How the Property Tax System is Impacting Housing Shortage

The Wall Street Journal recently shared how the low property tax rates for undeveloped land may be keeping some landowners from developing those parcels.They illustrate the low rate paid for vacant land by a parcel in Austin, TX that has been used as a parking lot for many years. The owners earn revenue from the parking and because the land is unimproved, their tax rate is substantially lower than nearby properties that contain buildings. Austin used to be an affordable town with plenty of housing, but it has become a boom town in recent years, resulting in a housing shortage. There are plenty of vacant lots, but owners of those lots are reluctant to build.A proposal from tax reform experts is to increase the tax rate on vacant land and decrease the rate on improved parcels, resulting in the same revenues for municipalities, but shifting the burden.Pittsburgh has adopted this taxation plan and it resulted in more construction activity, but it's not politically popular and developers tend to think it wouldn't make that much of a difference. Detroit is currently considering adopting it, stay tuned.You can watch this episode from WSJ on YouTube here.