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I've thought about this for a long time. I grew up in a town that had a booming downtown strip for as long as I can remember growing up. Then around 2008 you

I've thought about this for a long time. I grew up in a town that had a booming downtown strip for as long as I can remember growing up. Then around 2008 you started noticing stores closing up. Word on the street was that rent was just too high to make a profit, and a lot of the retailers who had been in the same store downtown for decades closed up shop forever. Fast forward to today, all of those stores and more are shuttered... the rent is still too damn high... and the absentee landlords that own these buildings are actually rewarded with property tax benefits for keeping them EMPTY! How crazy is that? Some rich guy owns almost every single building downtown, is asking $75/foot, and gets property tax breaks when his buildings sit vacant... slowly smothering the downtown vibe with an air of death. The value of his building's keep increasing so he doesn't care. He doesn't live here. IMHO retail properties should be taxed MORE if they sit vacant for too long, and that increased tax burden should go up exponentially every year that the building sits vacant. A vacant retail building should be the landlord's problem, not the town's.

AbrahamParangi 5y ago
Land value taxes are effectively one implementation. Land value taxes necessitate that high-value land be put to productive economic use. I think this is a nice taxation strategy given that land can be considered a common good (and it's finite, and you didn't make it).
- 3pt14159 5y ago
  I agree, but not just on land value. If you adjust the base rate for the land by how wide the plot is on the street you end up with a MUCH more walkable city. It's like a more efficient sorting algorithm, because once you get to the store you need you can just walk right in and find everything you need. Right, like imagine how stupid it is for us to be walking by squares. We have to walk across 25% of the perimeter of every building we go by. If they're thin rectangles then you only walk by, say 5% until you get to the store you need.
  - jaredklewis 5y ago
    At least in theory, an ordinary land value tax would have this effect, as if having street side property is considered desirable by the market, the value of such properties with more would increase. Of course the effect could be amplified by add-on adjustments, but one of the beauties of LVT is the simplicity.
    - 3pt14159 5y ago
      In a dense urban environment the LVT wouldn't cover this case well because the land value of a rectangle of the same area of a square is roughly the same. It's access to the street that is valuable, at least for reasonably sized blocks. This isn't really theoretical, I've been to cities where this type of taxing system was in place and it's completely different than what I find in, say, Toronto where giant big box stores take up a huge chunk of major downtown streets like Queen St.
      - s0rce 5y ago
        A LVT doesn't have to be based on the land area. A plot with more frontage on a busy main street will be more valuable and hence taxed more.
      - fredophile 5y ago
        I don't understand how this would make a difference. The depth of the block is already fixed so the only way to add area is to make your store wider and increase the space it takes up on the street. Taxing width just seems like it would artifically raise the value of buildings on blocks that are deeper if the blocks are irregular enough to have some variation.
- syshum 5y ago
  land value tax (or economic land rent) is normally seen as a REPLACEMENT for all other taxation, not an addition to it. "Land" in economics means natural resources. Land includes three-dimensional space; natural materials such as oil, water, and minerals; wildlife and genetic endowments, and the electro-magnetic spectrum. Nature and natural resources are prior to and apart from human action. I would whole heartily support replacing taxes on Labor (aka income tax), with taxes on economic land, equality and natural moral law implies equal self ownership. Therefore they should fully own their own wages and products of their own labor. However self-ownership does not apply to what a person has not produced namely natural resources aka economic land. I however can not support adding a land value tax in addition to our current tax system
throwaway2048 5y ago
this is visibly happening with retail and commercial properties, but people here swear up and down it absolutely is not happening with residential properties. The incentives are nearly identical.
- sudosysgen 5y ago
  It would be insanely ideologically inconvenient, yet it's a known reality. The only possible solution is to make housing a bad invenstment, but that's too unpopular.
  - ethbr0 5y ago
    You don't have to make it a bad investment. You can differentiate vacant and non-vacant investments. I.e. Vancouver's Vacant Homes Tax (11674) http://bylaws.vancouver.ca/11674c.PDF http://bylaws.vancouver.ca/11674c.PDF
