Do the Affordable Housing Laws Work?

[SeamusMcFly]

Another solution to this problem would be to incentivize the cities around Boston to get their act together and build good urban environments people want to live in near their transit hubs, for example, Worcester, Lowell, Quincy, Brockton.

It doesn't all need to be about Boston all the time. Any city that has good transit access and a good urban environment could be a great way to take housing stress off Boston. The characteristics that make Boston desirable such as activity, culture, walkability etc. can be replicated to some degree elsewhere.

As one of those residents, I feel this is a big one that is not capitalized on. Too many of these communities are content to keep being bedroom communities so that people can afford to live near transit to get to Boston. They are not trying to provide any of the amenities that make people want to be in the city. As always it's a chicken and egg scenario. They want young professionals with 'disposable income', but those young professionals want the convenience and culture of city living.

Those cities build one or two developments and it doesn't immediately succeed, they give up. They don't realize, or can't get investment to build the 10-20 developments it would really take to start providing that urban/city living experience the target demographic is looking for.

That coupled with the small city NIMBYism that looks at themselves as suburbs, and Boston is the big city, and all new housing is immediately assumed to be section 8, or will be in the short run. Walkability is never even a consideration, it's always 'where will everyone park?' It gets maddening.

 

[Arlington]

Check this out:

DC Area Rents Drop 3% as New Apartment Supply Rises

And drop yourself in Google Maps at any Metro Orange Line station between Rosslyn VA and Ballston VA (Arlington County VA) and see the *tens of thousands* of housing units that've been built on top of the Metro since 1985 (even the completely "made up" neighborhood of Virginia Square, which was not even "a place" when the Metro opened...just scrubby houses...it was an "infill" station that they built on the hunch it could catalyze a place) and then compare that to the *basically nothing* that's been built at real urban places on the MBTA Red Line Central Sq or Davis in that time.

"We" should have negotiated a relaxation on new supply (height & new construction) as part of the removal of rent control in Cambridge. That was a huge failure: enriching and entrenching the current residents without requiring new supply.

It is insufficient/lame to say "Davis is a lot better than it was" or "Central is bouncing back". Housing advocates should hang their heads and cry that Boston hasn't gotten a Clarendon or a Ballston out of Dukakis' Red Line extension

 

[bigeman312]

Agreed. The amount of terrible land use around the Sullivan Square and Community College T stops especially bothers me. It is criminal. Imagine if those MASSIVE parking lots looked like "Ballston." It would change the game of Boston rental costs.

 

[datadyne007]

And drop yourself in Google Maps at any Metro Orange Line station between Rosslyn VA and Ballston VA (Arlington County VA) and see the *tens of thousands* of housing units that've been built on top of the Metro since 1985 (even the completely "made up" neighborhood of Virginia Square, which was not even "a place" when the Metro opened...just scrubby houses...it was an "infill" station that they built on the hunch it could catalyze a place) and then compare that to the *basically nothing* that's been built at real urban places on the MBTA Red Line Central Sq or Davis in that time.

"We" should have negotiated a relaxation on new supply (height & new construction) as part of the removal of rent control in Cambridge. That was a huge failure: enriching and entrenching the current residents without requiring new supply.

It is insufficient/lame to say "Davis is a lot better than it was" or "Central is bouncing back". Housing advocates should hang their heads and cry that Boston hasn't gotten a Clarendon or a Ballston out of Dukakis' Red Line extension

Google Earth actually has imagery from 1988 of the DC area. Specifically looking at Ballson & Virginia Square, I notice vast open lots and underutilized lots. Those are of course prime development areas. Could you please point out to me where that exists in Cambridge & Somerville along the Red Line to the extent where that kind of tower community could be created? You specifically note that those DC residential tower neighborhoods weren't originally "places." All of the points along the Red Line were already well-established places when the T was brought through them. How do you plan on filling Central & Davis with housing towers? Bulldoze all the lots around the T stations? Btw, is that how the DC examples were created?

The Orange Line definitely has that ground-up potential near a lot of it. I just think the RL is a different scenario in the areas you have noted. If anything, the potential is at Alewife.

