Location Value Covenants vs Mortgages

Location Value Covenants are operated in a similar way to mortgages, and have the same kind of incentives, and even the same administration.

The key differences are:

 Mortgages LVCs
 Payment received by banks Payment received by government
 Liability on person Liability on landowner
 Index linked to interest rate Index linked to local land values
 Repaid over time Perpetual

In practice, these differences are minor.  You make monthly payments as a property owner through a bank.  The amounts vary automatically according to the index linking rule.  You can arrange either through a bank.

Location Value Covenants are a way of collecting the economic rent of land for public purposes.  Currently much of it goes to private purposes (ie the banks).

By making an LVC a liability on the landowner, it becomes unnecessary to "churn" the agreements as ownership changes hands.  Mortgages are paid off and recreated by the new owner, making work for banks!

By indexing the payments to local land values, owners have a much more stable payment - land rents are more stable than interest rates.

With a mortgage, the money is created out of nothing by the banking system.  With an LVC, the money is created out of nothing by the government.

Swapping out the vast majority of mortgages in the UK is practicable. Location Value Covenants offer better deal than mortgages because:

*   much less bank infrastructure to support
*   no interest is paid by government on new money created
*   more stable payments for home owners
*   lower initial payments

In summary:  The LVC "cuts out the middleman" of the mortgage system.  Banks function of creating new money and collecting land rent off owners through variable interest is deeply damaging to the economic system.  Land Value Covenants are a direct "slot-in" replacement for bank mortgages in the existing economy.  Land Value Taxes *cannot* serve this transitional role.

Location Value Covenants are the "Prosperity Pill" we've all been looking for!
Comments