    - harambae 5y ago
      This document is dated only 8 months ago. Is there any evidence it has worked so far? (There's a long history of intelligent people gaming laws, where the original intentions of the law were noble enough.)
  - deleted 5y ago
    [deleted]
dionidium 5y ago
This doesn't make any sense. The value of a lease on these properties vastly outweighs any property tax deduction.
- bfdm 5y ago
  Yes but I think the suggestion is that the taxes ought to (eventually) exceed the gains from asset value growth. We should want active main streets, and discourage squatters with empty space.
  - dionidium 5y ago
    A much better solution is to eliminate the zoning restrictions that lock properties into specific uses and ease the permitting process that makes it hard to convert these empty storefronts into something else (while also discouraging speculation by letting supply naturally grow to meet demand). But, frankly, even if I'm wrong about that, the point of my original comment is that the OPs claims make no sense, because, again, the implication that they can come out better under the current regulations by keeping the units empty is incorrect. It is arithmetically wrong. They would make much more money if they leased the units. So whatever explains these empty storefronts, it isn't this: > Fast forward to today, all of those stores and more are shuttered... the rent is still too damn high... and the absentee landlords that own these buildings are actually rewarded with property tax benefits for keeping them EMPTY! Unless what OP means by "[they're] rewarded with property tax benefits for keeping them EMPTY!" is that they lose money relative to their other options. I don't know why this explanation appeals to so many people; it doesn't survive a second of scrutiny.
- notatoad 5y ago
  you're correct, when considering a single property. the problem happens when an absentee landlord owns a dozen buildings on main street. if a third of their properties are empty and they lower the rent to the point where people will occupy them, it drives down the rent for the other two thirds of their portfolio. if they keep some properties empty to hold the rents artifically high, and they don't have to pay property taxes and management fees on the vacant ones, they can just hold the properties for free while the land value appreciates.
whall6 5y ago
What property tax breaks are you talking about?
- emodendroket 5y ago
  > Bradford brought a vacancy tax to the council in early 2020. Similar measures were put forward at roughly the same time in other areas, including New York, Boston, and Montreal. But many of these efforts are on hold while cities grapple with the impact of the pandemic on their budgets. A vacancy tax sounds like an easy balm to the problem of chronically vacant storefronts, but counterintuitively, cities have instead often given tax rebates to the owners of vacant property. Until recently, Ontario mandated a flat 30 percent tax break to owners whose buildings had been empty for at least ninety days, with no maximum time limit. It was a measure born of the ’90s recession, intended to help ease the effects of economic downturn and falling property values. > While vacancy rebates provided some businesses with a needed reprieve in fiscally difficult times, they were criticized for, in Bradford’s words, “incentivizing owners to keep stores empty while they waited for values to get high enough for redevelopment.” A review ordered by the Ministry of Finance showed that the policy had exacerbated the issue of “chronically vacant” street-level commercial real estate. A well-meaning initiative to help struggling property owners had been thoroughly negated through exploitation and speculation.
  - ethbr0 5y ago
    What is the public good here? I'd imagine: having shops, instead of vacant properties. And extending to residential: having more housing supply. So we want to (1) incentivize landlords to put their property to use, instead of letting it lay vacant & (2) avoid making property owning so risky that no one wants to do it. It seems like a non-use tax + national economic hardship exception takes care of that nicely. Taxes on your limited-supply property (e.g. city cores) increase at 30/60/90/180/360 days of vacancy. Where vacancy is defined on average across a timespan (to prevent resetting timers with faux leases). And then coupled to an external index (e.g. national occupancy rates for property type) that decreases the increased tax if there's a deteriorating economic period. We want it to be financially painful to not have a tenant in your property. To the extent that landlords are incentivized to go to the trouble to offer their property to the public for use.
haram_masala 5y ago
As much as I hate _Kelo vs. City of New London_, I can see the temptation in this case to invoke eminent domain and hand over those vacant properties to another private owner who will put them to good use.
ab_testing 5y ago
