A great little interactive tool compares house price trends to income trends and general price levels for twenty countries. Be warned that it is flash-based. Most series seem to go back to 1990. Relative to incomes, Holland and Belgium show the greatest increases, while the big decliner was Japan. Thanks to Steve Keen for finding it and providing the link, originally from The Economist. And of course we know that house prices mainly represent the cost of land (including the cost of permission to build).
Category: land value
Crash recovery manual
After the Crash: Designing a Depression-Free Economy. By Mason Gaffney, edited and with an intro by Cliff Cobb. Published by Robert Schalkenbach Foundation, 2009.
From time to time, a Georgist will suggest to me that one or another politician or academic, who seems sympathetic but ignorant about economics, should be given a copy of Progress & Poverty. I usually reply that such persons are too famous and wise to be influenced by new ideas or logical analysis. But now I might propose that, if one is serious about promoting wise economic policy, one might make the investment to give such a distinguished person After the Crash.
Georgists know that the crash could have been avoided by a simple policy of taxing privilege, not production. But here we are, in a real economy which is doing poorly. Mason Gaffney explains how we got here, and what needs to be done to get us out. Everyone who wants to understand the situation should read this book. It is as long as it needs to be– a bit over 200 pages– and doesn’t seem to be available on the free Internet, so unfortunately some of the most vocal advocates won’t read it. Wealthy institutions– Lincoln, Cato, New America, EPI, etc.– could do no better service than to buy whatever rights are necessary to make it widely available.
Although it is listed on Amazon, Schalkenbach seems to offer a much better price.
Here are what appear to be the main points.
1. Speculation in land titles, and other types of privilege, was the main cause of the crash. It was made more severe because banks and similar institutions financed it liberally.
2. For a job-rich recovery, we need to recognize that some types of capital investment create a lot more jobs than others. The best type of investment for this purpose turns over rapidly. Compare the number of jobs generated by a major infrastructure project— high speed rail, for instance— with the same amount of money invested by small scale businesses in working capital for inventory and payroll. Done properly, this analysis needs to cover the entire time period while the infrastructure project is amortized.
3. Current government policy at all levels focuses mainly on big projects that generate few jobs per million dollars invested. This involves not only direct government investment, but tax laws and other practices that favor these kinds of investments. One reason for this is that the beneficiaries– banks and monopolies– have the resources to lobby effectively.
4. Wise policy is to eliminate such programs, but not to create new ones subsidizing job-creating investments. Rather, if we just let the market function, without taxing labor to subsidize the privileged, the recovery will be faster, broader, and more stable.
5. The “property” (real estate) tax has much better economic effects than income taxes or consumption taxes. Even though it penalizes building construction, the effect is to channel more investment away from job-poor and into job-rich forms.
6. Banks have repeatedly got into trouble by lending on real estate, with the current crash only the most recent example. Wise policy would insist that banks make mainly “self-liquidating” loans, such as for inventory or accounts receivable, and require that real estate purchasers provide hefty equity.
There is much much more in this book, and I started to write a much longer review, but will not complete it because no one (including me) would have the stamina to read it. I will post some pieces of it later. Meanwhile, if you are concerned about our economic future, you should read this book.
“Health” care reform
I don’t see much thoughtful discussion of “health” care reform. (The quotes are because we’re really just talking about medical care. Health is much more impacted by things like sewers, water treatment, and garbage collection than by physicians and hospitals). So I enjoyed this discussion of the Australian system compared to the U. S., with some talk of the UK and France thrown in. Especially the comments are enlightening.
The conclusion seems to be that to make decent medical care available pretty much universally and at a reasonable price, we need to squeeze the providers and work around the insurance companies. One commenter proposes mandatory catastrophic insurance combined with 100% consumer-paid routine care (which, to give this item a Georgist theme, can be funded out of the citizens’ dividend). This is too reasonable to gain a fair trial in my lifetime.
Lots of folks like to live at relatively high densities. Though a big house and yard are nice, they prefer easy access to facilities and services. That’s why land prices are usually high in densely-developed areas (One might say that high price is the market’s way of maintaining density).
None of this is news to Georgists or observant urbanites, but it’s nice to note that it’s been documented that “walkability raises home values in U. S. cities.” How much? Well, computing a “walkability score” based strictly on proximity to 13 different services (apparently with no consideration of whether there are maintained sidewalks or paths), in Chicago each one point increase (equivalent to one percent of the total range) increases residential land value by $5260. This incidentally is the highest amount for any of the 15 cities studied
Public transportation is not directly recognized in this study, altho it is acknowledged that walkability is somewhat correlated with transit service. Therefore part of this value may be due to transit.
The walkability study is among many interesting resources identified in VTPI‘s new compilation and analysis “Where We Want to Be: Home Location Preferences and their Implications for Smart Growth (pdf). “
Minnesota looks at funding transport from land tax
A new report from the University of Minnesota looks at ways of financing transportation projects by capturing part of the benefit they provide. Land value tax is only one of the eight options (Land Value Tax, Tax Increment Financing, Special Assessments, Transportation Utility Fees, Development Impact Fees, Negotiated Exactions, Joint Development, Air Rights) considered.
A quick skim indicates that on the whole it’s pretty good, though it seems to overestimate the difficulty of assessing land value, and repeats the error of some previous studies which conflates owners of land occupied by low income people with the low income people themselves. (More likely, low income people are renters living on land owned by someone else, and when taxes on such land increase the owners can’t pass the cost on to their tenants.)
There is also mention of a study, new to me, that seems to document an anti-sprawl benefit from a land tax. The study unfortunately is secured by ssrn; I shall have to try to find it elsewhere.
This study was requested and funded by the Minnesota legislature.
Hat tip to lvtfan.
Chicago medallions rise again.
According to the June issue of Chicago Dispatcher, taxi medallion prices rose again in May, to an average of $170,000. Here’s some context:
Month Price Source
May ’09 $170,000 Chicago Dispatcher
April ’09 $164,500 Chicago Dispatcher
March ’09 $165,000 Chicago Dispatcher
February ’09 $158,000 Chicago Dispatcher
Feb ’07 $ 77,000 Chicago Tribune
2004 >$40,000 Chicago Tribune
1991 $28,000 Chicago Sun Times
(Chicago Dispatcher data are for the period ending on the 23rd of the indicated month).
I find it remarkable that this kind of real estate has continued to gain value, over 7% in 3 months, while most other kinds in Chicago seem to have declined. There was, however, considerable fluctuation recently, with sales in late April running around $145,000, increasing to $175,000 on May 19 and 20. According to ads in the Dispatcher, you can lease your medallion out for $600 to $700 per month, a yield of close to 5% (in addition to any price appreciation which might occur). There is, of course, some risk that the price might depreciate instead.
$300,000 for a Boston parking space
And it really seems to be just a parking space, outdoors, in a neighborhood where condo’s cost millions. If this space, including an allowance for access lanes, is 250 square feet, that works out to about $1200/square foot. More evidence that location matters.
Farmers still don't own their land
The Census Bureau has issued the 2007 Census of Agriculture reports for Illinois, and, no surprise, most farmland is not owned by the farmer who works it. 62% of farmland in the state is tenant-farmed, up from 58% in 2002. (table 9, pdf) . Owner-operators are the majority of farmers, but have much smaller farms, 107 acres and $47,726 gross revenue, compared to part-tenants (784 acres and $407,013) and farmers who rent all their land (439 acres and $254,814) (table 65, pdf)
Nationally, however, more than half of farmland is operator-owned. And these owners paid more than $7 billion in interest on loans secured by real estate.