7 ms·

It’s pretty simple, and the same reason a lot of people don’t understand real estate. RE isn’t an efficient market. In this case they are hinting at collusion b

It’s pretty simple, and the same reason a lot of people don’t understand real estate. RE isn’t an efficient market. In this case they are hinting at collusion but ultimately it doesn’t matter. Prices can remain elevated without any form of collusion. Most of these properties in rich metros are being held by people as a place to park cash. Having tenants to deal with is an annoyance. If you want an effective but controversial solution, make it easier to evict people. With less risk of deadbeats, landlords would be more willing to open up supply and not hoard vacant units.

adgjlsfhk1 4y ago
or more simply, put a tax on empty units so there is pressure to rent.
- hyuuu 4y ago
  in order not to get rented, they will list high rent prices + 750+ credit scores. Easy eviction makes the market more fluid, thus higher competitions because the supply will be more readily available. What I just said does not really matter because politicians will put forth failed policies like rent control or empty unit tax that does not help with the supply at all, BUT, it does help them to get votes at the expense of long term damage to the housing market. Singapore solved housing, New Zealand solved housing, both times by increasing supply.
  - jonfw 4y ago
    Nobody will try to avoid finding renters if it costs money to not have a renter
    - dh2022 4y ago
      I happen to own a couple rental properties. I can assure you that I avoided renters with low credit score and high rent / income ratio. Even if it took longer (months longer) to find a renter, is better to wait for someone solid than rent to someone who may trash the place, be late on rent, etc....
      - runnerup 4y ago
        > I happen to own a couple rental properties. I can assure you that... And I can assure you that you weren't directly responding to GP's proposal. If your property tax was 1.5% per month for every month that the unit was unoccupied, you'd find renters ASAP. There's no way you'd leave a $500,000 property unoccupied for a year if it cost you $100,000 in taxes to do so. Yes, we also need default YIMBY laws to make it easier to add new high-quality units. But in addition, we can immediately free up unutilized units with an empty-unit tax of 1.5% per month.
        Atheros 4y ago
        It would be vastly cheaper for us as a society to not do the vacancy tax at all and just build an extra X units where X equals the number of vacant units. Society would get to continue collecting the millions of dollars in annual property taxes on the vacant units without providing any city services because no one lives there. It's free money. Separately, the enforcement cost of your idea makes it untenable. The law would have so many loopholes, it would be and stay toothless for decades. Even if we assume for the sake of argument that it actually worked and the rate of empty units went to nearly 0%, it would warp the real estate market so much it would eliminate all benefit: because there would be fewer people looking for apartments (because they are housed in the previous vacant units), fewer new buildings get built. After a decade prices would be back to where they are now except that now it would be more of a headache to find an apartment because the vacancy rate is 0%.
        runnerup 4y ago
        I'd be fine also just doing a flat increase of property tax (preferably something slightly more towards a land-value tax). There should be more pressure to make sure real estate assets are being re-invested into the economy rather than hoarded for passive deflationary gains. As mentioned, we also need to make it easier to build lots of new high-quality units.
        ashwagary 4y ago
        >It would be vastly cheaper for us as a society to not do the vacancy tax at all and just build Could be a good idea to use the vacancy tax to build.
  - CogitoCogito 4y ago
    > because politicians will put forth failed policies like rent control or empty unit tax that does not help with the supply at all Why wouldn't an empty unit tax help supply? Holding a unit empty would be more costly. It would provide a direct financial incentive to rent out the unit. By what reasoning would it not increase the supply of rental units on the market? Now I could understand if you were to argue that other policies are better, but that's another argument all together. Also laws could be changes to make it easier to evict tenants while simultaneously putting empty unit taxes into place. They are independent policies.
    - dagw 4y ago
      Why wouldn't an empty unit tax help supply? Supply of what though? Housing units or rental units. Make owning rental units too expensive and risky and people will convert those units from rental to owned by simply selling them. Now while the total supply of housing hasn't changed (and might even have increased on the margin), there will be less supply of rental units on the market.
      - kjreact 4y ago