I am sorry, but I don't understand this logic. The owner still has to make mortgage and property tax payments on an asset that is not yeilding anything. Sure the value may be growing but how fast is it growing if it is sitting empty. Empty building with no maintenance tend to wear down and often get graffitied and broken into - all of which involves further mitigation costs.
- deleted 5y ago
  [deleted]
- emodendroket 5y ago
  I am not sure what societal benefit we're getting from bailing out failing landlords. It's not as though they're employing a lot of people, or any of the usual justifications we might have for propping up a failing business.
- lumost 5y ago
  Land is an easily leveraged asset. While an individual can only typically borrow 80% of the value, a bank/investment operation could easily leverage the land to 95%+. Given that property is returning 8% in competitive districts, all the landlord really needs is for the property to make better than 3% return to make money from ownership. Actually leasing the property or maintaining it simply adds costs to the arbitrage.
- johnnyApplePRNG 5y ago
  In this particular case, the owner has had full ownership of these properties for over 50 years. No mortgages necessary. The value of the properties have probably increased 10 fold above the rate of inflation in that timeframe. >Empty building with no maintenance tend to wear down and often get graffitied and broken into That's exactly the reason why they should be incentivized to get a proper tenant in there ASAP. I don't want to walk a downtown filled with barred windows and security guards behind every storefront.
- notatoad 5y ago
  >The owner still has to make mortgage and property tax payments they don't have to. if there is no demand for the property in its current state, they can redevelop to a use for which their is demand, or they can sell the property to somebody who will redevelop it.
thaumasiotes 5y ago
> The value of his building's keep increasing so he doesn't care. By what metric? According to you, they're in an area where people don't want to be and there are no renters. If your description is even close to accurate, the value of the buildings is dropping.
- notatoad 5y ago
  the value of the building might be dropping but the value of the land keeps going up. eventually somebody will buy it to tear down and build condos.
  - thaumasiotes 5y ago
    The value of the building drops all the time. The value of the land is also dropping, as described. Loss of foot traffic is a blow to the value of the land, not the building. Who wants a condo in the middle of nowhere? The replace-it-with-condos plan requires the area to be growing, not shrinking.
    - notatoad 5y ago
      We're not talking about the actual middle of nowhere here. There are plenty of towns or smaller cities in the Midwestern US or the Canadian prairie that are still nice places to live but have downtown commercial districts which have shrunk over the last couple decades, and are now adjacent to functional main streets and held vacant by landlords who think commercial tenants will at some point be willing to pay the same high rents again. Amazon, e-commerce, and remote work mean towns can be growing at the same time as their central business districts are shrinking.
- rasz 5y ago
  How would value be dropping if the commercial space has a $100/ft sticker on it and keeps going up. Its the same mechanism putting Tesla and shitcoins valuation on the moon.
  - 5y ago
el_nahual 5y ago
I have never met a landlord that would rather have a building sit empty than renting out to "save on taxes." By definition, the income from renting a property is greater than the taxes one could have deducted, because tax rates are not over 100%. This is sort of the same myth as the "I shouldn't take more money because it will bump my tax bracket" (which makes no sense since tax brackets are marginal)[1]. However, it is true that landlords will often have properties empty with rates at what seems to be higher than the market-clearing price. The only explanation for this I've heard that makes sense is that rents/tenants are bimodal: the average is misleading. There's one group of tenants (cafes, indie hardware stores, hobby shops, etc) can afford one rent, while Starbucks, Citibank, and Panera can afford a second, much higher rent. Which tenant you get is a lottery, so as a landlord it may be short-term beneficial to set the rent at the higher mode and "wait out" a high quality tenant. And yes, long term this can be a collective detriment. [1] Except for things like the EITC, and this was a strong criticism of it.
- deleted 5y ago
  [deleted]
- xhrpost 5y ago
  > By definition, the income from renting a property is greater than the taxes one could have deducted, because tax rates are not over 100%. I think the issue is more with capital appreciation. Yes, month to month you're still losing nominal dollars for not having a tenant, even with lower taxes. However, that land/building are likely still seeing appreciation, even in markets that aren't "hot". Some friends of mine recently bought a building to open a restaurant. I'm pretty sure it had been vacant for more than half its lifetime, yet trying to negotiate with the owner was a nightmare. They simply didn't want to budge and were apparently very content with saying 'No' to offers and letting it sit there for well over half a decade empty.