 

[Arlington]

Google Earth actually has imagery from 1988 of the DC area. Specifically looking at Ballston & Virginia Square, I notice vast open lots and underutilized lots. Those are of course prime development areas.

Any parking you see is because the lots had been acquired, combined, and cleared, sometimes by developers and sometimes by homeowners combining their lots with their neighbors. It's not like it was recently-paved farmland. Rather it had been auto-centric 1930s era housing (bungalows & colonials), and random commercial (and light industrial, in Virginia Square's case) (Arlington got built up to house New Deal federal-government workers)

The by-right Zoning was in place for making the parcels vastly more valuable for re-use and densification, and the market did the rest (no BRA, no eminent domain, and minimal intervention from the County of Arlington (though they did have PUD zoning)...but mostly just being 4 to 6 stops from the CBD and having density-friendly groundrules).


Look at 1979 or 1988 for 799 N Monroe St, Arlington VA 22203 at HistoricAerials.com. (the future Virginia Square)

Meanwhile Clarendon and Ballston *were* places a lot like Porter Sq, Davis Sq, and Central Sq. A Sears. A random tall building. (though Ballston had Car Dealerships)

How do you plan on filling Central & Davis with housing towers? Bulldoze all the lots around the T stations?

If you zone for increased supply, they will come. First they'll consolidate parcels. Then it'll be parking for a bit (1988...about when the Orange Line opened to Ballston). Then the tall cranes move in. Then supply steadily increases, keeping prices moderate.

30 years after the Red Line came to Central, it is crazy that there's abandoned apartments (Vail Court)
whole blocks of surface parking (Prospect St @ Bishop Allen)
just *steps away* from the station.

At Porter, the surface parking across from (and behind) Lesley, if it were zoned for "taller" would be the kind of thing that they couldn't afford to keep as parking. (George Washington University has made a fortune commercially developing lots it owned near Foggy Bottom in DC).

At Davis Sq, I think it is awful that the best use for the Rosebud was a gut rehab and not somehow building a 8-story something there instead, and it is crazy that there is so much surface parking (on the Highland side) and that the structured parking (on the Teele side) didn't get built with a building on it in the first place.

That kind of "market failure" can only be laid at the feet of government.

 

[Arlington]

This is really important for affordable housing: that you must ensure a big-enough "envelope" for supply to happen and the market will fill it in. As noted above, if you only leave a few, rare, parcels for development, they'll get built as a few, rare, overpriced luxury units.

20+ years after the first (of many) apartment buildings got built in Arlington VA, they are still there and, being a bit "tired" are more affordable than the new granite-and-stainless units that are still being built.

If you actually get the "Growth" part of Smart Growth, you will get enough supply to keep housing more affordable. Otherwise you just get Smart Stagnation, (Pretty Past?)which, while pretty and livable, does not stay affordable.

In five words:
Upzoning on top of Transit.

Here's Arlington County's view of its discovery of Smart GrowthVideo

(i've set the time to the middle, where the Metro planning starts, but if you watch from the beginning, you'll see a socially-progressive (for 1960s Virginia) county that dabbled with an auto-centric downtown (Rosslyn, complete with skywalks above over-wide streets), before realizing that they wanted what's become known as
Smart Growth.

 

[Matthew]

And drop yourself in Google Maps at any Metro Orange Line station between Rosslyn VA and Ballston VA (Arlington County VA) and see the *tens of thousands* of housing units that've been built on top of the Metro since 1985 (even the completely "made up" neighborhood of Virginia Square, which was not even "a place" when the Metro opened...just scrubby houses...it was an "infill" station that they built on the hunch it could catalyze a place) and then compare that to the *basically nothing* that's been built at real urban places on the MBTA Red Line Central Sq or Davis in that time.

Don't have to use Google Maps -- I've been to Rosslyn. And around D.C. Metro Area a bit. I've seen the construction first hand. It's impressive. One of the first things I noticed about D.C. when traveling there in recent years is the number of new buildings going up around WMATA stations.

