Housing Policy

This is an extension to previous posts:

• http://politicallyuntenable.blogspot.com/2012/09/objective-of-housing-policy.html
• http://politicallyuntenable.blogspot.com/2012/09/landless-housing.html

Taxes in place of property Tax

A property tax is a tax levied based on the value of the land and structures built on top. But if land is no longer traded, then property tax is levied only against the value of the structures built. However, this is hardly the only way to levy tax for real estate owned.

Land Value Tax

In short, a land value tax is based on an estimation of the market value of land based on its potential in residential or non-residential use (whichever is better). This tax ignores any current existing structures on the land, so if it is used "inefficiently", then the land value tax penalises this inefficient use. The idea is that a property tax penalises capital investment (and housing is now in the same category as capital investment).

The idea is to promote market efficiency and eliminate the deadweight caused by property taxes. Because the LVT is charged regardless of development, leaving land undeveloped is highly undesirable as you pay taxes on land that provides no revenue.

The ultimate objective of LVT is lower house prices, more development and higher population density. All of these fit the objectives of housing policy outlined in the previous post.

As an example, Pennsylvania uses this concept to levy a land tax that is much heavier than property tax. While statistical evidence goes to show all of the objectives achieved, there was great difficulty in maintaining proper land assessment across the nine decades it was in use. Some local government would maintain proper assessment that were timely and accurate, others would not. The question is likely what the cost of maintaining proper assessment versus the cost of sub-optimal property tax effects.

Examples in Australia and New Zealand are more compelling, with their use since the 19th century, they've mostly achieved the same objectives.

Statistical evidence in all cases suggests a light to heavy increase in urban development due to LVT.

However, it seems that LVT in practice must also be combined with competent zoning laws and good timely (likely yearly is good enough) property assessment. A variation for no land exchange is that a rent is charged for using land, much like a LVT, either for living purposes or commercial/industrial purposes. Like Australia, there can be a threshold above which tax is levied. The LVT could fully replace property tax.

Government management of land in history

Individual ownership of land in western democracies is a concept developed slowly over the last few centuries with the move toward land titles. This is likely due to the growth of the middle class over the same timeframe and the dissolution of old agrarian economies. Agricultural use of land tended toward community based ownership with informal contract over use between parties (each party could use the land in different ways or at different times). Modern use of land tends toward individual/single family ownership.

It's important to ask the simple question of whether this is desirable and evidence speaks to it generally being a "yes". A more nuanced explanation relates land ownership with modern industrial use of land. Since land is not as directly used for revenue (agricultural output) than in the past, more importance is placed on the structures built on top. Whether it is a software company that owns an office building (and thus, most of its revenue depends on the human capital owned, not the structural capital) or a car company with a robotic factory, the land itself doesn't matter as much except for how hard it is to build a structure there and whether they can hire the necessary labour force from the surrounding area.

So, if the issue now is no longer agricultural output, then land management should likewise change. Governments have largely shifted toward free market mechanisms to lower the administrative cost of assigning land but this has resulted in inner city dilapidation, land speculation (and the associated real estate bubble problems, a phenomena that should be well feared in today's heavily damaged economy from the sub-prime mortgage debacle) and uneven distribution of government services (such as education or road systems).

It's difficult to avoid the "tech park" issue because of the economy of scale that develops from the concept. That is, like businesses which depend mostly on human capital (which is most modern industries such as tech and finance) build in the same area. Then, the talent pool that they depend upon slowly moves into the area which reduces personnel and other operating costs. However, this means that local property prices start to shift dramatically according to the success of any particular industry.

Steel does well? Then the cities with steel mills get a significant spike in property values, the associated increase in tax revenue, increased development which is, as we've seen today, followed by the drop in steel manufacturing revenue and the rapid dilapidation of the neighbourhoods involved in the economy.

But what we see is that the specific location matters little for almost all of these industries, or that there are many locations in which they can exist but they can only choose a few. For instance, steel industry would like to be near water to cool their machinery but there are many bodies of water to choose from, however, they chose to be mostly around the Great Lakes. Another example would be the financial industry. They would like to be near a lot of people and money, so it has developed in locations key locations in each country such as "Wall St" in the United States and "Bay St" in Canada.

With this in mind, what land taxes and property prices should reflect is this reality in which locations matter little but what is on the land matters more.

