Here in Norway it super difficult to get a house/apartment unless you were born 40 years ago. People view getting a place or multiple as a passive investment (no need to rent it out even, as long as scarcity increases which is then the goal for the landowner class), and the flip side of course, is that housing is fing expensive.
The fix is of course a land value tax such that as scarcity and competition increases you have to pay more to hold a vacant apartment, and the only things you can make money on are things you do yourself. In theory.
Did it work in practice? And what’s the details of your implementation?
Edit: All the information I have is that you have it according to the Wikipedia article: https://en.wikipedia.org/wiki/Land_value_tax
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It’s not big enough to do anything to speculation. Property prices in the popular markets are still exploding.
It’s too early to tell.
But the main issue is still the post-legislation-trades.
A huge part of the market in the most superheated areas are still owned by old people that bought the houses a very long time ago, and experienced the majority of the growth.
This is also the main difference in acumulated wealth, population growth and socioeconomic differences in certain areas.
It could easily take 30-40 years before the new system is in full effect, because the purchase price needs to relate somewhat with the salesprice
Not really; There is still property speculation and especially in the major towns and cities housing is becoming absurdly expensive, both to buy and rent. The land-value tax hasn’t really helped, since, you know, people can just rent out the lots they buy, at extraordinary prices, and because housing is like… a necessity, it doesn’t really work in practice. Some guy once said about Georgism—the political thought that inspired the land value tax in Denmark—that it was “capitalism’s last ditch,” and “a simple attempt, decked out in socialism, to save property domination, and reestablish it at an even grander scale.” And he has been totally right; property ownership is becoming increasingly hard for people to get in to, in spite of the Georgist ideals that so have inspired the legislation. It is dogma to think, that if just ground-rent is paid to the state, everything will be alright.
The tax is collected on a municipal level, is calculated according to a value assessment done by the municipality, and the rate is set by the municipalities, so some places have higher rates, some have lower, though I don’t think any municipalities have higher land value tax rates over 35‰.
Does it work as intended? I’m inclined to say no because there’s a lot of speculation, but maybe it can’t be better than what it is now.
The land value tax was effectively dismantled in the early 00s when a popular “skattestop” was implemented, which all but froze the nominal amounts at that point in time regardless of land value, by capping the rate at which the nominal amount was allowed to rise.
So if you do look at the LVT rate, it is still the same, but the amounts being paid are not reflective of the rate.
we also opened up for no-installment mortgages with 10 years of only paying the interest portion of the loan.
The required down payment limit was also reduced to 5% if I recall correctly.
And we opened up for parental investments into apartments that made buying housing for your children the most tax-preferred method of generational wealth transfer.
And of course, there is the exemption that you don’t have to pay taxes on gains from selling a house, if you have lived in it yourself.
Combined with a frozen land value tax, this was basically a recipe for a price increases / bubble, as people could buy more house for their money (at least for 5-10 years) and contributed to the housing crash in the early 10s
However the root causes weren’t addressed in the housing crash and the skyrocketing prices picked up again.
In addition, a land value tax relies on knowing the value of the land.
The evaluations of the value of the land have not been updated since 2011, and even then the effective evaluation for tax purposes is often even earlier (2002), and the tax authorities electronic evaluation model that was supposed to provide new land valuations has been plagued by delays and issues.
valuations have only just started rolling out in the past few months and then only for single family housing.
But even with new land valuations being made, they won’t be effective until 2024 from a taxation purposes.
going into 2024, anybody living in a house will not be paying more in property taxes nominally than they did in 2023, this is 23->24 difference rebate is effective in perpetuity until they move.
It is also expected to significantly reduce the property and land value tax rates in proportion to the value increases to aim for a net-zero-impact.
after 2024, there is a new option to withhold payment of increases in property taxes until you sell your house, basically getting a 0% interest rate loan, until you sell and locking in your expected tax payments at the time of purchase.
So even with new valuations that are expected to be significantly higher than the previous valuations, the impact is limited, and the benefits of efficient economic allocation and stable price levels are unlikely to materialize.
Rather it is an attempt at locking in the baseline at the new normal (e.g. tripling the qualification of a high value house from 3 to 9 million), and then undoing the nominal freeze rate for the growth in taxes in the future and replacing it with a less bad freeze function that will at least “refresh” as a part of regular churn in the housing stock.
And that’s all why the land value tax doesn’t actually work as intended.