Your point is valid and you shouldn't be downvoted. Empirically, we know that high density of residential units is correlated with high rent.
Why is this? It ultimately comes back to the Law of Rent. The amount that landlords are able to charge directly corresponds to the produce obtainable at that location over their next best alternative... and that alternative is likewise set that way up until you reach the "margin" which is the best available rent-free location.
Since all land has been homesteaded, there's not much of a ceiling on rents... they tend towards the entire nominal productivity of the site. And the more desirable that site is, the more astronomical the rent.
We want locations to be desirable, so in effect we actually do want rent to be high. It's just important that everyone share in that rising wealth. In other words, we need to create a high demand for labor, by shifting taxes from labor onto idle landlords. Land speculators are like patent trolls atop the surface of the planet.
I do believe that the thing that would change the housing stock situation for SF is to remove sales taxes and add land value taxes. Just that change alone will make workers and renters richer overnight, and would change the anti-development mindset of owners quite a bit, considering that low-dense units will pay the highest amount.
No, because the supply of land is perfectly inelastic, and it already commands the highest price that can be obtained.
"A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground."
- Adam Smith, Wealth of Nations
"It is in vain in a Country whose great Fund is Land, to hope to lay the publick charge of the Government on any thing else; there at last it will terminate. The Merchant (do what you can) will not bear it, the Labourer cannot, and therefore the Landholder must: And whether he were best do it, by laying it directly, where it will at last settle, or by letting it come to him by the sinking of his Rents, which when they are once fallen every one knows are not easily raised again, let him consider."
- John Locke, "Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money"
Actually they will be able to ask for higher rents, as with lower sales and income taxes, the renters suddenly have extra cash that will eventually trickle towards rent.
That's if there are actually reductions in income/sales taxes. If the LVT money is instead invested in say mass transit, the population as a whole benefits, but rents don't increase, because money supply doesn't increase.
This is subtly wrong. Taxing rents instead of labor and consumer goods makes leasing less profitable (assuming government expenditures don't favor landlords) and creates opportunities in labor and consumer goods, in which erstwhile landlords can engage.
Milton friedman was an advocate of LVT, and I think stiglitz or krugman as well. There is economic consensus on LVT being good, although how good it is is hard to know, as LVT is a very hard tax to politically pass.
One way of thinking about why this won't happen is that most landlords charge the highest rent they think they can get. They don't just think, "I'll set the rent at my costs and a little profit. I'm not interested in making even more money." Some smaller owners might have personal relationships with their renters and not charge market rates, but I think more and more these days those landlords are rare. Maybe landlords will be able to up the rents because the reduction of other taxes will give people who pay rents more money, but that would be a small secondary effect I would guess.
The landlord can try. But when you introduce land tax and all those vacant apartments and lots come to market suddenly, I'd wish him luck with succeeding to shift the tax burden onto renters.
It's known that land tax together with similar antimonopoly taxes can't be shifted. What's nice is that not only this type of tax doesn't slow down the market, but on the contrary makes it more effective. Essentially without rent capture (antimonopoly tax) there is an open sink in the economy, so no matter how hard people work, all this value exits out of the economy, mostly in form of parked money in real estate.
As George predicted, all technological progress will just yield higher real estate prices and everybody will be working even harder than before.
Thank you for the explanation! I am still not sure I believe that what you predict would happen to a large degree in the Bay Area.
I agree a land tax would push the owners of vacant lots to develop them. But, the NIBMY owners of single family homes will still fight against the building of new apartment complexes and try to constrain housing supply (to prop up their property values). I certainly would hope that more apartments would be built though!
I didn't mean to validate that there was a causal connection, I was just agreeing with the general claim that yes, indeed, dense places (cities)... whether in terms of supply or demand are generally more expensive than other places.
Knowing why is important, though, and the law of rent explains the mechanics.
I'm in agreement with the idea that more building should occur. I'm just cautioning that even if someone destroyed every housing regulation in existence, or even if lots of public housing were built, we shouldn't be surprised if rents remain super high.
In the technology space we're used to seeing costs plummet from year to year. A land title system, by contrast, will predictably see increasing prices over time, while simultaneously extracting a flow of rent.
Why is this? It ultimately comes back to the Law of Rent. The amount that landlords are able to charge directly corresponds to the produce obtainable at that location over their next best alternative... and that alternative is likewise set that way up until you reach the "margin" which is the best available rent-free location.
Since all land has been homesteaded, there's not much of a ceiling on rents... they tend towards the entire nominal productivity of the site. And the more desirable that site is, the more astronomical the rent.
We want locations to be desirable, so in effect we actually do want rent to be high. It's just important that everyone share in that rising wealth. In other words, we need to create a high demand for labor, by shifting taxes from labor onto idle landlords. Land speculators are like patent trolls atop the surface of the planet.