Price does not reflect land value

If price reflects only the structure built and not the location, it more closely resembles the decision process of most modern industries. Whether you build your investment banking firm in Dallas or in Chicago, what matters are the people working in the building, not the land underneath it. Your investment bankers aren't growing corn after all.

Assessment problems are not likely to be difficult. The real estate industry already separates land price and house price in its analysis of pricing across any piece of property. It would be a bit strange but the change would have individuals pay for property prices but be taxed against land price.

Tax is property agnostic

If taxes on property were levied based only on the land and not the structures on top, then it encourages individuals to build the structure which generates the most revenue on the land. If that is a steel mill then a steel mill would be constructed. If it is a financial firm, then a financial firm is built. A property-agnostic tax would help to prevent discouraging high cost capital investment (like large expensive multi-billion dollar factories).

As a note, although not explored here, it could be worth investigating if property taxes discourages the construction of high cost capital facilities leading to out-sourcing issues in America. For instance, the construction of a ten billion dollar robotics plant to create smart phones also incurs a property tax on ten billion dollars of property value. That would be a major disincentive to construct such a facility in the United States.

As land value tax has been used in practice successfully in nearly two dozen countries for well over a century, it would seem to be a workable concept in areas not using land value tax.

Zoning law effects on property prices

In general, according to the previously stated objectives of housing policy, zoning would be used to increase housing supply to keep rent and property prices stable over the long term. Of course, zoning law is an intricate relationship between a competent bureaucracy and the land needs of the population. Therefore it's a question of good government.

A look at Hong Kong, we have an example of Comprehensive Development Area zoning. In heavily CDA zones, environmental complaints is somewhere between 4x to 6x less frequent, per capita, than areas with no CDA. There was also lessened price variance. Although one of the goals of CDA was to increase property prices compared to non-CDA areas (to reflect the superior urban planning). That is likely to be a complex subject as it likely a result of unfavourable development not occurring close to homeowners that help keeps prices higher than non-CDA zones.

There are some analysis that suggests the United States developed a bottom-up approach, with many different local governments managing various districts, that attempted to hedge the unsustainable cost of urban sprawl through zoning versus consolidation with dense central cities. This creates the implication that American experience with zoning laws was that to promote very high prices and low population density. Then the answer, for American homeowners, is to buy newer and newer development to keep the cost of home ownership low. But, this creates other problematic costs such as environmental pollution due to increased car use and commuting, increased stress and mental issues due to traffic congestion, decreased economy of scale in the use of water/electricity/snow removal and other local services. So, on the converse, zoning law can substantially increase property prices, lower population density and create many problems.

In particular if we look at California, many suburb communities adopted zoning policy in the 1970s to simply prevent new development. The result appears to be very old housing (using the lead paint and asbestos as an indication of age) and exceptionally high property prices despite lower population growth than the rest of America (which experienced lower house price growth). This would be an example of zoning policy working against the stated objective of providing a greater supply of housing and keeping prices affordable (as a percentage of median household income).

Between these two examples there is one very large difference: population density. It can be easily seen that Hong Kong suffers more greatly due to land scarcity than the United States which can expand along the edges of every single city to accommodate more inhabitants. This makes a significant difference in the "need" for zoning laws. Specifically, Americans can constantly choose new development rather than pre-existing housing to alleviate high demand in certain areas. However, this urban sprawl has additional environmental and infrastructure costs. People who live further from central job hubs need to commute to work and add to infrastructure woes whose costs may not be covered by any taxes/fees levied against these new commuters. Further, it also likely that these individuals are purchasing more affordable accommodation outside of a city due to lower income/wealth and thus taxing them more heavily will disproportionately affect the poor (though to what extent is debatable).

For the United States, there may be yet another two centuries of cheap land, thereby delaying the need for any government interference in anywhere but a few key urban centres. This is the same with Canada. So, stopping the trade and sale of land is not likely to make a large difference in prices except in major cities. This fall in prices should be then met with a construction drive. In particular, the United States regularly uses zoning law to restrict areas for higher income individuals, but if this works, then one expects the converse to work. Zoning laws push up housing density to prevent urban sprawl (and the associated environmental and infrastructure costs) and lower housing prices.

