Canada’s housing debate has a giant blind spot: Land rents
There is a blind spot the size of Canada's housing crisis in the debate that virtually no politician or pundit is talking about: unearned income from the rent of land.
In simpler terms: land owners collecting wealth from the community without work, while we tax the snot out of workers. The proper and efficient solution is of course to shift taxes away from work and onto land.
Recently, prominent Canadian economist and housing expert Mike Moffatt went public on land value tax and shared a number of thoughtful, if short-sighted, critiques. But as this article in Canadian Dimension highlights, Moffatt chose not to address unearned income from land whatsoever, despite it being a central motivation for LVT. He is not alone here; the unspoken consensus in the housing debate today seems to be to avoid this topic altogether. Perhaps, as the article title suggests, it is ‘unmentionable’.
The author of this article, community wealth advocate and artist Colin Anthes Bruce, writes:
Moffatt never mentions unearned income from land rent once in the entire podcast...
He is a good actor, and I would like to see him be a great one. Indeed, the reason his example is so revealing is because he is good: if even he is missing the point—not disagreeing with the point; simply walking right past it—it is because he is surrounded by an ocean of economists that are doing the same.
That is very big trouble for the rest of us. [emphasis added]
The discussion of land rents today remains largely confined to academia/policy papers and curiously absent in the public conversation. Canadian economists Green, Kesselman and Tedds are a few of the modern academic voices writing about this. They assert in one paper: "In B.C. the greatest source of economic rents is the value of land in urban areas...taxing rents is economically efficient, capturing the excess value for the benefit of society without affecting economic signals."
If we’re serious about addressing the broken incentives at the heart of the housing market, we should not shy away from talking about the housing crisis as what it is: a land crisis. Housing policy that is silent on this is just sidestepping the central issue plaguing the housing system. The article explains why this is imperative:
A system that treats unearned rentier income as legitimate earnings inevitably eats itself. In a version of Gresham’s Law, the bad pushes out the good. The private extraction of land value doesn’t just produce a crisis for housing, but virtually everything across the political spectrum that can be useful: on the right it is an obstacle to capitalist businesses that actually produce goods and services; on the left it is an obstacle to cooperatives, community organizations, and intergenerational fairness; to both it is inflationary since prices must rise to cover its costs.
This is a superb essay by one of Canada's emerging writers on the land crisis and a must-read for anyone seriously interested in housing:
