Renegade Economists Show 555
It’s time to look at Hong Kong, a nation often touted as the most economically liberated, but yet people live in caged housing. You may have seen the Vox video on this topic? Well here we discuss from our unique perspective the pathways forward, trying to stay on the middle road.
Like many shows, I wish I had more time on this topic. It is of interest to me as in the film Real Estate 4 Ransom I highlighted HK as a place of note for its low tax system and resultant powerhouse economy. As mentioned in our recent Trickle Up Economics report, any such savings on a more efficient tax system will end up being bidded away in higher land prices.
The land sales auctions by the government should not be a one-off sale. It should be an auction for the leasehold to the land with a yearly land rent due. This land would be valued yearly. In effect the higher land valuations would result in higher leasehold payments. These would in effect tax away the speculative profits attracting so much interest. The acceleration of speculative money into real estate hot spots around the world should be recognised as a contributing factor to HK housing pressures. Hopefully the piecemeal measures announced by the govt were criticised enough for listeners to recognise that there are no short cuts to this global phenomena.
We need to urgently change our form of land tenure. Ownership = commodification = greater debts, less time for family, more vacancies, more sprawl. The solution is to move towards Custodianship of the land via a leasehold system. Land Value Taxes is the most popular (!) term to describe this. Yes it is no zinger, but it is widely respected in economists circles. The political challenge is ours to overcome.
Government would not get as much money upfront but they would be encouraged to open up more land. Revenue shortfalls (if they need any with their healthy budget surplus of HK $138bn) could be supplanted by taking advantage of the record low interest rates and selling government bonds to the market.
I fear more communities will face caged housing in the years to come as climate shifts alongside record inequality and entrenched lobbyocracy act as a perfect storm for life on earth. We need to act! I hope to meet you at our 127th annual dinner.
Here’s the Twitter and watch #LVT, #commons, #rentier.
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