Urban Planning, Price Control and Segregation

In the absence of government, the level of segregation (based on statistical data) is likely to become primarily based on class and wealth strata than it does with ethnicity or skin colour. That is, a white community would be willing to accept blacks in their neighbourhood, provided the blacks were of sufficient wealthiness (and past wealthiness in the case of new money vs old money). But, in fact, wealthier individuals have a greater capacity to influence local government in order to obtain government interference to increase the level of wealth segregation in communities.

Likely somewhat ironic, given the tone of the discussion, but less government interference with regards to setting zoning laws in America would actually depress prices in many parts of the country. The primary reason for high prices in California is due to the "high price" restriction in areas such as Cupertino or Palo Alto, a tactic both for the wealthy to be near wealthy and for certain ethnicities to be excluded from the neighbourhood.

But, more accurately, it is the type of government interference that matters. Generally, if it does not match the objectives of housing policy (maximise house ownership, decrease price variance and increase density of land use for environmental reasons) then it should be rejected legislation. Competent bureaucracies can exist but most of these communities would find this type of government policy to be highly politically untenable.

Some aspects that may cause urban sprawl is the requirement for American universities to only select a maximum number of students per school. The expected result, for the rich to obtain more university slots, is urban sprawl to have more schools and thus more slots. This is only a cursory analysis of that policy and so may be inaccurate.

Australia and Canada both consider 30% of income to be the maximum threshold for affordable housing. This considers all costs, CMHC (Canada's housing federal housing agency) is in fact quite strict, as the cost includes mortgage, utilities and insurance (that is, it considers all expenses associated with owning a home, not simply the mortgage). Also, ideally, a family should earn above the statistically defined (by Statistics Canada) low-income cut-off (LICO). The LICO is not a poverty measure and Statistics Canada unfortunately has not been tasked with any particular paradigm for measuring poverty specifically.

Data for 2010, from the Bureau of Labor Statistics (USA), mean before-tax income is $62,481 and $16,557 spent on housing, and total expenditure of $48,109. If we calculate as a percentage of total expenditure (a good measure for after-tax income, tax makes up most of that mysterious hole between income and expenditure), then that is 34.4% of the household budget. This is, on average, above what Canada or Australia would recommend and is a sign of "high" or "unaffordable" housing.

Data for 2010, from Statistics Canada states that average expenditure is $70,574 and of that $20,693 relates to housing ($14,997 shelter, $3773 household operation, $1923 furnishings and equipment). This is at 29.3%, just under the government imposed concept of no more than 30% of income. Actually, that is quite an amazing result; a government program to meeting its objective (go CMHC?).

Data for 2010, from Australian government, indicates that 27% of expenditure is housing, also meeting their objective. From Statistics Sweden, the SCB, housing costs hovers between 27.4% to 31.7% depending on whether you live in sparsely populated areas (cheapest) or metropolitan municipalities (most expensive). Compared with the rest of Europe, Swedish housing expenses are near the highest but they also enjoy the highest quality of housing, so it is likely in line with the rest of Europe.

Australia, Canada and Sweden engaged heavily in assisted housing programs, moreso than the United States, although all countries do so in some aspect. The decreased share of income used for housing in the non-American countries is most likely due to the increased federal expenses involved in housing projects. The United States only a few percentage points higher than the other countries but there is also indication that American incomes are also substantially lower for the middle class compared to Canada, Australia and Sweden (between $20 000 to $30 000 USD lower). Some of that lower income can be mitigated by the fact that many Americans tend to live in sparsely populated areas with much lower cost of living but as the calculation of housing expenditure is in terms of percentage, Americans have lower disposable income both by an absolute measure and a relative measure.

Several major differences arise in the policies between Sweden/Canada and the United States. Housing projects in the United States suffered greatly from the "not in my backyard" political problem, whereas the Swedish and Canadian governments were more forceful about "mixing" neighbourhoods. As a result, housing projects in the United States, much like the housing projects of France, rapidly fell into economic ruin and dilapidation as concentrated poverty caused an economic downward spiral. On the other hand, Canadian and Swedish efforts were highly successful both at increasing home ownership rates but also by placing impoverished individuals into middle class neighbourhoods had increased class mobility. All measures of class mobility for Canada and Sweden are far superior to that of the United States.

Objective of Housing Policy

Summary

Landless housing is a concept where individuals purchase housing but land is never bought or sold, so that house prices correlated only with the material/labour cost of constructing the house. The idea centers around the concept that price should reflect the quality of the good. Location, inextricably tied with any housing built on top of it, would affect price and so this concept breaks that pricing model. Then, it may be asked, would that make sense?

