[HN Gopher] Empty storefronts are killing neighbourhoods
___________________________________________________________________
Empty storefronts are killing neighbourhoods
Author : pseudolus
Score : 189 points
Date : 2021-07-24 11:07 UTC (11 hours ago)
(HTM) web link (thewalrus.ca)
(TXT) w3m dump (thewalrus.ca)
| m0llusk wrote:
| Amazing that Henry George's proposed Land Value Tax is still the
| right answer to so many pressing problems.
| hourislate wrote:
| There are a few incredibly wealthy family offices buying up most
| of the apartment building and commercial space in Toronto and
| across Canada. I'm not sure but the two guys mentioned (Stephen
| Shiller and Danny Lavy) could be the group I was told are funded
| by very wealthy Israelis. There is also a German family office
| that owns about 5 billion (in 2010 money) in commercial space in
| Vancouver, Toronto and Montreal. These are just two that I know
| of for sure through people who own large amounts of commercial
| real estate in Toronto. In Toronto the goal is to accumulate
| enough of these store fronts that you can basically demolish a
| good part of the street block and build a Condo. Politicians are
| only concerned about tax revenue and not the character of a
| neighborhood, a Condo brings in far more property tax $$$ than a
| storefront.
|
| People don't understand how a Landlord would rather leave a space
| empty than keep it full because 5-50k a month lease (in Toronto)
| or whatever they are paying seems like a lot but the reality is
| you're talking about billionaires who are playing a long game and
| are acquiring land for development and not rental money which
| indecently is a pittance for them and not worth the effort.
| hahajk wrote:
| "his new landlord told him that the store's monthly costs--rent,
| taxes, insurance, and maintenance--would go up an impossible 150
| percent, to $5,000 a month."
|
| I've never owned or rented commercial real estate so I guess I
| never knew how much things cost. $2k seems cheap? I would have
| expected a storefront in a hip Montreal neighborhood to be much
| more.
| locopati wrote:
| it won't be a hip neighborhood much longer if only global chain
| stores can afford the rent
| maxerickson wrote:
| What do the global chain stores do differently that they can
| justify the rent against the store revenue?
| blevin wrote:
| Large co's play different games than mom & pop. They can
| afford some near-term losses if they can make the case it
| prevents competitors from gaining a foothold. Banks can
| justify rent on a seemingly empty branch in an expensive
| retail area if it supports catchment area of desirable
| clients that visit in person once every 18 months. Etc.
| treis wrote:
| I think people just like chain stores better. Plus they can
| take advantage of bulk buying for materials, services,
| advertising, etc.
| canadaduane wrote:
| It could simply be brand recognition. Visitors to a city
| will know which chain stores to visit to get what they
| need, glossing over (or avoiding) unfamiliar stores.
|
| So mom&pop stores get local customers, while chain stores
| get local PLUS just-visiting customers; multiply by
| months and years.
| seafoam wrote:
| Scale in distribution, especially marketing / brand / name
| recognition
| acomms wrote:
| Rents in Montreal are historically cheaper than other major
| metros (in Canada). I am currently looking for commercial space
| in Toronto and despite lots of empty spaces, rates remain high.
| fencepost wrote:
| Louis Rossmann's video series about his search for a new
| location in NYC may have a lot of relevant lessons even in a
| different city.
| orcasushi wrote:
| The problem is that these neighborhoods were build when the
| global population was half the size it is now and spending
| behavior was way different then it is now.
|
| It is no longer profitable to have a shoe repair shop in the
| neighborhood. Nobody repairs shoes, everyone buys new online. You
| cannot get these old times back.
|
| The solution? Look at the Asian urbs. High rise apartment
| buildings with the first 1 or 2 floors shops. The dense
| population will make these shops attractive again because dense
| population causes high demand for convenience-shops. The shops in
| turn will make the neighborhood attractive for city dwellers. The
| shops also cause the streets never be empty so crime / vandalism
| drops. Then it attracts tourists and creates jobs.
|
| Now move all the parking and roads underground and make all the
| roof tops green public parks and voila! But, what do we do
| instead? We yank car-oriented flat suburbs and shopping malls all
| over the place. Those will be the trash-towns of tomorrow.
| Gimpei wrote:
| I definitely see this in San Francisco. 24th street in Noe Valley
| is an odd combination of empty store fronts and shops selling
| hippy tchotchkies. There was a huge supermarket size space that
| was empty for fifteen years. They tried to make it into condos
| early on but the neighbors complained about "gentrification". Now
| it's a high end spa. Another win for Noe Valley.
| legerdemain wrote:
| This is what laws favoring tenants do to local commercial real
| estate. It is more risky for a landlord to allow one bad tenant
| than to miss the opportunity to rent to five good ones. It's the
| same reality in tech hiring.
| MichaelZuo wrote:
| " 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."
|
| The deleterious second order effects would have been clear to
| anyone in the real estate industry, and I imagine the senior
| people in the Ontario Ministry of Finance, at the time. Catchy,
| feel good, measures almost always do.
|
| So the tone isn't productive, since to expect commercial
| landlords from refraining from using a sizeable tax rebate
| specifically targeted to their needs is a bit absurd if it stays
| on the books. Same on the flipside with renters and rent control.
| Weakest link of the chain, etc.
|
| There is a good point buried in the article about the negative
| externality of empty storefronts collecting dust affecting nearby
| properties. A negative externality tax of some sort makes a lot
| of sense.
| newsclues wrote:
| This policy isn't just foolish, it is horribly corrupt.
|
| "Help struggling property owners"
|
| Real estate prices in Ontario have gone up astronomically, if
| you are a property owner you aren't struggling since you own an
| asset that's price has gone up significantly recently.
| delfinom wrote:
| Privatize profits, socialize losses and free coke for the
| rich
| cascom wrote:
| Seems that from an economic perspective the "solution" might be
| to shorten the length of time that a storefront could be leased
| by statute - thereby reducing the incentive of landlords to hold
| out for higher rents if there is more frequent repricing.
| rdtwo wrote:
| Why not just tax empty stores at a ever increasing tax rate. If
| you can't fill a property in a year taxes double till you do.
| They keep doubling till they hit 20% property value or till
| rented out. Empty stores are a Bligh and should be charged
| accordingly
| zihotki wrote:
| That's probably the case when local municipalities should take
| care of the situation by making it illegal to have empty
| storefronts and apartments for a long periods of time.
| another_story wrote:
| Not illegal, but taxes should be higher for unoccupied
| buildings in commercial areas. That rate could be determined by
| any number of things, from the tax revenue of other nearby
| businesses, residential housing prices, etc...
| chrisseaton wrote:
| > illegal to have empty storefronts and apartments
|
| How do you comply with such a law? If nobody wants to rent your
| space at any price, maybe because it's a terrible location or
| there isn't the demand to support any business at the moment,
| what are you supposed to do?
| dfadsadsf wrote:
| Tax foreclosure and town now owns the building? Happens all
| the time with abandoned buildings (both residential and
| commercial) all over the country.
|
| The thing though is that there are empty storefronts in very
| desirable locations including SOHO in NY. There is definitely
| lots of people who want to rent it - just may be not at
| 40k/month.
| syops wrote:
| I don't know the consequences of doing this but I think if no
| one wants to rent the space at any price then giving up the
| property seems feasible. The investment went bad. Unused land
| should go back to the community and be repurposed.
| chrisseaton wrote:
| How's the community going to pay your tax?
| syops wrote:
| They don't. The property would be sold at auction just
| like tax foreclosed properties are now sold at auction.
| chrisseaton wrote:
| Why would you buy a location that the previous owner had
| to sell because it came with a crippling tax burden and
| no source of income?
| syops wrote:
| Well, presumably because you could buy it at a price that
| made the investment feasible. That price could be $1.
| Maybe the land truly is worthless. In which case the
| auction is for nought. Then the community might decide to
| form a small playground for the plot of land or a
| community garden. Maybe the land could be used for
| housing instead of for commercial purposes.
| specialist wrote:
| IIRC, North America has ~3x the amount of retail per capita
| compared to the EU. Prior to e-commerce, prior to the pandemic.
|
| This reckoning was a long time coming, accelerated by recent
| changes.
|
| The intent of mixed use was noble. But like all land use, left
| hand meet right hand.
|
| Today, we should be repurposing retail. Get creative.
|
| Every zip code needs more child care. Any city wanting to be more
| "family friendly" should do whatever it takes to seed day cares.
|
| I'm sure there's dozens of similar ideas.
|
| I know the prevailing context led to "efficiency" and big box
| retail. But ffs why do I have to drive to the pharmacy? To get
| some bananas? Etc.
| opportune wrote:
| Mixed use is still not a bad idea at all IMO, the problem is
| that there is just too much dedicated land zoned commercial
| already, and most mixed use development has too high a
| commercial:residential ratio for it to make the problem less-
| bad.
|
| The solution could be to convert the zoning for large big box
| stores that go out of business to residential.
| specialist wrote:
| That's a pretty good idea.
| nickthemagicman wrote:
| Agree with you about the repurposing of retail. I'm actually
| happy to see shopping malls all over being switched to other
| uses.
|
| I just don't understand how ANY business can afford rents that
| extreme.
| specialist wrote:
| Supply and demand, right? Rents should be plummeting, right?
| Where are those Freedom Markets(tm) we were promised?
|
| The OC says high rents are being maintained by speculators
| removing inventory from the market. (I'm sure there's
| multiple factors at play.)
|
| One proposed remedy is a vacancy tax. I don't know anything
| about that kind of thing.
|
| I do know I support whatever it takes to repurpose these
| spaces.
| rtkwe wrote:
| There's also that building values are partially determined
| by the price of renting it so for loans and selling owners
| are encouraged to keep rent prices as high as possible.
| the-dude wrote:
| > Every zip code needs more child care.
|
| Why is this? Are there many more children?
| bradleyjg wrote:
| On the contrary. But over the last several decades there have
| been two relevant culture shifts:
|
| - a strong move to professional child care over care by
| relatives
|
| - a dramatic increase in the age at which children are
| considered able to be unsupervised
| rdtwo wrote:
| Yeah also it's very difficult to make a comfortable life on
| one income.
| bradleyjg wrote:
| During the years when childcare is needed the numbers
| often work out better with one income than two. Market
| labor is taxed and then post tax dollars have to be used
| to pay for professional childcare (which is then taxed
| again).
|
| However, the issue comes after the need is over. The
| employment market heavily penalizes a decade plus gap in
| work history. On a lifetime basis it can make sense to
| work and pay for childcare even if it comes out net
| negative on a year by year basis.
|
| Even more important than these financial considerations
| are cultural and social expectations.
| rtkwe wrote:
| Seems like that should only be the case if the cost of
| childcare is greater than the post tax wage of the lowest
| earning parent.
| bradleyjg wrote:
| That's the basic idea but you also need to include the
| net costs of working (clothes, commute, lunch, etc.)
|
| It's more likely to work out that way with disparate
| earners and in high tax states.
| owenversteeg wrote:
| That's true. It's pretty rare to see people mention cost
| of working, but it is a very real cost. For many on HN
| working from home in a job without a dress code,
| clothes/commute/lunch aren't more than being unemployed,
| but there are other significant costs around flexibility.
| Not working gives you flexibility and time, which can
| save huge amounts of money. Travel, flights and hotels
| can get easily 3x cheaper in the off season. By going
| midday, midweek when everyone else is working, you can go
| to tons of things half price, from ski lifts to movie
| theaters. Americans spend $680B/yr on travel, so between
| the 122M households that's an average of $5600/year spent
| on travel - by having flexibility you can easily save
| quite a bit right there. Then keep in mind that a penny
| saved isn't just a penny earned - for most people it's
| around 1.6-2 pennies earned after taxes and benefits:
| https://news.ycombinator.com/item?id=25382210
|
| That said, there are also costs to being unemployed. The
| big one of course is what to do with your time - whatever
| you do with those extra 40 hours a week will probably not
| be 100% free. Then there are potential risks: if you're
| unemployed and not on unemployment, and a pandemic
| strikes, then you might be stuck without any income for
| far longer than you expected, all while everyone else
| that got laid off gets unemployment. There are also
| career costs: a years-long gap may seriously hurt your
| career prospects when you return to the workforce and
| dent your lifetime earnings. Then there are the commonly
| forgotten benefits to working, such as building up Social
| Security (both for retirement, and disability.) The max
| SSDI, which you will get if you're making around $100k
| for some years, is around $3000/month. If you become
| disabled and haven't been working, you get far less.
| Obviously being unemployed makes lending money far harder
| (credit cards, personal loans, car loans) so you better
| have some cash set aside. Naturally you won't be able to
| buy a house, and renting a new place will be very
| difficult with no job. But there are other options: maybe
| you already own a place, maybe you can live with your
| parents, maybe you do van life.
|
| ----------
|
| If you add everything up, you may be surprised to see
| unemployment win out. This is, of course, the exact
| discussion taking place for millions of Americans in
| poorly paid service jobs, and the reason for the current
| labor shortage. It's not that young people are being
| lazy: they're being smart. If you're working a poorly
| paid job, the cost of working is disproportionately high
| to your income. $7.25/hr x 40hr/wk is $1160/mo, minus
| taxes somewhere around $1000/mo, and then you have to pay
| for a car to drive to work, gas, etc etc. On an income
| like that, you're basically just surviving, barely
| keeping your head above water if that. Sure, if you quit
| your McDonalds job you can't afford rent, but rent's so
| high you probably had a pretty crappy place anyway, so
| why not move back in with your parents, like 52% of
| Americans aged 18-30 do? [0] On top of that, many of
| those costs to being unemployed don't really factor in if
| you're in one of these poorly paid jobs. Gap on a resume
| doesn't matter for fast food. Social security - how many
| young people believe it'll be around in 40 years? It's
| pretty much a no-brainer, if I was working a poorly paid
| job I'd also quit and opt out of "the system" like
| millions of my fellow Americans.
|
| [0] https://www.pewresearch.org/fact-
| tank/2020/09/04/a-majority-...
| sokoloff wrote:
| We went down to one income for a period of time when we
| had two kids pre-school-age. Even with the lower income
| being substantial [white collar professional], the effect
| after taxes (this income would be taxed entirely at our
| highest marginal rate, of course) would be "working for
| no net cash every month, missing the kids' youngest
| years, having dramatically reduced household flexibility,
| and the only benefits being gap-less employment and
| retirement account contributions".
|
| That seemed like a terrible trade, so we opted out.
| Opting out was by far the best decision for our family. I
| might have to work one extra year to fill in the gap of
| the "missed" retirement contributions. Or maybe I won't,
| if we scale back our retirement lifestyle aspirations or
| are willing to take slightly more risk/leave less
| inheritance, any of which are still better for the kids.