  - awillen 5y ago
    It still appreciates if it's rented out, so that doesn't change anything. When it's rented, you get appreciation plus income, and when it's not rented, you get appreciation only.
JKCalhoun 5y ago
No word on the street that the big box stores had moved in and captured all the local business?
l33t2328 5y ago
The owner is still paying property tax and not taking any income from those buildings...their value would have to be growing aggressively each year for that to be remotely worth it.
- didibus 5y ago
  I think two things happen, the first is that yes, the value is in fact growing aggressively each year. The second is that eventually, it will find some tenant that are willing to pay double, by choking everyone to eventually accept that rent is just now more expensive than ever. Once that happens you'll quickly recoup the time where it didn't rent.
qaq 5y ago
This is not very accurate you can deprecate the building offsetting the rent income and only pay the tax if you sell the building and do not reinvest into a different property. In reality you can defer taxes indefinitely by just rolling over into the next purchase. If you need the cash you just take out a loan against the property.
syshum 5y ago
it is easy to put all the blame on the land lord, and I am sure they are partially to blame. However in many area's "downtown" is not a good place to be, there is limited parking, little public transit, high crime, high vagrancy, and the city does not spend much in keeping up their end of the bargin either. I know more than a few places that left downtown not because of increasing rents, but because of decreasing customers and other issues with being downtown, they moved a little outside the city core where they can have their own parking lot, their own good signage with out tons of regulations, get deliveries with out issue, etc... and the business boomed. Me personally, I live in the 2nd largest city in my state, I refuse to go to the down town area. There are plenty of businesses down there but there is no parking, higher prices, smaller shops, and it just is not enjoyable to me. I do not like high density...
- golemiprague 5y ago
  Might be true for American cities with their car based suburban structure but it is a complete different situation for European cities.
- 6510 5y ago
  Depends how you define blame. They chose to invest in the area which comes with its risks?
  - syshum 5y ago
    Sure. I am not clear on your point. I am not defending tax breaks just explaining why "downtown" decay is not simply a by product of "greedy evil landlords"
    - 6510 5y ago
      Right. Its not their job to do city planning, they were just looking to invest in something. Its hard to say when one becomes greedy, does trying not to end up in debt count? What does it matter really, motivation changes nothing to the situation.
- 5y ago
minikites 5y ago
>A vacant retail building should be the landlord's problem, not the town's. Some municipalities have a "vacancy tax" to address this. Buildings on good land shouldn't sit idle for years, that's not a good outcome for society.
- 6510 5y ago
  IMHO it should be by specific designation and the tax should be like a fine - for not using it. Say, you can buy a train station but you are going to have trains stop there. Buy a gas station and you are going to sell gas. Buy a store front and there shall be a store. Own farm land? Then farm? It should be like that even if local politics doesn't want it. Anything else makes a mockery of city planning and it could destroy decades of work.
social_quotient 5y ago
The cause and effects can be weird sometimes. Suppose that guy wants a lot for rent but no one can afford it. He either lowers the price (in turn the value of the property) which depreciates the value of the other property owners in the area. Lower values then shakes out eventually in other taxes. So the other route is we end up subsidizing small businesses to pay more for rent than they can afford (or to your point, should be charged). This means you the local resident are footing the bill either with local taxes or a federal subsidy. I don’t have an answer here but these things get complicated quickly. Setting an exponential tax on a vacant property (or any property) sounds like an easy way to drive investors out of the market. Then your downtown is dead either way. Curious other thoughts or maybe a solution to vacant holdings.
andrepd 5y ago
A prime example of a problem solved by Georgism and LVT. Honestly there's something broken with the way fundamental property laws work when we allow something like this.
pabs3 5y ago
It would be interesting if squatting became legal in the USA, or at least just in your town.
Aeolun 5y ago
How can the value of those buildings still increase in an otherwise deserted area. That doesn’t make any kind of sense. Nobody in their right mind would start a shop there, much less for extortionate prices.