As an extension to the idea that the quality of housing is the only determinant of price and not the location, the objective of housing policy is explored. In reality, most people would not explore history for economic policies but the concept of private land ownership has been one of the most significant factors in destroying large empires in the past. From the Roman Empire to the Qing Dynasty, the most successful societies have been ones that heavily regulated and provisioned housing on intelligent policy, carried out by a competent bureaucracy. Private landownership typically led to the "Crassus" problem, where a single person could own most of the land and force large swathes of the population into poverty.

Long Description

This article considers these housing policy objectives:

• Maximize Number/Quality of Land Owners
• Matching Individuals with Desired Housing
• Equally Distributing Social Services
• Avoiding Economic or Social segregation

Maximize Number/Quality of Land Owners

It's preferable for people and for the government tax system for everyone to be land owners, that it is affordable to be so and that they are of the highest quality possible. All of this, for the least amount of resources expended. This is the primary reason for eliminating land trade; a lot of money would go into purchasing land but other than this it does not translate into real material wealth.

Essentially, money that goes into the sale of land does not convert into anything. It does not improve the land; it only gives the right to improve land. It does not produce any products; in fact, it takes away available money from purchasing luxury goods. It does not make use of the land; a highly free land market means that people are also free to purchase land and then do nothing with it.

So, the elimination of the land market frees up money for development and luxuries, a portion of which will translate into superior housing (either more space and/or higher build quality). At worst, there is no decrease in quality/quantity of land owners since all housing is strictly cheaper, however if individuals are willing to pay half a million dollars for a home now, then logic would dictate that they would continue to be willing for a superior house.

There are several methods of tackling this issue:

• Reducing the Cost of Housing
• Improving Income

Taking away the land market would cause a definite decrease in house prices but it also removes the ability to "invest" in housing. Real estate ends up being much like capital purchases, individuals will spend money like businesses construct offices because housing depreciates over time (rather than appreciate despite the decreasing quality of the structure). This would result in old housing becoming low in price and thus becoming regularly replaced by more modern housing.

The expected result is an increase in construction work, renovations and development. There can be several issues that mitigate the benefit. First is corruption in the construction industry. As a rule, there's no way to separate government interference and the construction industry because everyone requires getting permits to build anything. Remove those permits and you have significant urban planning and environmental problems. Then, really the solution is to reduce corruption. The best tools in this regard is transparency (publicly accessible records on the web for all construction, all bidding done openly on a publicly accessible website, an auditor general with a yearly report) and a public that cares.

Second, varying incomes of individuals during their life time may cause hardship later in life when they are still paying rent. Generally, people would have to lower the amount of rent they pay. Rent control and proper zoning would tend to create sufficient housing at a reasonable price (an aim to keep rent prices below 20% of income, or so). This requires good urban planning. It would be useful for government to produce an urban plan and for a standard statistics agency and budget office to produce the expected outcomes of that plan. Western democracies are at a point where it no longer needs to have government state projected numbers for plans because there is sufficient number of skilled individuals who can work in budget offices and statistic bureaus to produce all these numbers.

On the flip side of controlling house prices and pushing for continuous new construction (of higher and higher density structures as population increases), government can work to improve income. This is a broad topic not addressed here but essentially, generally attempting to improve the economy would alleviate land ownership problems.

• Eliminating land trade will free up money for housing quality and ownership
• Zoning to drive toward higher density in more contested areas
• Transparent construction bidding/permit granting process using new technologies (such as the Internet) to lower corruption

Matching Individuals with Desired Housing

Ideally, people would get the exact housing they desire. Practically, land is scarce and there may not necessarily be sufficient housing to provision it to all individuals who want it. It's important to note that free market for land is merely a way to decide how this housing is provisioned (an important consideration if someone is of the mindset of "but if you don't have a price, how much do you pay for the housing?", the question ignores the assumption of a premise: that housing needs floating price component).

Pushing for higher density housing in areas that are more contested would be a government policy. This would help to, over time, provide more housing for people who desire it. Normally, with a price system, locations that are more desirable (due to natural geography) would fetch a higher price. The higher price forces individuals with lower income to stop consideration those locations. It does not, however, as many seem to believe actually change the supply of housing. Whether housing costs ten times the material/labour cost or one time the material/labour cost, it is land owners who reap the benefits and they have no incentive to build additional housing with additional income.

