Detroit considering changing to Land Value Tax, Duggan says

"The taxation method would mean properties are taxed on land value, not improvements like structures, and could encourage speculators holding property because the cost to do so is low to sell or develop the land.While Duggan said at the Detroit Policy Conference that conceptually there are plans to move it forward, he also said it's "the most legally complicated thing I've ever seen."

"We don't yet have a formula that works," the mayor said. "Conceptually, it's a great idea." The state Legislature would have to approve any reforms, Duggan said, then voters in the city would have to approve any changes. He said if a solution is found, property owners would encourage people not to sit on land.

"At an earlier panel, Nick Allen, a Ph.D. candidate in urban studies and planning at the Massachusetts Institute of Technology, said a new tax structure could bring tax relief to both residents and businesses in the city. If done right, he said, the effort would benefit people who have been historically hurt by disinvestment."
https://www.crainsdetroit.com/econom...it-duggan-says

I suspect this would be a big improvement in how property taxes work in the city, but it seems like a hard slog to get it in place. Also probably hard to explain to people.

If Duggan could do it, it would be a pretty impressive accomplishment.

Quote:

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Originally Posted by mwilbert

I suspect this would be a big improvement in how property taxes work in the city, but it seems like a hard slog to get it in place. Also probably hard to explain to people.

If Duggan could do it, it would be a pretty impressive accomplishment.

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I'm not sure this is the best nor only solution to a real problem. But the 'real' underlying problem is that Detroit taxes are extremely high. Fix that, and you've really addressed a dramatic harm to Detroit's.

At least the elephant in the room is no longer being ignored. Lansing has to get on board or nothing can possibly happen.

Crain's just had another excellent article about the Value tax and how it would benefit the city. I strongly believe that this is one of the best things that can be done to curb blight and drive investment in the city.

So many of our ills stem from massive amounts of vacant land that is just sat on. Whether it's the predatory suburban or international investor waiting for values to increase, or the city resident who inherited a vacant lot from family and just sits on it, this change will make it a lot less appealing to let land sit vacant and unproductive.

"As it's imagined, the city would replace its current operating tax — based on the value of both the land and any improvements — with a tax on just the value of the land itself. That would mean a 20-mill reduction on the current tax rate for homeowners, Rising said. For example, it would be expected to lower taxes on a $200,000 house from about $8,700 a year to between $6,000 and $6,500."

"The city does not yet know what the tax rate on land would be, he said. But the plan would be revenue-neutral for the city, shifting the tax burden away from homeowners and others who have structures on lower-valued land and toward vacant property and high-value land in the city."

https://www.crainsdetroit.com/politics-policy/what-detroit-land-value-tax-means-homeowners-developers

That doesn't sound like it would work.

Huge numbers of empty lots are actually owned by the Detroit Land Bank etc, at least in the neighborhoods.

So the Ren Cen and the Gaurdian building would see their prop tax reduced by 80%, and homeowners by 30%, and we'd make that up by charging people more taxes on their $1,200 empty lots?

I must be missing something.

For sure I think we should take back all the lots given to the Illiches, or at least make them obey the laws.

Quote:

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Originally Posted by Wesley Mouch

I'm not sure this is the best nor only solution to a real problem. But the 'real' underlying problem is that Detroit taxes are extremely high. Fix that, and you've really addressed a dramatic harm to Detroit's.

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On the surface it looks like it is going to drive existing values down.

Ours is set up per a millage rate,the value of the land plus the value of the existing structure according to the condition it is in.

If You homestead they deduct 25,000 and the remaining is the taxable value and your increases are capped a no more then 3% per year.

So for me as an example,8600 sqft lot,1200 sqft house built in 1928 80% remolded so the acessment is lowered,taxable value before homestead $265,000 taxes are $510 per year when I bought it 7 years ago it was $345.

It is a bit confusing because two articles posted say two different things.

You would think the goal is to encourage home ownership by lowering that tax obligation and discourage the allowing of properties to sit with nothing being done.

Its an issue every city deals with,in the UK and other countries they charge a “vacancy “ tax,so as an investor or speculator it becomes very expensive to sit on the property as it deteriorates or keep it empty.

Its two different issues- keeping homeowners at a lower rate and curbing the amount of vacant properties that are not marketed or even ready to market after sitting on them for decades.

