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.