| rtkwe wrote:
| > this income would be taxed entirely at our highest
| marginal rate
|
| So your one income alone was large enough to put your in
| the top marginal rate for a couple alone? That's going to
| be a pretty rare situation.
|
| I wish more people could afford for one person to stay
| home and for the reaction to a guy taking paternity leave
| wasn't so stigmatized.
| sokoloff wrote:
| Sorry, the top of whatever our bracket was was my point
| (that this is a marginal income decision, meaning
| marginal bracket analysis applies).
|
| It was the 33% bracket federally, which wasn't the top
| bracket overall, except perhaps in years with
| exceptionally good capital gains.
| stevekemp wrote:
| Hopefully if there were more choices for childcare the
| costs would fall.
|
| I know that childcare in many parts of America, and the
| UK, can eat up a whole parent's salary. Here in Finland
| we pay EUR250/month for Monday-Friday daycare 7:30-4:30.
| That's affordable, and means two parents can easily
| continue to work.
|
| If you pay $1500/month for child-care it becomes a
| tougher choice to send your child/children there. I know
| people in the UK where lesser-earning parent has been
| persuaded to quit their job, because it was "cheaper"
| than paying for childcare.
| bradleyjg wrote:
| There must be some kind of subsidization involved at that
| price, right? I don't see how a business owner could
| possibly make the numbers work charging that little.
| the_lonely_road wrote:
| Very high taxes. Works out great if you have children.
| Does not work out so great if you don't have children.
| The state should use taxes to subsidize the behavior it
| wants its citizens to engage in. Population growth is
| generally considered 'very important' (and historically
| it unquestionably was #1, but today its questionable).
| The U.S. attempts to do the same thing through its tax
| code with lots of additional subsidies for parents. Keep
| in mind that a large portion of childcare expenses are
| directly reimbursed on those parents tax returns so the
| $1500 in America weighed against the $250 in Europe needs
| to be adjusted for the very high tax in Europe (as high
| as 59% I think, but am no expert in the EU) and the large
| reimbursement in America in order to get a truly
| comparable price point.
|
| Of course reality is much more complicated than that and
| there will cohorts of 'winners' and 'losers' under both
| systems. You need to take into account the various
| cohorts if you want to know which system is better for an
| individual scenario (ie the lived experience we all see
| the world through): Poor/Rich No children, 1 child, 5
| children etc. Grandparents living next door, Grandparents
| living across the country. And many other factors.
| nkrisc wrote:
| I think it does work out or in your favor even if you
| don't have kids by having a functioning society and a
| stable generation after yours to care for you as you age.
| Who do you think your doctor will be when you're old?
| Today's kids.
| stevekemp wrote:
| Bear in mind salaries in the EU are lower, so even if the
| taxes go higher the "average" person will never hit those
| peaks.
| stevekemp wrote:
| The city council runs them, and there are income based
| subsidies.
| delecti wrote:
| There are fewer households with one parent working and one
| parent staying home to raise the kids.
| pueblito wrote:
| No, rather there is practically no child care
| refurb wrote:
| Someone mentioned that 3x before and it's mostly due to
| megastores, not small storefronts.
|
| When you can build a bunch of multiacre big box stores in each
| town I'm not surprised the US has way more square footage.
| Causality1 wrote:
| Empty buildings should incur a tax that increases every month
| they remain unoccupied.
| inglor_cz wrote:
| This would not work e.g. in my native city which lost some 12
| per cent of the population since 1990. In such conditions, some
| properties will inevitably stay vacant for long periods of
| time. Fewer people, less demand for services.
| tomjen3 wrote:
| If the price of the services go down enough, that should
| cause people to move to your city, because it has cheap cost
| of living.
| inglor_cz wrote:
| Well, I am going to move back next year, and indeed the
| reason is a combination of "much lower real estate prices"
| and "I can do my work remotely most of the time". But the
| second condition does not apply to everyone, so the job
| market will always play a role. My wife, for example, will
| probably make much less there.
| rtkwe wrote:
| It doesn't have to be completely blind, the local council
| could have options to waive or adjust the taxes or the law
| could include ways to show the landlord is trying to attract
| tenants by lowering the rent or something. Also most of the
| places this is suggested for aren't significantly shrinking.
| kec wrote:
| Rather than a sliding scale, why not something like x% of the
| 12 month average asking rent? If x is high enough that should
| be a great incentive for landlords to find and stay at the
| market clearing price.
| chrisseaton wrote:
| Lol what would you do if just nobody happens to want to rent
| your unit? You have to pay an increasing tax for the rest of
| time? You couldn't sell it because who would want to buy it.
|
| Not a sensible idea.
| dukeyukey wrote:
| Tie it to a percentage of the land value.
|
| So, units in areas of high land value get taxed more and
| more, incentivising either using the lot for something people
| want, or selling it to someone who will. Whereas units in
| areas of low land value get taxed much less, reflecting the
| higher difficulty in getting good value from it.
| chrisseaton wrote:
| Who's assessing the land value?
|
| Can I assess the value of your house at $5, and then tax
| you for not selling it to me at that price?
|
| Bizarre.
| nmca wrote:
| One proposal I like for this is "cost" from the book
| radical markets - owners have to state a price for their
| property quarterly, are taxed according to that price,
| and must accept offers to purchase at that price.
| ww2buff wrote:
| I love comments like this. Condescending, confident,
| completely ignorant of extremely basic concepts relevant
| to the topic under discussion, like the 300 year
| existence of property tax assessors in every county in
| north america
| CyberDildonics wrote:
| If that's what you love then I think you have found your
| graceland friend.
| dukeyukey wrote:
| > Who's assessing the land value?
|
| Presumably the local government, they already do this to
| calculate property tax across North America, and getting
| only the value of the land is easier than the value of
| the land plus property on top of it. It really isn't
| changing much in this regard.
| throw0101a wrote:
| >> _Who 's assessing the land value?_
|
| > _Presumably the local government_
|
| Actually it's an independent agency of the provincial
| government:
|
| > _The Municipal Property Assessment Corporation (MPAC)
| administers property assessments and appeals of
| assessment in the province of Ontario, Canada.[2][3][4]
| MPAC determines the assessed value for all properties
| across Ontario. This is provided in the form of an
| Assessment Roll, which is delivered to municipalities
| throughout the province on the second Tuesday in
| December. Municipalities then take the assessment roll,
| and calculate property taxes for each individual property
| in their jurisdiction. MPAC complains that taxpayers
| often confuse MPAC 's role as an assessment agency for
| taxes; MPAC responds that it only provides assessments.
| Municipalities set the tax rates and distribute the tax
| burden based on the assessed values provided by MPAC._
|
| [...]
|
| > _Every municipality in Ontario is a member of MPAC,
| which is governed by a board of directors composed of
| taxpayer, municipal, and provincial representatives.[6]_
|
| * https://en.wikipedia.org/wiki/Municipal_Property_Assess
| ment_...
| DecoPerson wrote:
| In Australia, property valuation is a regulated
| profession. We have state-run land registry departments
| that tell the tax office what value to assume for each
| piece of land for tax purposes. If you disagree with the
| valuation, you can pay for your own private one (from a
| registered valuer).
|
| Local government taxes ("shire rates") are indirectly
| based on "Gross Rental Value" (that is, if the rented out
| the property at market value, how much would you expect
| to receive per year?).
|
| There is also land tax, which is based on undeveloped
| property value.
|
| Most commercial leases have the tenant pay the rates &
| taxes. If you own a property with 10 equally-sized shops,
| and one of them is empty, then you by law must pay 1/10
| of the rates & taxes (and any other outgoings, like
| repairs). You cannot split the outgoings nine ways. This
| acts as a vacancy disincentive.
| hellbannedguy wrote:
| Just fill out a "No interest" form with the county.
|
| Penalty for lying would be steep.
|
| I don't think lack of interest would be a big problem in most
| areas.
|
| Yes--there will be skirters of the tax, but would it be worth
| a big fine?
| jl2718 wrote:
| For every solution, there are 10 new problems created that
| require new solutions. It never ends. It never goes
| backwards. Bureaucratic parkour.
|
| Software engineers should understand this. Imagine if it
| was 10x harder to delete a line than write a new one. Also,
| no forking and no starting over.
| partomniscient wrote:
| Eventually you'd have to sell it cheap enough that someone
| would buy it, or, rent it cheap enough so that someone will
| use it preventing your tax.
|
| It doesn't seem totally unreasonable. Is there an equivalent
| of adverse posession (squatters rights) for retail?
| tenebrisalietum wrote:
| Then the unit is in a bad place and shouldn't be there. It
| should be demolished and turned into a park, surrounding
| social issues addressed, or maybe combined with an adjacent
| unit.
| shadowgovt wrote:
| You would eventually render it to the state.
|
| There are pros and cons to this idea.
| chrisseaton wrote:
| Why would the state want it? Wouldn't they have to pay the
| same tax as other people?
| shadowgovt wrote:
| Pay tax to whom? The state?
|
| If the state owns the property, they lose the opportunity
| cost of taxes paid by a private owner. So, they're
| heavily incentivized to return it to private ownership as
| soon as possible... Or to consolidate several such
| properties into something that _is_ sellable, or to
| repurpose the property into something people need, like
| more housing.
| asdfasgasdgasdg wrote:
| If the value of the property is so low that I you can find no
| one to rent it at or above your costs, there is always the
| option to abandon it. At least in the US, you don't have
| obligations toward property you have abandoned.
| rdtwo wrote:
| Then you need to donate the space to a community organization
| or pay taxes. The donation can come in yearly increments
| until you fill it.
| valine wrote:
| If no one wants to buy you drop the price until they do. Not
| saying it's a good policy, but it would drive down real
| estate speculation and lower rent.
| chrisseaton wrote:
| What if you drop the price to zero and still nobody has any
| use for it at the moment?
| valine wrote:
| Presumably the vacancy tax would be tied to the value of
| the property. If the property really is worthless you
| won't be paying taxes on it.
| chrisseaton wrote:
| > Presumably the vacancy tax would be tied to the value
| of the property.
|
| > increases every month
|
| It can't be both things at the same time.
|
| And who's setting this land value? If it's on the market
| and nobody's buying then we don't know the value.
| robinson7d wrote:
| Why can't it be both? Could have a logarithmic scale,
| could have it increase by a fraction of a % of $(value -
| currentTax) so that it increases more slowly over time.
|
| Not saying I agree with the underlying idea, just
| confused about why "increases ever month" necessarily
| means it cannot be "tied to the value of the property" in
| a `calculateTax(propValue, timeEmpty)` sort of way.
| tomjen3 wrote:
| That would require that nobody has any extra use for
| free/cheap space. It would mean that nobody needs
| additional storage space, nobody needs space for a studio
| or an office.
|
| This would essentially only happen if you rented in a
| mega high crime area, which means landlords would be
| incentivized to do something about crime.
| datastoat wrote:
| How about making the tax increase each month the unit is
| unoccupied, but also making it proportional to the asking
| rent? No one has any use for it, high asking rent => high
| tax. No one has any use for it, very low asking rent =>
| low tax.
| rdtwo wrote:
| Then you use a percent of asking rent
| [deleted]
| ectopod wrote:
| If nobody will buy the property for $1 then it's
| worthless. Gift it the local authority and then you won't
| have to pay the tax.
| chrisseaton wrote:
| People won't buy it _because it comes with a tax burden_.
| They might buy it to redevelop it if it didn 't.
| dwater wrote:
| That does not seem like a realistic problem for very many
| places. If a jurisdiction contains land with so little
| value that it won't support the taxes required for upkeep
| of the jurisdiction, then the jurisdiction could
| dissolve. Which is what happens to a ghost town I would
| imagine. That is not likely to happen to New York City.
| effingwewt wrote:
| Good, then it will go to someone who needs a house, not
| another rent-seeking parasite.
| ectopod wrote:
| So over time the vacancy tax is increasing and the sale
| price is going down. Obviously the vendor needs to sell
| or redevelop before the price hits zero. If they fail to
| do so then they lose the property. Speculation sometimes
| fails. What's the problem?
| motohagiography wrote:
| Property taxes are a cost passed on to renters or potential
| renters, so an increasing empty-building tax proposal means
| increasing the price of something people don't want until the
| owner is forced to sell it. This is the quality of logic of tax
| policy advocates, and it needs to be addressed directly.
|
| I'm all for churning unoccupied spaces, but there are better
| ways.
| hellbannedguy wrote:
| This is technically a property tax.
|
| I don't like most property taxes.
|
| That said, an unoccupied tax makes sence now. I would throw
| residential apartments, homes, into the mix.
|
| (Single owner properties would be exempt. Realestate
| investment trusts would be targeted with this tax, along with
| foreign investors--rich people whom are not citizens whom buy
| our land, and let it sit.)
| motohagiography wrote:
| So long as you understand that all taxes get passed on in
| the gross price to the renter, and this causes bubble of
| inflation in the very thing you intend to make accessible.
|
| While I don't necessarily advocate it, I'd say
| disqualifying empty buildings from insurance would do more
| to that end, as no bank or lender will take an uninsured
| asset as collateral on leverage/debt. The ones who do lend
| against that uninsured asset will impose interest rates on
| the debt to where it is cheaper for the owner to just rent
| the space.
|
| It would be anti-inflationary as well, since it would
| reduce the amount of free money caused by cheap debt in the
| economy.
|
| When you see empty buildings, you have to ask who benefits,
| and in the end, it's always the banks.
| toast0 wrote:
| > While I don't necessarily advocate it, I'd say
| disqualifying empty buildings from insurance would do
| more to that end, as no bank or lender will take an
| uninsured asset as collateral on leverage/debt.
|
| Unoccupied buildings generally require different
| insurance than occupied buildings, and it's often
| significantly more expensive. Although, apparently, not
| more expensive enough to balance the incentives to leave
| property empty.
| nemo44x wrote:
| It's private property - the owner should be free to use it as
| they see fit.
| Causality1 wrote:
| Real estate is not a generated asset. Nobody made it in their
| shed. It was there and somebody walked up and declared that
| no one else but them was allowed to use it. Land is as
| fundamentally a common property as the air we breathe.
| nemo44x wrote:
| Maybe in your imaginary utopia but property rights and land
| ownership are fundamental freedoms in the West.
| cbm-vic-20 wrote:
| Where did that land come from?
| mikepurvis wrote:
| Having it empty is a negative impact on the surroundings, not
| dissimilar to a bad smell or loud noises. It's perfectly
| reasonable for the city to have a say in this.
| refurb wrote:
| You really want to go down that path? Negative impact is
| pretty subjective. Maybe we should tax all the dog owners
| too? To offset the noise and dog poop that doesn't get
| picked up?
| inglor_cz wrote:
| Dog taxes are actually levied in some places, including
| developed countries.