It sounds like a dick move to tax speculation so those who are not receive the discount but it could also be argued that the homeowners are also bearing the cost to remove the blight that also drives their values down and provides safety and security issues.

I can't read the entire article through the paywall, but I don't see how this would be successful in practice. The moment you introduce these skyrocketing rates on vacant land, you're going to have a tsunami of tax appeals being filed by land owners complaining their assessments were too high and arbitrary, that a property owner in another block got a lower tax increase, etc.

How do you decide what is a fair assessment on vacant land relative to other landholders? There would be so many tax appeals it would tied up in appeal boards for decades. The costs of hiring extra staff to run those appeal boards would far outweigh any benefit.

And what about the exemptions? If someone plants a tree farm or lines a rectangle of several railway ties and posts a sign that says, "Community Farm. Plant your own vegetables", does that qualify as an exemption? If it does [[since there are urban tree farms and community farms already), I would guess most landowners would then try to qualify for one of these low cost exemptions and the net benefit after hiring the extra staff to implement the tax change would be marginal.

Unless there's another city that can be used as an analogy where this has been successfully implemented, it's doomed to failure.

You can read the article here:

http://archive.today/2023.05.25-1032...ers-developers

Basically, our current tax system encourages speculative holdings in high-value areas, while 'punishing' developers with higher taxes when they actually build something. A parking lot and an office tower may be next to each other downtown, and have the same base land value, but the parking lot owner pays much lower taxes than the office tower because of what's on top of that land.

This proposal seeks to flip that by taxing all properties based on just the value of the land it sits on. Now the parking lot owner will pay the same tax rate as the office tower, so that owner will be incentivized to build something more productive on the site, or sell to someone else who will.

This does not appear to change the way property values are assessed. The consensus is that vacant landowners downtown will pay more, while homeowners in the neighborhoods will pay less. Landowners with structures on top will pay equal or less than before the change.

The article does mention other cities that have implemented this, with no examples of any being "doomed to failure" that I can tell. Though Detroit will be the largest city to make this change to date.

^ that’s socialism at its best.

So based on that I could buy a vacant lot in a desirable neighborhood and build a million dollar house and pay the same tax rate as the $50,000 house next door.

That is revenue suicide for the city and actually impossible to implement,what about all of the recent buildings that have received tax incentives and 30 year tax capture based on the current value,it wipes billions in property values out with a stroke of a pen.

So a house in EEV is no longer worth $500k it is only worth the value of the dirt it sits on,if that dirt is only worth $150K no bank in the world is going to allow a mortgage.

They did say other cities have implemented it and here is one response

"I don't think it's had any serious impact on development in the city," he said. "I can't think of a whole lot of development that might have been spurred by this."He added that Allentown wasn't a city with a lot of empty land, but many tracts that were underutilized when the tax structure changed are still underutilized now.
"I don't think it made a whole lot of difference either way," Glazier said. "At the margins, it might nudge them toward development, but at the end of the day, it's not the deciding factor."

Quote:

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Originally Posted by gratiotfaced

You can read the article here:

http://archive.today/2023.05.25-1032...ers-developers

Basically, our current tax system encourages speculative holdings in high-value areas, while 'punishing' developers with higher taxes when they actually build something. A parking lot and an office tower may be next to each other downtown, and have the same base land value, but the parking lot owner pays much lower taxes than the office tower because of what's on top of that land.

This proposal seeks to flip that by taxing all properties based on just the value of the land it sits on. Now the parking lot owner will pay the same tax rate as the office tower, so that owner will be incentivized to build something more productive on the site, or sell to someone else who will.

This does not appear to change the way property values are assessed. The consensus is that vacant landowners downtown will pay more, while homeowners in the neighborhoods will pay less. Landowners with structures on top will pay equal or less than before the change.

The article does mention other cities that have implemented this, with no examples of any being "doomed to failure" that I can tell. Though Detroit will be the largest city to make this change to date.

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By bringing up commercial properties like office buildings, you've made it even more complicated. I'm not sure how it works in the US, but I suspect it's very much like Canada where Office buildings would be assessed using a gross rent multiplier.

For example, say you have two office buildings abutting that parking lot. Office building A generates $1m a year in rent. Office building B generates $4m a year in rent. The parking lot generates $80K in rent.

