the rent is already priced to the maximum of purchasing power of the local renters ability.
if landlords were able to raise rent, they would have done that already as its pure profit for them. The fact that they can't, means they will have to eat any marginal tax imposed on them
The author makes the comment about the land value tax not being able to be passed on to renters in the context of comparing it to a property tax.
If I’m understanding the argument you’re making here correctly, wouldn’t what you’re saying be equally true for a property tax?
I’m not saying you’re wrong, but I don’t think the author would agree with your point since I don’t see how your argument could be true for a land tax, but not for a property tax.
costs are irrelevant here, imagine there was no tax hike, but just landlords decided to be greedy.
if they hike rents, whoever is more inelastic will eat the rent increase to the degree of her inelasticity.
the cost increase is shared between renters/landlords in the ratio of their elasticities. Whoever is more inelastic, will eat the cost.
Inealstic renters will pay up increased rent (like techbros in SF are eating up all rent increases).
Elastic renters will get up and move to Texas, if renter swill hike rent.
Elastic landlords will lever down and decrease number of low margin properties like rent-controlled properties, or unprofitable properties.
Inelastic landlords will eat the taxes and take a hit to profitability.
> The fact that they can't, means they will have to eat any marginal tax imposed on them
My company rents a space in a commercial lot, and the contract states the property tax is split among the tenants. It's separate from the rent.
Apparently this is common in commercial settings. I wouldn't be surprised to see this start happening for consumers.
some tenants who are on the margin of profitability will decide to close shop/relocate to Texas, which will free up rental space and drive down the prices
Landlords are competing with each other, and renters can take their next best alternative. If everything gets strictly more expensive, the next best alternative is not necessarily any cheaper...
if everyone raises rents by a certain percentage trying to recoup taxes, this will be equivalent of Supply line shifting up by the amount of tax in Economics 101 terms.
From economics we know that increase in cost is split between Landlords/Renters in accordance to their elasticities. Whoever is more elastic - will eat the tax.
the cost increase is shared between renters/landlords in the ratio of their elasticities. Whoever is more inelastic, will eat the cost.
Inealstic renters will pay up increased rent (like techbros in SF are eating up all rent increases).
Elastic renters will get up and move to Texas, if renter swill hike rent.
Elastic landlords will lever down and decrease number of low margin properties like rent-controlled properties, or unprofitable properties.
Inelastic landlords will eat the taxes and take a hit to profitability.