        > Now while the total supply of housing hasn't changed (and might even have increased on the margin), there will be less supply of rental units on the market. But then you’d also have less renters in your scenario because a renter became an owner. Less renters would mean a decrease in demand for rentals. The only situation which hurts buyers and renters is when the unit is left empty to artificially decrease supply.
      - Rury 4y ago
        Why not both?
  - tuatoru 4y ago
    New Zealand solved housing in the 1940s and 1950s. In the 21st century, New Zealand is notable for having extremely high house prices and rents relative to mediam income. On charts produced by the Economist magazine, NZ is regularly top or second for "most expensive housing". It's not uncommon for over 50% of a NZ household's net income to be going on rent. People are renting tin sheds to live in because there's nothing else.[1] New Zealand needs to solve housing. 1. Having said that, the average NZ house built in the 1960s through the 1990s is worse than most tin sheds to live in. Colder and moldier.
- lotsofpulp 4y ago
  Should be an extremely high property tax (or land value tax) with a sufficient credit for residents. Make use of it, or make it untenable to not sell it. But also make it easier and quicker to evict for nonpayment.
- perryizgr8 4y ago
  How would you enforce that with any effectiveness? If I'm a landlord I'll just get one of my distant relatives to transfer me $100 every month and show the unit as "rented". They have rented it, but just happen to spend a lot of time away due to "reasons".
  - klyrs 4y ago
    The Vancouver area had a problem with developers building condo buildings, with the majority of units being empty. That's gonna need a lot of distant relatives being willing to engage in tax fraud.
  - lotsofpulp 4y ago
    Require all residents to submit a federal and state tax return showing their resident addresses. The city can simply outsource this verification to the state, since the state is already collecting federal income tax returns. I doubt many distant relatives are willing to commit federal and state felonies by fraudulently claiming they live somewhere they do not so that their relative can profit from holding onto a property. Additionally, mobile networks have logs of your real time location just a subpoena away, so good luck fighting it.
  - smileysteve 4y ago
    Some people can risk performing tax fraud for a while; others cannot. This tax fraud scheme would open you to both state and federal audits.
- thinking4real 4y ago
  Taxes should not be a hand break for politicians to control civilians This is tyrannical thinking and I see it a lot…
  - Jcowell 4y ago
    Taxes have always been means to control civilian behavior. I.e Sugar Tax
- Atheros 4y ago
  There already is. Some cities, including the expensive cities in the U.S., make bank collecting property taxes on vacant units- units for which the city provides no schools, transit, trash collection, healthcare, water, or any other services because no one lives there. It's free money! The rational course of action is to not only not levy a tax on empty units, but to encourage as many empty units as possible! Collect property taxes without the overhead of futilely trying to figure out which are vacant. Then let the free market build housing to make up for it. This is what New York City is doing. Remember that the housing market is a market. If you magically appear 20K units out of nowhere, prices will go down for a while until 20K units don't get built that would otherwise get built and prices then end up right where they would have if you didn't magically appear those units.
- cryptonector 4y ago
  You have to think dynamically and from the landlords' p.o.v. If you do you'll realize that this likely wouldn't work. The comments below explain some of it.
kar5pt 4y ago
People keep telling this story but not providing any evidence. What evidence is there that landlords not wanting to rent their units is the cause of high rents in nyc? On its surface it makes no sense. Why wouldn't they want to collect rents if they can do it?
- saurik 4y ago
  So, you are partly asking about the causal link between the practice of keeping properties vacant and rising rent, as maybe you believe there are multiple explanations and that's not the dominant one, but you do also seem to not believe that the vacancies are a thing in the first place, which is a lot easier to address. FWIW, even without my having any prior knowledge of the correct terminology here--which is apparently "warehousing"--it took about 10 seconds to find a bunch of references to what is going on using the search query "new york landlords keeping properties empty renters". I have provided a spattering of results from different kinds of sources. https://jacobin.com/2022/10/new-york-city-landlords-affordable-housing-single-room-occupancy-crisis https://jacobin.com/2022/10/new-york-city-landlords-affordab... https://nypost.com/2022/10/20/nyc-landlords-holding-60k-rent-stabilized-units-for-ransom/ https://nypost.com/2022/10/20/nyc-landlords-holding-60k-rent... https://www.fox5ny.com/news/nyc-warehousing-empty-apartments.amp https://www.fox5ny.com/news/nyc-warehousing-empty-apartments... https://www.thecity.nyc/housing/2022/10/19/23411956/60000-rent-stabilized-apartments-vacant-warehousing-nyc-landlords-housing https://www.thecity.nyc/housing/2022/10/19/23411956/60000-re... https://www.businessinsider.com/why-cant-find-affordable-nyc-rent-controlled-regulated-vacant-apartments-2022-7 https://www.businessinsider.com/why-cant-find-affordable-nyc... https://www.reddit.com/r/nyc/comments/ygnh7o/new_york_landlords_would_rather_keep_homes_empty/ https://www.reddit.com/r/nyc/comments/ygnh7o/new_york_landlo... (discussion of the jacobin article) How have you previously tried to find evidence and come up short? Can you list some of your failed attempts to research this?