Based off of that, using a Detroit commercial mill rate of 4.13 and let's give it a condition of 3,
Office building A's property taxes are $1m x 4.13% x 3 = $123,900 a year in property taxes
Office building B is 4x the height with the same lot size and the property taxes are $4m x 4.13% x 3 = $495,600 a year in property taxes
The Parking Lot generates $80K x 4.13% x 3 = $9,912 a year in property taxes and has the same size lot as office building A and B.

So should the parking lot be assessed on Office building A's taxes of $123,900 a year or Office building B at $495,000?

Let's throw another variable in. What if there's a parcel with a single storey building that's rented out to an ice cream parlour in the next block that generates $60K a year in rent. $60K x 0.0413 x3 = $7,434.

Do we raise the parking lot's property taxes and then he appeals it claiming his taxes should be assessed on the ice cream parlour's lower taxes since we're using some hybrid GRM model now?

Every landowner is going to do this because they're upset with the huge increases and you've tied up the tax appeals board for decades.

And I still don't understand what your formula is for assessing buildings based on land. Residential houses are assessed on recent comparable sales of similar houses. How do you assess vacant land without a building on it if it's not based on comparable sales of vacant land? And again the differences on how you come up with a figure is going to send it straight to the appeal board and there's going to be a tsumani of appeals which is going to be very expensive to operate with all the new staff you have to hire to sort through this mess.

If you're saying it's not doomed to failure, explain it to me with specific numbers and a formula that isn't open to being appealed.

Just a thought, maybe you could change the condition variable for vacant land from a 3 to say a 12. So if it has a building on it, it's a 3-4. Without a building on it, it's a 12 or even 20. But again, what are the exemptions to that rule? Are community gardens and tree farms exempt? I remember years ago I saw Dan Gilbert's community garden in downtown. Is that exempt or will he be dinged at the 20 factor? If not, then everybody with vacant land is going to turn their vacant lot into a community garden or tree farm.

Honestly, I would encourage you both to just search for and read the papers analyzing this topic. I am not an expert on this subject and am not equipped to answer your questions. Maybe direct your questions to the names mentioned in the piece. The explanation I gave is just my understanding of how this would work, but we simply won't know more details until legislation moves ahead and the proposal is adopted.

Personally, I'm supportive of a change. The status quo is clearly not great, and a reform that both incentives development and relieves tax burdens on working class neighborhoods sounds like it's at least worth a try. We won't turn this city around if we're too afraid to implement any new ideas.

That’s why the city is where it is at,allowing legislation to move forward and the proposal is adopted.

You have to be proactive and have these discussions so people understand and can decide whether to support it or not,there are no ideal situations but most will be able to understand if something is going to do more harm to them then helping.

New ideas are good and change is good but there is something that is called cause and effect.

examples are

The scorch and burn of cities in order to combat white flight,many cities have never recovered.

The placement of freeways through established neighborhoods that destroyed the continuity of cities along with generations of families,the problem with change simply designed to implement change is it effects and can effect for many years real people.

Any changes like this should be taxpayer approved after the taxpayers are made well aware of the unintended consequences and the benefits so they are well aware,because at the end of the day they are the ones that pay the real price of failed social experiments.

Comments are not directed at you personally,when you or I or anybody else posts something it is doing what it should be doing,opening up a discussion where people get involved - that is the goal - for people to get involved in their cities future,it’s not a dictatorship.

The basic idea that improvements to a property should show no increase in value is insanity,if you have a lot that is assessed at X amount of dollars how are you even going to obtain financing because they are saying the structure has no value.

So other then the value of the dirt the Book Tower has the same value as a burned out vacant house.

As soon as they mentioned the goal was equitable housing everybody becomes the same,no matter what street you live on or no matter how much your house is worth.

This concept was successful in the past,in France when all the properties were declared property of the state,Cuba where all properties are property of the state,Mexico the government owns the land and you get lifetime leases and can build whatever you want and the value does not increase.

So the city has 145 acres,the only source of revenue is the taxable value of the dirt,does anybody know the extra tax you would have to place on each parcel in order to make up for the losses that would occur when you removed the improved values of existing structures.

So what do you tell the existing residents,pack your bags and leave because your 200k house is now worth the value of the dirt or instantly destroying the net worth of everybody in the city,those who have equity built up will lose it with the stroke of a pen,banks will instantly call loans due because improved values will no longer equal loan value.

