VALUE  OF  LAND  AN  UNTAXED  VALUE  43

that  fixes  the  price  of  land.  Economic  rent  is  the
initial  and  governing  factor  from  which  all  calculations
must  proceed.
second:  the  house
Proposition  6.  —  The  lot  having  been  acquired,  let  it
he  supposed  that  you  are  in  need  of  a  house,  and  that
such  a  house  as  you  want  would  cost  to  build  $6,000,
or,  in  interest,  $300  a  year,  the  same  as  the  annual  cost  of
the  land.
(a)  You  will  observe  at  once  that  the  problem  of
the  house  is  quite  different  from  that  of  the  land.  The
cost  of  acquiring  land  depends  primarily  upon  its
rent.  Conversely,  the  rent  of  a  house  depends
primarily  upon  its  cost.  Builders  will  not  build
houses  unless  they  can  get  interest  on  the  cost  of
construction.  Competition  among  builders  will  not
allow  one  builder  normally  to  get  more  than  interest
°n  cost  of  construction.
Proposition  7.—  If  such  a  house  were  free  of  tax,  but
mortgaged  for  $2,000,  it  would  cost  you  to  buy  only
I4.000,  and  it  would  cost  you  to  use,  as  in  case  of  the
land,  interest  on  purchase  price  (4,000  at  5  per  cent)
I200,  plus  interest  on  mortgage  ($2,000  at  5  per  cent)
1100,  making  $300  as  before.
(a)  The  mortgage  upon  a  house,  like  that  upon
land,  will  add  nothing  to  the  cost  of  the  house  for  use.
Proposition  8  —  But  you  find  that  such  a  house  is
subject  also  to  a  tax  of  1100,  which  you  will  have  to  pay
l n  addition  to  the  above  $300,  interest  on  purchase  and
mortgage,  making  the  house  cost  you  for  use  altogether
$400,  instead  of  $300  a  year,  or  $100  more  on  account
°f  the  tax.