That's why I'm pointing to it, and linking the planning presentation from there. The Rosslyn-Ballston corridor has been in planning like this since the 70s. One of the few places.

 

[KentXie]

Lets see all the people saying "luxury housing cant lower rents" "no reasonable amount of development can accommodate demand" and "the only way to get affordable housing is *insert misguided government intervention here*" admit their mistakes or qualify their position, because that sure looks like housings construction lowering costs in an expensive city.

Ok easy. The median rent dropped due to influx of luxury units coming online. That's not deniable, but are they at a level that can be considered affordable? No, you still need to make a lot of money just to rent them out; a recent article at Boston Globe states that for an apartment around $2,497/months which is comparable to what you find in DC, you need to make $50/hr which is more than $100,000 a year. Let me know when all your friends make 6 figures and I'll agree that building only luxury units are working. Furthermore, it can be argued that the article supports our view. Supply is outstripping demand and it doesn't take a genius to know what will happen next but in case you aren't getting the picture, when there's too much supply, developers will build less, i.e. developers are going to stop constructing luxury apartments until the market heats up again. They are NOT going to keep constructing luxury apartments when profit is falling, nor will they build affordable apartments because profits from them are even lower than that. They will sit until demand starts to outstrip supply before constructing any more luxury apartments, or better yet, they move their focus into other hotter markets until the local market rebounds. So no, what we are saying are not "mistakes." Your view of the economic market is just way too narrow.

The Boston Globe article btw:
http://www.bostonglobe.com/business...et-hour-job/xYKYw3Fcl1IB786rWh4KKP/story.html

 

[Arlington]

They are NOT going to keep constructing luxury apartments when profit is falling, nor will they build affordable apartments because profits from them are even lower than that. They will sit until demand starts to outstrip supply before constructing any more luxury apartments, or better yet, they move their focus into other hotter markets until the local market rebounds.

We all agree that there's a "scarcity" problem. You've stated it very nicely. You're missing the point, though.

The point is that there are too few opportunities for "the market" to build units.

So few, that they are very valuable. So valuable that they have to be built as very-high-end. And so valuable (compared to the carrying costs of the empty lots) that it is worth waiting for the market to come back.

Basically, in an environment of scarcity, it pays to hoard.

That's all you're describing above. High prices, if they are not permitted to attract increased supply, serve instead to encourage hoarding and even greater scarcity and even higher prices. That's basically been the dynamic in cities since zoning was imposed.

Only the suburbs, with cheap, surplus land (as ag productivity soared 1880 -present) and cheap gas (it was originally a waste product), provided temporary relief. Now that land is again scarce and gas is a lifeblood, we're back to scarcity.

Developers and Parcel Owners are hoarding sites, unused, waiting for either the rare super-deluxe buyer, or waiting for a time of even greater scarcity, or higher demand, or both. Its like hoarding grain at a time of famine. Sell a little to the guy who offers you a crazy high price, and save the rest to sell to someone even more desperate.

But this famine is government-created. Zoning (low limits) artificially constrains supply and creates this scarcity, driving up prices (ruining affordability) and making hoarding a valid economic strategy.

Solutions to the hoarding problem:
1) Increase potential supply: If people believe the famine will soon be "over" they'll bring their produce to market sooner (while the price is still perceived as high) rather than later (when they expect it to be worth less in a time of plenty)
a) Upzone (greatly) over transit.
b) Give upzoned communities preference in transportation (transit) expansion

2) Make hoarding expensive (tax land at a higher rate than buildings). What you tax you get less of. A tax on structures reduces people's desire to improve their lots (and generally stifles construction and consumption...a bad thing)

But tax their lots and it isn't like the land goes away. Instead, it gets too expensive to hoard and you start looking around for a way to make it be worth owning...by building something on it.

 

[KentXie]

We all agree that there's a "scarcity" problem. You've stated it very nicely. You're missing the point, though.

The point is that there are too few opportunities for "the market" to build units.

So few, that they are very valuable. So valuable that they have to be built as very-high-end. And so valuable (compared to the carrying costs of the empty lots) that it is worth waiting for the market to come back.