Somebody on the council mentioned that this would be opposed by those with power and wealth.

Of course they will because they will see it for what it is,an attempt to use property tax reform as a Trojan horse in order to flip an American city into a 100% socialist haven.

People abandoned the city and made it is what it is today,because the properties had no value and it was easy to walk away.

That worked out so well,let’s try it again and see if it turns out different.

There are plenty of cities in this country where property owners are not overburdened by high tax rates,they seem to be doing just fine,if lowering that burden is the true intent,it’s not that hard,property taxes have been around for a long time,pretty easy to see what works and what does not.

Quote:

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Originally Posted by Richard

^ that’s socialism at its best.

So based on that I could buy a vacant lot in a desirable neighborhood and build a million dollar house and pay the same tax rate as the $50,000 house next door.

That is revenue suicide for the city and actually impossible to implement,what about all of the recent buildings that have received tax incentives and 30 year tax capture based on the current value,it wipes billions in property values out with a stroke of a pen.

So a house in EEV is no longer worth $500k it is only worth the value of the dirt it sits on,if that dirt is only worth $150K no bank in the world is going to allow a mortgage.

They did say other cities have implemented it and here is one response

"I don't think it's had any serious impact on development in the city," he said. "I can't think of a whole lot of development that might have been spurred by this."He added that Allentown wasn't a city with a lot of empty land, but many tracts that were underutilized when the tax structure changed are still underutilized now.
"I don't think it made a whole lot of difference either way," Glazier said. "At the margins, it might nudge them toward development, but at the end of the day, it's not the deciding factor."

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This is utter nonsense. You clearly have zero grasp on the difference between taxable vale, assessed value, and market value. No mortgage company looks at the taxable or assessed value when considering how much they will lend on a piece of real estate.

What exactly would be the issue with someone building a million dollar home next to an older, less expensive one? That's exactly the development we're trying to encourage. Would it be better if the hypothetical lot stay vacant and non-productive? What's the downside to a vacant lot being built on? Not to mention, what "desirable neighborhood" has homes going for $50K currently? That's nothing more than a straw man.

The downtown land being built on and the companies receiving incentives and tax captures would be virtually unaffected, as this land would undoubtedly be valued very highly considering it's location under the proposed system, just as it would under the current system post-construction.


Throwing out the word "socialism" is just the cherry on the nonsense sundae.

^ you did not even read the article posted but yet saw fit to take a personal jab

The city does not yet know what the tax rate on land would be, he said. But the plan would be revenue-neutral for the city, shifting the tax burden away from homeowners and others who have structures on lower-valued land and toward vacant property and high-value land in the city.

——————

The thousands that bought the vacant lot next door,community gardens,you are going to tell them to pay more tax because they are not improving those parcels?

That is 21,000 already sold with another 10,000 coming up at the next land bank sale.

Your tree farm land?

Tax the rich to feed the poor until they are rich no more.

I call it socialism,so that is why I used the word.

High value properties downtown are already taxed a higher rate because of their value,what would be the incentive to improve properties downtown?

You are not in a position to take jabs at me and say I have zero understanding when the city itself does not even have the details worked out,so you are basing your counter argument on what you think personally and not on facts.

I am basing mine on there is a whole country out there with thousands of tax structures in thousands of different forms.

This is not reinventing the wheel and throwing a unknown social experiment on already struggling taxpayers just to see if it works,how many lives are you willing to destroy if you find out is does not work out as intended?

It is a unnecessary risk,if it backfires it will throw more residents off of a cliff,if they were comfortable financially and could absorb the loss should it backfire it would be different.

Reinventing the wheel is okay if the city was on solid financial ground and could absorb the fallout,I do not think it is there yet.

It is not addressing the core issues of what causes the taxes to be high in the first place,it is shifting the burden,they told you in the article.

Trying new things has its risks,when they have all the details then people can decide if the risk is worth the potential gain.

But the basics are already there and you can glean from 100 years of cites collecting taxes where things lead to,if it worked somebody would have already implemented it 50 years ago.

Cause and effect - Give new development 30 year tax captures,you have removed those properties from the equation,but the city still has the same financial obligations,so now you have more residents having to pay more in order to cover that loss and the answer is to shift that increased obligation over to the very same people that you are giving the 30 year tax capture to?