|
| https://www.iamexpat.de/lifestyle/pets-information-
| germany
| dukeyukey wrote:
| Part of a government's job is to play a role in shaping
| laws and society in ways that make it nice to live in,
| and if (for whatever reason) the current set-up is
| incentivising a lot of unused land even while pricing
| people out of the area, then taking action against it
| sounds reasonable.
|
| It might not gel with your (I imagine) rightish
| libertarianish beliefs, but it certainly fits with the
| general idea of the role of government, especially local
| government.
| nemo44x wrote:
| Why not just let the market take care of it? I'd support
| not incentivizing vacant property (via the tax code,
| limiting deductible losses and/or write offs on real
| estate) but absolutely do not believe government has a
| right to force a property to rent their property out.
| That's tyranny.
|
| And what wound stop the property owner from just creating
| a "business" that is open "by appointment only"? There
| would be many ways around it.
| rtkwe wrote:
| The market only achieves the idealized results in ideal
| situations where supply and demand can freely change with
| minimal costs. Real estate in cities is inherently supply
| limited because you can't magic more land out of nowhere
| and building a larger building only kind of works for
| retail because upper floors make for shitty retail
| spaces.
|
| There are also a lot of forces pushing building owners to
| keep rents high, principally because building value is
| partially determined by the rental rates of that
| building. So if an owner is angling to sell or get a loan
| they have a strong incentive to not lower rents so long
| as the rents are in line with the 'market' rate because
| it immediately lowers the value of their property if they
| do, potentially driving them underwater on any loans.
|
| > creating a "business" that is open "by appointment
| only"
|
| The law could easily address this with requirements about
| public accessibility. It's disingenuous to pretend the
| law has to use the broadest, most abusable definition of
| any word to create loop hole counter arguments.
| dukeyukey wrote:
| > Why not just let the market take care of it?
|
| Because land is an awful example of a free-market
| commodity. It's not like you can set up a land factory to
| drive prices down (outside the Netherlands and Singapore
| I suppose...), and it's something everyone needs to live
| an even vaguely decent life.
|
| And even worse, someone who owns land doesn't need to do
| a damn thing to make it increase in price; it's the
| businesses and people living around it that do that. So
| money sitting in real-estate is far less useful to
| society than money invested into productive businesses.
| refurb wrote:
| There is nothing that says the free market doesn't work
| for scarce and limited resources.
|
| You don't have to be able to "set up a land factory" for
| the free market to work.
| rdtwo wrote:
| Because free market isn't free. The reason these
| properties aren't rented out is tied to some off
| financial/financing incentives that encourage this
| activity.
| rdtwo wrote:
| Seattle has a dog and cat tax
| cascom wrote:
| I find it pretty interesting that this comment would
| downvoted
| dwater wrote:
| It is a very simplistic, low-effort idea with no supporting
| argument. It does not take much thought to come up with
| reasons why society would not permit every single
| individual complete unrestricted domain over their
| property. Like, what if any of the actions you take on your
| property have an effect on your neighbors?
| nemo44x wrote:
| It was within the context of forcing a property owner to
| rent their property of be fined. Not within a context of
| a property owner should be able to do anything on their
| property.
|
| So the idea was presented succinctly. I really don't
| think I need a long explanation on why it's an absurd
| idea to force someone to sell their space at a price
| lower than they think it's worth.
| refurb wrote:
| That sounds like a great way to get people to replace retail
| space with a more productive asset.
| reidjs wrote:
| I'm lucky enough to live in a neighborhood that has the following
| within 3 short blocks of me:
|
| Organic grocery store, park, church, dentist, urgent care, bars,
| restaurants, hardware store, barber, liquor store, outdoor gym,
| and others.
|
| The only problem? No parking. So I sold my car. I have never
| lived in such an amazing neighborhood and I think most people
| never will because they feel compelled to live miles away from
| cities. I think it's because most city neighborhoods aren't like
| my neighborhood where everything is so accessible.
| rufus_foreman wrote:
| I have most of that around the same distance in my
| neighborhood, but if I walked 3 blocks right now I would be
| completely soaked in sweat, and would likely have a few
| mosquito bites also.
| opportune wrote:
| Exactly the same with me. I have everything I need in walking
| distance, the car is not necessary.
|
| I guess the problem is how do we get neighborhoods to "evolve"
| in this direction naturally? My neighborhood I think was
| essentially built in the 20s before cars were common household
| items. The lot sizes are small, there are no setbacks or tree
| mandates.
|
| It seems hard to get a suburban area to morph into a walkable
| neighborhood like that unless the location is highly desirable
| (which, to be fair, applies to huge parts of the SF Bay Area
| from the Peninsula to South Bay, but not the whole country),
| which would incentivize wide-scale new construction enough for
| people to put up with the short term pains of living in
| something built for walkability in a larger community that is
| still car-based.
| bart_spoon wrote:
| I'm not sure it happens naturally at this point. It requires
| conscious action. I recently moved back to my suburban
| childhood city, and under the mayor's directive over the last
| 10 years, they've been attempting to overhaul the town from a
| truly stereotypical American suburb of big box stores, chain
| restaurants, and completely unwalkable neighborhoods, to
| something denser and less car centric.
|
| They've encouraged a lot of development to the "downtown"
| area, which used to be basically town hall and the library,
| to a place with a large central park/amphitheater with
| biweekly free concerts, a farmers market, and town festivals,
| lots of mixed use apartment/retail/business buildings,
| extensive bike/walking paths, etc. They've torn up an old
| train rail that was in disrepair that cut through the city
| and turned it into a pedestrian nature trail that connects
| the northern and southern parts of the city to the downtown
| core. They've partnered with private enterprise to develop a
| "test kitchen" that acts as a sort of incubator for chefs
| before they establish their new restaurant to encourage more
| varied and unique culinary experiences. They've developed an
| "IoT" lab to act as an incubator to attract tech startups to
| the area, as well as a makerspace/trade hub to connect
| employers and people seeking training in the trades. They've
| been working with developers to buy up old single family
| homes in the downtown area to develop into denser townhome
| and apartment complexes. They've done a lot of this over the
| complaints of the usual loud minority who screech about any
| and all change.
|
| It isn't all perfect, and there's much to be done, and part
| of it was enabled due to the fact that it's a relatively
| wealthy suburb, but it's blown me away how they've taken what
| used to be the epitome of an American suburb and turned it
| into a city in track for something more sustainable. I could
| never have walked anywhere growing up, but since moving back,
| I've bought a bike and am strongly considering selling my
| second vehicle due to lack of use. But the point is that it's
| all been active development by the mayor and the city
| council, at times over fierce objections by others.
| zwkrt wrote:
| > how do we get neighborhoods to "evolve" in this direction
| naturally?
|
| Get rid of cars and people will quickly find they like
| walkable neighborhoods.
| notsureaboutpg wrote:
| People feel compelled to live away from cities because they
| don't want to pay $1 million to live in a 2 bedroom apartment
| with kids and rely on public transit that cuts lines because of
| pandemic related financial stress and have to dodge drug usage,
| feces, and mentally disturbed individuals on the streets
| (thinking about SF here).
|
| In cities that are not NYC and SF lots of families live in the
| city centers and love it because it's somewhat affordable and
| not ludicrously dangerous for children.
| hnuser847 wrote:
| Another article blaming speculators instead of central banking
| policy. The author never bothers to ask, why has every asset
| class, from residential real estate and RVs to penny stocks and
| junk bonds, dramatically increased in value since March of 2020?
| rcpt wrote:
| A lot of this is property taxes which has nothing to do with
| the banks
| asah wrote:
| +1 to this - it's fruitless to build public policy on
| businesspeople behaving economically irrationally, and worse
| can you imagine if they did?
|
| It _is_ reasonable and useful to pitch businesspeople on
| sacrificing short term gains for clear, low risk, long term
| benefits - and proof lies all around us from empty storefronts
| that could be leased at lower rates, to homeowners locking in
| 30 year mortgages.
|
| Greater time horizons require much greater stability to control
| risk.
| canadianfella wrote:
| That's a great question. Do you know what the answer is?
| boondaburrah wrote:
| This has definitely been a problem long before last year. Heck,
| in 2018 Harvard Square lost a great cafe everyone liked that
| had been there for years because a landlord firm off in North
| Carolina figured they could charge triple the rent if they
| brought a VC-backed NYC chain restaurant in.
| cbm-vic-20 wrote:
| All the while the long standing institutions that make
| Harvard Square what it is continue to shut down, only to be
| replaced by bank branches and national chains. This isn't
| really a new development, it's been happening since at least
| the 1980s, but has become much more apparent in the last 15
| years.
| delfinom wrote:
| The joke is several bank branches are starting to close in
| NYC because rent is too high. Hah.
| freddie_mercury wrote:
| If a new tenant can afford triple the rent then they are (at
| least) 3x as productive. Why do you want to reward less
| productive businesses? Do you also enjoy working with
| coworkers who are have 1/3rd the productivity you?
| jdavis703 wrote:
| Because lots of less productive businesses still provide
| excellent products or services. I can think of lots of
| local restaurants, bookstores and cafes near me that are
| less productive than McDonalds, Barnes & Noble and
| Starbucks, but non the less have better food, curation or
| coffee than their competitors.
| dan_mctree wrote:
| Many of the common reasons that make companies able to pay
| more rent do not align well with preferences of locals.
| They could have higher prices, pay employees less, use
| lower quality ingredients, give less personal attention or
| externalize costs through say noise pollution. They also
| often have competitive advantages through brand recognition
| or company support, that don't actually increase quality
| anigbrowl wrote:
| Capitalists love quoting Adam Smith until they encounter someone
| familiar with his views on usury and landlords, at which point
| they want to drop him like a hot potato.
|
| https://www.barrons.com/articles/the-trouble-with-adam-smith...
|
| I'm broadly in favor of a land value tax, think landlords deserve
| no special protections, and generally have a 'use it or lose it'
| attitude. I strongly support the idea that squatters can gain
| tenancy and even property rights through mere occupation, and
| reject the notion that landlords should be able to have court
| decisions enforced by police. Though no doubt a small number of
| decent and kind small landlords exist, they are outnumbered by
| the much larger number of rent seekers.
| epicureanideal wrote:
| Make it easier to build new things, and people speculating on a
| nearly fixed supply of existing structures won't be able to gouge
| their tenants as much.
|
| As usual, the solution is the same. Let people build more.
| fundamental wrote:
| In a similar vein Louis Rossmann has been walking through NYC
| showing current commercial storefront vacancies. While each video
| focuses on one street the rates of empty spaces seem to be higher
| than in the posted article. The rents do seem to be very steep as
| well, which you might expect out of NYC ($40,000/month is one
| price which stuck with me). One root cause cited in NYC, which
| isn't mentioned in the above article, is that commercial loans
| may prohibit leasing a space at a lower rate without lender
| approval (as it impacts the value of the building), though I do
| not know if the same issue applies in Canada.
|
| Most of the videos are long-form content which fits well into the
| background if anyone is interested: e.g.
| https://www.youtube.com/watch?v=Zjd1WNhGliY
| https://www.youtube.com/watch?v=Q53Wxx7aLrs
| https://www.youtube.com/watch?v=kuALRyGI3Ho
| delecti wrote:
| I've heard that bit about the value of buildings being impacted
| by units with lowered rents, but I've never understood why that
| wouldn't also apply to units bringing in _zero_ rent.
|
| I'm sure there are details I don't know, but naively it seems
| like enforcing those same valuation consequences for empty
| units too would incentivize filling units.
| thrav wrote:
| Purchases can be made on expectations of returns based on
| comparable properties, or prices may be assumed based on
| other filled units. Filling at a lower rate definitively
| lowers those expectations.
|
| On a 30 year model, small fluctuations have big consequences,
| and they cascade even further if there are multiple units.
| delecti wrote:
| > Filling at a lower rate definitively lowers those
| expectations
|
| Not filling at all should too though.
| dwater wrote:
| It just depends on the difference between what you can
| get today, and what you expect to get in the future and
| when.
|
| If you discount it to 80% today and then rent it at that
| rate for 10 years, you'll lose 10% compared to if you
| leave it empty for a year and rent it for 9 years at 100%
| of asking price. Obviously financial calculations have a
| lot more complexity than that, but it illustrates why
| someone would prefer a vacant property. It's based on
| expectations of future income.
| bilbo0s wrote:
| And that doesn't even factor in what also happens a lot
| in NYC, owners wanting to redevelop. Your building sits
| empty for a while, as horrible as it sounds, it can speed
| approvals that you might not get if they were full. Never
| miss an opportunity to take advantage of a crisis, and a
| crisis like the pandemic doesn't come along very often.
|
| The fundamental problem is everyone wants in on the big
| money. No one really wants to serve the lower end. And
| the lower end would be upper middle class in some cases
| in a lot of other cities. Definitely all of it will
| concert to make parts of NYC the exclusive domain of the
| wealthy soon. (Actually, parts already are, I guess I
| mean _more_ parts.)
| [deleted]
| underseacables wrote:
| A tax on vacant property is an exceptional idea.
| busterarm wrote:
| My rent stabilized building in a desirable and convenient part
| of midtown manhattan is sitting at almost 30% vacant. This is
| completely unprecedented and wasn't even like this in the 80s.
| I'm leaving myself soon.
|
| New York is in serious trouble and everyone is acting like
| things are somehow normal again.
| tekstar wrote:
| What happened? Mass exodus of people from NY due to covid /
| work from home?
|
| Serious question, I haven't seen any articles about this so
| just guessing
| notjustanymike wrote:
| Mass exodus from Manhattan into the other boroughs. The
| biggest sacrifice you make in Manhattan is space, but you
| make it to be near your job.
|
| Now that a lot of places are remote, the people who could
| afford a Manhattan apartment don't need it anymore and got
| tired of living in a shoebox.
|
| You still get all the benefits of New York in the other
| boroughs, just in a 1 or 2 bedroom instead of a 5th floor
| studio walkup.
| g00gler wrote:
| I'm from the NYC Metro.
|
| Insane pricing pushed us out initially.
|
| Philadelphia is such a horrible place, pre-covid I was
| longing to go back.
|
| COVID restrictions and now the fallout from that don't make
| it feel like a good idea.
|
| Really thinking about Florida now.
| akudha wrote:
| I too am thinking of FL. Any particular city you are
| interested in?
| jeffbee wrote:
| Philadelphia is a wonderful city of great beauty and
| culture. What do you find so horrible?
| gavinray wrote:
| I moved from Boulder to Florida maybe 2.5 - 3 years ago.
|
| After a year in Orlando, I moved to Miami, so have been
| here just under 2 years I think.
|
| We are seeing so many people from California and other
| tech-heavy areas migrate here lately, it's insane.
| busterarm wrote:
| In two months I'm joining you. Finding an apartment was
| hard too -- buildings are at 99% occupancy and go within
| hours.
