 just introduces this idea that like everyone is kind of 0:20:31.040 --> 0:20:34.720 a renter or to some extent in this framework. Yeah, 0:20:34.760 --> 0:20:38.480 I think that's an ideological hurdle when it comes to 0:20:38.560 --> 0:20:41.440 land value taxes. And in the book Gone with the Wind, 0:20:41.480 --> 0:20:44.920 Scarlett O'Hare's dad is always railing about property taxes, and 0:20:44.960 --> 0:20:47.199 I has always found it really ironic that like this 0:20:47.280 --> 0:20:51.400 character that owns people is mad that he doesn't pay 0:20:51.440 --> 0:20:54.200 for this land that he thinks he owns. Is entiled 0:20:54.240 --> 0:20:56.879 to anyway. I think another side, I think there's like 0:20:56.880 --> 0:21:00.600 a lot of ideological stuff and whether somebody can actually 0:21:00.600 --> 0:21:04.480 own land or not. Yeah, So just on this note, 0:21:04.480 --> 0:21:07.000 I mean, so two countries that spring to mind for 0:21:07.040 --> 0:21:10.359 me that have this sort of land tax system or 0:21:11.320 --> 0:21:14.600