Re: Friedman’s LVT argument—this doesn’t quite scan for me.
The argument depends entirely on the assumed administrative diseconomies of scale, where both businesses are less productive than they would be if they had independent owners. Without this argument, the problem appears to be that it is extra profitable to completely develop a large patch of land, and extra-extra profitable to build complementary businesses on the same patch of land. Said that way it sounds like an incentive for better land use, and the incentive is bigger for bigger patches of land.
But how good is it to assume these diseconomies of scale? I have never lived in, or even seen available to rent where I live, an apartment complex that wasn’t run by a property management company. I would be surprised if malls were different. The presence of professional management screens out the administrative influence of the owner/developers of property in the same way it does investors in startups or stockholders—they don’t determine how well the business is run, management does.
I also feel like the argument fails to account for the regular economies of scale. The hard parts of building are things like permits, licenses, utilities, and moving dirt. I would be deeply shocked if it was more efficient to have twice the contractors, two separate utilities projects, twice the heavy machinery on site to dig.
Putting those arguments aside and charitably granting the administrative diseconomies of scale, and assuming away any regular economies of scale, this still feels like…not that bad? The matter of not increasing the LVT on the big parcel in question has no impact on all of the surrounding parcels of land, which will see their values increase the same either way. The same is true in reverse: whether two parcels or one, the developed land will see its value increase about the same by people doing development on the surrounding parcels.
Recall that LVT isn’t primarily a revenue generating scheme—the pitch is rather that it eliminates a huge rent from the market and incentivizes productive uses of land.
If I am right about the outcomes between the parcels under consideration and the surrounding ones, this turns into a kind of first-mover advantage: the first uptick in value that would normally be taxed away gets pocketed instead, but I cannot see how this would persist through future cycles of value assessments; as soon as people started improving the surrounding parcels, the unimproved value of the land will update to the current market condition whether it is one parcel or many.
Re: Friedman’s LVT argument—this doesn’t quite scan for me.
The argument depends entirely on the assumed administrative diseconomies of scale, where both businesses are less productive than they would be if they had independent owners. Without this argument, the problem appears to be that it is extra profitable to completely develop a large patch of land, and extra-extra profitable to build complementary businesses on the same patch of land. Said that way it sounds like an incentive for better land use, and the incentive is bigger for bigger patches of land.
But how good is it to assume these diseconomies of scale? I have never lived in, or even seen available to rent where I live, an apartment complex that wasn’t run by a property management company. I would be surprised if malls were different. The presence of professional management screens out the administrative influence of the owner/developers of property in the same way it does investors in startups or stockholders—they don’t determine how well the business is run, management does.
I also feel like the argument fails to account for the regular economies of scale. The hard parts of building are things like permits, licenses, utilities, and moving dirt. I would be deeply shocked if it was more efficient to have twice the contractors, two separate utilities projects, twice the heavy machinery on site to dig.
Putting those arguments aside and charitably granting the administrative diseconomies of scale, and assuming away any regular economies of scale, this still feels like…not that bad? The matter of not increasing the LVT on the big parcel in question has no impact on all of the surrounding parcels of land, which will see their values increase the same either way. The same is true in reverse: whether two parcels or one, the developed land will see its value increase about the same by people doing development on the surrounding parcels.
Recall that LVT isn’t primarily a revenue generating scheme—the pitch is rather that it eliminates a huge rent from the market and incentivizes productive uses of land.
If I am right about the outcomes between the parcels under consideration and the surrounding ones, this turns into a kind of first-mover advantage: the first uptick in value that would normally be taxed away gets pocketed instead, but I cannot see how this would persist through future cycles of value assessments; as soon as people started improving the surrounding parcels, the unimproved value of the land will update to the current market condition whether it is one parcel or many.