No. Landlords will not just raise their rents. They are already charging the maximum the market will bear. However the result of LVT would increase the disposable incomes of those that rent, from which they will apportion some of on purchasing more/better location, the rest of more goods and services.
Rents will rise for this reason, and so will the amount an LVT can collect. But this isn't an infinite spiral. There will reach an equilibrium, as there is now, where renters apportion are certain % of their income on valuable locations. Which is collected by the landlord and taxed away by the LVT.
The LVT would not make landlords build denser housing, they have exactly the same incentive anyway. It would how ever reduced vacancy and under occupation among owner occupiers, and would increase the average size of dwellings, even if that meant they were more densely clustered by building upwards.
> No. Landlords will not just raise their rents. They are already charging the maximum the market will bear. However the result of LVT would increase the disposable incomes of those that rent, from which they will apportion some of on purchasing more/better location, the rest of more goods and services.
The day after the BI-increase, the housing supply and demand will be exactly the same, but renters will have a greater capacity to pay. The maximum amount that the market will bear will have risen exactly by the extent of the increase. It is hopelessly optimistic to think that landlords won't increase rents to claim almost all of it.
Until zoning laws permit greater density/supply (building upwards is great but often prohibited by local laws), the situation won't change, and a tax linked to rent will just cause an inflationary spiral.
I won't even go into the difficulties of separating land value from building value, since it's clear that objective land value isn't intended to be a factor in setting the tax level.
No, a tax on the rental value of land would move the demand curve over to the left. This would reduce both rental incomes and selling prices. ie a reduction in demand. So the rise in rents would be cancelled out by the fall in selling prices. ie No inflation.
Landlords do not currently claim most of peoples disposable incomes. That ratio hasn't, nor would it change because renters get more income via the BI.
Landlords would in fact be keeping a lot less of peoples income once equilibrium has been reached.
There are no difficulties in separating the value of location from that of the buildings. Easy to do. Besides as far as LVT is concerned, its the structure rather than value taxed that is important. But I'd need to write more than I've got time for here to explain why that is.
Net rental income will remain steady, since landlords will raise the rent to pass along the tax. They may even list it on the lease: "Rent $1000 + UBI tax $400." Everyone will have more money and be able to pay the higher total. The only way the rents can be prevented from rising is instituting price controls.
The percentage of income claimed by landlords will increase slightly ...
before the BI-increase: say $12k rent of $36k income = 33%
after the BI-increase: $17k rent of $41k income = 41%
The only way rents drop is that zoning laws change to allow massive increase in rental space supply, or demand for rental space drops because people are enticed by low rents elsewhere and move. Since zoning laws will change only glacially, if at all, rents less than $(pre-BI rent + new disposal income) will require the Great Universal Basic Income Migration (GUBIM) from urban to exurban and rural areas. The GUBIM is possible, I just think it is vanishingly unlikely.
Rents will rise for this reason, and so will the amount an LVT can collect. But this isn't an infinite spiral. There will reach an equilibrium, as there is now, where renters apportion are certain % of their income on valuable locations. Which is collected by the landlord and taxed away by the LVT.
The LVT would not make landlords build denser housing, they have exactly the same incentive anyway. It would how ever reduced vacancy and under occupation among owner occupiers, and would increase the average size of dwellings, even if that meant they were more densely clustered by building upwards.