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These huge landlords can leave units empty for years rather than drop prices. They need to be cut off from their near endless lines of credit that keeps distort

These huge landlords can leave units empty for years rather than drop prices. They need to be cut off from their near endless lines of credit that keeps distorting the commercial real estate market. Only then will prices correct. It’s killing small businesses in the US. A modest retail business or restaurant can’t afford the $20,000 a month they want for a tiny unit. Their control of the market is having harmful downstream effects on society.

anotherhue 3y ago
Yes, they've used the monthly rent price as leverage in other financial decisions, so if it was to fall as supply/demand suggests it should, they're left over-exposed. So better to eat the 1x loss than lose the 5x multiple.
acdha 3y ago
We’ve had a slew of “we need to end remote work to support downtown businesses” pieces in the local news, but almost every time there is an article about a business closing there will be a paragraph tucked in at the bottom that their landlord had refused to negotiate on a massive rent increase. I think the answer has to be a punitive vacancy tax: like if a commercial restaurant space is idle for 3 months, the tax rate for every property with the same commercial owner goes up every month. These properties being idle has ripple effects throughout a neighborhood which shouldn’t take years to recover.
- yowzadave 3y ago
  I think a vacancy tax would be useful for the residential market as well--at least in New York, there are many luxury apartments sitting empty, because they are bought as investments and/or money-laundering efforts; the owner may never intend to live in them. This has a negative impact on a city, both in driving up prices for the actual residents, and in distorting the texture of a neighborhood. If you want to have multiple homes that sit unoccupied for most of the year, you should definitely pay a punitive vacancy tax.
  - 0cf8612b2e1e 3y ago
    Are there such laws on the books anywhere? It seems like it would be hard to thread the needle to avoid people skirting the law. Can you host a pop up bar for one night to qualify for occupancy for six months? Rent to your brother? Airbnb listing that does poorly?
    - mint2 3y ago
      Why yes, SF actually has some laws to tax vacant real estate. (Unless court challenges were successful, not sure the status and there’s always court challenges to everything)
    - novok 3y ago
      Vancouver has vacancy tax laws, they don't seem to do much in practice. I think vacant units are highly visible, but are actually a small part of the market in practice.
    - yowzadave 3y ago
      Presumably the government already knows where you live for what percentage of the year through your tax returns? A vacancy tax should also apply to landlords to encourage them to rent out units at actual market rate (rather than pretend market rate is something different for tax purposes).
    - acdha 3y ago
      As with many things, there are but the quality of implementation and enforcement varies wildly. We have some laws here but under a mayor who gets a lot of donations from the commercial real estate industry enforcement is … unmotivated.
  - ttfkam 3y ago
    Georgism https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism
didntknowya 3y ago
i think one of the problem is the value of commercial properties is directly linked to their rent. hence why so many would rather keep their property empty than negotiate down the rent as it would instantly devalue their property. they'd rather stay in their inflated bubble.

anotherhue 3y ago

Yes, they've used the monthly rent price as leverage in other financial decisions, so if it was to fall as supply/demand suggests it should, they're left over-exposed. So better to eat the 1x loss than lose the 5x multiple.

acdha 3y ago

We’ve had a slew of “we need to end remote work to support downtown businesses” pieces in the local news, but almost every time there is an article about a business closing there will be a paragraph tucked in at the bottom that their landlord had refused to negotiate on a massive rent increase. I think the answer has to be a punitive vacancy tax: like if a commercial restaurant space is idle for 3 months, the tax rate for every property with the same commercial owner goes up every month. These properties being idle has ripple effects throughout a neighborhood which shouldn’t take years to recover.

yowzadave 3y ago
I think a vacancy tax would be useful for the residential market as well--at least in New York, there are many luxury apartments sitting empty, because they are bought as investments and/or money-laundering efforts; the owner may never intend to live in them. This has a negative impact on a city, both in driving up prices for the actual residents, and in distorting the texture of a neighborhood. If you want to have multiple homes that sit unoccupied for most of the year, you should definitely pay a punitive vacancy tax.
- 0cf8612b2e1e 3y ago
  Are there such laws on the books anywhere? It seems like it would be hard to thread the needle to avoid people skirting the law. Can you host a pop up bar for one night to qualify for occupancy for six months? Rent to your brother? Airbnb listing that does poorly?
  - mint2 3y ago
    Why yes, SF actually has some laws to tax vacant real estate. (Unless court challenges were successful, not sure the status and there’s always court challenges to everything)
  - novok 3y ago
    Vancouver has vacancy tax laws, they don't seem to do much in practice. I think vacant units are highly visible, but are actually a small part of the market in practice.
  - yowzadave 3y ago
    Presumably the government already knows where you live for what percentage of the year through your tax returns? A vacancy tax should also apply to landlords to encourage them to rent out units at actual market rate (rather than pretend market rate is something different for tax purposes).
  - acdha 3y ago
    As with many things, there are but the quality of implementation and enforcement varies wildly. We have some laws here but under a mayor who gets a lot of donations from the commercial real estate industry enforcement is … unmotivated.
- ttfkam 3y ago
  Georgism https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism

didntknowya 3y ago

i think one of the problem is the value of commercial properties is directly linked to their rent. hence why so many would rather keep their property empty than negotiate down the rent as it would instantly devalue their property. they'd rather stay in their inflated bubble.