  - kar5pt 4y ago
    I was hoping for peer-reviewed research, not articles written by journalists. I'm not denying the vacancies are real (not sure how you thought that?). I'm questioning whether the cause of the vacancies are landlords intentionally refusing to rent out units for which qualified renters exist (in the absence of market-distortions like rent-control). I'm open to evidence that this happening, I'm just pointing out that I've seen dozens of people online make this claim and no one ever provides evidence to back it up. I don't have time to thoroughly read through all 6 of those articles, but I've skimmed through them and don't see evidence for the claim there either. The Jacobin and City articles just assert that it's true without citing any evidence. The Business Insider doesn't even try to make that claim, it immediately blames rent-control in the 4-6 paragraphs. The Fox5 article just says units are empty without trying to provide an explanation. If there is a piece of the articles I missed, please point it out.
than3 4y ago
Making it easier to evict people will in no way help this problem. The tax benefits of owning property far exceed any other asset. Once the local market has been consolidated into a small group, anytime that happens you get price fixing through collusion even if they don't plan it all ahead of time as some conspiracy. Its done just by looking at the prices others are charging and charging the same or higher. With loans that cost almost nothing to service, and extra tax benefits that they can offset other losses. There is nothing preventing this sector from being driven exponentially higher by bad actors. They can just hold onto the properties and let them go fallow with no incentive to rent. This effect is worsened because new housing is so hard to build (or has been made hard). If you want to fix this, legislatures need to taper or remove some tax benefits, as you assume positions in ever larger portions of the market. Further incentivize cash flow over price fixing by setting, and set ever higher tax brackets and windfall taxes on profits and further limitations on REIT vehicles. When the RE crash hit 2008, banks simply held onto assets instead of full foreclosure sales in many cases (other then OneWest which had guarantees of value from Fed but only if they had above a certain amount in losses which incentivized foreclosures for their own extreme profit). Many properties at that time from other banks were simply being abandoned (and accruing damage as a result, water leaks, mold, no remediation since no one reports it). Instead of foreclosure sales and offering the properties for what they were worth at the time on the market those held onto those abandoned properties for years. Pre-foreclosure RE inspections to determine if winterization was needed or document other damage so it could be covered by insurance were not uncommon and boomed during that time, but a very small percentage of those properties were actually fully foreclosed on until prices recovered towards late 2013, with one exception, OneWest bank. Week-to-week those foreclosure inspection requests were often repeat properties in every area, when you stop getting the requests its usually foreclosed on and that rarely happened until 2012-2013 and by rare I mean single digit changes in the percentages of the total inspections for the area each week. It was not uncommon to have 150 or more inspections for an area each day. I worked in that industry for a time. It was pretty despicable, and a dangerous job because people were crazy even though we had a legal right to take pictures of the property. I was shot at once, drug related squatters were a big problem. One place was swarmed by squatters, and one of the inspectors car was lifted and put on its side with him inside it and PD being dispatched, one of those properties we had to call the local PD and have them send out the bomb squad as the previous owner had left what we found out later turned out 'thankfully' to be just an empty pipe. It was capped off on both ends with wires running from the house electric (which was off) through a hole drilled into it and was attached to the inside of the garage door. Just absolutely crazy stuff, and I'm glad I don't work in that sector anymore. No line of work is potentially worth your life, and we were not paid hazard pay. Only slightly above minimum wage for the time.

