7 ms·
We might get a lot, but it likely won’t be enough. Many land owners would already prefer to leave their buildings empty for years over even considering negotia
by fiblye 7y ago
We might get a lot, but it likely won’t be enough.
Many land owners would already prefer to leave their buildings empty for years over even considering negotiating on rent. I doubt anything can change their minds.
- social_quotient 7y agoIt’s odd but really true. Does anyone have insight why this is the case?
- Kluny 7y agoAccording to Strong Towns, it's because the building can borrow money based on the projected value of rent. If they lower the rent, they can't borrow as much money. https://www.strongtowns.org/journal/2017/11/27/the-paradox-of-persistent-vacancies-and-high-prices https://www.strongtowns.org/journal/2017/11/27/the-paradox-o...
- opportune 7y agoAt an aggregate level it can make more sense to leave X% of units vacant than to lower prices (which could have effects on the rate you can charge with the rest of your units). I think it’s an example of our financial system not working as intended. For example let’s say I have a 100 unit apartment building. If I maintain a 20% vacancy rate target I can charge an average of $1000/mo/unit. But to set a price at which my vacancies get filled very quickly, to hit a 5% vacancy rate, maybe I need to charge $700/mo/unit. In that case I’m making less money than before - $80k/mo vs $66.5k/mo.
- leetcrew 7y agowhy wouldn't you just price discriminate through short-term concessions to fill the remaining 20% and increase revenue? this seems to be what most apartment buildings around me actually do.
- opportune 7y agoThat is what people do sometimes (esp. in SF where you'll get "2 months free rent"). But I think in commercial real estate the math is a bit different because leases tend to be longer - so you really don't want to budge on the actual monthly rate and even 1-2 months free doesn't end up helping the prospective tenant that much
- majormajor 7y agoWe need taxes on vacancies. Encourage people to let property go to people who can put it to some use. Prevent blight and crime, etc, too.
- lmm 7y agoPut a land value tax in place, and then the incentive to hold property for speculation goes away, in favour of selling it to people who can use it productively.
- WalterBright 7y ago> Put a land value tax in place We already have that. I pay huge property taxes every year and so does everyone else who owns land.
- lmm 7y agoNot the same thing. Property taxes based on the improved value of the land create a perverse incentive to avoid making improvements, and California prop 8 and similar laws encourage people to hold property as long as possible rather than sell to people who could make better use of it.
- umeshunni 7y agoAh yes, the California solution to everything - tax it.
- maest 7y agoHonest question - should taxes be abolished?
- groby_b 7y agoHonest answer: No, because that would mean to return to Hobbesian world. Taxes are a way to pay for communal goods. We don't pay enough of them - our obsession with cutting them is part and parcel of the disastrous response to SARS2-CoV. I very much like having a government that can step in during emergencies and distribute the load. I like living in a society where we care about other people to. Abolishing taxes is strictly "me first, fuck the rest". I suggest people who like this approach try living in Somalia for a while, that's their desired end state.
- WalterBright 7y agoNot if they're short on cash, which they will be with this panic.
- leetcrew 7y agothey prefer to leave the building empty in anticipation of a higher priced long-term lease in the future. if you're already renting space to a profitable business that was stable before the crisis, the incentives are probably to work out an arrangement with the business that helps it not go under. now if you're already unsatisfied with the current tenant, you might see now as a good opportunity to kick them out and wait for someone willing to pay a higher price.