AbrahamParangi 5y ago

Land value taxes are effectively one implementation. Land value taxes necessitate that high-value land be put to productive economic use. I think this is a nice taxation strategy given that land can be considered a common good (and it's finite, and you didn't make it).

3pt14159 5y ago
I agree, but not just on land value. If you adjust the base rate for the land by how wide the plot is on the street you end up with a MUCH more walkable city. It's like a more efficient sorting algorithm, because once you get to the store you need you can just walk right in and find everything you need. Right, like imagine how stupid it is for us to be walking by squares. We have to walk across 25% of the perimeter of every building we go by. If they're thin rectangles then you only walk by, say 5% until you get to the store you need.
- jaredklewis 5y ago
  At least in theory, an ordinary land value tax would have this effect, as if having street side property is considered desirable by the market, the value of such properties with more would increase. Of course the effect could be amplified by add-on adjustments, but one of the beauties of LVT is the simplicity.
  - 3pt14159 5y ago
    In a dense urban environment the LVT wouldn't cover this case well because the land value of a rectangle of the same area of a square is roughly the same. It's access to the street that is valuable, at least for reasonably sized blocks. This isn't really theoretical, I've been to cities where this type of taxing system was in place and it's completely different than what I find in, say, Toronto where giant big box stores take up a huge chunk of major downtown streets like Queen St.
    - s0rce 5y ago
      A LVT doesn't have to be based on the land area. A plot with more frontage on a busy main street will be more valuable and hence taxed more.
    - fredophile 5y ago
      I don't understand how this would make a difference. The depth of the block is already fixed so the only way to add area is to make your store wider and increase the space it takes up on the street. Taxing width just seems like it would artifically raise the value of buildings on blocks that are deeper if the blocks are irregular enough to have some variation.
syshum 5y ago
land value tax (or economic land rent) is normally seen as a REPLACEMENT for all other taxation, not an addition to it. "Land" in economics means natural resources. Land includes three-dimensional space; natural materials such as oil, water, and minerals; wildlife and genetic endowments, and the electro-magnetic spectrum. Nature and natural resources are prior to and apart from human action. I would whole heartily support replacing taxes on Labor (aka income tax), with taxes on economic land, equality and natural moral law implies equal self ownership. Therefore they should fully own their own wages and products of their own labor. However self-ownership does not apply to what a person has not produced namely natural resources aka economic land. I however can not support adding a land value tax in addition to our current tax system

throwaway2048 5y ago

this is visibly happening with retail and commercial properties, but people here swear up and down it absolutely is not happening with residential properties. The incentives are nearly identical.

sudosysgen 5y ago
It would be insanely ideologically inconvenient, yet it's a known reality. The only possible solution is to make housing a bad invenstment, but that's too unpopular.
- ethbr0 5y ago
  You don't have to make it a bad investment. You can differentiate vacant and non-vacant investments. I.e. Vancouver's Vacant Homes Tax (11674) http://bylaws.vancouver.ca/11674c.PDF http://bylaws.vancouver.ca/11674c.PDF
  - harambae 5y ago
    This document is dated only 8 months ago. Is there any evidence it has worked so far? (There's a long history of intelligent people gaming laws, where the original intentions of the law were noble enough.)
- deleted 5y ago
  [deleted]

dionidium 5y ago

This doesn't make any sense. The value of a lease on these properties vastly outweighs any property tax deduction.

