Even better, just aggressively tax owners based on the land value. This requires them to either eat high costs for their speculation, or use it for income-producing purposes (someplace to live or someplace to work).
High enough land value tax, consistently applied, will make the land cheaper and affordable to said old couple, because it neutralizes the phenomenon that land continuously increases in value as long as the population keeps growing.
What about the old people who didn't buy a house a long time back and now face high rents? Why is it always a selective group of old people we are supposed to carefully design policy to perfectly accommodate?
Because home equity is highly liquid. You can refinance your mortgage (and take money out), or take out a reverse mortgage (which pays you monthly in exchange for eventual ownership), or a home equity loan. Tons of ways to turn your home equity into cash.
Applying a tax commensurate with income-earning potential is the usual explanation.
Given the wide range of possible incomes to various professions, this can be problematic. Your $7.25/hr federal minimum wage worker ($14,500/year) competes against a $290k/yr SV tech worker, with 20x the income. Unless that's mitigated by other factors (residence size, amenities, etc.), a land tax might prove further discriminatory.
But in general, a tax that's sufficient to kill the prospects of real estate as simply a bankable nonproductive asset would be a net benefit.
why should property tax only be a function of property? Shouldn't property tax be a little like income tax and also be a function of the 'ability to pay'= Function(wealth, income,dependents)
There are ... some ways of achieving this somewhat equitably.
One of the notions behind property tax is to make efficient use of land -- someone simply squatting on a property and not contributing to the local economy is a less efficient use than someone who's actively engaged. In particular, high-density uses are preferable to low, where land value is high.
That conflicts with the notion of neighbourhood and social stability. Kicking out pensioners (or young families) simply because they cannot afford to pay taxes ... is highly disruptive. For a sufficiently growing market, it need not be a necessary problem, tough much experience with gentrification (or its less genteel earlier forms of land appropriation and expropriation) show.
One possible compromise is to allow taxes to accumulate, but to factor against the value of the property itself. When the property is sold (or transfered in estate), those taxes come due, and are debited agains the value of the property. You don't evict those unable to pay, but the benefits of squatting do come with an (ultimate) cost. That cost is also a bankable asset to the government authority, who can consider this a future receivable.
reply