A conversation today, where someone expressed frustration that a family member couldn’t sell a valuable piece of land in location A because there was no land in location B where they wanted to move. Now we know that there is land in location B: what they were really saying is that the land in location B is too expensive, that proceeds from the sale of the land in A weren’t enough to allow the purchase of land in B. There is always land for sale if you have enough money.
I hear similar conversations a lot, where someone will commiserate about the high cost of housing while they plan where to move to when they sell their place, ignoring that the same scarcity driving up the value of their land is why their friends are having a hard time buying a place of their own.
The luckless owner of that valuable land in location A is playing the same game as those in location B — the landlord’s game, scarcity and timing.
We’ve all played Musical Chairs and most people know the Monopoly board game. They are both about scarcity, about grabbing up the available resources until there is only one person left with all of it. What many don’t know is that Monopoly was based on an earlier game that was designed to explain the Landlord’s Game, how privatizing land created scarcity that drives up the cost of living. You can keep all the nonsense about money and inflation: the real source of inflation is the extraction of rents through scarcity.
With the growth of population, land grows in value, and the men who work it must pay more for the privilege.
As density increases and available land becomes more scarce/more expensive, wages can’t keep up. In some cities in the 21st Century, some industries will pay high enough wages to feed that vicious cycle, overheating local housing markets and forcing out those who made those cities worth living in. The small businesses, restaurants, artists, musicians, that create the local aesthetic are forced out as rents chase the newcomers’ wages.
In many cases, those newcomers don’t need to be in these cities at all: there is no natural resource that they have to be close to. They only need to be close to one another, to collaborate, and as we saw in the Pandemic, they didn’t really need that. They could whatever it is they do from anyplace that had internet access…and many did just that.
So what is to be done? How do we break the vicious cycle that creates boom towns that either go bust (as many of them do) or simply become enclaves of wealth where no one who works in those cities can live there, while who do live there work online and could do so from anywhere?
We need to tax the land, to extract the rents from the bottom, rather than try to add deadweight taxes to the top. We hear arguments for rent control, to cap rents, but that’s the wrong approach. As land becomes more expensive and property taxes rise, landlords will let their properties fall into disrepair, even into ruin, so long as they can hold onto the land. So to prevent that, cities would do well to tax land and force the owners to do whatever they have to do so they can cover that rent — develop, renovate, whatever it takes. And as more land is placed under that model, there will be more development — idle land will be too expensive to hold onto — and rents will fall back into line. To be sure, we need zoning to match the density we need but we can’t do anything without capturing the rents from land that would otherwise go to speculators and investors who might not even know where their holdings are located.
Don’t hate the player, hate the game. Or better, end it and create more players, rather than a few winners and many losers.