Many individuals may not actually have a preference and care only about the quality of housing. Most natural geographic conditions only vary with proximity to water and nature preserves. All other artificial conditions (quality of school, rate of crime) are caused by pricing issues and should not exist in the first place. Putting price pressure to perpetuate the problems would be counter-productive.

But, how much free market is reasonable? Is it more pragmatic to have government construct housing? Historically, housing arrangement has always been somewhat government controlled but mostly with respect to land and not the actual housing. So then, is it more efficient to provision land via a government program or through a semi-free market?

If it was done through a government program, in order to match the objectives listed, then we should expect that provisioning is done by stated desire and then by socio-economic background of each family. The aim would be a fairly even distribution of the income ranges in an attempt to create greater class mobility.

• Drive higher density housing in more desired locations
• Provisioning land by desire and socio-economic status

Equally Distributing Social Services

Even in more socialist countries such as Sweden, neighbourhoods tend to have areas with richer social services and those with poorer social services. In the case of Sweden, all schools are equally funded initially but then additional local grants are provided and distributed by local government. That secondary distribution is uneven. In the case of Canada, schools receive local income from local government based on municipal taxes (property tax for instance) in addition to provincial funding. Provincial funding might be very equitable but obviously local tax income will not be so.

In the United States it is even worse. Though there is a state education budget, local taxes make up a much larger proportion of school income than it does in Canada, leading to significant differences in house prices. Buying the same quality of house in Palo Alto (California), due to school quality, will be nearly triple or quadruple the price of a home in north Waterloo (Ontario). Yet, the school quality in Waterloo is not inferior to that in Palo Alto because of superior government policy. Palo Alto is not waterfront property, it is not a pristine beach, it is not near some magical nature preserve. In fact, it's pretty crappy land near a bit of marsh. On the other hand, north Waterloo is near open fields, forests and a slow flowing river. So, we can see that artificial environmental conditions cause just as much price fluctuation as natural ones but there is one difference: we can control artificial conditions.

What is there to do? One of the primary solutions is evolution of power versus devolution of power. That is, we move tax income up to the state/provincial level and then redistribute based on local cost of living and per capita equalisation. That is, a person living in Cupertino (California) would receive the same school funding per capita (adjusted for cost of living) as someone in San Francisco. The greater expectation is that funding difference due to cost of living is specifically due to issues with remoteness, transportation costs and economy of scale due to population density.

To believe that "location" is a set of factors outside the control of a democratic population is to ignore the power that people wield. Government is there to do a job for the people, to make their lives better, not to sit and watch and ensure the "free market" exists. The free market is a tool used to make lives better and if there is a better tool then it should be used. Unequal funding of schools is not acceptable. Class mobility is an important aspect of the American economic system.

• Equalise funding of schools, roads, police through state/provincial level funding
• Preferable to have a digital public online accounting book for funding per school, funding for roads in an area and so on (some places may have already implemented this)

Avoiding Economic or Social segregation

One of the effects of free market price of land is that it necessarily provisions housing accord to income/wealth strata (more the latter than the former). This means the creation of neighbourhoods of specific wealth levels. Economic segregation of this nature leads to differing crime rates, higher level of corruption in the government (it's easier to identify rich neighbourhoods to focus political efforts on) and other social problems that manifest itself in the long term as a decrease in social mobility and the entrenchment of poverty.

There are a number of tactics to alleviate this issue in a "fair" manner.

The government could sprinkle different quality of housing in the same neighbourhood to allow people of different wealth strata to coexist in close proximity. Then policing resources, education funding and infrastructure building would have to be spread evenly as there is no specific location for political capital to be focused upon.

The government could institute price controls, or specifically, rent control. Keeping rent in line with mortgage rates for buildings keeps prices stable. Profit for landlords then becomes a question of quantity of housing. With rent control they can only increase profit by providing more housing rather than providing the same and charging a higher price. Without rent control, the incentive is to price rent as high as possible until people can no longer afford to live. However, rent control must be instituted in wide areas, such as at the county scale.