adgjlsfhk1 4y ago

or more simply, put a tax on empty units so there is pressure to rent.

hyuuu 4y ago
in order not to get rented, they will list high rent prices + 750+ credit scores. Easy eviction makes the market more fluid, thus higher competitions because the supply will be more readily available. What I just said does not really matter because politicians will put forth failed policies like rent control or empty unit tax that does not help with the supply at all, BUT, it does help them to get votes at the expense of long term damage to the housing market. Singapore solved housing, New Zealand solved housing, both times by increasing supply.
- jonfw 4y ago
  Nobody will try to avoid finding renters if it costs money to not have a renter
  - dh2022 4y ago
    I happen to own a couple rental properties. I can assure you that I avoided renters with low credit score and high rent / income ratio. Even if it took longer (months longer) to find a renter, is better to wait for someone solid than rent to someone who may trash the place, be late on rent, etc....
    - runnerup 4y ago
      > I happen to own a couple rental properties. I can assure you that... And I can assure you that you weren't directly responding to GP's proposal. If your property tax was 1.5% per month for every month that the unit was unoccupied, you'd find renters ASAP. There's no way you'd leave a $500,000 property unoccupied for a year if it cost you $100,000 in taxes to do so. Yes, we also need default YIMBY laws to make it easier to add new high-quality units. But in addition, we can immediately free up unutilized units with an empty-unit tax of 1.5% per month.
      - Atheros 4y ago
        It would be vastly cheaper for us as a society to not do the vacancy tax at all and just build an extra X units where X equals the number of vacant units. Society would get to continue collecting the millions of dollars in annual property taxes on the vacant units without providing any city services because no one lives there. It's free money. Separately, the enforcement cost of your idea makes it untenable. The law would have so many loopholes, it would be and stay toothless for decades. Even if we assume for the sake of argument that it actually worked and the rate of empty units went to nearly 0%, it would warp the real estate market so much it would eliminate all benefit: because there would be fewer people looking for apartments (because they are housed in the previous vacant units), fewer new buildings get built. After a decade prices would be back to where they are now except that now it would be more of a headache to find an apartment because the vacancy rate is 0%.
        runnerup 4y ago
        I'd be fine also just doing a flat increase of property tax (preferably something slightly more towards a land-value tax). There should be more pressure to make sure real estate assets are being re-invested into the economy rather than hoarded for passive deflationary gains. As mentioned, we also need to make it easier to build lots of new high-quality units.
        ashwagary 4y ago
        >It would be vastly cheaper for us as a society to not do the vacancy tax at all and just build Could be a good idea to use the vacancy tax to build.
- CogitoCogito 4y ago
  > because politicians will put forth failed policies like rent control or empty unit tax that does not help with the supply at all Why wouldn't an empty unit tax help supply? Holding a unit empty would be more costly. It would provide a direct financial incentive to rent out the unit. By what reasoning would it not increase the supply of rental units on the market? Now I could understand if you were to argue that other policies are better, but that's another argument all together. Also laws could be changes to make it easier to evict tenants while simultaneously putting empty unit taxes into place. They are independent policies.
  - dagw 4y ago
