Bayard posted this a few weeks ago. He didn't present it as an argument against LVT but said it was not necessarily an argument for, nut nonetheless, it is clearly incorrect:
The argument for LVT "... the private collection of rent is not only economically imprudent because it periodically destroys the economy, it is wrong!"
Leaving aside the periodic destruction of the economy, I don't think that it is a valid argument for LVT that it will be an instrument of social justice. This idea has quite some traction, especially amongst the ranks of the class warriors and ties into the populist landlord-bashing cause of enduring appeal.
His argument seems to be that rents will just increase, leaving tenants and first time buyers no better off, i.e. no improvement in 'affordabiity', however defined.
Let's forget vague terms like "social justice", let's just think about the most important measure of inequality - people's disposable incomes after paying rent/mortgage.
There are two scenarios which illustrate that in an LVT-world, most people's disposable incomes after housing costs would increase considerably, it just requires a bit of imagination:
Back in 1900 or so, only a few people were owner-occupiers and everybody else rented from a few private landlords. This clearly leads to massive inequality, as the tenants are left over with the bare minimum and few landlords live the life of Riley.
Fearful of a Socialist revolution, councils started building social housing, which was much cheaper and/or better than what private landlords were prepared to offer; and for most of the 20th century, UK housing policy had the aim of squeezing out private landlords, as a result of which by 1980 or so, 70% of households were owner-occupiers; 30% were council tenants and only 10% rented privately.
The council housing was more a Labour thing, and increasing the number of owner-occupiers was more a Tory thing, but they were both good stuff and worked well in tandem.
The 1970s position is a combination of two possible trajectories.
1. From 1900 on, councils could just have built enough social housing for everybody, constantly under-cutting private landlords until all households were in government-owned housing (like in Singapore). In the UK, council rents were below market rents. The land rent element, which would have been used to pay a Citizen's Dividend was not collected in the first place. From a council tenant's point of view, it comes to much the same thing whether he pays £80 a week for the bricks and mortar cost (below market rent), or pays full market rent £200 a week (to include the land/location element) and his household gets a Citizen's Dividend of £120 a week.
That £80 a week is clearly very affordable for all but the poorest couple of percent. The rest of your income is yours to spend on nice stuff!
2. If they'd kept rent/mortgage caps and high taxes on rental income in place, house prices would have been stayed at just above rebuild costs and all households ended up as owner-occupiers. Apart from a few years paying off the mortgage on the rebuild value (not land rent), owner-occupiers are benefitting from location rents without having to actually pay for them; again, that rent/mortgage saving is like a Citizen's Dividend.
Once you have paid off the small mortgage, the rest of your income is yours to spend on nice stuff!
Therefore, with LVT in place, whether it is used to reduce other taxes or paid out as a Citizen's Dividend, we would all effectively be somewhere in between council tenants and owner-occupiers; the net housing cost is reduced to little more than the bricks and mortar cost of housing (just like it is for council tenants and owner-occupiers with a small or no mortgage).
There is no point arguing that 'landlords will put up the rent'. If they do, then LVT receipts will go up accordingly, and taxes on earnings and output will go down and/or Citizen's Dividend will go up, leaving most households entirely unaffected in net terms.
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