Greetings and salutations Mr. Zohran Mamdani:
There is no doubt you have identified the problem: “The rent is too damned high”. You are an
amazing personality, and I have every expectation that you will become the next Mayor. Your
challenge will be to deliver on your promise to make housing more affordable. I’m sure you
know the unintended consequences of rent control and rent stabilization, and I’m sure you know
that as soon as New York becomes a place with higher wages or lower rents, people will come
from near and far and the immigration will eventually tend off set some of your success.
I believe the biggest challenge that has faced your predecessors has been vacant lots, empty
buildings, and obsolete buildings that are now many stories below the highest and best use. It
costs no less to maintain the infrastructure in front of an idle lot than one with people and
economic activity. It costs as much for the police and fire engines to travel past empty buildings
and vacant lots as all the rest. By shifting all of New York City’s taxes to the value of land, the
supply of housing will increase. It will create additional jobs as well. That is because land value
taxes are not based on what is built, produced, or sold on the land, but the potential of the land
to yield an income when it is put to its highest and best use.
If the city of New York were to shift all municipal taxes to the value of land, and collect the same
total revenue as now, vacant lots, empty buildings, and grossly under used land would pay
significantly more. In fact, their owners would soon realize that their strategy of non-use and
under-use (categorized as land speculation) where the primary profit comes from the increase
in the selling value of land, was no longer viable. They would either develop the site to its full
potential themselves, or sell it to someone who would. Although idle and grossly underused land
would no longer be profitable, the selling value of land would actually increase. When the land is
put to its highest and best use, landowners pay less in total taxes than they do under the current
system of taxing buildings, sales, wages. Therefore, the value of land increases.
Because it cost more per floor to construct high-rise buildings, the real-estate tax levied on the
value of buildings greatly reduces the maximum height at which buildings are profitable (the law
of diminishing returns). And so tax abatements are enacted and the city loses revenue. With
land value taxation many more floors are profitable at the same dollar per square foot of floor
space rental rates. That means more housing units or more jobs depending on the location and
zoning. The city gets measurably more revenue from the same sites, and because there is so
much more rental space, the landowners also get more income.
Even after the city is developed to its full potential with land value taxation, the infrastructure
and public service will have become so much more efficient that total taxes per parcel will
continue to be less than before, and, the selling values remain high.
Although landowners gain the most money with a shift to land value taxation, having grossly
more housing units and jobs is certainly better than homelessness and unemployment.
As more and more units of housing and jobs are generated, competition will come from more
people who want to live and work in the city. Some of those people will be more skilled and
educated than some of your current residents. In that case, land value taxation can provide
additional revenue for housing subsidies and job training, without in any way diminishing the
incentive of landowners to develop their land and put it to full use.
Free public transit will save the cost of collection, and increase land values by an even greater
amount.
Mike Curtis – mikecurtisarden@icloud.com henrygeorgeacademy.org