    Why wouldn't an empty unit tax help supply? Supply of what though? Housing units or rental units. Make owning rental units too expensive and risky and people will convert those units from rental to owned by simply selling them. Now while the total supply of housing hasn't changed (and might even have increased on the margin), there will be less supply of rental units on the market.
    - kjreact 4y ago
      > Now while the total supply of housing hasn't changed (and might even have increased on the margin), there will be less supply of rental units on the market. But then you’d also have less renters in your scenario because a renter became an owner. Less renters would mean a decrease in demand for rentals. The only situation which hurts buyers and renters is when the unit is left empty to artificially decrease supply.
    - Rury 4y ago
      Why not both?
- tuatoru 4y ago
  New Zealand solved housing in the 1940s and 1950s. In the 21st century, New Zealand is notable for having extremely high house prices and rents relative to mediam income. On charts produced by the Economist magazine, NZ is regularly top or second for "most expensive housing". It's not uncommon for over 50% of a NZ household's net income to be going on rent. People are renting tin sheds to live in because there's nothing else.[1] New Zealand needs to solve housing. 1. Having said that, the average NZ house built in the 1960s through the 1990s is worse than most tin sheds to live in. Colder and moldier.
lotsofpulp 4y ago
Should be an extremely high property tax (or land value tax) with a sufficient credit for residents. Make use of it, or make it untenable to not sell it. But also make it easier and quicker to evict for nonpayment.
perryizgr8 4y ago
How would you enforce that with any effectiveness? If I'm a landlord I'll just get one of my distant relatives to transfer me $100 every month and show the unit as "rented". They have rented it, but just happen to spend a lot of time away due to "reasons".
- klyrs 4y ago
  The Vancouver area had a problem with developers building condo buildings, with the majority of units being empty. That's gonna need a lot of distant relatives being willing to engage in tax fraud.
- lotsofpulp 4y ago
  Require all residents to submit a federal and state tax return showing their resident addresses. The city can simply outsource this verification to the state, since the state is already collecting federal income tax returns. I doubt many distant relatives are willing to commit federal and state felonies by fraudulently claiming they live somewhere they do not so that their relative can profit from holding onto a property. Additionally, mobile networks have logs of your real time location just a subpoena away, so good luck fighting it.
- smileysteve 4y ago
  Some people can risk performing tax fraud for a while; others cannot. This tax fraud scheme would open you to both state and federal audits.
thinking4real 4y ago
Taxes should not be a hand break for politicians to control civilians This is tyrannical thinking and I see it a lot…
- Jcowell 4y ago
  Taxes have always been means to control civilian behavior. I.e Sugar Tax
Atheros 4y ago
There already is. Some cities, including the expensive cities in the U.S., make bank collecting property taxes on vacant units- units for which the city provides no schools, transit, trash collection, healthcare, water, or any other services because no one lives there. It's free money! The rational course of action is to not only not levy a tax on empty units, but to encourage as many empty units as possible! Collect property taxes without the overhead of futilely trying to figure out which are vacant. Then let the free market build housing to make up for it. This is what New York City is doing. Remember that the housing market is a market. If you magically appear 20K units out of nowhere, prices will go down for a while until 20K units don't get built that would otherwise get built and prices then end up right where they would have if you didn't magically appear those units.
cryptonector 4y ago
You have to think dynamically and from the landlords' p.o.v. If you do you'll realize that this likely wouldn't work. The comments below explain some of it.