bfdm 5y ago
Yes but I think the suggestion is that the taxes ought to (eventually) exceed the gains from asset value growth. We should want active main streets, and discourage squatters with empty space.
- dionidium 5y ago
  A much better solution is to eliminate the zoning restrictions that lock properties into specific uses and ease the permitting process that makes it hard to convert these empty storefronts into something else (while also discouraging speculation by letting supply naturally grow to meet demand). But, frankly, even if I'm wrong about that, the point of my original comment is that the OPs claims make no sense, because, again, the implication that they can come out better under the current regulations by keeping the units empty is incorrect. It is arithmetically wrong. They would make much more money if they leased the units. So whatever explains these empty storefronts, it isn't this: > Fast forward to today, all of those stores and more are shuttered... the rent is still too damn high... and the absentee landlords that own these buildings are actually rewarded with property tax benefits for keeping them EMPTY! Unless what OP means by "[they're] rewarded with property tax benefits for keeping them EMPTY!" is that they lose money relative to their other options. I don't know why this explanation appeals to so many people; it doesn't survive a second of scrutiny.
notatoad 5y ago
you're correct, when considering a single property. the problem happens when an absentee landlord owns a dozen buildings on main street. if a third of their properties are empty and they lower the rent to the point where people will occupy them, it drives down the rent for the other two thirds of their portfolio. if they keep some properties empty to hold the rents artifically high, and they don't have to pay property taxes and management fees on the vacant ones, they can just hold the properties for free while the land value appreciates.

whall6 5y ago

What property tax breaks are you talking about?

emodendroket 5y ago
> Bradford brought a vacancy tax to the council in early 2020. Similar measures were put forward at roughly the same time in other areas, including New York, Boston, and Montreal. But many of these efforts are on hold while cities grapple with the impact of the pandemic on their budgets. A vacancy tax sounds like an easy balm to the problem of chronically vacant storefronts, but counterintuitively, cities have instead often given tax rebates to the owners of vacant property. Until recently, Ontario mandated a flat 30 percent tax break to owners whose buildings had been empty for at least ninety days, with no maximum time limit. It was a measure born of the ’90s recession, intended to help ease the effects of economic downturn and falling property values. > While vacancy rebates provided some businesses with a needed reprieve in fiscally difficult times, they were criticized for, in Bradford’s words, “incentivizing owners to keep stores empty while they waited for values to get high enough for redevelopment.” A review ordered by the Ministry of Finance showed that the policy had exacerbated the issue of “chronically vacant” street-level commercial real estate. A well-meaning initiative to help struggling property owners had been thoroughly negated through exploitation and speculation.
- ethbr0 5y ago
  What is the public good here? I'd imagine: having shops, instead of vacant properties. And extending to residential: having more housing supply. So we want to (1) incentivize landlords to put their property to use, instead of letting it lay vacant & (2) avoid making property owning so risky that no one wants to do it. It seems like a non-use tax + national economic hardship exception takes care of that nicely. Taxes on your limited-supply property (e.g. city cores) increase at 30/60/90/180/360 days of vacancy. Where vacancy is defined on average across a timespan (to prevent resetting timers with faux leases). And then coupled to an external index (e.g. national occupancy rates for property type) that decreases the increased tax if there's a deteriorating economic period. We want it to be financially painful to not have a tenant in your property. To the extent that landlords are incentivized to go to the trouble to offer their property to the public for use.

haram_masala 5y ago

As much as I hate _Kelo vs. City of New London_, I can see the temptation in this case to invoke eminent domain and hand over those vacant properties to another private owner who will put them to good use.

ab_testing 5y ago

I am sorry, but I don't understand this logic. The owner still has to make mortgage and property tax payments on an asset that is not yeilding anything. Sure the value may be growing but how fast is it growing if it is sitting empty. Empty building with no maintenance tend to wear down and often get graffitied and broken into - all of which involves further mitigation costs.

