Reply #6: The deeper implication is: This decision could depress housing prices [View All]

[tubbacheez]

Much depends on how the municipalities exercise their newfound (and unprecedented) powers.

If government, by action or even rumor, creates the public impression that attractive properties can simply be confiscated with merely taxable value as compensation, the incentive to own property goes down dramatically.

Investors expect a rate of return on property, typically in the form of appreciated market value. If government can bypass the free market and give itself a discount (by paying only taxable value instead of open bidding), why bother to invest in such a property at all?

Renting, by comparison, looks far more predictable and stable. And the savings from not having to pay property tax can be invested elsewhere.

Housing prices, bubble or no, would feel a heavy downward pressure as a result of fewer investors willing to take the newly added risk.






And after a few years of this policy, there's an even bigger fuss coming. New businesses can continually ask the government to take land away from existing businesses, with the reasoning that the new business will generate even higher taxes.

Now government has taken on the quirky role of judging the merits of business plans competing for the same land. Another chunk of the free market goes bye-bye.

If land were simply sold according to supply and demand, the market value of the land contributes strongly to the practicality of any business plan.

But now that government is essentially setting the prices artificially, officials now must arbitrate who gets what... and for how much.

Taken to its logical extension, this policy will destroy a couple centuries of property law and restore the governmental land-granting commonplace in colonial times and earlier.




Again, much depends on how the municipalities exercise their newfound powers.