Betterment

In real estate, betterment (making better) is the increased value given to real property by causes for which a tenant or the public, but not the owner, is responsible; it is thus of the nature of unearned increment. When, for instance, some public improvement results in raising the value of a piece of private land, and the owner is thereby bettered through no merit of his own, he gains by the betterment, and many economists and politicians have sought to arrange, by taxation or otherwise, that the increased value shall come into the pocket of the public rather than into the owner's.

A betterment levy or betterment tax would be assessed in order to divert from the owner of the property the profit thus accruing unearned to him. The whole problem is one of the incidence of taxation and the question of land values, and various applications of the principle of betterment have been tried in the United States and in England, raising considerable controversy from time to time.[1]

Prevention of real-estate bubblesEdit

 
Preventing Real Estate Bubbles

Germany managed to prevent a real-estate bubble when all others have experienced it thanks to its 10 years at length and 50% at valuation real-estate betterment tax: the German Betterment-Tax Law [de]. Speculators are the main driver of real-estate bubbles. They borrow fiat money from the banks and invest it whenever they think the market can still go up. There's no effective limitation on how much money they can borrow or on how much the banks can lend them. This is a clear example of how prices are detached from actual need for the underlying asset.

Speculators typically invest when the market is low, thus holding down the speculators for the entire duration of the economic cycle, of at typically 10 years, forces them to pay interest on that money throughout that period and further during the following up-cycle i.e. at least 15 years altogether. This impediment keeps the real-estate market stable at affordable prices.

In Latin AmericaEdit

In Colombia, a betterment levy (called contribución de valorización) has been applied since 1921. The model applied depends on the city. The "Bogotá model" of betterment levy reflects more a general tax to cover the cost of specific public works. In the "Medellín model", it's more a participation in the surplus value generated by public works.[2]

ReferencesEdit

  1. ^   One or more of the preceding sentences incorporates text from a publication now in the public domainChisholm, Hugh, ed. (1911). "Betterment". Encyclopædia Britannica. 3 (11th ed.). Cambridge University Press. pp. 831–832.
  2. ^ "Evaluación de la contribución de valorización en Colombia". Lincoln Institute of Land Policy. Retrieved 2021-04-03.

External linksEdit