Here you aren’t just making an argument against LVT. You’re making a more general argument for keeping housing prices high, and maybe even rising (because people might count on that). But high and rising housing prices make lots of people homeless, and the threat of homelessness plays a big role in propping up these prices. So in effect, many people’s retirement plans depend on keeping many other people homeless, and fixing that (by LVT or otherwise) is deemed too disruptive. This does have a certain logic to it, but also it sounds like a bad equilibrium.
I agree this argument could be generalized in the way you suggest, but I want to distinguish between,
Keeping housing prices artificially high by maintaining zoning regulations that act as a barrier to economic growth, in particular by restricting the development of new housing that would drive down the price of existing housing if it were allowed to be constructed.
Keeping the value of property held in land high by not confiscating the ~full rental value of land from people.
While I agree the first policy “does have a certain logic to it”, it also seems more straightforwardly bad than the second approach since it more directly makes society poorer in order to maintain existing people’s wealth. Moreover, abandoning the first policy does not appear to involve reneging on prior commitments much, unless you interpret local governments as “committing” to keep restrictive zoning regulations for an entire community indefinitely. Even if people indeed interpret governments as making such commitments, I assume most people more strongly interpret the government as making more explicit commitments not to suddenly confiscate people’s property.
I want to emphasize this distinction because a key element of my argument is that I am not relying on a “fairness” objection to LVT in that part of the post. My point is not about whether imposing an LVT would be unfair to people who expected it to never happen, and purchased land under that assumption. If fairness were my only argument, I agree that your response would weaken my position. However, my argument in that section focuses instead on the inefficiency that comes from forcing people to adapt to new economic circumstances unnecessarily.
Here’s why the distinction matters: if we were to abandon restrictive zoning policies and allow more housing to be built, it’s similarly true that many people would face costs as they adapt to the resulting changes. However, this disruption seems like it would likely be offset—more than adequately—by the significant economic growth and welfare gains that would follow from increasing the housing supply. In contrast, adopting a land value tax would force a sudden and large disruption, but without many apparent corresponding benefits to justify these costs. This point becomes clearer if we accept the argument that LVT operates essentially as a zero-sum wealth transfer. In that case, it’s highly questionable whether the benefits of implementing such a tax would outweigh the harm caused by the forced adaptation.
I agree this argument could be generalized in the way you suggest, but I want to distinguish between,
Keeping housing prices artificially high by maintaining zoning regulations that act as a barrier to economic growth, in particular by restricting the development of new housing that would drive down the price of existing housing if it were allowed to be constructed.
Keeping the value of property held in land high by not confiscating the ~full rental value of land from people.
While I agree the first policy “does have a certain logic to it”, it also seems more straightforwardly bad than the second approach since it more directly makes society poorer in order to maintain existing people’s wealth. Moreover, abandoning the first policy does not appear to involve reneging on prior commitments much, unless you interpret local governments as “committing” to keep restrictive zoning regulations for an entire community indefinitely. Even if people indeed interpret governments as making such commitments, I assume most people more strongly interpret the government as making more explicit commitments not to suddenly confiscate people’s property.
I want to emphasize this distinction because a key element of my argument is that I am not relying on a “fairness” objection to LVT in that part of the post. My point is not about whether imposing an LVT would be unfair to people who expected it to never happen, and purchased land under that assumption. If fairness were my only argument, I agree that your response would weaken my position. However, my argument in that section focuses instead on the inefficiency that comes from forcing people to adapt to new economic circumstances unnecessarily.
Here’s why the distinction matters: if we were to abandon restrictive zoning policies and allow more housing to be built, it’s similarly true that many people would face costs as they adapt to the resulting changes. However, this disruption seems like it would likely be offset—more than adequately—by the significant economic growth and welfare gains that would follow from increasing the housing supply. In contrast, adopting a land value tax would force a sudden and large disruption, but without many apparent corresponding benefits to justify these costs. This point becomes clearer if we accept the argument that LVT operates essentially as a zero-sum wealth transfer. In that case, it’s highly questionable whether the benefits of implementing such a tax would outweigh the harm caused by the forced adaptation.
Sorry—I realized after commenting that I overstated this bit, and deleted it. But anyway yeah.