Link: Renters deserve a better shake by Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies
The op-ed begins:
NOT EVERYBODY in the family tree makes it into the family portrait. Most families have ne'er-do-wells; many families crop them out.
Housing USA is like a family portrait. We see ourselves as a nation of homeowners or wannabe homeowners; and our policies, programs, and rhetoric support that image. The news focuses on the homeownership crisis: foreclosures, toxic loans, mortgage fraud, the "jingle mail" when homeowners, facing foreclosure, send keys to the lender. The major federal housing initiatives (including the Federal Housing Administration, Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System) have helped more than two-thirds of us buy into the American dream. Indeed, a few years ago policy-makers were lauding the nifty subprime mortgages marketed even to buyers with poor credit, enabling even them to own.
What about renters? One-third of all households rent - surely they are part of the American family; but policies, as well as rhetoric, have overlooked them. While the federal government has subsidized some renters (25 percent of eligible households) and the production of some "affordable" units, those subsidies pale beside the forgone tax revenues from the mortgage interest deduction, property tax deduction, and capital gains exclusion.
I applaud his thoughts, and/but have another way of looking at this. Suppose that instead of doing things for renters, we instead set things up so that all of us -- renters, owners of very choice land, and owners of only marginal land -- were on an equal stance with respect to the earth itself. Owning a piece of the earth should not be a means of enriching oneself at others' expense. How would we do this?
I'd start with shifting our taxes off buildings and onto land value. Those of us who owned land would pay taxes based on the value of that land, without regard to whether we kept that land vacant, put a cottage on it, or a skyscraper hotel or condo. He who had a piece of land worthy (by virtue of its location) of a skyscraper but put only a cottage on it would pay taxes appropriate to a site suitable for a high-rise. He who thought it worthwhile to put a skyscraper on a lot worthy of only a cottage would pay taxes appropriate to a site suitable for a cottage (though he'd be a fool to do so, so cottage-worthy land would remain available for cottages). And those who owned land suitable only for agriculture would pay taxes according to that value, whether they chose to use it or keep it vacant.
What does this have to do with renters? It would cause a lot more housing to be created in places suitable for housing; those lots suitable to skyscrapers would not continue to sit with cottages on them, and one who wanted to use one of those lots would not have to pay its occupant the value of the land. Rather, one would pay him the value of his cottage, and pay to the community an annual (or monthly) payment for the use of the land. One could build the skyscraper on it, to be rented to tenants, or sold to condo-buyers, and not pay any tax on the skyscraper itself.
As long as there was a demand for high-rise housing, owners of choice skyscraper sites would have all the incentive in the world to build them -- and none of the current disincentives. We wouldn't tax his improvements to the site -- be they granite-and-stainless or simply serviceable; energy-saving or energy-hogging. We'd only tax the value of his site. (If the market wanted energy-saving, no one would be penalized for doing so.)
The market would still tell him where to build, and what to build. We'd set up the incentives so that he'd be motivated to build if there was unsatisfied demand.
Environmentalists will approve of this: it will create density in the cities, and preserve the wild areas and agricultural land in its current state; it might even cause many city and town edges to draw in. That density would promote public transportation, and thereby encourage people to reduce their dependence on cars and probably encourage them to walk more. More people would be living in technologically modern, well-insulated homes, served by efficient heating and cooling systems, with water-saving devices. Shared walls/floors/ceilings would also be more efficient in use of natural resources.
Fewer people would be commuting long distances to get from housing they can afford to jobs which pay well or intrigue them.
Existing infrastructure would be used more intensively, and we would not need to add capacity at the edges for some time.
Retsinas concludes,
We can better the lot of renters. Specifically, we can preserve affordable rental units. We can use foreclosures as an opportunity to increase the supply of rental units. (The recently passed federal housing bill is a step in the right direction.) We can remove local land-use barriers to the construction of affordable housing - especially workforce housing for low wage workers. A balanced housing policy would focus on decent, affordable housing, whether owned or rented.
One-third of the nation rents. They belong in our family portrait.
Homeownership should not be the road to riches. We should all be able to afford homes, and we should have enough left to invest in productive activity to help to fund our retirements. But none of us should get rich on land value, and none of us should be impoverished by paying others simply for a place to live, or, more precisely, by paying both rent [land rent] and taxes. Land rent is a large flow, and it should flow into public pockets, not private pockets or corporate pockets.
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