Basically, in an environment of scarcity, it pays to hoard.

That's all you're describing above. High prices, if they are not permitted to attract increased supply, serve instead to encourage hoarding and even greater scarcity and even higher prices. That's basically been the dynamic in cities since zoning was imposed.

Only the suburbs, with cheap, surplus land (as ag productivity soared 1880 -present) and cheap gas (it was originally a waste product), provided temporary relief. Now that land is again scarce and gas is a lifeblood, we're back to scarcity.

Developers and Parcel Owners are hoarding sites, unused, waiting for either the rare super-deluxe buyer, or waiting for a time of even greater scarcity, or higher demand, or both. Its like hoarding grain at a time of famine. Sell a little to the guy who offers you a crazy high price, and save the rest to sell to someone even more desperate.

But this famine is government-created. Zoning (low limits) artificially constrains supply and creates this scarcity, driving up prices (ruining affordability) and making hoarding a valid economic strategy.

Solutions to the hoarding problem:
1) Increase potential supply: If people believe the famine will soon be "over" they'll bring their produce to market sooner (while the price is still perceived as high) rather than later (when they expect it to be worth less in a time of plenty)
a) Upzone (greatly) over transit.
b) Give upzoned communities preference in transportation (transit) expansion

2) Make hoarding expensive (tax land at a higher rate than buildings). What you tax you get less of. A tax on structures reduces people's desire to improve their lots (and generally stifles construction and consumption...a bad thing)

But tax their lots and it isn't like the land goes away. Instead, it gets too expensive to hoard and you start looking around for a way to make it be worth owning...by building something on it.

I agree with you wholeheartedly and thank you for explaining it better than I do. My response is more focused on the idea that just building luxury building will solve our problem (which it doesn't), and unless there is some sort of intervention, you won't be seeing any affordable housing in the city (builders have no incentives) and the only affordable housing you'll see is way out in the suburb. A more viable strategy is to encourage the development of both affordable apartments and luxury condos. A better way to market this strategy is, instead of if you build this many luxury condos, then you must build this many affordable apartments, it should be, if you build this many affordable apartments, then you can build this many luxury condo. That way, it sounds more like developers are being rewarded for building more affordable apartments, instead of being punished for building that many luxury condos.

I do however, question your first solution. This is more or less a viable solution if the market is very localized and access to other markets is more or less very difficult. Developers, remember, tend to finance their constructions via loans and as issuers of these loans tend to look for hefty returns, they are more likely than not going to balk on financing a project that produce a nice return. Unfortunately, we live in a world where it is very easy to buy a plot a land in another city, with a hotter market. If, in your analogy, farmers feel that the famine is about to be over in one city, they can move their produce to another city where they can generate more profit. It's a simple case of arbitrage.

All in all, you want to bunch up people in smaller area as that means more people will be able to enjoy the economic benefit of living in a city (less transaction cost, i.e. less cost spent on delivery of goods between participants, especially those living in farther away area and less time it takes to conduct business which increases efficiency. It benefits both the poor and rich.

 

[Hufer]

the first question that comes to my mind is

What is "affordable in Boston and its neighboring towns" anyways?

While house prices remain high despite the current economy, there are few people buying new homes while the majority are either trying to sell or get something smaller. Then there is the group that went back to renting because of financial burdens with the intentions of saving money, just to realize the expenses inherited to lease are as close or equal to a mortgage.................then I ask once more: What is "affordable" in this Town?

 

[HalcyonEra]

This is truly an incredibly complex issue. Like some others on here, I too have libertarian leanings, not so much as being a closest Republican, but more so because Government in general screws up more than it helps and is incredibly expensive at that. I do not think Arlington’s idea of taxing open space is sustainable either as it creates an opinion based penalty on an alleged free market system of property rights.