kar5pt 4y ago

People keep telling this story but not providing any evidence. What evidence is there that landlords not wanting to rent their units is the cause of high rents in nyc? On its surface it makes no sense. Why wouldn't they want to collect rents if they can do it?

saurik 4y ago
So, you are partly asking about the causal link between the practice of keeping properties vacant and rising rent, as maybe you believe there are multiple explanations and that's not the dominant one, but you do also seem to not believe that the vacancies are a thing in the first place, which is a lot easier to address. FWIW, even without my having any prior knowledge of the correct terminology here--which is apparently "warehousing"--it took about 10 seconds to find a bunch of references to what is going on using the search query "new york landlords keeping properties empty renters". I have provided a spattering of results from different kinds of sources. https://jacobin.com/2022/10/new-york-city-landlords-affordable-housing-single-room-occupancy-crisis https://jacobin.com/2022/10/new-york-city-landlords-affordab... https://nypost.com/2022/10/20/nyc-landlords-holding-60k-rent-stabilized-units-for-ransom/ https://nypost.com/2022/10/20/nyc-landlords-holding-60k-rent... https://www.fox5ny.com/news/nyc-warehousing-empty-apartments.amp https://www.fox5ny.com/news/nyc-warehousing-empty-apartments... https://www.thecity.nyc/housing/2022/10/19/23411956/60000-rent-stabilized-apartments-vacant-warehousing-nyc-landlords-housing https://www.thecity.nyc/housing/2022/10/19/23411956/60000-re... https://www.businessinsider.com/why-cant-find-affordable-nyc-rent-controlled-regulated-vacant-apartments-2022-7 https://www.businessinsider.com/why-cant-find-affordable-nyc... https://www.reddit.com/r/nyc/comments/ygnh7o/new_york_landlords_would_rather_keep_homes_empty/ https://www.reddit.com/r/nyc/comments/ygnh7o/new_york_landlo... (discussion of the jacobin article) How have you previously tried to find evidence and come up short? Can you list some of your failed attempts to research this?
- kar5pt 4y ago
  I was hoping for peer-reviewed research, not articles written by journalists. I'm not denying the vacancies are real (not sure how you thought that?). I'm questioning whether the cause of the vacancies are landlords intentionally refusing to rent out units for which qualified renters exist (in the absence of market-distortions like rent-control). I'm open to evidence that this happening, I'm just pointing out that I've seen dozens of people online make this claim and no one ever provides evidence to back it up. I don't have time to thoroughly read through all 6 of those articles, but I've skimmed through them and don't see evidence for the claim there either. The Jacobin and City articles just assert that it's true without citing any evidence. The Business Insider doesn't even try to make that claim, it immediately blames rent-control in the 4-6 paragraphs. The Fox5 article just says units are empty without trying to provide an explanation. If there is a piece of the articles I missed, please point it out.

than3 4y ago

Making it easier to evict people will in no way help this problem. The tax benefits of owning property far exceed any other asset. Once the local market has been consolidated into a small group, anytime that happens you get price fixing through collusion even if they don't plan it all ahead of time as some conspiracy. Its done just by looking at the prices others are charging and charging the same or higher. With loans that cost almost nothing to service, and extra tax benefits that they can offset other losses. There is nothing preventing this sector from being driven exponentially higher by bad actors. They can just hold onto the properties and let them go fallow with no incentive to rent. This effect is worsened because new housing is so hard to build (or has been made hard). If you want to fix this, legislatures need to taper or remove some tax benefits, as you assume positions in ever larger portions of the market. Further incentivize cash flow over price fixing by setting, and set ever higher tax brackets and windfall taxes on profits and further limitations on REIT vehicles. When the RE crash hit 2008, banks simply held onto assets instead of full foreclosure sales in many cases (other then OneWest which had guarantees of value from Fed but only if they had above a certain amount in losses which incentivized foreclosures for their own extreme profit). Many properties at that time from other banks were simply being abandoned (and accruing damage as a result, water leaks, mold, no remediation since no one reports it). Instead of foreclosure sales and offering the properties for what they were worth at the time on the market those held onto those abandoned properties for years. Pre-foreclosure RE inspections to determine if winterization was needed or document other damage so it could be covered by insurance were not uncommon and boomed during that time, but a very small percentage of those properties were actually fully foreclosed on until prices recovered towards late 2013, with one exception, OneWest bank. Week-to-week those foreclosure inspection requests were often repeat properties in every area, when you stop getting the requests its usually foreclosed on and that rarely happened until 2012-2013 and by rare I mean single digit changes in the percentages of the total inspections for the area each week. It was not uncommon to have 150 or more inspections for an area each day. I worked in that industry for a time. It was pretty despicable, and a dangerous job because people were crazy even though we had a legal right to take pictures of the property. I was shot at once, drug related squatters were a big problem. One place was swarmed by squatters, and one of the inspectors car was lifted and put on its side with him inside it and PD being dispatched, one of those properties we had to call the local PD and have them send out the bomb squad as the previous owner had left what we found out later turned out 'thankfully' to be just an empty pipe. It was capped off on both ends with wires running from the house electric (which was off) through a hole drilled into it and was attached to the inside of the garage door. Just absolutely crazy stuff, and I'm glad I don't work in that sector anymore. No line of work is potentially worth your life, and we were not paid hazard pay. Only slightly above minimum wage for the time.