The government could change permit grants. Specifically, as house prices start moving upward, zoning laws should shift to start including the construction of higher density housing. Many price issues in the United States arise simply due to enforced low density housing to keep a certain "style" in a city. That is an admirable goal, but it is problematic if rent prices increase to the point, as they are now in San Francisco, to be one of the highest in the world for housing quality comparable to that of places for a tenth the price. It is not as if incomes have gone up similarly so the only result is pricing out the poor from having housing.

Land could be provisioned on a multi-slot basis. There are a specific number of slots for each type of wealth strata (it's a fuzzy line between any strata of course, a public algorithm may be helpful, or perhaps a public application system). Any particular neighbourhood cannot "tip" into a specific wealth strata. The algorithm should take into account the monthly changing economic structure of the population (such as a growing number of upper middle class, as a percentage of the population, means any specific area can have more of them). Of course, the provisioning should be blind to the usual list of characteristics (skin colour, religion, etc). That normally should be obvious but as single ethnic neighbourhoods still exist for reasons due to social exclusion, it should still be a consideration in government policy.

• Mixed neighbourhoods of varying house quality levels
• Rent control and zoning as a combination policy to keep price levels low
• Provisioning housing based on socio-economic status to keep neighbourhoods mixed

Overall Policy

So what is the incomplete list of ideas?

• Eliminating land trade will free up money for housing quality and ownership
• Zoning to drive toward higher density in more contested areas
• Transparent construction bidding/permit granting process using new technologies (such as the Internet) to lower corruption
• Drive higher density housing in more desired locations
• Provisioning land by desire and socio-economic status
• Equalise funding of schools, roads, police through state/provincial level funding
• Preferable to have a digital public online accounting book for funding per school, funding for roads in an area and so on (some places may have already implemented this)
• Mixed neighbourhoods of varying house quality levels
• Rent control and zoning as a combination policy to keep price levels low

There are probably more policies to throw into this package, land is a contentious issue. It has been one of the largest factors causing the decline of many previous empires. Free markets for land typically brought about their downfall, so it would be wise to ensure that land ownership does not result in the same problems for the United States.

In the modern world these problems are mitigated for the United States because it is a young country and thus has a lot of open free space. Three hundred million people may seem like a lot for a population, but picture that China, of somewhat smaller size than the United States, has 1.3 billion inhabitants. Suddenly, three hundred million sounds like a lot of free space. Land issues arise when it becomes more scarce.

Also heavily mitigating the issue is that land is not the primary wealth generator today than it was just a few centuries ago. So then, super-landowners aren't as much of an issue as they would have been when agricultural income made up the vast proportion of national gross domestic product.

Rationale

Living location is a sticky issue. Individuals don't simply choose to say that today they will live in New York City and tomorrow they will live in Chicago and the next day they will live in Seattle. A person's living location is a function of the property they desire, the location of their job and the wealth they have at their disposal to use for moving expenses. Those are, at the least, some of the large factors that affect living location.

So, living location is a matter of choice of small variations. Whether to live in one neighbourhood or another two streets away. It is not a matter of "New York City rent is high, I will move to Dallas". And will your family move with you? Your relatives? Your job? No, they will not. So it is not a decision one can simply make. But, free market for housing makes that exact assumption.

However, if price simply reflected material/labour cost, that is fair. Material costs usually varies only by transportation costs. Labour does not vary much either. And, you are paying for the quality of the house. That is expected, at some point, someone must pay for this. You can ignore land prices but you cannot ignore construction prices.

Most people, especially in lower wealth strata, never move far from where they are born. They simply don't have the wealth. So to state that they should choose to live somewhere cheaper ignores... everything. If someone is in the tech industry there's really only a few cities to choose to live within. You cannot choose to live in Hamilton (Ontario) and expect that you will have a job magically.

Of a more pragmatic nature, there is the issue of "relative" and "absolute" prices. When land is no longer a consideration in price it is somewhat "unfair" that someone living in the middle of a desert out in Nevada pays the same price for the same quality of housing as someone in prime real estate in the middle of San Francisco. The keyword is "unfair" because the relative price difference of the two locations is zero.

However, what of the absolute prices under free market? The desert location would be (for instance) ten times cheaper than the prime real estate in San Francisco. That is "fair". But what are the actual prices under the free market system versus that of the semi-free market system (the material/labour cost is still free market)? Without land in the price, prices would drop. Or, people are willing to pay up more money and thus acquire higher quality housing in prime locations and so housing quality rises in both the desert and the prime real estate. So, does it matter?