| xxxtentachyon wrote:
| What makes Philadelphia "horrible" in your eyes? As
| somehow who has lived in what I think were nice but not
| luxurious parts of both urban cores, I found Philly every
| bit as livable and probably more pleasant and friendly,
| but I'm in New York now for social and work reasons
| sylens wrote:
| Lived in Philadelphia from college years in the mid 2000s
| up until about 2019.
|
| It is a great city that is extremely walkable, has
| passable public transit, a tech giant (Comcast) and lots
| of hospitals and universities boosting the local economy.
| It saw a rebirth beginning with revamping its Center City
| district and Broad Street in the late 90s/early 00's that
| has radiated outward to other areas.
|
| The problem with Philadelphia is that it is a city that
| is unable to take the next step to maintain its pace of
| improvement. The mayor and city council are unwilling to
| perform city-wide street cleaning out of fear of blowback
| from South Philly lifers who would then have to move
| their 6 cars once every two weeks. They currently cannot
| even collect residential trash on time on a weekly basis
| due to an overworked and understaffed sanitation
| department. Their transit is underfunded, partially due
| to them being a blue city in a state where most of the
| legislature is from rural red counties that would rather
| build barely used highways than extending their subway or
| commuter rail. And last but certainly not least, the
| opioid crisis makes the area around Kensington and
| Allegheny look like something from a third world country.
| The city seems to have no solution other than evicting
| the addicts from their current encampment every year or
| so, which just results in them setting up shop a few
| blocks over.
| underseacables wrote:
| Perhaps voters should consider another party in the city.
| If your leaders are not making the right decisions, why
| don't you vote for different leaders? Being completely
| married to a single party seems to lead to these types of
| outcomes. No matter how bad the politicians do, no one
| will vote against them because they are married to the
| party, for better or worse.
| rdtwo wrote:
| Delta loves Doris Florida are you ready for it?
| bradleyjg wrote:
| Florida to me will always be the place that people's
| grandparents go when they get too old to deal with NYC
| winters. I realize that's foolish but there it is.
|
| If I was going to be a tax exile I'd be more inclined to
| look at parts of NH within the metro area of Boston and
| Texas (especially Austin). Maybe Nashville.
| AtlasBarfed wrote:
| Florida is an ecodisaster slowly unfolding. I get that a
| winter hovel is a nice thing, but a permanent move to
| Florida? Between sea rise, and temperature rise....
|
| As stated elsewhere... Slowly boiling frogs.
| delfinom wrote:
| If you are wealthy with fuck you money, a summer home in
| Miami is pretty good spend even if it sinks. Anyone else
| however should strongly consider their plans on how long
| they intend to live there.
| opportune wrote:
| Florida is also extremely suburban, even in its biggest
| cities the truly "city" like parts are quite small. That
| lifestyle is not for everyone.
| Someone wrote:
| My educated guess: internet shopping, combined with
| property owners that don't want to face reality and tell
| their accountants their shops aren't worth what they used
| to be (a 100% guess is that's sometimes due to incorrect
| incentives. If a property manager gets a bonus based on the
| (perceived) value of a property, more so than on the income
| it generates, raising prices can be the optimal short-term
| strategy, even if it means shops close left and right)
|
| I don't think it will happen in the USA, but I think a
| solution would be to tolerate squatting, if the squatters
| improve the neighborhood.
| sickcodebruh wrote:
| Can only speak anecdotally, but...
|
| A significant number of our friends and family moved since
| the start of COVID but they went in different directions.
| We're all mid-to-late 30s working in tech, mostly, so this
| is in no way representative of all the people making moves.
|
| Some people moved out of the city entirely. All of these
| people have good jobs with high pay but decided that this
| was their opportunity to get the big house in a different
| area. In all but one case, these were renters who bought
| when they moved. That last case was a family that sold
| their place for more than asking price in 7 days and then
| bought a new place.
|
| Others were renters who bought in the city. This includes
| me and my wife as well as two of her siblings. We have a
| handful of friends who either bought or are trying to buy.
| We and everyone I know doing this identify as "city people"
| who just don't want to leave and are using this as an
| opportunity to upgrade space and take advantage of the
| benefits of home ownership. Many of our friends who rent
| took the opportunity to find a bigger place at a better
| rate or strong armed their landlords to get better deals.
|
| So the tldr here: in our group of friends, the people who
| left were those who wanted to leave anyway and didn't have
| the opportunity until now. The people who stayed are those
| who grew up here and/or just want to stay in the city long
| term.
| throwawaysea wrote:
| Do you feel the ones who moved out are doing so
| permanently? From coworkers I know who did this, it seems
| they are all "city people" but are finding that they
| really like single family zoned neighborhoods, more
| space, and a slower paced environment. It seems to me
| like what began as an experiment is likely to be a
| permanent change for them. Anecdotally, my sense is that
| these are people that never gave living outside the city
| a chance, or had preconceptions about it, but with this
| pandemic driven experience they are figuring out their
| actual tastes or priorities.
| AtlasBarfed wrote:
| I don't know about commercial, but a few years ago it
| seemed half or more of the new construction condos sat
| empty because they were investment speculation, foreign
| investment/hiding, and other real estate shenanigans.
|
| The fact that quant spreadsheets extend to commercial is
| unsurprising.
|
| The spreadsheets forget that you need people to make a city
| work.
| switz wrote:
| Maybe in Manhattan, but Brooklyn is booming - apartments are
| being snatched up in days and rents seem to be trending
| towards all time highs right now. "New York" is bigger than
| just Midtown Manhattan.
|
| I don't think we need the FUD; Manhattan (especially midtown)
| will be on a bit of a downswing as some companies get rid of
| their office space and people switch to semi-remote work, but
| it will survive and thrive just fine.
| delfinom wrote:
| Brooklyn has been booming for some time. Hell if I had
| piles of money, I would never buy a property in Manhattan
| and have to deal with tourist hell prepandemic. Brooklyn
| still has 'real residents' as the majority roaming about.
| busterarm wrote:
| But New York isn't just Brooklyn either. The rest of the
| city and the state (especially the state) are cratering.
| Brooklyn, or at least the wealthy, fashionable parts can
| keep their heads down and act like things are great for a
| while but eventually poor conditions in the city will reach
| them.
|
| And people will leave.
| isbvhodnvemrwvn wrote:
| For someone not familiar with NYC at all, what was going on
| in the 80s?
| yardie wrote:
| Suburbaniztion in the 70s hollowed out the middle class
| leaving just the extremely wealthy and extremely poor.
| Crack epidemic and the War on Drugs and the resultant crime
| accelerated the exodus. With the loss of tax base the city
| was going bankrupt, cutting back services (like police),
| and the infrastructure began to rot.
|
| It wasn't all bad. Some of my favourite artists and
| musicians lived in the city of that era. They were paying
| low rents or squatting while working on their craft.
|
| Once the disinvestment had run its course developers
| swooped in and bought some of the most desirable property
| for cheap. New buildings went up. A generation of kids
| raised in the suburbs discovered cities were awesome. And
| those starving artists either became successful or were
| forced to move out.
|
| The working poor and working class who built the city,
| maintained the city when everyone else walked away they
| were discarded. Sent to live in unfashionable suburbs hours
| away. Rising ever so briefly as "essential workers" while
| COVID wrecked the economy and ravaged the cities knowledge
| workers.
| busterarm wrote:
| This is pretty much it exactly except what really gutted
| the artistic community wasn't pricing but HIV.
|
| Drug use and HIV infection went hand in hand in those
| days and there was just so much death.
| nemo44x wrote:
| Lots of crime and cities not thought to be attractive
| places to live. Crack is often cited as the main driver of
| urban decay but there myriad reasons cities like nyc began
| a decline in the late 60's until the early 90's when cities
| began to be sought after again.
|
| What happens is as the tax base leaves the city has less
| money to take care of itself leading to more people
| leaving, etc. The opposite happens as people move back in.
|
| I'd never count NYC out but it was clearly in need of a
| correction. After the riots and the regime in charge
| supporting it, the increase in muggings and robbery, and
| the blandness to much of what Manhattan has become, I know
| a few people that left. Especially with remote work being
| more viable.
| ww2buff wrote:
| The police riots were indeed awful but unfortunately I
| don't think there's going to be a correction- as they
| showed when they were cracking skulls in Washington sq
| park the NYPD can operate basically independent of the
| civilian authorities
| delfinom wrote:
| The problem is NYC has learned nothing. In fact, it
| passed a record multibillion budget for this year after
| federal aid. Everyone is putting their head in the sand
| pretending everything is back to normal. I expect the
| city to crash and burn financially in another year or
| two. Or start begging for a federal bailout.
|
| And I don't say this as a twisted conservative wanting to
| see liberal cities burn. I'm pretty fucking liberal and
| NYC is going pretty much off a cliff at the moment.
| bradleyjg wrote:
| For a few decades NYC settled into a truce---things would
| be good for real estate moguls, bankers, jet setters with
| 2nd/3rd/5th houses in the city, etc.
|
| In exchange no one would complain that city government,
| the state authorities, and trades would be fantastically
| overpaid and overstaffed.
|
| This was also good for people that worked in industries
| that cater to the rich (waiters, doormen, weed delivery
| services, etc, etc).
|
| Things were hardly perfect but aside from the very poor
| and people being squeezed out of neighborhoods due to
| gentrification most groups were doing well enough to be
| satisfied.
|
| The problem is that the whole thing depends on a few
| thousand very wealthy people sticking around. If they no
| longer care enough about the restaurants, museums, clubs,
| private schools, house parties, whatever to want to be in
| NYC pay taxes and spend lavishly then the whole thing
| falls apart. The worst part is that there's no way to
| gracefully dial back---wages and benefits are sticky.
| ezconnect wrote:
| I have a friend who is an NYPD and he retired early along
| with his batch mate, he cited the cities policies is
| increasing crime and it's becoming dangerous to be out
| there. One of his mate got shot and died after he retired
| this year and he said that guy was also retiring soon and
| got unlucky.
| busterarm wrote:
| Commercially zoned real estate was at 80%+ vacancy for more
| than a decade. Business only concentrated in a few areas.
|
| Most of midtown manhattan storefronts were just boarded up
| and covered in graffiti.
| base698 wrote:
| https://mobile.twitter.com/GodCloseMyEyes/status/1415029183
| 2...
|
| Thread about the decay in general.
| underseacables wrote:
| This article is more about Canada, but it does have some
| applicability to America. The rising cost of rent, coupled with
| the desire for greater returns over stability, I just pushed a
| lot of small retailers out. I think this is also a problem of the
| walk-ability issue in America: it's very hard to walk to
| anything. European cities Are easier to walk to the corner shop.
| Not so in America. If you are able to live in one of these
| walkable communities, it's often too expensive to have something
| like a bookstore.
| herf wrote:
| We should remember that one of the problems with retail right now
| is wages that are too low, so low that many restaurants can't
| hire enough workers. These businesses are often paying for prime
| retail and then paying _again_ for customer acquisition from food
| delivery or other online services.
|
| If property owners manage to capture such a large portion of
| revenue increases (or even to increase prices in a declining
| retail market), it is a zero-sum game with many other important
| parts. Apart from cute mom and pop stores being replaced by
| national chains, the other costs are the lack of capital for
| investment in new concepts, lack of funds to pay employees
| through fair wages, and also lack of resilience in a downturn.
| banada1 wrote:
| The problem is real. Entire blocks of retail spaces in my
| Vancouver neighborhood stayed empty for 5 years. Now I'm leaving,
| it's sad to think about what could have been.
|
| Not a single mention of zoning or construction in this article.
| rcpt wrote:
| Vancouver also has ridiculous property taxes that incentivize
| land banking and speculation.
|
| https://www.policynote.ca/vancouver-property-taxes/
| TazeTSchnitzel wrote:
| Zoning can be a problem but it's not the be-all-and-end-all of
| property market problems. Maybe existing landlords need to be
| less greedy rather than sitting on empty properties.
| refurb wrote:
| Exactly. Those employers who can't find employees? Maybe
| employees should be less greedy?
| inglor_cz wrote:
| I am not even sure what sense does it make to sit on an empty
| property for five years.
|
| Lower rent income is still better than constant 0. At least
| it covers necessary repairs.
|
| One would expect that after some months of making nothing,
| the landlord would start to have second thoughts.
| [deleted]
| rdtwo wrote:
| It's a financing thing. You can pretend a building is worth
| more if the asking rent is high but the unit is empty vs if
| the unit is full for a lower rate
| inglor_cz wrote:
| Can you explain that to me in more detail? This is
| interesting, and I am not experienced in that black
| sorcery.
|
| If you need a loan or so, won't the bank actually
| investigate if the units are vacant?
| CydeWeys wrote:
| The key thing to understand is that commercial real
| estate is valued as some multiplier on rent (exactly the
| same as evaluating a bond by the interest rate it pays
| out). If the rent you're charging goes down then so too
| does the valuation, which can out you underwater on your
| loan and then you're just screwed.
|
| Some kind of regulation that imposed an equation that
| increasingly devalues property from its last rented price
| the longer it remains vacant would do wonders here at
| correcting the market distortions. Another way to
| implement that would be to value vacant properties using
| the total rents charged over the past 5 years -- so the
| more vacancy there is in that, the more your total rent
| suffers.
|
| Lenders can (and should) make this change too. It doesn't
| even need to be imposed top-down by the government.
| bombcar wrote:
| Commercial loans can also often be called - unlike home
| loans - so if you go underwater the lender can say "cash.
| Now."
| shiftpgdn wrote:
| Because they don't care. The loan is collateralized and
| sold as a financial instrument and the bank is no longer
| involved. The loan holders should care but the loans are
| owned by hundreds or thousands of organizations and
| individuals who don't have the mechanism to see what the
| underlying assets in their financial instruments are
| doing.
|
| The movie "The Big Short" actually does a great job of
| showing this but for the 08 financial crisis.
| dwater wrote:
| The bank makes a loan based on what they think is likely
| to happen in the future, and you the borrow can influence
| that. You can say, I'm going to buy this commercial
| building in the highly desirable neighborhood, which has
| seen continuous growth for the past 10 years, and it will
| continue to grow for the next 10 years, so I can charge a
| rent of $X, which will support a loan payment of $Y, so
| you can safely give me $Y.
|
| The problem arises when predictions about the future
| don't come true. Like a pandemic lowers the value of
| living in a city, so the amount of rent you can charge
| goes down. Do you admit that to the bank and let them
| change the terms of the loan (or have them foreclose), or
| do you pretend everything is fine, keep your asking rent
| high, and hope things turn around before the bank calls
| you?
| eigen wrote:
| it seems that somehow $0 is not less than say 5% discount
| on rent. perhaps unrented is counted a NULL for these
| calculations.
| MereInterest wrote:
| > Lower rent income is still better than constant 0.
|
| Depends on the terms of the lease and the expected changes
| in the future. Suppose you're negotiating a 5-year lease.