deleted 5y ago
[deleted]
emodendroket 5y ago
I am not sure what societal benefit we're getting from bailing out failing landlords. It's not as though they're employing a lot of people, or any of the usual justifications we might have for propping up a failing business.
lumost 5y ago
Land is an easily leveraged asset. While an individual can only typically borrow 80% of the value, a bank/investment operation could easily leverage the land to 95%+. Given that property is returning 8% in competitive districts, all the landlord really needs is for the property to make better than 3% return to make money from ownership. Actually leasing the property or maintaining it simply adds costs to the arbitrage.
johnnyApplePRNG 5y ago
In this particular case, the owner has had full ownership of these properties for over 50 years. No mortgages necessary. The value of the properties have probably increased 10 fold above the rate of inflation in that timeframe. >Empty building with no maintenance tend to wear down and often get graffitied and broken into That's exactly the reason why they should be incentivized to get a proper tenant in there ASAP. I don't want to walk a downtown filled with barred windows and security guards behind every storefront.
notatoad 5y ago
>The owner still has to make mortgage and property tax payments they don't have to. if there is no demand for the property in its current state, they can redevelop to a use for which their is demand, or they can sell the property to somebody who will redevelop it.

thaumasiotes 5y ago

> The value of his building's keep increasing so he doesn't care. By what metric? According to you, they're in an area where people don't want to be and there are no renters. If your description is even close to accurate, the value of the buildings is dropping.

notatoad 5y ago
the value of the building might be dropping but the value of the land keeps going up. eventually somebody will buy it to tear down and build condos.
- thaumasiotes 5y ago
  The value of the building drops all the time. The value of the land is also dropping, as described. Loss of foot traffic is a blow to the value of the land, not the building. Who wants a condo in the middle of nowhere? The replace-it-with-condos plan requires the area to be growing, not shrinking.
  - notatoad 5y ago
    We're not talking about the actual middle of nowhere here. There are plenty of towns or smaller cities in the Midwestern US or the Canadian prairie that are still nice places to live but have downtown commercial districts which have shrunk over the last couple decades, and are now adjacent to functional main streets and held vacant by landlords who think commercial tenants will at some point be willing to pay the same high rents again. Amazon, e-commerce, and remote work mean towns can be growing at the same time as their central business districts are shrinking.
rasz 5y ago
How would value be dropping if the commercial space has a $100/ft sticker on it and keeps going up. Its the same mechanism putting Tesla and shitcoins valuation on the moon.
- 5y ago

el_nahual 5y ago

I have never met a landlord that would rather have a building sit empty than renting out to "save on taxes." By definition, the income from renting a property is greater than the taxes one could have deducted, because tax rates are not over 100%. This is sort of the same myth as the "I shouldn't take more money because it will bump my tax bracket" (which makes no sense since tax brackets are marginal)[1]. However, it is true that landlords will often have properties empty with rates at what seems to be higher than the market-clearing price. The only explanation for this I've heard that makes sense is that rents/tenants are bimodal: the average is misleading. There's one group of tenants (cafes, indie hardware stores, hobby shops, etc) can afford one rent, while Starbucks, Citibank, and Panera can afford a second, much higher rent. Which tenant you get is a lottery, so as a landlord it may be short-term beneficial to set the rent at the higher mode and "wait out" a high quality tenant. And yes, long term this can be a collective detriment. [1] Except for things like the EITC, and this was a strong criticism of it.

deleted 5y ago
[deleted]
xhrpost 5y ago
> By definition, the income from renting a property is greater than the taxes one could have deducted, because tax rates are not over 100%. I think the issue is more with capital appreciation. Yes, month to month you're still losing nominal dollars for not having a tenant, even with lower taxes. However, that land/building are likely still seeing appreciation, even in markets that aren't "hot". Some friends of mine recently bought a building to open a restaurant. I'm pretty sure it had been vacant for more than half its lifetime, yet trying to negotiate with the owner was a nightmare. They simply didn't want to budge and were apparently very content with saying 'No' to offers and letting it sit there for well over half a decade empty.
- awillen 5y ago
  It still appreciates if it's rented out, so that doesn't change anything. When it's rented, you get appreciation plus income, and when it's not rented, you get appreciation only.

