…the mortgage is lower risk for the bank… allowing them to extend those loans to more people
That was the part I meant about this proposal increasing demand by giving the average person more purchasing power.
Multiple strategies makes sense. Quadratic property tax is a new one to me, and it confused Google. Is it like a progressive tax, where larger valuations are taxed at a higher rate?
It gives the average person more purchasing power but it also opens up new supply by opening the foreclosure auctions to the average person. The increased demand I argue is partially or wholly counteracted by pushing out the house flippers from the foreclosure markets; those people are generally only interested in buying properties at severely under market prices at foreclosure auctions or similar sales. Essentially, I am saying that the entire “flipper” business model should be destroyed as it does not provide sufficient value to the taxpayer to offset its negative effect on the market and this policy could do severe damage to that sector.
Quadratic property tax is a combination of the “quadratic” nature of quadratic voting and, of course, taxation. I made this term up hoping people would know what I was talking about but it turned out to not be as obvious as I initially thought.
Essentially, the taxation scheme takes into account the number of lots owned by a person in addition to the value per lot. Consider the following sample scheme:
The amount of tax due on any given property is calculated according to the following formula: r×(1 + Np)²×V, where N is the number of lots owned by the taxpayer beyond the first and V is the value of the lot. The variables r and p are determined by the local taxing authority which correspond to tax rate (higher = more tax per unit of money) and the penalty for owning excessive numbers of lots (higher = greater penalty for owning multiple lots).
If a local taxing authority selects values r = 0.002 and p = 0.05, the tax due for a lot worth 100 units of money would be as follows:
An individual or family who owns only that lot pays 0.002 × (1+0×0.05)²×100 = 0.2 units of money per year.
A small individual landlord who owns this property and 2 others would pay 0.002 × (1+2×0.05)²×100 = 0.242 units of money per year.
A corporation who owns this property and 10 others would pay 0.002 × (1+10×0.05)²×100 = 0.45 units of money per year, which is more than double the individual family
A huge real estate conglomerate who owns this property and 100 others would pay 0.002 × (1+100×0.05)²×100 = 7.2 units, which is so high that it probably would not be profitable to even own this property.
It is “quadratic” because the tax rate scales with the square of the number of previous lots owned.
Coupled with counting rules that ignore subsidiary corporate entities for the purpose of determining ownership, finely-tuning values of r and p will discourage corporate ownership of housing without punishing individual homeowners or small-time landlords.
While this strategy has not been tried in real life to my knowledge, interestingly, some Minecraft servers have implemented a similar scheme to prevent hoarding of desirable lots in the overworld to varying degrees of success, mostly depending on whether those in charge admit any loopholes for privileged players to exploit.
Ah, I missed part where home flippers left the market. I’m not totally following the chain of logic after that, but I am OK with that.
I am not convinced using regulation (tax incentive or otherwise) to drive larger landlords out of the market would improve the experience of the average renter. Some small landlords are terrible. With proper regulation, some ginormous ones are good (countries that do public housing well - government-run is bigger than any corporate landlord).
That was the part I meant about this proposal increasing demand by giving the average person more purchasing power.
Multiple strategies makes sense. Quadratic property tax is a new one to me, and it confused Google. Is it like a progressive tax, where larger valuations are taxed at a higher rate?
It gives the average person more purchasing power but it also opens up new supply by opening the foreclosure auctions to the average person. The increased demand I argue is partially or wholly counteracted by pushing out the house flippers from the foreclosure markets; those people are generally only interested in buying properties at severely under market prices at foreclosure auctions or similar sales. Essentially, I am saying that the entire “flipper” business model should be destroyed as it does not provide sufficient value to the taxpayer to offset its negative effect on the market and this policy could do severe damage to that sector.
Quadratic property tax is a combination of the “quadratic” nature of quadratic voting and, of course, taxation. I made this term up hoping people would know what I was talking about but it turned out to not be as obvious as I initially thought.
Essentially, the taxation scheme takes into account the number of lots owned by a person in addition to the value per lot. Consider the following sample scheme:
The amount of tax due on any given property is calculated according to the following formula: r×(1 + Np)²×V, where N is the number of lots owned by the taxpayer beyond the first and V is the value of the lot. The variables r and p are determined by the local taxing authority which correspond to tax rate (higher = more tax per unit of money) and the penalty for owning excessive numbers of lots (higher = greater penalty for owning multiple lots).
If a local taxing authority selects values r = 0.002 and p = 0.05, the tax due for a lot worth 100 units of money would be as follows:
It is “quadratic” because the tax rate scales with the square of the number of previous lots owned.
Coupled with counting rules that ignore subsidiary corporate entities for the purpose of determining ownership, finely-tuning values of r and p will discourage corporate ownership of housing without punishing individual homeowners or small-time landlords.
While this strategy has not been tried in real life to my knowledge, interestingly, some Minecraft servers have implemented a similar scheme to prevent hoarding of desirable lots in the overworld to varying degrees of success, mostly depending on whether those in charge admit any loopholes for privileged players to exploit.
Ah, I missed part where home flippers left the market. I’m not totally following the chain of logic after that, but I am OK with that.
I am not convinced using regulation (tax incentive or otherwise) to drive larger landlords out of the market would improve the experience of the average renter. Some small landlords are terrible. With proper regulation, some ginormous ones are good (countries that do public housing well - government-run is bigger than any corporate landlord).