In Austin, it's been an incredibly effective way to gentrify old neighborhoods.
You have people who have lived in their houses for a generation and may have even paid them off but when the land under their home - let alone their home itself - doubles in value every 8 years and the rate doubles in eight years, they have to sell to get out or lose their house anyway.
Then developers swoop in, tear down the houses, and build condos which are much more "economically efficient".
I don't really want to be disagreeable because what is written is all obviously true and correct. However, there are 3 issues that deserve mention in this context:
1) It is a lot more economically efficient, the situation has gone from 1 family living in a desirable area to multiple families. If we ignore the fact that one family had to move that is a big step up.
2) The alternate scenario, where the family just sits in their rapidly appreciating house, is grossly unfair. They are reaping huge benefits without doing anything. It is ok in principle but it is unfair on the other normal folk who can't move in that area and get priced out because there isn't enough housing. This concept is the justification of the land value tax and it goes to a very important principle - benefits should come from either hard work or by taking risks with saved money.
3) Since the economic and social benefits of tearing down single houses and building apartments are so huge (ie, lots of people get to live where they want instead of few people) it would be well worth looking for ways to keep the land value tax and mitigating the effect on the family that has to move rather than doubling down on the idea of people having a right to land. Taxes represent the government taking something people worked to earn. Taxing someone on land and they have to move is not that different from taxing their income and they have to give up some pleasure in life. That is what taxes do.
The thing is people don't even have to move away necessarily. If the land is that valuable and it'll be upzoned, they could just trade in for a unit in the new building + some cash.
Forcing someone to sell because you find their life choices economically inefficient is gross morally.
Further, it creates a legal and financial risk in the entire system where property becomes subject to the whims of whatever governing authority therefore discouraging investment and real ownership.
The Kelo decision was despicable, let's not encourage it.
Welcome to taxes. You could have had something, then the government says you can't and you have to live a different lifestyle. All the options here are morally gross and it is easy to justify either side.
If land values have truly doubled in 8 years it isn't like the family involved is out of pocket. They've made a small fortune. The idea they can make a small fortune and prevent land from being used is also morally gross. The only justification is that a large hurt is diffuse where the small hurt would be concentrated. That is a defensible philosophy but it is also one where eventually everyone is worse off. And it isn't like this is an erosion of property rights; they are being taxed on benefits that they are not responsible for creating. 1.5% land tax so people have to re-buy the land once a generation is as good an idea in tax law as any I've seen.
I agree that having to change a lifestyle because of taxation is pretty awful and the system should strive not to do it. But I've visited places like Hong Kong and seen the density of living there. We're talking an order of magnitude more people. The number of people who come out ahead from that sort of property development is so overwhelming we can't process it using intuition and positive stories about individuals.
You don't have to be forced to sell. You could live in it until you die at which point the sale is forced and the taxes are paid.
This can be done by borrowing against the house from a financial institution or we can have the government place just place liens on the property if you can't pay.
Rarely is there ever a policy proposal, even a good policy proposal, that is entirely without downsides. Pretty much any proposal that is so perfect that there isn't a single criticism that can be made of it has already been enacted. That there are negative consequences of a policy is not an argument against the policy.
> and build condos which are much more "economically efficient"
You can solve this with an age-based property tax abatement. I’d personally aim to make it an abatement for the equivalent of a 1BR condo, though - 85 year olds really don’t need large houses with a bunch of stairs, whereas young families do, and often can’t find much supply on the market in cities, which drives up prices. If an old person wants to live alone in a huge house, I think it’s ok to tax them on that.
I mean, I'm not completely unsympathetic, but we charge property tax partly to make sure land is being used well, and not just being sat on while it appreciates. When people live in low density housing in the midst of cities, that has a very real cost to everyone else in that city. The housing crisis is partly a result of this phenomenon, and that hurts a huge number of people.
I don't understand your last paragraph, but clearly society generally doesn't agree with you that "their land, their choice". Maybe in your country it's different, but in most cities in the US there are a huge number of restrictions on what you can do with your land. I think too many, in some ways.
If you want to have complete freedom over your land, you generally can't live inside a city, because people inside a city are much more interdependent, and what you do can very easily impact others. In the countryside, you have much more freedom to do what you want with it.
See the picture, it shows how you can make "more efficient use" of land by building tall, high density apartment buildings that will bring more people and traffic and pollution in the cities.
When I built my house it was 1 km (0.7 miles) outside of the city, that was the distance to the closest building. Now, just 12 years later, it is 1.5 km inside. Not my choice, not my doing, not my fault: why should I be put all the restrictions and the taxes when the city expanded (in a really ugly way, btw) chaotically and engulfed everything around it?
The challenge is in the details. Who determines X, and how? Is X fixed or does it increase over time? If yes, is it indexed to inflation? In what way? CPI, local housing market, something else?
Capping property taxes is the same as rent control. It has the same challenges in its implementation, and the same downsides and costs.
Price appreciation alone isn't enough to force people to sell - they can take out home equity loans, and the appreciation is more than enough to cover the increased taxes and interest payments. "Doubles in value every 8 years" means something like 9% appreciation, HELOC rates are 5% and property tax rates are below 2%. Starting with a paid off house, you can take out home equity loans to cover property taxes forever with that rate of price appreciation.
> but when the land under their home - let alone their home itself - doubles in value every 8 years and the rate doubles in eight years, they have to sell to get out or lose their house anyway.
I'm having trouble thinking of a realistic combination of numbers where the asset owner would exhaust the equity in their home under such a scenario, or is that "off limits" for some reason?
There are other options than just "sell and move away". They could owe the taxes against the value of the land. They could sell to the condo developer in exchange for a new unit and some cash, so they don't have to move away. I'm sympathetic to people wanting to stay in the same place, but it doesn't have to be in the exact same house.
You have people who have lived in their houses for a generation and may have even paid them off but when the land under their home - let alone their home itself - doubles in value every 8 years and the rate doubles in eight years, they have to sell to get out or lose their house anyway.
Then developers swoop in, tear down the houses, and build condos which are much more "economically efficient".