To clarify the last question, my house value would be affected if it was known that my neighbor will undergo a construction project. So I was just wondering that if the rise in propensity to teardown increased under LVT, that it would have weird ripple effects of devaluing the land of the good house by virtue of it being next to a future construction zone.
Could it be possible in areas like Detroit where the cost of renovating the house for profitability is just too prohibitively expensive that the house itself just isn't sellable? Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out?
Thanks for the concise explanation! You must be the original author. I've shared the article with many friends.
A few follow up questions:
- I'm interested to see how this affects multi-family housing. Do the same mechanics come to play? In an apartment complex, I assume that the positive or negative value of the property would be way greater than the land value, no?
- Do the resulting effects of the 3rd property only apply for teardown and straight up unliveable properties? Or would it be the blanket bottom x% of all houses in SF?
If it was the latter, could this count as an inefficiency under the proposal? As "bad but livable" units today are now taken off the market?
- Does the "good house" now lose re-sale value now simply by virtue of being next to a "bad house"? Let's say that the house issues are internal, and the outside is fine. Is this okay?
Looking forward to part II. If these questions get answered then, I'll just wait until I read it and ask more questions.
I really liked this article. I had a question about it.
Could there be a case where existing unpleasant rental properties in highly dense urban cities suddenly have negative rental value?
For example, imagine there was a run-down house that is livable, but is one of the most undesirable in SF. Adjacent to it, let's say there's a shiny desirable house with the same land characteristics. If I understand correctly, these 2 apartments would have the same land value tax right?
What kind of effect will this have on the rental price of the bad house? What will dictate the floor of it?
- Would it be the cost of the LVT?
- Would it be the lowest rent transaction that occured in the market?
- Would it be zero?
If it is one of the last two, I can't imagine the land-owner renting it out except for speculation on the desirability of living in SF right?