| There aren't too many new businesses at the moment, and so
| the market price is 25% below typical rates. If you take it
| and rent right away, then you get 3.75 normal years worth
| of rent over the next 5 years. On the other hand, if you
| expect that things will get back to normal in 6 months,
| then you might want to wait and rent in 6 months instead.
| Over the next 5 years, you then get 4.5 normal years worth
| of rent.
|
| The numbers vary based on location, and what the crystal
| ball tells you about if/when the prices will change, but
| there can be a financial incentive to keep things empty
| until to avoid locking yourself into a low rate. I'd agree
| with other posters that there should be a tax on vacant
| commercial properties, so that it tips the equations in
| favor of renting now vs waiting indefinitely.
| inglor_cz wrote:
| Yeah, a 5-year lease is a big commitment, for both the
| landlord and the renting business.
|
| I would imagine that a string of 2-year leases would work
| better in that case. More flexibility.
|
| "if you expect that things will get back to normal" -
| sure, but after several _years_ of vacancy you are deep
| in red numbers, so it would make sense to reevaluate that
| position. That is a reason why I would not expect to see
| long-term vacant properties in places that do have
| reasonable demand.
| CydeWeys wrote:
| Unfortunately, unlike with residential, there's a
| substantial amount of upfront build-out time and costs
| that go into retail. For most retail renters it simply
| doesn't make sense to sign a short lease.
| MereInterest wrote:
| The expectation can be significantly different from
| reality, because that's how humans work. We form an
| expectation of what something is intrinsically worth, and
| then get surprised when market conditions change. People
| still see that pinned price as the "true" price, and any
| differences as temporary fluctuations soon to be
| corrected once people change their minds.
|
| I agree that it is illogical to expect a significant
| change in market price after several years of low demand.
| However, I don't think people behave perfectly logically,
| and so it is important to also determine what people are
| likely to do.
| landlordy90810 wrote:
| Actually making 0 means you have a rather fixed assets
| depreciation and some base appreciation that follows the
| market.
|
| We don't rent a place because there is a cost in managing
| the renter too, and a single bad renter would probably wipe
| all the gains.
| georgeburdell wrote:
| Are empty storefronts worse than no storefronts? My city seems to
| think so, and mandates all buildings in a particular area be
| mixed use. The developers view it as a tax to get housing units
| built
| swayvil wrote:
| The recent "covid crisis" crushed several nice businesses in my
| town. All small businesses, locally owned.
|
| Walmart didn't even blink. The big chains are just fine.
|
| In fact, the failure of small business has provided big business
| with opportunities to scoop up cheap properties. Not to mention
| the removal of competition.
|
| And by "covid crisis" I actually mean the policy and propaganda
| ostensibly generated in response to the "covid crisis".
|
| Because compared to the damage done by our politicians and media,
| the damage done by covid was actually quite small.
|
| Put that in your pipe and smoke it.
| kgin wrote:
| I'm curious how much retail space is integrated into
| neighborhoods in the United States at all as opposed to strip
| malls down a 6 lane highway set back in a sea of parking.
|
| Most of the country doesn't even have the ability to even have
| this problem.
| chrisseaton wrote:
| > mobilized a book-buying protest
|
| Consumerism as a form of protest!
| xrd wrote:
| I came here to read the inevitable second-order effects
| discussion, that is to say, if cities enact things like vacancy
| rate they will cause extra unforeseen problems.
|
| But, I've never seen anyone discuss second order effects from
| hedge funds, or rich developers.
|
| Can someone explain why second order effects are only relevant
| and as powerful when it is a government entity. Hedge funds and
| large corporations often seem like they have more power and often
| much more agility than governments. And, they have impacts far
| greater as well at times.
|
| Is this a relevant question? What am I missing?
| User23 wrote:
| > Hedge funds and large corporations often seem like they have
| more power and often much more agility than governments.
|
| They don't. Hedge funds and corporations don't have powers like
| eminent domain and men with guns authorized to use violence to
| enforce them.
|
| The vacancy rates actually are a second order effect of the
| banking industry. You'd think landlords would reduce rents
| because some income is better than none. However commercial
| property is valued as a function of the rent, so reducing rents
| 20% could reduce the value of the property 20% too, potentially
| leaving the commercial mortgage underwater. But leaving it
| empty with a rent the market can't bear keeps that from
| happening.
|
| Therefore the correct solution is changing banking regulations
| to eliminate that perverse incentive, not to try an ad hoc fix
| at the city level which probably won't work as intended.
| sokoloff wrote:
| That provision is because commercial property is often valued
| by reference to a cap rate (essentially a net-operating-
| income multiplier to get to the property value). This is not
| a property of the banking system but of the market for
| commercial property.
|
| The banking angle is to ensure that loans on property aren't
| durably underwater, such that the bank has a high likelihood
| of ending up owning underwater property. (The bank is in the
| money business; anytime they get into the real estate
| business with a REO, someone screwed up.)
|
| Preventing banks from doing this is likely to lead to a lot
| more bank-owned properties (REOs), which is generally a bad
| sign for a real estate market.
| krisoft wrote:
| You seems to be understanding this better than I do.
|
| I understand that if a commercial property gets rented out
| at 80% of its previous rent that causes a reduction in the
| valuation of the property. What I don't understand,
| shouldn't not-renting it out cause an even bigger dip?
|
| An 80% reduced property brings in 20% less income to the
| owner, but if the property is empty that means the owner
| has to pay for maintenance out of their pocket.
| (maintaining the roof, keeping the squatters away etc.
| However cheap these expenses are, it is clearly not zero
| dollar.) The property becomes from an asset to a liability.
| (in the colloquial sense at least, as you can hear I'm not
| well versed in economics.) How does that not decimate the
| valuation like crazy?
| sokoloff wrote:
| Commercial property as a category has some characteristic
| vacancy rate. (For office and retail, this can be around
| 10% under typical market conditions. It's not at all
| weird for "good" property to sit vacant for 18 months at
| a stretch.)
|
| The valuation is based* on looking forward multiple
| decades. If you think COVID (or recession or other short-
| term event) is a blip in the future prospects, you aren't
| overly concerned if a property sits vacant for a year or
| two, when you're looking at the overall income over the
| next 30 years.
|
| On the other hand, if you drop the rents 20% because
| you're feeling an urgent need to fill the property now,
| your fixed costs don't change (property tax may
| eventually go down slightly), you have 20% less income to
| cover them and leave a profit, and your next 10 years' of
| rental income outlook is now nerfed by about 20% (and
| profit by perhaps 30% or more).
|
| It's the reason that rent rebates are a thing. You don't
| drop the monthly rental rate; you instead credit free
| months of rent over the initial period of the lease, give
| larger allowances for landlord-paid improvements, or
| other "one time" credits.
|
| * - every market participant does something slightly
| different, of course, but they're all more or less
| looking over a multi-decade period to judge what the
| property is worth now.
| User23 wrote:
| As you say, it means the bank's underwriting process
| failed. It makes more sense to me that they eat the loss
| caused by their error and auction off the property at a
| price the rental market will bear. Papering over bad
| underwriting with dishonest valuations doesn't strike me as
| worth sacrificing cities' commercial vibrancy for.
| sokoloff wrote:
| That's the thing the bank is (sort of) "trying to do" and
| the landlord is seeking to prevent them doing. If the
| landlord lowers the rent such that the property would now
| be in violation of the loan covenants, the bank has the
| option to foreclose on the loan and auction the property
| off. If the landlord does not lower the rent, they can
| avoid being in violation of the loan covenants and the
| bank does not have the right to foreclose and force an
| auction (provided the landlord keeps making the loan
| payments, of course).
|
| If the bank has a loan on the books that's being paid-as-
| agreed and is in compliance with the agreed ratios, it's
| not at all clear to me that there's been an underwriting
| mistake and consequently I don't think that giving them
| the power to foreclose is in the public or borrower's
| interests. (Giving them the _option_ is technically
| always in the bank's interests, but if the loan's being
| paid, they're not likely to exercise the option anyway.)
| User23 wrote:
| > I f the bank has a loan on the books that's being paid-
| as-agreed and is in compliance with the agreed ratios,
| it's not at all clear to me that there's been an
| underwriting mistake and consequently I don't think that
| giving them the power to foreclose is in the public or
| borrower's interests.
|
| This view is implicitly premised on the notion that banks
| exist purely to make a profit. I take the view that
| banking licenses are issued by the government
| representing the public and that licensees should act in
| a way that benefits the community in which they are
| licensed to operate. Using a dishonest valuation scheme
| that blights urban commercial districts violates that
| public purpose. I have no strong opinion on how the
| lender and borrower ought to work out the costs of
| accepting reality, and I acknowledge that it probably
| needs to be handled with finer granularity than some
| blanket policy.
| sokoloff wrote:
| The question remains "how [and when] do we determine that
| _this specific property_ is being valued _dishonestly_? "
|
| If commercial property commonly has 2 year vacancies (as
| a matter of the inherent friction in finding a user who
| needs exactly that amount/mix/configuration of space),
| how does one determine that 123 Commercial St that's been
| vacant for 9, 12, 15, or even 30 months is being
| incorrectly valued or valued at less than the bank's
| note?
|
| It sounds to me like you're perhaps pulling on the wrong
| rope. If your concern is encouraging occupancy, go
| directly to policies that encourage occupancy rather than
| concluding that this is banking problem at its root.
| Maybe it is; maybe it isn't, but rather than trying to
| puppeteer an outcome by tweaking something in banking,
| there might be more direct policy frameworks that would
| help more.
| User23 wrote:
| This is circular reasoning. These multi-year vacancies
| exist precisely because the present regime encourages it.
| One determines the appropriate vacancy rate and then
| tunes the regulatory framework to remove barriers to
| achieving that public purpose.
|
| The most direct policy framework would be wielding the
| sledgehammer that is eminent domain. However, I think
| government should use the lightest touch possible to
| achieve the public purpose, so I'd prefer setting the
| rules in a way that maximizes freedom while still
| achieving the public purpose of having non-blighted
| commercial districts.
| sokoloff wrote:
| It's not just banking ratios that cause this behavior,
| though, but rather in part the owners of commercial
| property, often let out for 5 year terms with 2 5-year
| renewal options, who don't want to be too quick to lower
| their rental base for possibly 15 years for a 1-2 year
| recession.
|
| Property with no bank note on it would behave the same
| way. (It's just exceedingly rare, especially in an easy-
| borrowing, money-printing presses running environment.
| itronitron wrote:
| I expect that companies create larger second order effects than
| governments. However governments last longer than private
| companies so they are a more reliable target for criticism.
| When a company messes up it can morph it's constituent parts
| into something else.
| qwertycrackers wrote:
| It's definitely a matter of what the commenters view as
| "right". Obviously everything affects everything else, to
| infinite degrees. But assuming an American perspective, hedge
| funds and developers are both dealing in their own private
| assets, that being their reserves of capital and valuable
| labor. So whatever they do with those things is... primarily
| their business. Of course most reasonable people accept some
| small intrusions to this situation, but the overall perspective
| remains the same.
|
| Whereas land use regulations and the like are a public commons,
| and everyone is entitled to a say and should have their needs
| meet. So all the ramifications of any public policy like this
| are of great significance and the affected feel they have a
| right to be heard.
|
| Private actors with very strong claims on things like their
| labor and capital can just do what they will, and the second
| order effects aren't discussed because they are not relevant to
| the stakeholders. Everyone is a stakeholder of public policies
| like this.
| Ericson2314 wrote:
| To start, the huge elephant in the room is that it is _insane_
| that cities are more expensive when city dwellers consume less
| resources and incur fewer environmental externalities, and are
| more productive. If our only hope is continued
| "suburbanization with li-ion characteristics", as so many
| people seem to believe, we're fucked as a country.
|
| So this preposterous fact those that all manner of incentives
| have gone wrong.
|
| For example, we now know rent control isn't bad, just like
| minimium wage: https://jwmason.org/slackwire/considerations-on-
| rent-control.... To flip this around, that these neoclassical-
| economics-defying conclusions are true means the housing market
| and labor market are terrible markets.
|
| We do need to abolish bad zoning and things, but we also need
| more public housing. The simple fact is we need to build enough
| dense housing to "devalue" the existing events in terms of
| their rent revenue, and the private sector will be loath to do
| that.
|
| Another thing is public transportation. Public transit is
| extremely valuable, but the private sector is unable to provide
| because a) it's a natural monopoly we can't trust the private
| sector with (except for Japan, where a bunch of things relating
| to land use are really different). It works best when cars are
| _beaten back_ (investments in one hampers the utility of the
| other), see https://pedestrianobservations.com/2019/09/18/cars-
| and-train.... The private sector is too impatient without the
| prospect of terrible rent seeking to wait out a transition from
| cars, and is also powerless to eradicate lanes and do other
| things that might driving rightfully harder
| (https://www.youtube.com/watch?v=ORzNZUeUHAM).
|
| So people saying every government intervention has unwanted
| side effects are just shills for the continued retrenchment for
| the state. The fact is the market cannot coordinate on a scale
| needed to "turn the ship". At the same time, the emaciation of
| the administrative state decades across across the US means we
| have a weak and incompetent pubic sector that's currently
| incapable of administrating the necessarily infrastructure we
| need.
|
| Hard problems all around, but the former is a hard fact, while
| the latter is fixable.
| Mc91 wrote:
| > public transportation
|
| I have spent some time in the San Francisco bay area and a
| lot of time in New York City.
|
| Looking at BART and Caltrain schedules - the last Caltrain
| train leaving San Francisco is three minutes after midnight.
| The last BART train leaving San Francisco leaves at 1041PM!
| The BART website says they will add slightly later trains
| next month, but still - it was like this before Covid too.
|
| In New York City, PATH and subway trains run all night.
| Metro-North, LIRR and New Jersey transit trains run fairly
| late as well. It's a larger city, but many people commute 40
| miles or more every day, and it's no big thing - get on a
| train in Bay Shore, Suffolk, New York in the morning, and in
| a little less than an hour you walk out of Penn Station, over
| 40 miles away. If you want a faster commute, then live 35, or
| 30, or 25 miles away - still plenty of room for one family
| homes and lawns if that is your thing.
|
| I have taken the BART from SFO into the city during the day,
| and that worked well enough when I did it, but expanding
| BART, Caltrain etc. could solve a lot of the Bay's problems
| of insane rent for a small place in a neighborhood that is
| not that great.
| Ericson2314 wrote:
| NYC is better, but there is still to much sprawl there too.
|
| The A train is < 40 miles, and Manhanttan is roughly in the
| middle, so subways commutes are less long.
|
| There is nothing wrong with long regional rail commutes
| per-se, but the the problem is US "commuter rail" is set up
| so the richest surburbanites in the biggest homes drive for
| the rest of their lives (and are the worse green house gas
| emitters in the country), and _just_ take transit to get to
| their 9-5 midtown office jobs.
