In practice, the tenant can typically break the lease with minimal consequence as the landlord (the government) can generally find new tenants, and diversifies risk over many landholdings.
That removes any benefit of confiscating all land and leasing it out while still retaining all the society destroying consequences of this idea. Basically at this point it's just a proposal to confiscate all land and resell it, for fun I guess.
This is an important part of the system. People won't construct buildings unless they feasibly believe that they can also provide the highest return on investment for said buildings and therefore pay the highest rent on the land. If you are unable to produce the greatest value with a piece of land, why should you be allowed to hoard it away from someone who can do something better with it? That said, this theory obviously falls short in practice, but equally obviously, there exist many practical remedies to that problem. Lease values can be adjusted based on the value of surrounding leases, then negotiated down by an auction if the owner believes they've grown to high, rather than periodically re-auctioned. Down payments can force bidders to internalise the cost of displacing existing business. Existing lease holders would clearly be given an advantage in the bidding process if they choose to initiate it.
Edit: I should add that the simplest way to handle this is to attach the debt used for building to the land instead of the land-owner. That way there is no loss for auctioning off the land after building.
So I rent somewhere cheap, take out massive loans, pay my brother to build a house (with a large profit), then leave the debt with the land and don't bother next year?
The LVT solution to this is valuing the unimproved land. I.e. if someone were to buldose the buildings and infrastructure actually on the land, how much would it cost to rent it.
This works fine on a lot-by-lot basis, we tend to know the value of land in cities. It starts falling when you buy a large amount of land. The value of land in Manhattan is very high obviously. Remove the empire state building and that plot is still worth a lot of money.
The value of that lot is the surrounding infrastructure - transport, power, proximity of people, etc.
If one company owned the entire island as a single lot though, the unimproved land would be very low. If two companies owned the land, the unimproved value suddenly balloons.
That still doesn't answer the question "Why would I pay to improve the land if next year someone can simply outbid me and take the land off me?". Why wouldn't this world's Blackrock swoop in the instant a profitable lease comes up for auction?
> Why would I pay to improve the land if next year someone can simply outbid me and take the land off me?
You wouldn't pay. The building would be financed by debt and the debt would be attached to the land. You'd only pay the interest on that debt for as long as you maintain the lease on the land.
> Why wouldn't this world's Blackrock swoop in the instant a profitable lease comes up for auction?
Two reasons: Firstly, Blackrock could hypothetically do this in real life but they don't because they don't have the money. And secondly, from an ideological perspective they would have no motivation to. You are still thinking in terms of "owning land" and the idea that it's better to own more land. Under the new system, you can't own land, only rent it. Hence you want to minimise the amount of land you are leasing. If Blackrock gets the lease, they will lose money on the down payment, then lose money on the rent unless they can find something productive to do with the land. Any business they set up won't be competitive as they'll be paying more in rent than the surrounding businesses. Overpaying on rent is a strictly money-losing affair.
Even if I don't pay in money, I have to pay in time and effort. Does the bank lend me that too? Furthermore, no Blackrock cannot do this in real life because in real life you are not0 _required_ to sell a thing to anyone.
Let me outline this simple hypothetical
I lease a plot of land with a parking lot on it. I spend a year of my time building a quadplex on it, financed by a loan, and get tenants in. After all my expenses, I am making 10k a month in profit! Next year rolls around, tell me what stops Blackrock from taking the lease by offering the value of the lease+9.5k per month and making their money in quantity? Down payment doesn't matter because they have so much more in assets than me that they can make use of a plot of land that generates less profit than I need to live on.
Well then Blackrock would only make $500/month in profit. This is good, you found an actor willing to pay higher taxes for the same land and thus contribute more to the public purse.
The issue is that the value for all land in all cases trends towards zero. If you start making a profit you have to give the government all or most of it, if you lose money you just abandon the plot since the debt isn't attached to you. There's zero reason to ever do anything.
