Tuesday, February 14, 2017

Political Superstitions (part 4): Gentrification and Identity Politics

This is a somewhat obscure topic that is of exclusive concern to the left, since the right dismisses it entirely, that despite being controversial is shrouded in superstition. Merriam Webster defines gentrification as the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents. It is most often viewed through the lens of identity politics as wealthy young whites displacing minorities from traditionally minority neighborhoods because they can no longer afford the rent. The solutions prescribed range from rent control to subsidized housing all of which merely address the symptoms.

The difficulty arises when rent is spoken of as a single unit instead of a composite. Rent in its common usage refers to both interest payments for the use of a building and rent for the use of a specific site or location. The latter is economic rent. Property values are a combination of the value of the building or any improvements to the land (e.g. drainage, pavement, water supply) and the rental value of the land that arises from demand for a fixed supply of it (e.g. amenities and proximity to business district). The law of rent stipulates that increases in population density, growth in commerce, improvements in education, improvements in infrastructure and basic government services like policing all add to the rental value of land and drive up the cost of living, especially housing. The unintended consequence of urban renewal is that wages are consumed by incrementally growing rent, as their purchasing power decreases in proportion to rent. A lower margin of production, the floor of wages, would inevitably hit the lowest income earners the hardest.

A single tax on land rent would raise the the margin of production, providing higher wages, and recapture the value added by public services and private businesses for public expenditure. Unlike property taxes and sales taxes, a land value tax would not be passed onto tenants and consumers because they are not paying for a good or service, but a government granted monopoly that is fixed in supply. This concept is not new. Cities that charge parking rates on busy streets already levy a form of land value tax. Similarly, states that require hunting and fishing licenses are levying a form of land value tax and countries such as Australia, New Zealand, Estonia, Canada, and Norway already have them at either the local or national level, though none recapture all rents.

Side Note: To ensure each person’s natural right to use the earth, a citizen’s dividend could be funded from the surplus revenue providing low income tenants with a non-paternalistic dole instead making them dependent on a plethora of social services.

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