So who is going to cover the losses that the current taxpayers are now when you shift that burden over to those who are not putting back into the system in the first place?

Yes it makes for a strong Detroit 30 years from now when the fruits will bear,but what about the people living there today,lots will not be waiting 30 years,they will leave compounding the issue.

Detroit has the advantage because it is a late bloomer,plenty of cities have already been through what you are going through now,they tried everything in the book to become successful,some things worked,some were disastrous,would it not be more prudent to collect the little bits n pieces from across the country that have already been proven to work successfully and have an established track record then to try something new without knowing what it leads to?

I heard a talk by the fellow at Yale mentioned in this article and I'm not impressed that he knows what he's talking about.

Also, the guy from Pennsylvania quoted in the Crain's article says that when his city did this, they didn't notice any real changes.

Leaves me very skeptical, but it does seem to be a cause celeb around here these days.

1953

https://www.youtube.com/watch?v=_A_Z96gZxIM&t=2292s

Duggan's speech here might help alleviate some concerns.

Also, not to nitpick, but an LVT is a textbook example of Georgism, not Socialism.

Quote:

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Originally Posted by gratiotfaced

https://www.youtube.com/watch?v=_A_Z96gZxIM&t=2292s

Duggan's speech here might help alleviate some concerns.

Also, not to nitpick, but an LVT is a textbook example of Georgism, not Socialism.

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Of course it isn't socialism--people just like to use that word as a catchall for stuff they don't like. If anything, the main idea of Georgism is to not tax stuff that's being produced by human effort [[land improvements like structures) but tax the stuff that people aren't responsible for--the existence of the surface of the earth. In that sense, it's quite capitalist.

One thing to keep in mind is that this proposal would only affect the city tax portion of the property tax bill, so the changes seen by individual property owners would be muted. But even so, it should make it a lot less attractive to own a downtown parking lot.

Georgism, also called in modern times Geoism,^[2][3]and known historically as the single tax movement, is an economic ideology holding that, although people should own the value they produce themselves, the economic rent derived from land—including from all natural resources, the commons, and urban locations—should belong equally to all members of society

You have to look at the basics and how a city creates revenue in order to pay its bills,by taxation on improved properties,once again if you remove the incentive to improve a parking lot what have you gained,the parking lot holders and the speculators have very good accountants and lawyers better then the average homeowner who just acquired that vacant lot next door.

It would take years in order to re-write and implement the city tax code verses the time it would take to just eliminate the code that was written in to make it advantageous for the speculators in the first place.

The city still has that base debt and legacy costs,no matter how you shift it around it still falls on the taxpayers to pay it,so okay you shift it over to those parking lots or improved downtown properties that are of high value.

Then it gets tied up in the courts,spending even more taxpayer monies in order to try and enforce it while the base debt still accumulates and when it reverts back to the homeowner it’s resolved nothing but increased their obligations.

It’s an enforcement issue,no other city in the country will allow you to buy a property with a vacant building and do nothing to it as it deteriorates for 20 years.

Not sure why it all stays bolded

On a different note... Canada wants to levy a tax on absentee property owners...

"A new 1% tax on vacant or underused housing in Canada is putting US-Canada relations "in jeopardy", according to a bipartisan group of US lawmakers. The legislators want Ottawa to exempt US citizens from the tax, which imposes the additional levy on residential properties that sit unused for more than half of each calendar year."

This may be mainly aimed at Asians who purchase Canadian properties, but rarely live in them.

Quote:

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Originally Posted by Wesley Mouch

I'm not sure this is the best nor only solution to a real problem. But the 'real' underlying problem is that Detroit taxes are extremely high. Fix that, and you've really addressed a dramatic harm to Detroit's.

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Lowering property taxes is definitely one way to go. Well, here's my problem. Back in 2021 the Land Bank offered side-lots within five hundred feet of a taxpayer's principal residents for $100. My mother's property was surrounded by side-lots to the South and West of her principal residence. On her behalf, I purchased seven of the lots. I later added my name to the lots and my mother's principal residence. In the spirit of the movie the Godfather, "The Land Bank made me an offer I couldn't refuse."

Ok, so I'm sitting on these lots with the idea that I could sell some of them to a developer who wants four to five contiguous lots to develop. In the meantime, I cut the grass and maintain the properties. The city no longer has to hire someone to cut the grass. In addition, I'll eventually have to pay property taxes [[currently they're exempt up to 2026).

Here's the thing. I'm maintaining the properties, but according to this land value tax I'm going to be penalized if I don't put houses on them? Or worse still, I'll be forced to sell the properties because the property tax is going to be higher than what I pay on my principal residence. Someone help me understand this. Thanks in advance.

Quote:

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Originally Posted by royce

Lowering property taxes is definitely one way to go. Well, here's my problem. Back in 2021 the Land Bank offered side-lots within five hundred feet of a taxpayer's principal residents for $100. My mother's property was surrounded by side-lots to the South and West of her principal residence. On her behalf, I purchased seven of the lots. I later added my name to the lots and my mother's principal residence. In the spirit of the movie the Godfather, "The Land Bank made me an offer I couldn't refuse."

Ok, so I'm sitting on these lots with the idea that I could sell some of them to a developer who wants four to five contiguous lots to develop. In the meantime, I cut the grass and maintain the properties. The city no longer has to hire someone to cut the grass. In addition, I'll eventually have to pay property taxes [[currently they're exempt up to 2026).

Here's the thing. I'm maintaining the properties, but according to this land value tax I'm going to be penalized if I don't put houses on them? Or worse still, I'll be forced to sell the properties because the property tax is going to be higher than what I pay on my principal residence. Someone help me understand this. Thanks in advance.

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As the proposal currently stands, the taxes on those lots would go up. But how much tax are we talking about? Vacant lots in a random part of the city aren't usually that valuable. You should be able to find out what your assessment is on those lots even if your tax is abated. Then you can calculate what the tax would be if such a proposal was adopted. And as mentioned earlier, most of the tax wouldn't be affected at all, because this proposal would only affect the city portion of the tax.

There is no penalty because a lot doesn't have a buildings on it. The idea is that the underlying land has some value, that is taxed the same [[higher than now) whether or not it has a structure. Then if you put a building on it, the land tax doesn't change, but there's also a tax on the building. But that tax is at a lower rate than it is now.

The net result is that if the building is worth much more than the lot, which is true of the vast majority of lots with buildings on them in the city, the overall tax would be lower. The owners of vacant lots and low-value buildings on expensive lots pay more. But because most of the lots in the city aren't worth that much, the main effect is that overall tax is shifted onto people to with underutilized land in parts of the city where land is relatively expensive, such as downtown parking lots. Which is the idea--to make it unattractive to hold valuable land idle or in low-value uses, and to make it more attractive to build things.

Quote:

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Originally Posted by mwilbert

As the proposal currently stands, the taxes on those lots would go up. But how much tax are we talking about? Vacant lots in a random part of the city aren't usually that valuable. You should be able to find out what your assessment is on those lots even if your tax is abated. Then you can calculate what the tax would be if such a proposal was adopted. And as mentioned earlier, most of the tax wouldn't be affected at all, because this proposal would only affect the city portion of the tax.

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To tax land separately from buildings requires a good valuation of each component. And teasing the two apart fairly is difficult, but not impossible.

Assessments ultimately are based on actual sales of property -- both bare and improved [[with buildings). To know the land value, you have to be able to remove the home or building value from the sale price, and then impute the land value.

Quote:

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Originally Posted by mwilbert

There is no penalty because a lot doesn't have a buildings on it. The idea is that the underlying land has some value, that is taxed the same [[higher than now) whether or not it has a structure. Then if you put a building on it, the land tax doesn't change, but there's also a tax on the building. But that tax is at a lower rate than it is now.

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This is precisely correct. All that would be done is the change the relative valuation of the components, assuming that information has been done correctly. It doesn't seem difficult to do. But there may be impacts that are unintended. That's the problem.

Quote:

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Originally Posted by mwilbert

The net result is that if the building is worth much more than the lot, which is true of the vast majority of lots with buildings on them in the city, the overall tax would be lower. The owners of vacant lots and low-value buildings on expensive lots pay more. But because most of the lots in the city aren't worth that much, the main effect is that overall tax is shifted onto people to with underutilized land in parts of the city where land is relatively expensive, such as downtown parking lots. Which is the idea--to make it unattractive to hold valuable land idle or in low-value uses, and to make it more attractive to build things.

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Sure, it's a nice theory. But how will it really play out?

