Here's my understanding: by capturing land lift, governments reinforce the land lift phenomenon and high housing prices. If the government backs off, developers and renters/owners will both benefit. Revenue-wise, a fairer approach would collect from user fees and property taxes, and not rely too much on renters and buyers.
Would comprehensive upzoning (instead of spot) reduce the steep land lift phenomena? Would this increase valuations everywhere more evenly and increase city-wide revenues?
I think your understanding is correct. Capturing land lift requires local governments to keep the base zoning as low as possible. Then it's like pushing down on a balloon: when they allow higher density at one particular spot, the incentive is to build *a lot*, because there's so few places where you can do it.
Comprehensive upzoning would reduce this artificial scarcity and thus the pressure to max out density in one particular spot. See comments by Shane Phillips on broad upzoning: https://morehousing.ca/excess-capacity
Comprehensive upzoning and building a lot more housing would increase city-wide revenues *if* the city government doesn't lower property-tax rates. (In Canada, cities typically lower their property-tax rates automatically every year.)
It's a little complicated to explain. The city sets its budget, then divides up the property tax based on property value. If everybody's property values increase by 10%, it doesn't mean that your property tax goes up by 10% - it goes up by zero, assuming next year's budget is the same as this year's budget. What happens is, the city automatically lowers the property tax rate by 10%.
In 2000, the city of Vancouver's property tax rate for residential property was 0.63%. In 2024, it was 0.31%.
I see. I thought the budget would have been increasing for items like capital upgrades and increased services... But those are counted separately, not expected to be paid by property taxes?
I guess property values have outpaced budget/spending increases. Hmm. But CACs and other revenues must be separately expected/accounted then, for property taxes to not be affected and even go down.
Really great points. It makes no sense to me that cities can charge new entrants to the market these exorbitant fees and allow current homeowners to enjoy the services that are provided by these fees, at no cost to them. Seems entirely undemocratic. And you're right, now that fees are so high, there will be no new entrants to the market, which means the whole funding model falls apart.
Here's my understanding: by capturing land lift, governments reinforce the land lift phenomenon and high housing prices. If the government backs off, developers and renters/owners will both benefit. Revenue-wise, a fairer approach would collect from user fees and property taxes, and not rely too much on renters and buyers.
Would comprehensive upzoning (instead of spot) reduce the steep land lift phenomena? Would this increase valuations everywhere more evenly and increase city-wide revenues?
I think your understanding is correct. Capturing land lift requires local governments to keep the base zoning as low as possible. Then it's like pushing down on a balloon: when they allow higher density at one particular spot, the incentive is to build *a lot*, because there's so few places where you can do it.
Comprehensive upzoning would reduce this artificial scarcity and thus the pressure to max out density in one particular spot. See comments by Shane Phillips on broad upzoning: https://morehousing.ca/excess-capacity
Comprehensive upzoning and building a lot more housing would increase city-wide revenues *if* the city government doesn't lower property-tax rates. (In Canada, cities typically lower their property-tax rates automatically every year.)
That's lowering in real terms bc it doesn't catch up with inflation, right?
It's a little complicated to explain. The city sets its budget, then divides up the property tax based on property value. If everybody's property values increase by 10%, it doesn't mean that your property tax goes up by 10% - it goes up by zero, assuming next year's budget is the same as this year's budget. What happens is, the city automatically lowers the property tax rate by 10%.
In 2000, the city of Vancouver's property tax rate for residential property was 0.63%. In 2024, it was 0.31%.
I see. I thought the budget would have been increasing for items like capital upgrades and increased services... But those are counted separately, not expected to be paid by property taxes?
I guess property values have outpaced budget/spending increases. Hmm. But CACs and other revenues must be separately expected/accounted then, for property taxes to not be affected and even go down.
Correct. Property values have increased quite dramatically, much faster than spending.
Really great points. It makes no sense to me that cities can charge new entrants to the market these exorbitant fees and allow current homeowners to enjoy the services that are provided by these fees, at no cost to them. Seems entirely undemocratic. And you're right, now that fees are so high, there will be no new entrants to the market, which means the whole funding model falls apart.