At one point, government did build a lot of public housing, however, they turned into colossal failures both by way of incorrect density and massing (putting all lower income folks in one place) and also due to neglect, waste and nepotism (see McLaughlin pulling in $360k in Chelsea as public housing director as exhibit A). To be sure, throughout history there have always been slums, but what public housing really did was create segregation between the haves and the have-nots, rather than provide adequate housing for those who truly need it. I recently read a book about the Bronx fires of the 70’s which had a very in-depth analysis of Robert Moses’ building of Manhattan and the attempt to eliminate working and lower class from that area combined with the Rand Corporation’s policy driven modeling which greatly contributed to the destruction of solid and well-built sections of the Bronx and Brooklyn. Sickening stuff.

In theory, 40B should eliminate the fear of the neighborhoods that their area will turn to shit if poorer people more in because the other residents will not allow for it. But it’s been a struggle and it is a very difficult proposition to overcome. The fact is that junkies, derelicts and others of their ilk harm neighborhoods to such a tremendous degree that most people simply want to avoid that at all costs. Those types have little to live for, don’t care about anything except their next fix, and they let their living quarters get filthy and never fix anything because they simply don't care.

That said, it is incredibly unfair to those of lower income means to have to live among such degenerates since the vast majority of people want to live in a nice, clean and safe area. However, the images of the “projects” resonates so deeply and is feared so much because of government failures, that any attempt to provide housing to the less fortunate is met with extreme resistance.

I do believe that CDC’s or other non-profits can build lower income housing that is desirable (or at least acceptable to most) but it takes continual investment to keep it up to date, clean and safe, which is where most lower income developments have failed in the past. Look at what was accomplished in Mission Hill to see what properly (re)done public housing can be. 40B on the other hand, in theory works, but cities and towns are also hostile due to our inadequate infrastructure and a lack of mass transit. Therefore, build up around transit stations is a must, but we continually scale it back due to local concerns (see Westwood station and Canton’s opposition – given the land mass, along with being a transit hub, it should have been built into a small city rather than some medium/semi-upscale low-rise units with a Target, Wegman’s and various crap mass retailers within walking distance).

We live in a complicated area with differing interests everywhere you turn which is why is so difficult to build anything in these parts.

 

[Arlington]

I do not think Arlington’s idea of taxing open space is sustainable either as it creates an opinion based penalty on an alleged free market system of property rights.

????
Please explain:
- sustainable (politically? economically?)
- opinion-based (why dismiss opinions? Most laws and home appraisals rest on opinions)
- alleged (by whom, and why should we care?)

Some days, I'm a libertarian, but even on those days, I've got to recognize that 1) Some taxes are necessary and admit that 2) taxes disincentivize whatever's being taxed.

We want to encourage uses that are relatively more dense, so we should tax improvements (buildings) more lightly. A dollar of building should be taxed more lightly (at a lower rate) than a dollar of land.

Today, there are punitive taxes on remodeling your kitchen or building more units (ironically in the name of being "progressive"--thinking of building owners as "rich-- we discourage activity that creates middle-class trade jobs and could be expanding housing supply).

And so the capitalists (whether pensioners or developers) have an incentive to let well-located parcels languish under deteriorating and under-dense buildings. Differential taxes would fix that.

 

[Matthew]

The fact that, historically, many people cut floors off their buildings in order to lower their property tax bill should be a total indictment of the way we assess property tax.

That's insane: cutting floors off your building!

 

[HalcyonEra]

????
Please explain:
- sustainable (politically? economically?)
- opinion-based (why dismiss opinions? Most laws and home appraisals rest on opinions)
- alleged (by whom, and why should we care?)

Some days, I'm a libertarian, but even on those days, I've got to recognize that 1) Some taxes are necessary and admit that 2) taxes disincentivize whatever's being taxed.

We want to encourage uses that are relatively more dense, so we should tax improvements (buildings) more lightly. A dollar of building should be taxed more lightly (at a lower rate) than a dollar of land.

Today, there are punitive taxes on remodeling your kitchen or building more units (ironically in the name of being "progressive"--thinking of building owners as "rich-- we discourage activity that creates middle-class trade jobs and could be expanding housing supply).

And so the capitalists (whether pensioners or developers) have an incentive to let well-located parcels languish under deteriorating and under-dense buildings. Differential taxes would fix that.

