> I'm not talking about long-term, but the initial effect of LVT coming into effect. If the landlord has to pay more then that's an increase in cost.
Right, but how does that lead to less housing? It's not like the landlord would stop renting the apartment and just hold it empty right after an LVT is implemented, since they would to pay the LVT either way. Most likely, the landlord would sell the building and land to someone else, who would then develop it to something that would provide enough income to cover the LVT obligations (say, a taller apartment).
Your claim also assumes that the LVT will be greater than the current property tax obligations. I don't think that's a given. The LVT for buildings that are using land efficiently probably would be lower, since the would no longer have to pay tax on the building (which is higher for a multi-unit building compared to a SFH).
As a side note, I am in favour of the government providing a subsidy to current landowners when a LVT is implemented, to compensate them from the lost land value (essentially "buying them out"), but I don't think that would be economically necessary.
> It might make sense to turn that housing into something else.
Yes, this is a possibility. But if that happens, then it's a sign that the demand for new housing is a low, so it makes sense to not build new housing (or convert existing housing). In regions where there's a housing shortage, a developer would be able to make a large profit building new housing, and thus would do so.
A housing shortage doesn't necessarily mean that new housing would be more profitable than something commercial. I do agree that this would encourage landowners to improve their buildings more in theory. I'm from a country that has a land value tax and frankly it just doesn't matter much. Maybe I just haven't seen the distorting effects that property taxes have.
Right, but how does that lead to less housing? It's not like the landlord would stop renting the apartment and just hold it empty right after an LVT is implemented, since they would to pay the LVT either way. Most likely, the landlord would sell the building and land to someone else, who would then develop it to something that would provide enough income to cover the LVT obligations (say, a taller apartment).
Your claim also assumes that the LVT will be greater than the current property tax obligations. I don't think that's a given. The LVT for buildings that are using land efficiently probably would be lower, since the would no longer have to pay tax on the building (which is higher for a multi-unit building compared to a SFH).
As a side note, I am in favour of the government providing a subsidy to current landowners when a LVT is implemented, to compensate them from the lost land value (essentially "buying them out"), but I don't think that would be economically necessary.
> It might make sense to turn that housing into something else.
Yes, this is a possibility. But if that happens, then it's a sign that the demand for new housing is a low, so it makes sense to not build new housing (or convert existing housing). In regions where there's a housing shortage, a developer would be able to make a large profit building new housing, and thus would do so.