|
| This is bad for the environment, and regressive. Transit
| should serve all classes, and be paired with dense
| development around stations (think more flushings) so
| people living far out might have more room for kids, but
| need not rely on cars to any greater extent.
|
| See https://pedestrianobservations.com/2021/03/09/the-
| hempstead-... and linked posts for plans about this sort of
| thing.
| dasil003 wrote:
| Last BART train going to the East Bay left Civic Center
| after midnight, not sure if this got dialed back for Covid,
| but I used to take this all the time.
| zootboy wrote:
| Indeed. The pre-COVID schedule was that all active lines
| had their last train leave from the end of their line at
| midnight. The last SF to East Bay would be the SFO train,
| which would hit Civic Center around 12:30 am.
| sgregnt wrote:
| > In a setting where the supply of new housing is already
| limited by other factors - whether land-use policy or the
| capacity of existing infrastructure or sheer physical limits
| on construction - rent regulation will have little or no
| additional effect on housing supply.
|
| I find this sentence to be crucial. So 3/4 of the way into
| his speech it seems like he mentions perhaps the most
| important assumption he is making: he is assuming a situation
| where the supply and demand of housing is already largely
| fixed regardless of whether there is or there is no rent
| control.
|
| That's a bit funny, if that the case then it's almost by
| definition, the rent control is not going to have much effect
| in this case...
|
| Even if he is right about what he is pitching for under these
| assumptions, the discussion seems incomplete unless he also
| treats the situation where the supply of housing is flexible
| enough.
|
| What happens then? Does rent control has effect on supply in
| this case?
|
| Maybe the problem is actually too much regulation to begin
| with. Which then leads to very reduced flexibility in the
| market response. So he is not arguing about policies to reach
| global optimum, just policies to adjust for a local optimum
| under heavily regulated market assumption.
| sudosysgen wrote:
| Actually, that is not his position. He includes economic
| constraints to construction, ie, the price of the land
| being too high.
| [deleted]
| Ericson2314 wrote:
| Keep in reading, including the comments such as the
| author's in https://jwmason.org/slackwire/considerations-
| on-rent-control... :
|
| > I'm not entirely unsympathatic to your point of view. If
| we could do more to boost the supply of affordable housing,
| there would be less need for rent control, that is true.
|
| > But, first, less need is not no need. I don't think it's
| even physically possible to get a perfectly elastic housing
| supply at the local level, so when local demand rises some
| people are still going to face displacement from rising
| rents. And I think they deserve protection from that.
| Second, and more important, I am not at all sympathetic to
| the idea that we should remove protections that people very
| much need today, because they would need them less in a
| quite different world that we may reach someday.
|
| I'd say what you are talked about is exactly addressed.
| Sure, it would have been good to include in the article
| _this_ audience, but that wasn 't the audience of the
| original speech.
| tonyedgecombe wrote:
| >the huge elephant in the room is that it is insane that
| cities are more expensive when city dwellers consume less
| resources
|
| 50% of the world lives in cities yet they consume 70% of the
| worlds energy.
| aqme28 wrote:
| What are those numbers for American suburbs?
|
| We're not comparing to the third world here, we're
| comparing across models of living in the developed world.
| Swizec wrote:
| Is that because the 50% who don't live in cities spend half
| their typical day in the nearest city?
| tonyedgecombe wrote:
| I assume it's because people in cities are richer so they
| tend to consume more.
| othello wrote:
| To enjoy modern standards of living, medium to high density
| urban arrangements are much less resource intensive than
| suburban sprawl, which the relevant comparison point.
|
| The figure you quote, aggregated at the global level,
| entirely results from a comparison of city lifestyle with
| pre-industrial countryside lifestyles in developing
| countries. By contrast, living in the countryside or in
| suburbia in rich nations is much more environmentally
| damaging than in dense urban areas, which is what gp was
| referring to.
| Ericson2314 wrote:
| Also keep in mind that turning nature into agriculture
| also has huge environmental costs not captured in energy
| usage.
|
| If "developed cultured" is fixed by pricing the
| externalities, it would be absolutely better to pack
| people in cities, replace subsistence farming with
| sustainable industrial agriculture (no tilling, no
| aquifer depletion, etc.) and _decrease_ the portion of
| land devoted to agriculture.
| akiselev wrote:
| _> The figure you quote, aggregated at the global level,
| entirely results from a comparison of city lifestyle with
| pre-industrial countryside lifestyles in developing
| countries._
|
| _Literally_ pre-industrial [1]. Last numbers I saw from
| the UN estimated 2 billion subsistence farmers as of
| 2015, all living without the benefit of modern
| agriculture except the occasional bag of fertilizer or
| engineered seeds. The future is very unevenly
| distributed.
|
| [1] http://www.fao.org/3/i5251e/i5251e.pdf
| jimmaswell wrote:
| > it is insane that cities are more expensive when city
| dwellers consume less resources and incur fewer environmental
| externalities, and are more productive
|
| If people in the city earn more on average than people
| elsewhere, then everything will cost more, just supply and
| demand. Not sure what you can do about that besides put price
| controls on literally everything.
|
| That and the extra taxes and other business costs. When the
| hot dog vendor has to pay a million dollars a year for their
| spot at central park then they're going to have to charge
| more.
| saddlerustle wrote:
| It's not "just supply and demand". Supply can increase to
| match demand! The production of almost everything in our
| lives has _economies of scale_ , so it's surprising that
| this isn't the case for cost of living in cities.
|
| It also use to be true! The main thing that changed is
| government policies increasingly _restricting_ supply.
| kube-system wrote:
| The amount of land in a given area of a city in largely
| fixed. You can build upwards to create more usable space,
| but there are no economies of scale in doing this. The
| relationship is the opposite --- taller buildings are
| more expensive per unit of area as you go up. Space is a
| multi-floor building is not constructed marginally like a
| widget in a factory. Each floor must support the floor
| above it.
| Ericson2314 wrote:
| > there are no economies of scale in doing this
|
| False. Yes, taller buildings are more expensive per
| floor. But the benefits they bring in far exceed those
| costs.
|
| You have to account for the whole system, or track your
| externalities if it's not closed. And if our current
| economic systems don't do that, they need to be fixed.
| kube-system wrote:
| I was responding to the parent comment about the
| economies of _production_ specifically.
| Ericson2314 wrote:
| OK, fair enough. I read "production" to not just be about
| the production of housing in isolation, but it is
| ambiguous.
| bobthepanda wrote:
| While this is true, the expectations of the US have also
| overshot. The US is an outlier in terms of square footage
| in new homes, American homes are very large. And
| personally I don't want some 2000 sq ft McMansion because
| that means all the cooling, heating, cleaning, and
| maintenance of such a large space that I've only ever
| seen really used to accumulate lots of stuff.
|
| We don't need to go to extremes (a Parisian studio can go
| as low as 100 square feet!) but house size in the US has
| mostly crept up as a function of minimum lot sizes in US
| zoning.
| kube-system wrote:
| Those homes aren't in cities where space is a concern.
| They're in sprawling suburbs where land is highly
| available. The construction costs of those 2000 square
| foot homes is cheaper than 1000 square foot on the 25th
| floor of a building.
|
| People in the US have a choice between the two, and
| they're largely chosen to put up with a commute from the
| suburbs in exchange for more space. Those lot sizes
| aren't just wasted space. Lower density also translates
| to more green space, lower noise, fewer shared spaces,
| etc.
| Ericson2314 wrote:
| People are choosing suburbs based on costs. The aver
| person has little ability to choose based on any other
| reason.
|
| This is why it's incredibly important that we fix this
| stuff. Rich environmentalists' "sacrifices" achieve
| nothing. It is also why I am incredibly sad the current
| infrastructure bill is slated to fund so much stupid
| suburbanization.
| amanaplanacanal wrote:
| The costs are out of whack. Environmental externalities
| are paid for by everybody instead of the person creating
| them. We need carbon taxes to fix that problem.
|
| This is on top how much zoning craziness distorts the
| market.
| perl4ever wrote:
| I think that discussion about "suburbs" tend not to
| accomplish much because the word isn't really defined. I
| mean, in common parlance, but also in the US government I
| believe that things like the census divide everything
| into urban and rural.
|
| I live within city limits, in a multifamily building. But
| the edge of the city outside of which is presumably
| "suburban" is literally a few dozen feet away. Also, my
| neighborhood has a layout and look that I think a lot of
| people would consider suburban. No businesses, mostly no
| sidewalks, mostly a cookie cutter development. On the
| other hand, it's super quick to go from where I live (by
| car that is) into the middle of the city where I work,
| which is kind of against the stereotype of suburbs. It's
| also much cheaper than the "actual" suburbs, probably
| because it's part of the city school district.
| Ericson2314 wrote:
| A suburb is where people's work aren't tied to the land
| (agriculture, logging, etc.) And virtually all transport
| is done by car.
|
| There, did it.
|
| Sounds like your place has some nice benefits, but since
| you drive everywhere (you mentioned work, and stores not
| being in the neighborhood, so that's a safe assumption,
| right?), It's suburban.
| perl4ever wrote:
| I'm within easy walking distance of a bus stop. However,
| the bus goes mostly east and west, rather than north to
| where I work.
|
| I could also technically walk to a convenience store or
| perhaps a supermarket. It doesn't take that long to walk
| a mile or two.
|
| Point is though, it's clearly not rural, and it's within
| a recognized city, so any time people are talking about
| "urban" it includes this sort of setting. It doesn't
| matter if you think it _should_ be classified as urban,
| the fact that it is, means that 's where the statistics
| show up indirectly.
|
| There is a distinct separation in property value between
| my neighborhood and surrounding suburbs with single-
| family housing at double or quadruple the price.
|
| Furthermore, as a matter of geometry, any city that is
| more or less a roundish blob, is going to have more space
| near the edges than the center. So it seems plausible to
| me that it's more representative of a city lifestyle. The
| very center in several cities I've been in is almost
| completely commercial.
| kube-system wrote:
| They're choosing suburbs for value, not cost. There are
| plenty of apartments available in cities at rents lower
| than the average suburban mortgage payment.
|
| If we want revitalized cities where people want to live,
| we don't just need low cost housing, we need high value
| housing. The middle class didn't leave cities on cost
| alone and they're not going to move back to cities on
| cost alone.
| throwawayboise wrote:
| But there are many many things you cannot do living in an
| apartment that you can do with your own home/property.
| It's not simply a calculation of value in a $/sq-ft sense
| that people are making.
| kube-system wrote:
| Yes, that's part of what I mean by value as opposed to
| cost.
| Ericson2314 wrote:
| Sure, value not costs.
|
| > There are plenty of apartments available in cities at
| rents lower than the average suburban mortgage payment.
|
| But what is the floor area? Saying people don't need
| McMansions is not the same as saying additional bedrooms
| for kids isn't nice.
|
| > If we want revitalized cities where people want to
| live, we don't just need low cost housing, we need high
| value housing.
|
| It's very easy to tear down walls making bigger units.
| Focusing on the cost of housing is the key part. Value
| comes after.
|
| Also remember that suburbs and driving is _massively_
| subsidize, even separately from the externalizes. It 's
| not fair to expect cities to compete completely on costs
| without that being fixed.
|
| Go read https://www.strongtowns.org/ for urbanism for
| small-scale romantics if big cities still sound "just
| bad".
| kube-system wrote:
| I agree with everything here except I'm not sure that
| value will necessarily result from focusing on cost.
|
| I think if you focus on cost alone, you're going to build
| poor neighborhoods and jump start a cycle of poverty.
|
| I think the key is to build diverse neighborhoods. You
| want poor, rich, and middle income housing all in the
| same place. The segregation of incomes is how we got into
| this mess to begin with.
| Ericson2314 wrote:
| I'm not sure poor neighborhoods are _built_. Most
| construction these days is shit quality, with just a few
| cheap trappings making something "luxury".
|
| Other than physical dividers like highways, I don't
| really think segregation is _built_?
|
| One big exception is we certainly want the public housing
| to not be congregated in ghettos. That was another
| terrible NYCHA (and others) practice.
| kube-system wrote:
| The congregation of public housing into one place is an
| example of what I'm referring to as "building poor
| neighborhoods". In contrast, you can build rich
| neighborhoods depending on the structure and how the
| land-use is controlled.
| nobodyandproud wrote:
| Real estate isn't instantly scalable. It takes years of
| planning and decades of execution to create a truly
| scalable city.
|
| With stores, they're squeezed on both ends: Pressure from
| online retailers and then exorbitant rents.
|
| It's not unusual to have monthly rents that go into mid-
| five figures for a small store at ground level.
|
| Few small businesses can sustain that in the long term.
| perl4ever wrote:
| I think you're (and Ericson2314) confusing/conflating two
| different ideas.
|
| Big cities obviously have economies of scale, so, say,
| the chicken lo mein is fresher and hotter due to higher
| volume. Or, the first time I had a cup of plain coffee at
| a random cafe in NYC, it was stunningly good. Any
| reasonably successful business has much higher volume
| than in a less populated area and is pressured by
| competition more too. They can and must do better.
|
| But people make more money on average in a big city, and
| that means they spend more. If the exact grade of
| hamburger available everywhere is 20% cheaper, that
| doesn't in any way prevent your meals from being much
| more expensive. The whole point of being in a city is so
| you can get stuff you can't otherwise.
|
| If you are living and working in NYC, are you going to
| just have the same fast food you could get in Albany,
| that's incrementally better?
|
| Don't mix up "city dwellers use less resources for a unit
| of a given thing" with "city dwellers use less resources
| _period_ ".
| Ericson2314 wrote:
| For green house gas emissions, at least, it is absolute.
| See https://coolclimate.org/maps.
|
| True rural and true urban (with public transit
| predominating) is good. But the suburbs where most people
| live are absolute trash.
| BurningFrog wrote:
| The dominant factor making US cities expensive to live in
| is that they ban housing construction.
|
| Legalizing a healthy housing supply would improve this
| country more than anything I can think of.
| jimbob45 wrote:
| There are enough houses to house everyone in the US. The
| problem is that half of them are for rent which enriches
| one person off the dime of another.
|
| We don't need more houses unless we want to continue
| wrecking the environment. Better to block renting and use
| what we have.
| beerandt wrote:
| Then we should repeal the majority of Dodd-Frank.
| BurningFrog wrote:
| Repealing zoning is the more common answer :)
|
| What in Dodd-Frank stops housing construction?
| Ericson2314 wrote:
| > Why this reminds me of treating workers as caged hen?
| Dense in the sense of building complexes of decent size
| family homes? That I could support, but building blocks of
| shoebox flats, should really be eliminated.
|
| Affordability is the _ratio_ of income to prices. Nobody is
| saying city prices should never be higher in absolute
| terms, they simply shouldn 't keep up with the higher
| incomes.