Duly noted.

However, how do you determine underuse? Is 110 Broad Street with The Littlest Bar underused? Grampy’s gas site? The Seaport for the past 30 years? Do you tax under-built buildings for unused air rights? All single story buildings in certain areas? What about the nimby factor? Lack of financing? Grandfathered usage? Contaminated sites? Wetlands? Spotted salamanders? It seems that there would be a lot of exclusions to consider, and given our patronage style of politics around here the good old boy network would continue indefinitely.

I agree wholeheartedly that there needs to be incentive for owners of underused parcels to properly develop the space, but there is always a wide disparity in opinions as to what is appropriate. I’m just not certain that the government is in the best position to always make an underuse determination, especially considering that administration’s change every few years and thus new priorities come along and old priorities fade away. As it stands, there are plenty of programs already in place to incentivize redevelopment – 40B, 40R, brownfields acts, etc. albeit ones with mixed success.

As for the cutting floors to avoid taxes, I agree. Totally insane, but hopefully a trend of the past.

 

[underground]

At one point, government did build a lot of public housing, however, they turned into colossal failures both by way of incorrect density and massing

In the US, that's sort of true, but it's not 100% true here and it's definitely not true in other countries. The feds have had a ton of success building through public/private partnerships using all sorts of government backed loans/mortgages, tax breaks, block grants (a program actually started by Nixon), etc. The only issue now is the feds won't fund the programs anymore for ideological reasons. And other countries have had a ton of success building public housing projects when they focus on low to medium income housing instead of just lowest of the low. But yeah, standard issue American style public housing construction has well and truly been shown to be a complete failure.

Some great reads on the history of public housing/public housing policy:

From Tenements to the Taylor Homes, Bauman, John F., Roger Biles, and Kristin M. Szylvian, eds. The Pennsylvania University Press, 2000.
Von Hoffman, Alexander. House by Bouse, Block by Block: the Rebirth of America’s Urban Neighborhoods. Oxford University Press. Oxford. 2004.
Wright, Gwendolyn. Building the Dream: A Social History of Housing in America. The MIT Press, Cambridge. 1998.

 

[bigeman312]

Duly noted.

However, how do you determine underuse?

I am a VERY strong advocate for land-based tax assessment. There are examples that have proven extremely successful. The best thing about is is that "YOU" don't determine under-use. The land-owner determines whether the land has a high enough use through simple economics. If they are paying an exorbitant amount of taxes on their very valuable land, but are not reaping any return, they will build the land into a higher use, or sell to a developer.

Imagine two people each own an acre in Central Square. Their properties are adjacent and determined to have the same land-based value. One property has a fully occupied apartment building. The other property has a parking lot. If they are paying the same amount in taxes, there is no longer a dis-incentive for the owner of the parking lot to build. He will be encouraged to build. Currently, the government discourages that person to build, as he will pay more in taxes once improving his land. It is this kind of discouragement that needs to go away to encourage development.

 

[HalcyonEra]

I am a VERY strong advocate for land-based tax assessment. There are examples that have proven extremely successful. The best thing about is is that "YOU" don't determine under-use. The land-owner determines whether the land has a high enough use through simple economics. If they are paying an exorbitant amount of taxes on their very valuable land, but are not reaping any return, they will build the land into a higher use, or sell to a developer.

Imagine two people each own an acre in Central Square. Their properties are adjacent and determined to have the same land-based value. One property has a fully occupied apartment building. The other property has a parking lot. If they are paying the same amount in taxes, there is no longer a dis-incentive for the owner of the parking lot to build. He will be encouraged to build. Currently, the government discourages that person to build, as he will pay more in taxes once improving his land. It is this kind of discouragement that needs to go away to encourage development.

I get it, but I also think that the parking lot landowner can claim that the parking lot is a necessary use due to the lack of parking in Central Square, notwithstanding the fact that many city dwellers would like to see cars eliminated all together. The arbitrary nature of determining appropriate use just seems to me to scream litigation. At least with improved properties, you can place a somewhat legitimate tax value.