A good analogy would be healthcare. A mid-range US healthcare plan costs 7000 for a single individual. A plan comparable to that of any Canadian healthcare government plan costs in the range of 12000-15000 depending on the state. Canadian healthcare plan costs on average 2300 for the government and another 500 for private spending. So we'll say that it is $12000 (USD) vs $2800 (CAD, which at the time of this writing is worth slightly more than USD). But the Canadian healthcare plan is unfair. No matter your risk factor, age and such, it still costs $2800. But, obviously, it is four times less the cost for the same quality. So, does the relative price unfairness really matter?

Although it might seem like a question of "end justifies the means", it's not quite so. It's hardly diabolical to ask people "do you wish to pay the same but much lower price?". People are suffering less due to the means and suffering less due to the accomplished ends. It is superior in all ways.

Tools

A website for transparent and public tracking of construction bidding, permit granting to create a paper trail for auditing (either by the media or an auditor general).

Tracking house prices and rent relative to local income. Preferably detail down to the neighbourhood (aggregated data to avoid personal information leak).

Tracking home ownership levels and amount of housing owned per capita.

Website to track housing availability, showing housing acquired and wealth strata distribution per neighbourhood.

Online tracking of state/provincial budget, with detail down to the funding of each school. Preferable, but obviously would take time to create an automated system for this.

Landless Housing

Summary:

The economic realities of housing wrestles with concepts such as rent control, land value, renting and assisted housing.  All of these policy ideas are different methods of provisioning housing to different people according to different criteria.  The concept of landless housing has one primary goal: provide the most housing at the cheapest possible price with no loss in quality.

In short, the concept forgoes assigning land value, it always belongs directly to the government, but the property built on top can be owned privately (if privately purchased) with price dependent only on the labour/materials that had gone into the construction of the structure.  If a house was built for $600 000 CAD or USD, then it was due to the labour/material cost totalling $600 000.  Market price still affects labour and material costs.

A person only pays for what is built, for a price at which it was built and nothing else.

Long Description:

Housing management is typically a package of policies that deal with land management, fees with land use, taxes on owning land, tax breaks on renting/leasing, taxes on commercial land owners, taxes/fees associated with different uses on land, rent controls, government transfers based on economic goals or assisted housing etc.  The list is long and complicated.

Landless housing is a concept that envelopes the policies that revolve around purchase price.  Essentially, the shift in the current model of housing management is to eliminate the idea of "owning" land.  Generally speaking, housing development typically involves paying a fee to the local municipal government for development rights, as well as purchasing the land from previous owners.  Speaking in contemporary terms, this has resulted in farmland being sold off for suburban development due to the low income of farmland.

Environmentally speaking and also with respect to economy of scales, municipal governments typically lose money on large sprawling communities in the long term.  Due to the short term nature of city politics, most politicians/city councillors do not take this into consideration.  Instead they rely on the short-term income earned from development fees and land transfer tax income (and other fees/taxes collected) despite the long-term loss due to services provided to the urban sprawl (snow removal in cold areas in northern United States and Canada, sewage and trash removal and so on, also look toward the string of city bankruptcies due to poor development choices by Californian cities).  What would be more optimal is to maintain farmland (better even if let fallow) for future food production to guarantee food security in the future and to have high density housing to gain the benefits from mass transit and provide more economic opportunity for small/medium size businesses to thrive (such as small daily bakeries).

The decreased cost of purchasing housing, due to the absence of land value, means that more of the money spent on housing goes directly into quality.  This frees up private wealth to be put towards better, higher quality housing, either larger housing or simply higher quality materials.

If the concept of landless housing is combined with assisted housing and rent control then the ultimate result would be a policy package that would do the following:

• Housing prices reflect the material/labour value of the home constructed
• Rent is based on initial house price, with the ability to increase rent with inflation (such as the CPI + 1 percent maximum increase per year)
• Assisted housing allowance can be targeted for a percentage of the housing in the area in order to prevent poverty from becoming geographically concentrated

In order to move from the current model of land value to valueless land, the government (likely provincial governments in Canada and state governments in the United States) can slowly purchase land and then leave construction bids open.  The simplest method would be have construction bids open, people to express interest and the winning bid goes ahead on the land (as chosen by potential buyers who risk a deposit with the winning bid).  The government is only enforcing that land does not factor into the price (there are likely other ways to perform this).

