6 ms·

This is a great reason to have a local-level tax on vacant space. Both commercial and residential.

• monocasa 7y ago
  Meanwhile, here in my town, the landlords run the place and got the opposite passed. Commercial retail properties are exempt from property tax while the property is vacant.
  • taurath 7y ago
    That sounds crazy - I wonder if that causes more or fewer derelict properties.
    • monocasa 7y ago
      More. What they do is double the rent on businesses when their contract is up, and leave the derelict properties up as an example to the other businesses of "you have no negotiating power. We'll just leave the property empty if you don't pay up because it only has an opportunity cost"
• slavik81 7y ago
  A vacancy tax seems weird to me. It's effectively the same thing as a higher property tax, but with a discount for non-vacancy. That is, a discount for putting anything in that space. I just don't see why you would give out a discount without ensuring the use of the property is doing something that provides a public benefit.
  • drb91 7y ago
    > I just don't see why you would give out a discount without ensuring the use of the property is doing something that provides a public benefit. Public benefit and the profit margin are inversely correlated. The idea that you can encourage any benefit without having public competition is laughable. There is no market effect that can encourage people to care about the public benefit over profits. The key is to remove the landlord from the equation entirely and de-commodify real estate, especially residential real estate.
  • abathur 7y ago
    I've been mulling this a lot for a while now. I see so much vacant space and wonder how much of a boon it would be to small entrepreneurs and communities if the market were optimizing for filling a larger share of rental space. I suppose it might be disappointing if the rents dropped and all it lured in were payday loan shops, and I imagine any tax enough to effect behavior will also induce some landlords to just fake occupancy to dodge the tax without the liabilities/risks of an additional business running onsite. I'm a little skeptical (but maybe not pessimistic?) about how plausible it is to engineer public-benefit outcomes for this kind of space?
  • 4ntonius8lock 7y ago
    The way I see, to care for vacant property, you need police, roads, and a ton of infrastructure. This is also needed for property that is used. A non-vacant used property will provide a city with money in the form of sales taxes, jobs, growth, fees and in general prosperity. A town with a ton of small independently owned shops and restaurants (a side effect of forcing property on the market) is more attractive than one with strip malls filled with franchises. It will make people want to live there and drive prices up. Why should a vacant property pay the same tax? It's taking up the same and paying less, in fact, in many cases, the vacant property is pulling down the value of the city. It's only fair for the vacant property owner to have to pay to blight his community. Such an arrangement is dealing with externalized costs, which is one of the best functions of government.
    • akincisor 7y ago
      Does this same logic apply to promote a Wealth Tax on people who have wealth that's being hoarded?
      • a1369209993 7y ago
        Assuming you're talking about money, actually no. Money doesn't have any associated geometry or topology, ie one bit of money, unlike land, is pretty much equivalent to another. It would be like "hoarding" a bunch of land in the middle of nowhere: only a problem if you're taking up a significant fraction of the global supply.
      • 4ntonius8lock 7y ago
        Nope. You hoarding wealth won't make the neighborhood less appealing. The hoarder is not free loading. New wealth can be created, we don't need yours. If your investment real estate is contributing $1/square foot in property taxes but everyone else's occupied property is contributing $5/square foot in wages, sales tax, property tax and municipal fees... then it makes sense to charge the free loaders. This isn't even dealing with the blight and community development points. Just from a financial perspective it makes sense.
    • RaceWon 7y ago
  • bluGill 7y ago
    Vacant property needs more police and fire protection. When someone is there they keep the "riff-raft" out.
  • jdreyfuss 7y ago
    Vacant properties have a lot of negative externalities -- higher safety risks, reduction in the quality of a neighborhood and in foot traffic (harming other businesses), higher incidences of squatting/homeless encampments, etc. A vacancy tax is an attempt to correct for those externalities and encourage better behavior from landlords. This is a situation where just having something is noticeably better than nothing at all.
• lamarpye 7y ago
  That sounds like a great way to slow down real estate development. Make sure there is an additional cost if you oversupply the market.
  • ricardobeat 7y ago
    Sounds good. Careful, controlled growth is always better.
    • lamarpye 7y ago
      Really? Why is it always better? Does this rule only apply to real estate?
      • xtian 7y ago
        Why is uncontrolled growth better? Seems like it most often leads to waste. In the real estate context this manifests as ugly, unlivable spaces which become derelict as soon as the frenzy passes.