| [deleted]
| varispeed wrote:
| > The simple fact is we need to build enough dense housing to
| "devalue" the existing events in terms of their rent revenue,
| and the private sector will be loath to do that.
|
| Why this reminds me of treating workers as caged hen? Dense
| in the sense of building complexes of decent size family
| homes? That I could support, but building blocks of shoebox
| flats, should really be eliminated.
|
| The supply of residential housing should be at a level, where
| buying or renting from a private sector could be considered
| an option, not a necessity. Local governments should be
| allowed to rent houses from private investors, but pricing
| should be strictly regulated, so that residential property is
| not viewed as an investment, but rather as a way of getting
| maintenance money for idle properties.
|
| Residential property investment should be treated as carts
| and horses of economy and become the past.
| iamstupidsimple wrote:
| It's not families living in San Francisco. It's single,
| urban professionals and engineers. I don't like that people
| aren't really having families anymore, but just pretending
| that it's still the 70s doesn't exactly work either.
| Ericson2314 wrote:
| Actually, many of your points are good, just not your first
| one
|
| > The supply of residential housing should be at a level,
| where buying or renting from a private sector could be
| considered an option, not a necessity.
|
| That's actually good.
|
| > Local governments should be allowed to rent houses from
| private investors
|
| Nah, there's no value for the private sector to add, and
| huge risk of regulatory capture here.
|
| We avoid NYCHA failures be saying public housing != low
| income housing. Allow the average rent to meet costs so
| public housing is self sufficient. Having average rent not
| meet costs is moronic politics, basically committing
| seppuku for the right.
|
| > So that residential property is not viewed as an
| investment, but rather as a way of getting maintenance
| money for idle properties.
|
| Also true!
|
| -------
|
| > Why this reminds me of treating workers as caged hen?
| Dense in the sense of building complexes of decent size
| family homes? That I could support, but building blocks of
| shoebox flats, should really be eliminated.
|
| Saying density means less space for people is dead wrong!
| Less land space too, but taller buildings can mean _bigger
| units_.
|
| Back yards don't scale. Ensure people city and natural park
| access (which the Bay Area has lots of), and then build the
| buildings as big as possible to give people humane floor
| space.
|
| Ultimately it's single family homes that make people caged
| hens....in tents.
| rcpt wrote:
| > we now know rent control isn't bad
|
| Huge ask that we all accept that conclusion from the speech
| you linked.
| opportune wrote:
| Yeah. One has only to look at the housing market in Berlin
| to see that it can be bad. Of course that is one extreme
| and there are many different ways to implement rent
| control. Overall I think this is a whole other can of worms
| in itself though
| Ericson2314 wrote:
| Ideally we should build enough public housing that rent
| control isn't needed, just as ideally we should have
| strong enough unions that minimum wages aren't needed.
|
| But we fail miserably on both those counts, and denying
| the next best thing does not strike me as useful
| accelerationism.
| ItsMonkk wrote:
| What Prop 13 does for owners, rent control does for
| renters. Both gives huge advantages to current residents at
| the expense of future residents. It's obvious why current
| residents would vote for such a change. This allows current
| residents to ignore problems as they occur, so these
| problems grow out of control.
|
| We can't keep giving benefits to certain populations of
| people. You need to work out the negative externalities and
| tax it. You need to work out the positive externalities and
| subsidize it. Anything else leads to perverse incentives.
| If you happen to have a surplus as a result of taxing
| negative externalities, you should take the tax money and
| give it back to your residents as a dividend.
|
| If you want to have parking minimums, if you want to have
| certain setbacks and limited building height, if you want
| to disallow building train-tracks through your backyard,
| that's fine. But those are externalities on the community
| and they should ultimately show in the Land Value and that
| needs to be taxed. When it is not taxed it is incentivized,
| and those perverse incentives only lead to more bad
| policies. A Land Value Tax would instantly turn most NIMBY
| voters into YIMBY voters. Fixing all of these follow-on
| symptoms would go from an up-hill battle to a downhill
| breeze. Focus on the disease, tax negative externalities.
| Lammy wrote:
| > What Prop 13 does for owners, rent control does for
| renters.
|
| Economically trap them in their home/apartment forever,
| thus achieving segregation with extra steps? I agree.
| sudosysgen wrote:
| Rent control doesn't just benefit current residents, any
| sane rent control policy carries forwards when tenants
| change. Those that don't are ineffective on purpose.
|
| Beyond that, lowering rents benefits even future
| residents and homeowners-to-be as they lower property
| values and dampen speculation.
| Ericson2314 wrote:
| Please.
|
| This is from an actual economist, not some political hack,
| and links have been added to the underlying studies.
| Disparaging this for being originally a speech is
| intellectually lazy.
| clairity wrote:
| the more compelling critique of rent control is that it's
| a tiny patch on a heavily distorted market--just enough
| bone to keep the riff-raff distracted from the naked
| engorgement of capital on real estate. if we had highly
| dynamic, fair, and transparent real estate markets, we'd
| have no need for rent control, because a high-functioning
| market keeps prices just above the cost to
| create/provide, that is, a fair market price.
| slibhb wrote:
| There are actual economists who think rent control
| doesn't hurt supply. And there are actual economists who
| think the opposite. Given that, saying "we now know rent
| control isn't bad" is quite a stretch.
|
| Personally, I don't understand how rent couldn't hurt
| housing supply. I do understand that there is empirical
| evidence suggesting it doesn't but I'll remain skeptical
| until there's some theory explaining how that could be
| that I can understand.
| sudosysgen wrote:
| We know, _empirically_ , that rent control, when it
| satisfies some key constraints, is effective.
|
| Unless you are one of those that thinks that economics
| isn't subject to the scientific method, reality trumps
| theory. And it's false that we have no theory of why rent
| control is effective, we absolutely do.
| slibhb wrote:
| You and the above poster are overstating your case. Your
| post boils down to "don't u believe in science lol?"
|
| I agree with this comment:
| https://jwmason.org/slackwire/considerations-on-rent-
| control...
|
| I think that if rent control doesn't hurt housing supply,
| it's because of various regulations that are distorting
| the market. Enacting rent control instead of reforming
| those regulations seems silly to me.
| sudosysgen wrote:
| It's on you to show an example of a city where these
| various regulations are absent and where rent control
| hurt housing supply. Good luck.
|
| I'm being serious here, if you think that a vague, purely
| theoretical argument, from theories that we already know
| are very far from complete, is a match for empirical
| evidence, then you are not treating economics as a
| science.
| slibhb wrote:
| There's nothing vague about the argument against rent
| control. Further, I don't agree with your view of
| science. Empirical evidence matters but the pure
| empiricism that you're advocating is not convincing to
| me.
|
| I think we would be better off reforming regulations that
| are preventing people from building than enacting rent
| control. That seems like a very reasonable opinion with
| plenty of support from economists. I find your posts in
| this thread overly dismissive and aggressive.
| sudosysgen wrote:
| No, the argument is indeed vague. There are plenty of
| situations where intervening in the market actually
| increases efficiency - for example, patents, state
| monopolies on utilities, minimum wages, etc...
|
| Simply pointing to "supply and demand" and operating by
| maximalist principle is a vague argument. You have to
| actually engage with the fact that housing can never be
| an ideal markets and that inelasticities are indeed
| great.
|
| Again, if you think that these regulations are both more
| effective and exclusive to rent control, you can find
| empirical evidence.
|
| I'm not being a pure empiricist. A basic theory made an
| empirical prediction - that rent control would decrease
| supply - and the theory is wrong. You can't then use the
| same theory that made an already incorrect prediction to
| make a second prediction that is this time almost
| impossible to evaluate empirically. Find another theory
| and make an original prediction, without ex-post-facto
| retconning, and we can judge that theory on the merits.
|
| As it is, we already know that simple neoclassical market
| theory does not apply to markets with significant price
| in-elasticity and friction, and the housing market is and
| will always be like that.
|
| It's theory that is often wrong, that is wrong here
| again, you can't rely on it over the empirical evidence
| by retconning your predictions after the fact. That's
| just bad science. In another field that would get you
| laughed out of the room.
| bregma wrote:
| Regulatory capture is like boiling a frog. Hedge funds and
| developers make us warm wet and happy until it's too late.
| krisoft wrote:
| > But, I've never seen anyone discuss second order effects from
| hedge funds, or rich developers.
|
| I think we do. We discuss startup culture, unicorns, huge
| companies with no revenue, the effects of quarterly reporting
| on long term thinking and many similar topics. These are all in
| my opinion second order effects of how business is financed
| nowadays. If you can think of other second order effects which
| are not widely discussed please do write about it. They are
| usually all super interesting and more insightful analysis is
| always welcome.
|
| > Can someone explain why second order effects are only
| relevant and as powerful when it is a government entity
|
| I don't think that they are only relevant when it is about
| government. See my previous point, but it is easier to talk
| about governments in this sense. Our governments in the "free
| and democratic" world are very transparent. We have freedom of
| information laws, the laws and policies of our countries are
| published, and politicians leak info like a sieve. Of course
| there are secrets, and backroom deals, and honest to goodness
| conspiracies too. But when you compare how transparent our
| governments are to how transparent hedge funds are it is day
| and night. It is much easier to talk about what you can
| observe, therefore there is more discourse around the second-
| order effects of transparent government action than the
| intentionally more opaque hedge funds.
|
| Likewise people discuss more what they can influence. At least
| in theory we all can influence our governments. I'm not voting
| on hedge fund managers. They don't really care what I think.
| They care enough to not anger so many people that they grab
| pitchforks, but the opaqueness and lack of information helps
| them there. Curiously the easiest way the average Joe and Jill
| can affect a hedge fund is by convincing the government to
| enact and enforce some law. This is another reason why people
| might be talking about the second-order effects of government
| action more.
| jl2718 wrote:
| There is only one thing that distinguishes the difference
| between government and all other social entities:
|
| A monopoly on the use of force.
| [deleted]
| aqme28 wrote:
| A government is also accountable to the citizens while a
| private company is only accountable to its shareholders.
| That's a pretty big difference.
| jl2718 wrote:
| Private companies and governments can both exist without
| accountability.
| sudosysgen wrote:
| There is literally no government in the world that isn't
| somewhat accountable to citizens.
|
| Meanwhile, there are many multinationals that are not
| accountable at all to the citizens of countries they
| operate in.
| csomar wrote:
| > There is literally no government in the world that
| isn't somewhat accountable to citizens.
|
| Actually, there might only be a few government that are
| accountable to citizens. Maybe most governments _care_
| for their citizens, but accountable? I don 't think so.
| AtlasBarfed wrote:
| Companies are dominated by the major shareholders,
| basically the rich.
|
| Guess what the us government is dominated by?
| Apocryphon wrote:
| Sufficiently wealthy private entities can buy access to that
| force, which makes it more of an oligopoly than a monopoly.
| Not to mention there are private security services who are
| also granted force.
| HWR_14 wrote:
| > But, I've never seen anyone discuss second order effects from
| hedge funds, or rich developers.
|
| There is a huge body of research on it. When private entities
| do it the term used is an "externality".
| juanani wrote:
| Greed(capitalism) is killing neighborhoods. FTFY. Not just
| neighborhoods either. ThE GrEaTeSt SyStEm EvEr
| lordnacho wrote:
| Why not just make a law that says the old tenant can keep paying
| until the new tenant who is gonna pay 10x arrives? Seems like
| there must be some other explanation as to why the landlord
| doesn't just keep the little guy until he finds someone who will
| pay more.
| nostromo wrote:
| Overly restrictive zoning is killing neighborhoods.
|
| North America needs more housing and less retail. But the market
| can't respond because zones are too restrictive.
| jmclnx wrote:
| As I said in the past, when a rental property goes vacant and
| stays vacant for more than 1 year, the property tax goes up for 5
| years minimum equal to the amount of the rent that was previously
| paid. Increasing 15% every year until rented.
|
| This is for every unit that is vacant.
| johnnyApplePRNG wrote:
| 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.
| whall6 wrote:
| What property tax breaks are you talking about?
| emodendroket wrote:
| > 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 wrote:
| 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.
| el_nahual wrote:
| 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.
| s0rce wrote:
| I'm sure you'd make more money after takes renting it out but
| you have more costs associated with having a tenant (and
| risks). If you can just sit on a vacant property get some tax
| rebates and watch it appreciate you don't need to do
| anything. Your tenant won't break stuff, you don't need to
| find new ones, its just appreciating slowly and requires less
| hands on management.
| xhrpost wrote:
| > 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 wrote:
| 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.
| anigbrowl wrote:
| Appreciation only + tax deductions can be a great combo
| in a hot market. why deal with the hassle of tenants when
| you can have rapid appreciation, and the more property is
| off the market, the higher the prices become?
| kflzufkrbzi wrote:
| If appreciation is 99% and rent is 1% does it change
| anything?
| djrogers wrote:
| That's a bit of a straw man, as that degree of market
| imbalance would completely end renting.
| nend wrote:
| Isn't that what this thread is about though? The complete
| end of renting in this downtown strip. The buildings are
| sitting empty and not renting.
| 55555 wrote:
| The risk-adjusted return differential is much less than
| appears at first glance.
| franciscop wrote:
| The thing I learned recently that happens in Spain is that
| if you have a property sitting empty, the government will
| calculate a "virtual rent" so to speak and charge you based
| on that (normally lower than actual market rate, but not
| much). If you rent it out, you get taxed based on what you
| actually make and not on this potential rent. Real estate
| taxes are apart/independent.
|
| This makes people really want to rent out places, and you
| see a much higher occupancy than in other countries (you
| still have squatters, which is a big issue, pushing in the
| opposite direction so it's still not perfect).
| 6510 wrote:
| It should be much more harsh. If you own a building where
| a store should be but aren't using it as such you should
| be made to pay an insane tax for lowering the value of
| the entire shopping area.
| pxeboot wrote:
| I can only speak to residential, but when I worked in the
| industry, it was extremely rare for rents to go down because
| many existing tenants would see the new rate and demand a
| discount or leave.
|
| It was perceived as cheaper to have a few vacant units at
| $2000 a month instead of renting them for less and lowering
| the rate for anybody renewing their lease.
| BeFlatXIII wrote:
| I now have the mental image of a tenant moving one unit
| over to start "new" and get the discount lease rate. Thanks
| for brightening my day.
| m-ee wrote:
| A friend of mine did this during the pandemic. Asked for
| a rent reduction and the landlord refused but offered
| them an identical unit in the building at the lower
| price.
| TeMPOraL wrote:
| That's how you deal with mobile phone operators :).
| Threaten them to leave if they won't give you a better
| offer, and if they don't, then just leave... and come
| back some time later, to get the much better "new
| customer" treatment.