JKCalhoun 5y ago

No word on the street that the big box stores had moved in and captured all the local business?

l33t2328 5y ago

The owner is still paying property tax and not taking any income from those buildings...their value would have to be growing aggressively each year for that to be remotely worth it.

didibus 5y ago
I think two things happen, the first is that yes, the value is in fact growing aggressively each year. The second is that eventually, it will find some tenant that are willing to pay double, by choking everyone to eventually accept that rent is just now more expensive than ever. Once that happens you'll quickly recoup the time where it didn't rent.

qaq 5y ago

This is not very accurate you can deprecate the building offsetting the rent income and only pay the tax if you sell the building and do not reinvest into a different property. In reality you can defer taxes indefinitely by just rolling over into the next purchase. If you need the cash you just take out a loan against the property.

syshum 5y ago

it is easy to put all the blame on the land lord, and I am sure they are partially to blame. However in many area's "downtown" is not a good place to be, there is limited parking, little public transit, high crime, high vagrancy, and the city does not spend much in keeping up their end of the bargin either. I know more than a few places that left downtown not because of increasing rents, but because of decreasing customers and other issues with being downtown, they moved a little outside the city core where they can have their own parking lot, their own good signage with out tons of regulations, get deliveries with out issue, etc... and the business boomed. Me personally, I live in the 2nd largest city in my state, I refuse to go to the down town area. There are plenty of businesses down there but there is no parking, higher prices, smaller shops, and it just is not enjoyable to me. I do not like high density...

golemiprague 5y ago
Might be true for American cities with their car based suburban structure but it is a complete different situation for European cities.
6510 5y ago
Depends how you define blame. They chose to invest in the area which comes with its risks?
- syshum 5y ago
  Sure. I am not clear on your point. I am not defending tax breaks just explaining why "downtown" decay is not simply a by product of "greedy evil landlords"
  - 6510 5y ago
    Right. Its not their job to do city planning, they were just looking to invest in something. Its hard to say when one becomes greedy, does trying not to end up in debt count? What does it matter really, motivation changes nothing to the situation.
5y ago

minikites 5y ago

>A vacant retail building should be the landlord's problem, not the town's. Some municipalities have a "vacancy tax" to address this. Buildings on good land shouldn't sit idle for years, that's not a good outcome for society.

6510 5y ago
IMHO it should be by specific designation and the tax should be like a fine - for not using it. Say, you can buy a train station but you are going to have trains stop there. Buy a gas station and you are going to sell gas. Buy a store front and there shall be a store. Own farm land? Then farm? It should be like that even if local politics doesn't want it. Anything else makes a mockery of city planning and it could destroy decades of work.

social_quotient 5y ago

The cause and effects can be weird sometimes. Suppose that guy wants a lot for rent but no one can afford it. He either lowers the price (in turn the value of the property) which depreciates the value of the other property owners in the area. Lower values then shakes out eventually in other taxes. So the other route is we end up subsidizing small businesses to pay more for rent than they can afford (or to your point, should be charged). This means you the local resident are footing the bill either with local taxes or a federal subsidy. I don’t have an answer here but these things get complicated quickly. Setting an exponential tax on a vacant property (or any property) sounds like an easy way to drive investors out of the market. Then your downtown is dead either way. Curious other thoughts or maybe a solution to vacant holdings.

andrepd 5y ago

A prime example of a problem solved by Georgism and LVT. Honestly there's something broken with the way fundamental property laws work when we allow something like this.

pabs3 5y ago

It would be interesting if squatting became legal in the USA, or at least just in your town.

Aeolun 5y ago

How can the value of those buildings still increase in an otherwise deserted area. That doesn’t make any kind of sense. Nobody in their right mind would start a shop there, much less for extortionate prices.