        • lamarpye 7y ago
          I didn't say uncontrolled growth was better, I said a vacant building tax would slow or restrict new development. Of course there is waste, this is part of the cycle of boom and bust. The people that mistime the market will overbuild and lose their investment. When the frenzy passes, house may stay empty, but the market will adjust. Fewer new houses will be build and people who stayed out of the market will have a chance to buy at cheaper prices.
          • xtian 7y ago
            You can argue the degree to which growth is controlled but the alternative to “careful, controlled growth” is uncontrolled growth.
            • 7y ago
• _red 7y ago
  Instead of being a defeatist, why not just invest in a REIT on Etrade and join the party?
  • mywittyname 7y ago
    I think the OP is considering social goods, not personal profit. Society benefits greatly from having low rents.
  • zwkrt 7y ago
    What a horrible, misanthropic viewpoint!
  • FakeComments 7y ago
    The return from a REIT is negative when property values collapse due to social breakdown. I want long term growth on a multi decade scale, ergo, I have to take lower immediate returns to support the ecosystem which generates those returns. Your view is myopic, not perfectly rational. And is an example of what goes wrong with hill climbing algorithms: local gradients can lead to globally unwanted outcomes.
• SkyBelow 7y ago
  Why not tax the place based on the land value regardless of how it is being utilized? If there are too many vacancies then it would indicate the tax is too low and should be raised (or that the valuation of the land needs to be redone).
• User23 7y ago
  Problem is if landlords lower rents it reduces the computed capital value of the property. If there’s a mortgage this will trigger Bad Things. Btw I also think excessive rents are strangling society, but it’s not as simple as it seems to fix.
  • vageli 7y ago
    > Problem is if landlords lower rents it reduces the computed capital value of the property. If there’s a mortgage this will trigger Bad Things. > Btw I also think excessive rents are strangling society, but it’s not as simple as it seems to fix. But if the property is vacant, isn't the effective rent $0? I have no experience with commercial mortgage lending and appreciate more details on the Bad Things and why they don't occur without repricing rent.
    • User23 7y ago
      I'm not an expert on the subject, but I did learn this from a banker who is. So here's a simple and hopefully not too wrong description. Commercial real estate is an investment property, and it's expected to return some percentage. For argument's sake let's just say 5%. So if the rent is reduced, that expected return holds constant, meaning the capital value of the building drops proportionately. With a mortgage, this can bring the owner into negative equity, and banks really dislike that in commercial real estate. On the other hand, if a space is empty, but for lease at "market rate" then that continues to be the value used for computing the capital value of the property. Of course this means in some cities you have entire blocks with half the store fronts for lease at "market rate" sitting there for years. This is clearly lousy for everyone, so these perverse incentives ought to be fixed, but to be honest I have no idea how to do that practically and equitably.
      • vageli 7y ago
        From your description, commercial real estate sounds like a bubble waiting to burst, in that vacant properties exist to prevent the mortgage from going underwater to protect the property owners.
• mruts 7y ago
  That’s a pretty terrible idea. Sure, maybe in Manhattan where the economy is good that would work, but in less prospereous places that’s just regressive and will cause the economy to get into a death spiral. Here’s how that would work: 1. A couple stores owned by a landlord close down due to a recession or something. 2. Landlord has to keep the vacancies for awhile while he finds other renters. 3. He get’s levied the extra taxes due to the vacant properties. Now he really needs to get it off his books or find a renter. 4. He can’t find a renter because the economy is bad. So he tries to sell the properties. 5. He either doesn’t sell it, or sells it a big discount because the buyer needs to price in the tax premium. 6. Rinse and repeat.
  • vageli 7y ago
    > That’s a pretty terrible idea. Sure, maybe in Manhattan where the economy is good that would work, but in less prospereous places that’s just regressive and will cause the economy to get into a death spiral. > Here’s how that would work: 1. A couple stores owned by a landlord close down due to a recession or something. > 2. Landlord has to keep the vacancies for awhile while he finds other renters. > 3. He get’s levied the extra taxes due to the vacant properties. Now he really needs to get it off his books or find a renter. > 4. He can’t find a renter because the economy is bad. So he tries to sell the properties. > 5. He either doesn’t sell it, or sells it a big discount because the buyer needs to price in the tax premium. > 6. Rinse and repeat. If this is truly "rinse and repeat", since each subsequent sell results in a price discount, wouldn't the price eventually settle on what the market can bear?
    • mruts 7y ago
      Look at Detroit, where the government was giving away houses for $50 (literally).