The total amount of taxes required to support city services at the current levels is pretty much fixed. [[Except for adding a few more equity programs every day.)

So the taxes are simply being redistributed.

What is the actions taken based on these new valuations. Current developers who are trying to put together projects face increased costs. This makes development less likely in the future, since their total cost of development obviously goes up.

Land Speculators will stop speculation. And that sounds great. They'll want to sell the land -- but the value will have dropped since nobody wants to pay the increased taxes if they can avoid. [[Unless they will profit more from the home sales.)

Will local residents buy this land, and build homes? I suppose that's the dream. They'll face increased taxes on the bare land until they do. And likely during construction. Building would be riskier, as you have to be prepared to face increased ongoing taxes until you can develop.

Key to how much this breaks housing construction and development will be how much the taxes have to go up. What's the ratio of developed to undeveloped? Is it even 50/50? Let's say that it is. Then every dollar down that your total tax bill goes down on your home results in a $1 increase in the tax on vacant land. You're pretty much going to upend the tax burden, and support existing homeowners, at the expense of anyone trying to bring new homes on-line. Sure, there'll be developers who will be encouraged to build -- but likely far more than just walking from Detroit development. That's not gonna help, and that's likely.

Quote:

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Originally Posted by Wesley Mouch

Will local residents buy this land, and build homes? I suppose that's the dream. They'll face increased taxes on the bare land until they do. And likely during construction. Building would be riskier, as you have to be prepared to face increased ongoing taxes until you can develop.

Key to how much this breaks housing construction and development will be how much the taxes have to go up. What's the ratio of developed to undeveloped? Is it even 50/50? Let's say that it is. Then every dollar down that your total tax bill goes down on your home results in a $1 increase in the tax on vacant land. You're pretty much going to upend the tax burden, and support existing homeowners, at the expense of anyone trying to bring new homes on-line. Sure, there'll be developers who will be encouraged to build -- but likely far more than just walking from Detroit development. That's not gonna help, and that's likely.

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This seems wrong, and also not the point of the change. But the effect on residential developers should be positive. A typical residential lot in Detroit isn't worth very much. Even if you tripled the taxes on it, and a developer had to pay the taxes on it for a couple of years, the cost would be small relative to the cost of building a new house on one. It's just not going to have much effect. On the other hand, lowering the taxes on the house that ends up getting built will have a positive effect on the value of that house, and hence on the profit the builder could make by building it. But it's not like very many new houses are built in Detroit each year--right now in the bulk of the city housing prices aren't high enough to yield a profit on new construction, so what you get are various kinds of subsidized multifamily developments, and rehab. There's unlikely to be a big effect on this kind of development in any direction.

The main effect will be in the small portion of the city where land is expensive, and there the change should be to lower land prices somewhat, make more land available to develop, and to make that development more profitable. And that, along with shifting some of the tax burden from neighborhood residents to downtown/midtown, is the point.

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Originally Posted by mwilbert

This seems wrong, and also not the point of the change. But the effect on residential developers should be positive. A typical residential lot in Detroit isn't worth very much. Even if you tripled the taxes on it, and a developer had to pay the taxes on it for a couple of years, the cost would be small relative to the cost of building a new house on one. It's just not going to have much effect. On the other hand, lowering the taxes on the house that ends up getting built will have a positive effect on the value of that house, and hence on the profit the builder could make by building it.

In any case. the main effect will be where land is expensive, and there the change should be to lower land prices somewhat, make more land available to develop, and to make that development more profitable. And that, along with shifting some of the tax burden from neighborhood residents to downtown/midtown, is the point.

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It’s the point but also the problem and what got the city to where it is today,shifting the tax burden to those who can afford it more,the ratio changes of those who can afford it more which increases the burden to the point to where they bail.

Look at the 100s of thousands fleeing high tax states,instead of looking for ways to lower that burden they are looking at ways to shift it.

Not to go into politics but progressive policies are what hurt the city from the start and now they are doubling down on them.

First the $50m cap now this,it follows the mantra of the rich can afford to offset the transfer of obligations.

In the video a $500 lot in Detroit was compared to a $150,000 lot in a desirable location in the burbs.

Can I buy a lot for $500 in EEV or Mid Town or even downtown,sign me up ,real estate is location location location.

If it was the answer every city in the country would have implemented it already even more so the ones that are bleeding population,there is a reason they have not.