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(2025). > The obvious thing cities could try is to put more pressure on building operators to fill their spaces, but the building operators are already under a

(2025). > The obvious thing cities could try is to put more pressure on building operators to fill their spaces, but the building operators are already under a ton of pressure — they’re losing a bunch of money! So, cities could do something like put a vacant storefront tax and… make them lose even more money? If that “worked,” the mechanism would be to force a lot of commercial property to default, which could put a lot of new space on the market at lower prices, which should lower the commercial rent. But it would also hurt the banks a lot, which has a history of leading to bad consequences and subsequent bailouts. I agree that this is the obvious remedy. I don't know if it's exactly the right answer, but it's the natural place to start the conversation, and I think it's at least in the ballpark of the right solution. It's the city (and bigger) government's job to create policies that incentivize the right behaviors for the benefit of the community. There clearly has been an oversight here, if extremely valuable commercial properties are literally just sitting unused for no good reason. In my opinion we'd all be better off if the market did correct itself, at least getting us all on the same page about what these properties are actually worth, rather than the current situation. The city stepping in also helps put the fuckup back in the right place, in the hands of the property owners and lenders who seem to have made these bad bets, rather than externalized to the residents and business owners of the city, who haven't done anything wrong. The article suggests that this leads to "bad consequences" and even bank bailouts, but I'm pretty unconvinced that the problem is widespread enough that the federal government would literally need to start bailing out banks. From what I've seen, it's really bad in a few specific metro areas and not so much in others.

em-bee 4mo ago
another possible remedy would be to find ways to change the conditions of the loan so that building owners can continue to pay off their loan at better rates that match the income they can make from rent.
- nemomarx 4mo ago
  If the banks would prefer to adjust their loans instead of defaulting on them I think they would just naturally do that? They may not want to take a longer loan though.
  - em-bee 4mo ago
    the question is, why don't they prefer that? what is influencing that decision. for the building owners, if they don't want a longer loan then that's their choice. but we want the building filled, so if forcing them to lower the rents will cause them to go bankrupt because they refuse to accept a longer loan with lower monthly payments, then that's also their choice. and if the banks don't want to offer such a loan, the question is also "why?". if there are legitimate reasons then we need to fix those. if there aren't then it's probably just greed.
- userulluipeste 4mo ago
  Then you'll most likely get moral hazard. That is, rather of people acting in their own limits, as responsible business parties, they would instead be encouraged this way to make deals which they know won't be able to carry through, then after getting this metaphorical foot in the door, they'll expect "to change the conditions of the loan", i.e. beneficial intervention on their behalf (and a kind of bait-and-switch).
  - em-bee 4mo ago
    how is that a moral hazard if the consequence is that we avoid shops staying empty? because that's the goal from the city's perspective. and isn't investing into a property that they then fail to rent out in a profitable manner also already a failure to act within their own limits?
    - userulluipeste 4mo ago
      "how is that a moral hazard if the consequence is that we avoid shops staying empty" The shops staying empty is one problem. The call for bailing out or helping in any way the creditors that took loans in bad faith by relying on that kind of help (to prop them up along the way) is another problem. I very much want to address the first problem, but not by enacting perverse incentive inducing rules. A better solution (in my view), which I think was mentioned in other comments, was to disallow tax reductions for unused spaces, and maybe even rise them above the tax level for what that space is when rented. In this case the landlord may be incentivized to find ways to make their spaces (at least) look busy (if not be busy with something of real value), which may be what the cities and community think of as an improvement. "and isn't investing into a property that they then fail to rent out in a profitable manner also already a failure to act within their own limits?" Yes, it is "already a failure", and it was the reason behind my initial objection. The bad decisions should meet their bad consequences. A "remedy" "to find ways to change the conditions of the loan so that building owners can continue to pay off their loan" sounds to me like a measure to shield decision makers from facing their failures. It is also, in the context of imminent failure, a call for someone else to hold the bag, which is in itself unfair.

em-bee 4mo ago

another possible remedy would be to find ways to change the conditions of the loan so that building owners can continue to pay off their loan at better rates that match the income they can make from rent.

nemomarx 4mo ago
If the banks would prefer to adjust their loans instead of defaulting on them I think they would just naturally do that? They may not want to take a longer loan though.
- em-bee 4mo ago
  the question is, why don't they prefer that? what is influencing that decision. for the building owners, if they don't want a longer loan then that's their choice. but we want the building filled, so if forcing them to lower the rents will cause them to go bankrupt because they refuse to accept a longer loan with lower monthly payments, then that's also their choice. and if the banks don't want to offer such a loan, the question is also "why?". if there are legitimate reasons then we need to fix those. if there aren't then it's probably just greed.
userulluipeste 4mo ago
Then you'll most likely get moral hazard. That is, rather of people acting in their own limits, as responsible business parties, they would instead be encouraged this way to make deals which they know won't be able to carry through, then after getting this metaphorical foot in the door, they'll expect "to change the conditions of the loan", i.e. beneficial intervention on their behalf (and a kind of bait-and-switch).
- em-bee 4mo ago
  how is that a moral hazard if the consequence is that we avoid shops staying empty? because that's the goal from the city's perspective. and isn't investing into a property that they then fail to rent out in a profitable manner also already a failure to act within their own limits?
  - userulluipeste 4mo ago
    "how is that a moral hazard if the consequence is that we avoid shops staying empty" The shops staying empty is one problem. The call for bailing out or helping in any way the creditors that took loans in bad faith by relying on that kind of help (to prop them up along the way) is another problem. I very much want to address the first problem, but not by enacting perverse incentive inducing rules. A better solution (in my view), which I think was mentioned in other comments, was to disallow tax reductions for unused spaces, and maybe even rise them above the tax level for what that space is when rented. In this case the landlord may be incentivized to find ways to make their spaces (at least) look busy (if not be busy with something of real value), which may be what the cities and community think of as an improvement. "and isn't investing into a property that they then fail to rent out in a profitable manner also already a failure to act within their own limits?" Yes, it is "already a failure", and it was the reason behind my initial objection. The bad decisions should meet their bad consequences. A "remedy" "to find ways to change the conditions of the loan so that building owners can continue to pay off their loan" sounds to me like a measure to shield decision makers from facing their failures. It is also, in the context of imminent failure, a call for someone else to hold the bag, which is in itself unfair.