Invest in land or buildings?.
This is from Nicholas Rosen, writing in The Progress Report:
Some people think that land rents are not a significant percentage of GNP, or, when they hear "land reform," think only about agriculture, probably in the context of Third World latifundia.
If you believe that land rents don't matter in a modern economy, I have a wonderful get-rich-quick scheme for you! And I won't charge you a cent for my brilliant idea, so listen up!
If you believe that land rents don't matter in a modern economy, I have a wonderful get-rich-quick scheme for you! And I won't charge you a cent for my brilliant idea, so listen up!
I was looking at the real estate ads in the Washington Post (October 2, 2010, p. F1), and I observed that for just $271,000, you can buy a four bedroom, three bath contemporary chalet in Basye/Bryce Resort, Virginia, with screened porch and hot tub. It looks pretty nice, it has trees in the yard, and it was built in 2005. I'm not sure just where Bryce Resort is, so it must not be too close to DC, or I'd know more.
Other houses are more expensive. There's a three bedroom townhome (what used to be called a row house) in Alexandria, less than a mile from the Huntingdon Metro, for $579,000, more than twice as much, $308,000 more. Alexandria is on the Potomac, across from Washington DC.
Other houses are more expensive. There's a three bedroom townhome (what used to be called a row house) in Alexandria, less than a mile from the Huntingdon Metro, for $579,000, more than twice as much, $308,000 more. Alexandria is on the Potomac, across from Washington DC.
What else can you buy? There's a three bedroom townhouse in Alexandria, for $642,800. There's also a white house, described as a 1920's classic, with the number of bedrooms unspecified, but a yard and landscaping of its own, for $1,250,000, nearly a million dollars more than the chalet in Bryce Resort. It looks attractive, but it's not a huge mansion. When I was a child, say in 1975, I think you could have bought a house like that in my home town for under $50,000, $60,000 at most.
So how do you get rich quickly? You buy houses in Bryce Resort, of course, and sell them in Alexandria at a $300,000 markup! Even after the costs of cutting up houses and moving them on flatbed trucks, you should come out way ahead. Buying and selling one house a year should give you a middleclass income, and if you work faster than that, you'll soon be set to retire rich.
So how do you get rich quickly? You buy houses in Bryce Resort, of course, and sell them in Alexandria at a $300,000 markup! Even after the costs of cutting up houses and moving them on flatbed trucks, you should come out way ahead. Buying and selling one house a year should give you a middleclass income, and if you work faster than that, you'll soon be set to retire rich.
Can anyone consider the obvious flaw in this scheme, and not realize that land prices matter? Land prices in Alexandria must be at least $300,000 for the land under a decent townhouse, more for the land portion of a home with a nice yard. Annual land rents must be about $10,000 or more for modest lots, several times that for bigger ones. This is not a trivial percentage of homeowners' incomes, or of GNP.
As a 19th century Georgist put it, instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?
As a 19th century Georgist put it, instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?
Every week when I scan the NYT's "What You Get" column, which showcases three homes currently on the market in various parts of the country, I wonder why the column doesn't provide the answers to the important questions?
- How far is each home from a vital job market?
- What share of the children in the local school district graduate from high school? attend 4-year colleges? graduate from college?
- What sort of public goods and services and cultural amenities does the community offer?
- Must those who live there have a car for every working adult?
I think Nicholas Rosen nailed it when he quoted a 19th century Georgist: instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?
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