| awillen wrote:
| This is definitely true in large apartment buildings, where
| units are very comparable and leases are identical. Not so
| much in commercial where lease terms may vary widely, and
| even units in the same building may be meaningfully
| different in value based on how they're currently
| configured and who's looking to rent (e.g. if you want to
| rent a space to start a restaurant, and it was previously
| set up as a restaurant, you've got a lot of infrastructure
| there already, so it's more valuable to you as a tenant
| than it would be to someone who wants to use it as a
| hardware store).
| conjecTech wrote:
| There may be other factors besides what they nominally
| "want". Depending on their source of financing, landlords
| changing the rent on these spaces can be both logistically
| difficult and may cause a huge negative cashflow shock
| because of the way it effects capital requirements on
| commercial loans. Louis Rossmann covers it in a video
| (https://www.youtube.com/watch?v=NdfmMB1E_qk) based on this
| reddit comment (https://www.reddit.com/r/nyc/comments/innhah/
| nearly_twothird...).
| smsm42 wrote:
| Small point on [1] - it's not only EITC, there are a number
| of benefits that are income-dependant where a small income
| increase could make you ineligible for a ton of benefits.
| Effective marginal tax rates for people right around poverty
| line is crazy high for their income - because each additional
| dollar earned turns into lost benefits.
| https://fee.org/articles/the-welfare-trap-labyrinth-of-
| progr...
|
| The tax rates still aren't 100% there but even something like
| 50% may seriously discourage people.
| burlesona wrote:
| There is actually a phenomenon colloquially called "extend
| and pretend," where it's better for commercial properties to
| sit vacant or half-vacant than lower the rent.
|
| The reason is, the building is financed based on it's
| calculated property value, and commercial property value is
| simply a multiple of the listed rent. Whether or not you're
| collecting the rent is immaterial -- after all it's perfectly
| normal to buy a vacant lot and built a building on it, or to
| buy an old warehouse etc. and refurbish it, etc., such that
| the bank has to make the lending decision based on projected
| rent rather than actual rent. So this is what they do.
|
| The problem is only when the projections are proven false,
| such as when you lower the rent to fill the space. If you do
| that, the bank must now lower the value of the building,
| which can easily make the building worth less than the loan.
|
| Further complicating things, commercial properties are
| usually on short-term financing, for example a 5-year
| "revolving" loan where the developer pays interest only for
| 5-years and then is expected to pay off the loan all at once
| (unlikely) or refinance (99% of the time).
|
| So, suppose the building has a $8M loan based on a
| theoretical $10M valuation. The developer is making the
| payments, whether from the partial rent, or his personal bank
| account, even though the building is vacant. The loan is now
| due to be refinanced.
|
| If the developer says, "I'll get a tenant in here any day
| now," the banker can nod and say "I believe you," and
| refinance the building. The developer keeps paying the
| payments and doesn't have to go bankrupt. The banker doesn't
| have to foreclose and write off the loan as a loss.
|
| Conversely, if the developer had cut the rent in half to get
| the building full, the banker now has to lower the building's
| value from $10M to $5M, and therefore the maximum loan is
| reduced to $4M. But the developer owes $8M to the bank, and
| doesn't have the money to pay it off. Not even the $4M to
| cover the difference and refinance the rest.
|
| In this scenario, the developer goes bankrupt and the bank
| has to foreclose on the property.
|
| Thus both parties choose "extend and pretend" as the rational
| action, even though it's not good for the developer and
| terrible for the surrounding community.
|
| From my friends in the real estate business, my understanding
| is that a shocking percentage of commercial real estate is
| currently operating in this "extend and pretend mode," which
| ironically just reinforces the pattern, since all the players
| involved know that if the banks started forcing the issue
| they would likely kick off a chain reaction of bankruptcies,
| write-offs, and a destabilized real estate market that would
| lead to huge losses for most or all of them.
|
| So instead, "this is fine."
| el_nahual wrote:
| This makes a lot of sense--it seems that the real problem
| is rent "stickiness."
|
| And there's a lot of factors making rent sticky: the
| financing structure you mentioned, maybe the bimodal
| distribution of tenants I'd hypothesized.
|
| In residential there's also the "unintended consequence" of
| quite a few tenant's rights laws that makes rent extra
| sticky (why do you think NYC landlords require proof of 40x
| monthly rent as income?!)
|
| But what doesn't seem to bek the case is simply chalking it
| up to "tax breaks" which is a common boogyman.
| clairity wrote:
| there is certainly a tension between the bank and the
| developer/owner over potential default, but the mechanism
| isn't simply the developer/owner presenting financial
| projections and bankers being relegated to only accepting
| their word and being stuck with a bankruptcy ultimatum if
| the deal goes sour. commercial appraisers must validate the
| assumptions and calculations based on prevailing conditions
| and comps.
|
| the question is really who should take the risk of getting
| the projections wrong, and the answer is straightforwardly
| the bank, although the developer/owner has to act in good
| faith in both the financing and the operations. a new
| development is basically a finite business, and projecting
| the cash flows, and therefore the ultimate valuation, is
| risky. loan officers' principal job is to assess (and
| accept/reject) that risk.
|
| all that said, we need to stop propping up banks and loans
| gone bad. without real downside consequences, we get
| misallocation, as we plainly see in many commercial real
| estate markets.
| pasabagi wrote:
| It seems to me that real estate is the locus of a colossal
| regulatory failure that has already created one trainwreck
| (2008) and will just continue to spawn more until people
| start taking a look at the system and honestly evaluating
| how much of it is rational.
|
| Making everybody who wants to live in a stable home get
| involved in the real estate market is sort of like making
| everybody who wants a computer buy tech stocks. It's
| insane, and leads to a completely insane market. I own a
| house despite the fact I know nothing about houses and
| don't want to own a house, because the alternatives are far
| worse.
|
| When you get a situation where the incentives are all set
| up to make people act in a way that's not only destructive,
| but also blatantly unsustainable for everybody involved, it
| means the government is sleeping at the wheel.
| drewg123 wrote:
| Is this also why apartment complexes seemingly refuse to
| lower the rent when demand slumps, but rely on one-time
| incentives?
|
| I'm talking about the "move in special!" "one month free
| rent", etc. It would seem more rational to reduce the rent
| by 1/12th...
| JMTQp8lwXL wrote:
| If rents are bi-modal, as one of the parent posters
| suggests, then how can all properties be valued based on
| the higher end (e.g, tenants with deep pockets) when not
| all tenants actually have deep pockets? Shouldn't the
| entire demand curve be considered when deriving the
| multiplier and therefore the price of the commercial
| property?
|
| Not everyone can get the deep pocket tenant. The staggering
| number of empty store fronts reflects that.
| ChrisMarshallNY wrote:
| If you say the rent is $100/sqft, then the tax break is for
| $100/sqft of unrealized rent.
|
| If you rent at a reasonable (for the area) rent (say,
| $15/sqft), then you get the money, true, but it may not beat
| the tax break.
|
| Accounting is weird.
|
| I learned this, back in the late 1980s. I was wandering
| around Ann Arbor, and marveled at all the "FOR RENT" signs.
| The person giving me the tour explained why they were there.
|
| I am no expert, and don't know much about tax whatnots and
| real estate, but that was the story they told me, and they
| stuck by it.
| busterarm wrote:
| I worked doing data entry in my teen years for a tax
| certiorari law firm in NYC and I can tell you that one of the
| favorite tricks of multiple-building owners is to have a
| mostly vacant building (or several) as a tax sink. Most of
| the time they would put their family in the units at no
| charge and write off the whole building to offset their
| others.
|
| This is especially true of buildings they were holding for
| sale to property developers.
| [deleted]
| qaq wrote:
| 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.
| haram_masala wrote:
| 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.
| AbrahamParangi wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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.
| syshum wrote:
| 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
| thaumasiotes wrote:
| > 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.
| rasz wrote:
| 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.
| thaumasiotes wrote:
| You can put a sticker on anything you want. You already
| know the value is less than that because it's not being
| rented at that price.
| notatoad wrote:
| 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 wrote:
| 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.
| minikites wrote:
| >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 wrote:
| 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.
| throwaway2048 wrote:
| 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 wrote:
| 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 wrote:
| 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
| dionidium wrote:
| This doesn't make any sense. The value of a lease on these
| properties vastly outweighs any property tax deduction.
| bfdm wrote:
| 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 wrote:
| 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 wrote:
| 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.
| dionidium wrote:
| This still doesn't make any sense! Lower rent is worth more
| than no rent and the property appreciates _either way_.
| Keeping a unit off the market to keep the rents up is kind
| of a silly plan if you never end up actually renting any of
| the units.
| useful wrote:
| My understand is that commercial real estate loans
| require additional collateral for lower rents than what
| was agreed to when the mortgage was created. Building
| value is basically (monthly rent * constant).Accepting
| lower than when the mortgage was written will trigger
| provisions that value the property differently and
| require the building owner to add principal to get back
| to 25%.
|
| If lowering the rent by 10k a year lowers the value of
| the building by 100k, the building owner may have to add
| 25k that they don't have to keep the building from
| falling into default. If you have a completely empty
| building and you accept a lower rent in one of ten units,
| you could need to put down 250k it of you have many
| building under one loan they may want millions because of
| how it changes the loan valuations.
| ethbr0 wrote:
| Any tenant comes with risk. Risk has a financial cost.
|
| Ergo, lower rent is _not_ always worth more than no rent,
| even all else excluded.
|
| Example: you rent your property to a tenant for $100 /
| month, who does $5,000 worth of damage to the property,
| and declares bankruptcy when you sue them for recovery,
| in addition to the time you spent installing them +
| evicting them + dealing with recovery.
| [deleted]
| ethbr0 wrote:
| > _don 't have to pay property taxes [...] on the vacant
| ones_
|
| Property tax abatement depends on local laws, correct?
|
| On the other hand, I assume you can claim the usual
| boatload of expenses (e.g. mortgage interest, upkeep, etc.)
| against vacant properties, thus generating a paper loss to
| offset income generated by other properties or activities.
|
| The real lynchpin appears to be: vacant properties are
| allowed to contribute tax losses to their owner(s).
|
| Whereas in reality, what we _probably_ want is something
| more akin to "If you have not fully utilized (i.e. leased
| for a percentage of the timespan) a property in the last X
| months, you can no longer claim any tax expenses for value-
| based (i.e. mortgage, financing, property taxes) components
| of the property. You can still claim expenses related to
| the improvement of the property (e.g. maintenance, etc.)".
| resonantjacket5 wrote:
| I don't know which city johnnyApple is commenting on but if
| it's American ones what is happening is there a glut of
| commerical/retail properties
| https://www.bloomberg.com/graphics/2020-commercial-real-
| esta... (There was excessive retail even before covid aka
| also why many malls are dying). However the land is still
| appreciating if it can be converted to residential
| apartments/homes though it does depending on zoning laws.
| ab_testing wrote:
| 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.
| johnnyApplePRNG wrote:
| 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.
| colechristensen wrote:
| The logic is that you either lower the rent until a building
| is being used or sell the property to somebody who has a
| better idea for something to do with it.
|
| The idea is making it expensive to leave a building empty to
| force down rent prices and property values which is in the
| best interests of people who want to participate in the
| economy instead of collecting rent from it.
| emodendroket wrote:
| 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 wrote:
| 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.
| [deleted]
| notatoad wrote:
| >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.
| JKCalhoun wrote:
| No word on the street that the big box stores had moved in and
| captured all the local business?
| syshum wrote:
| 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 wrote:
| Might be true for American cities with their car based
| suburban structure but it is a complete different situation
| for European cities.
| l33t2328 wrote:
| 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.
| cascom wrote:
| While I whole heartedly sympathize with the sentiment of the
| article (no one wants to see local institutions forced out, chain
| stores move in, or storefronts sit empty), and real estate
| developers and "speculators" no doubt make an easy target, it
| would seem that the author thinks that neighborhoods can and
| should keep their current character and not evolve (for the good
| and the bad).
|
| It somehow always strikes me as odd how some tenants think that
| they should not be subject to market forces, if you want to lock-
| in prices for more than 1-10 years, buy.
| xerox13ster wrote:
| > if you want to lock-in prices for more than 1-10 years, buy.
|
| Many people who are tenants are tenants precisely because they
| can't afford to do that when speculators have manipulated
| market forces to artificially drive up the prices.
| rdtwo wrote:
| These aren't real market forces if the properties are staying
| vacant. It's likely that the tenants are getting hit by 2nd
| order effects of bad regulation like the tax thing or financing
| requirements that incentivize leaving properties empty
| acd wrote:
| I think this is an effect of near zero interest rates from
| central banks. With near zero interest rate loans will rice real
| estate price go higher and thus rent increase
| adflux wrote:
| Yup... Wonder what will happen when the bond yields and
| interest rates go up
| jdavis703 wrote:
| There's also the fact that we had a pandemic. Some cities had
| an empty storefront problem before the pandemic, sure. But a
| lot of places just gave up.
| rcpt wrote:
| Prices can go up but rent doesn't have to.
|
| Price to rent ratios are huge in California because speculative
| demand far outstrips actual demand. Most landlords are cash
| flow negative and own only so they can bet on equity wins.
| rufus_foreman wrote:
| >> Most landlords are cash flow negative and own only so they
| can bet on equity wins
|
| That's the "Ponzi financing" phase of Minsky's financial
| instability cycle. It typically does not end well.
| mensetmanusman wrote:
| Amazon won economies of scale. The only thing worth selling in
| storefronts is services.
|
| If cities want stores that sell things, they will have to
| subsidize them.
| lazyjones wrote:
| > The only thing worth selling in storefronts is services.
|
| The downside of Amazon is lack of selection for quality. I
| prefer to go to brick-and-mortar stores if I need a minimum
| acceptable quality of e.g. bedclothes. On Amazon you get 1000s
| of low quality products from China and no real help discerning
| better choices (reviews are fake, price is no indicator,
| specs/info by the seller is not reliable).
| delfinom wrote:
| This, either as I get older my demands for quality is
| increasing or Amazon is getting increasingly garbage, beyond
| Walmart standards.
| pessimizer wrote:
| Walmart quality is miles beyond mean amazon quality.
| Walmart got where they are from brutalizing their vendors,
| not their customers. Their vendors are punished for
| excessive returns.
| Dumblydorr wrote:
| Neighborhoods are communities, empty storefronts are just one
| symptom of community-waning overall. A lot of things are
| declining during covid, like social club membership, in person
| gaming, in person sports playing, places of worship, dance clubs,
| bars, restaurants, etc. Just so many institutions were battered
| into an earlier decline due to Covid.
| cowmoo728 wrote:
| Empty storefronts were a huge issue in prime manhattan shopping
| areas since I moved there in 2015. At least in Manhattan it's
| not due to covid. There may have been a brief spike in
| vacancies in mid 2020 but the vacancy rate in 2019 was already
| extremely high.
|
| https://www.bloomberg.com/news/articles/2019-08-12/vacant-ny...
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