 

[Arlington]

However, how do you determine underuse?

BigEMan gave a great answer (above) that each owner decides for themselves.

Today, most real estate appraisal is done in two parts: 1) Land value and 2) Improvements, but then these numbers are just combined and taxed as a single whole. Letting your lot stay underused or letting your building fall apart is the best way to cheaply hold (or, I'd say, hoard it).

The ultimate hoarders--and the ultimate "removal of stories" strategy--is to knock all stories down, removing all improvements, and devote it all to surface parking (which is why we see too much surface parking) or just weeds.

So the government "opinion" under differential taxation isn't what improvements are preferred, it is to say that *all* improvements are tax-advantaged versus the land they sit on. The appraiser would look at Grampy's Gas and assign a value to the land, any residential improvements, and any commercial improvements, and each would be taxed at its own "per thousand" rate. (Grampy's isn't a great example because the former station has been written down to zero by now)

So I note that Boston already taxes residential (whole parcels) at $12.11 per thousand and commercial at $29.62.

Under differential taxation, you might tax the land at $40, commercial improvements at $20 and residential at $5. (the goal, initially is to be revenue-neutral, but to shift people's longer-term preferences)

If you had $12000 to invest, and start with $1000 of it in "raw land" and you'll pay $40/year in taxes on it. But invest the next $1000 in a commercial building, and you'll pay only $60 total (and $30 per thousand). Then stack $10,000 worth of residential on top and that'd only add $50 to your tax bill.

But hoard the same $12,000 worth of open land with surface parking, and under differential taxes, you'd pay $480/year.

Build $11,000 worth of building (as described) on a $1000 parcel, and you'll pay $110--basically $9 per thousand

Real fast, people would see that they should behoarding less land and building more building--densifying. Their money to work building us a city (whatever investors decide the market needs building-wise) and we'll reward them with lower taxes than if they hoarded an equal value's worth of land.

 

[HalcyonEra]

BigEMan gave a great answer (above) that each owner decides for themselves.

Today, most real estate appraisal is done in two parts: 1) Land value and 2) Improvements, but then these numbers are just combined and taxed as a single whole. Letting your lot stay underused or letting your building fall apart is the best way to cheaply hold (or, I'd say, hoard it).

The ultimate hoarders--and the ultimate "removal of stories" strategy--is to knock all stories down, removing all improvements, and devote it all to surface parking (which is why we see too much surface parking) or just weeds.

So the government "opinion" under differential taxation isn't what improvements are preferred, it is to say that *all* improvements are tax-advantaged versus the land they sit on. The appraiser would look at Grampy's Gas and assign a value to the land, any residential improvements, and any commercial improvements, and each would be taxed at its own "per thousand" rate. (Grampy's isn't a great example because the former station has been written down to zero by now)

So I note that Boston already taxes residential (whole parcels) at $12.11 per thousand and commercial at $29.62.

Under differential taxation, you might tax the land at $40, commercial improvements at $20 and residential at $5. (the goal, initially is to be revenue-neutral, but to shift people's longer-term preferences)

If you had $12000 to invest, and start with $1000 of it in "raw land" and you'll pay $40/year in taxes on it. But invest the next $1000 in a commercial building, and you'll pay only $60 total (and $30 per thousand). Then stack $10,000 worth of residential on top and that'd only add $50 to your tax bill.

But hoard the same $12,000 worth of open land with surface parking, and under differential taxes, you'd pay $480/year.

Build $11,000 worth of building (as described) on a $1000 parcel, and you'll pay $110--basically $9 per thousand

Real fast, people would see that they should behoarding less land and building more building--densifying. Their money to work building us a city (whatever investors decide the market needs building-wise) and we'll reward them with lower taxes than if they hoarded an equal value's worth of land.

True. However, you need that tax savings to be equivalent to the loss in ROI if the developer builds affordable housing. Real Estate is not an altruistic endeavor. Maybe it can be done in the form of a subsidy of some sort. But we all know what happens over time to tax funds held for specific purposes, they somehow end up in the general till when general revenues go down and not used for their original purpose.