Economic theory, in various schools, usually predict a "lack of housing supply" if there is rent control, or that repairs are not conducted properly etc.  In reality, rent control allows landowners to charge prices far above the value of the housing (if it was initially built for $500 000, they charge a rent of $8000 a month, far beyond what a mortgage would cost) and the increase in income would unlikely be used for anything but profit.  It is more likely that rent control merely correlates rent prices with the price of the housing, with respect to the cost of the mortgage.  In fact, it is more likely that due to the lowered price of housing, a higher number of individuals would become home owners and for renters, their prices can be predicted to help housing stability.

With landless housing implemented, people would purchase homes from contractors or the government at a price that reflects only the price of labour and materials.  Renters pay a rent that would correlate only to the mortgage payments and inflation, rather than market fluctuations.  The most important difference is that older homes depreciate in value because land holds no value.  This would significantly shift economic behaviour since housing is no longer an investment (after all, a house requires greater repairs or renovations as time goes on, why would it make sense to go up in value against inflation?).  This last point has significant implications.

In general, commercial/industrial businesses should benefit from structures whose value is separated from land.  For instance, a manufacturer would think when a factory needs to be replaced (say every 25 years), then the factory depreciates in value each year (capital depreciation).  Then at 25 years, (if for some reason this occurs) the factory owner does not need to purchase land to build another factory.  Another example could be small businesses such shops, which would likely benefit much more.  A failing business can have their shop (say it is a restaurant) sold but only at the actual value of the material/labour (basically initial cost, with inflation calculated, subtract the necessary repair costs unless the repairs were already done) and then the business is replaced.  This allows greater fluidity in the small/medium business sector.
Looking to the far end of the concept, no land is traded any more. Businesses construct and own structures until they are no longer useful and then decide to either redevelop the area or release it to another business to develop if they cannot do so (such as lacking the financial resources). Housing and small shops will be as high density as possible to leave as much land open for future farmland or left fallow for ecological purposes. Private construction is likely to be left to private entities but the government can assist using new web technologies to provide a simple platform for open construction bidding (probably most useful for housing projects). Government construction projects would strictly be required to be done under the openness of the Internet to prevent as much corruption as possible (although this by itself will not eliminate corruption it gives a handy paper trial for the auditor general).

Rationale:

The primary rationale is to have individuals pay for the actual cost of what they purchase.  As structures become older and require greater repairs to keep stable, they will depreciate in value rather than appreciate, eliminating a strange economic phenomena in current society in which housing of lower quality can sell for a higher price than housing of a higher quality.

Property values and house prices do not track with neighbourhood conditions any longer.  Instead, it tracks with exactly the quality of housing.  Much like buying a cast iron pot in Richmond is not any different from buying the exact same cast iron pot in Scarborough, buying houses of the same quality will not shift in price.  Land value would normally increase or decrease with respect to community conditions (such as crime or school quality) but Canada is meant to be a country of equal opportunity.  No matter where you are born or raised, you should have the same opportunities.  Property taxes will likely be replaced with a slight increase in a combination of sales tax, income tax and corporate tax rates (likely easiest to simply raise the highest income tax bracket, or increase sales tax slightly or hike large corporate tax rates, all of which probably requires a fraction of a percent increase to cover the loss of property tax income).  Or property taxes are simply flat, based on the square footing of property owned, used to pay for services (waste collection, sewage/water, snow removal).  Ideally, roads/school would be handled solely by the province/state in order to more evenly distribute financial resources.

Tools:

Anywhere it says "Statistics Canada" replace it with Bureau of Statistics for the United States and pretend that the department has already been formed in the United States Government.

Statistics Canada should begin to track housing prices and the associated portion of the price being the price of the land of the property rather than the housing itself.  This gives a good sense of how much money is actually going into labour/material costs of building these structures.

Housing prices are already tracked by various real estate agencies, so whether Statistics Canada tracks housing prices for stability issues may not matter.

There should already be statistics on house ownership but it would be good to keep track of house ownership quality (rooms in a house, square footage, lot size and amenities).  This would require a return to the mandatory long form census, which will hopefully return in the event of a more scientifically-minded Canadian government coming to power in the future.

It would be nice for government structures to depend only on material/labour cost to construct once land has been purchased by the government.