[HN Gopher] More than a third of US small businesses couldn't pa...
___________________________________________________________________
More than a third of US small businesses couldn't pay all their
rent in October
Author : mfiguiere
Score : 86 points
Date : 2022-10-31 19:28 UTC (3 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| throw8383833jj wrote:
| >> "More than half say their rent is at least 10% higher than it
| was six months ago, and in seven say rents have increased at
| least 20%."
|
| And it's not just businesses of course. we all know how high
| rents have gotten in residential.
|
| but, what really gets me is that it does NOT have to be this way.
| I've been reading Henry david thoreau a writer from 200 years ago
| and I was stunned about how much higher their standard of living
| was for shelter.
|
| Here are some figures from thoreau's book walden:
|
| Unskilled labor was paid 1$ per day
|
| Skilled labor 1.50$ to 2$ per day
|
| Land was 8$ per acre
|
| Average Houses cost 800 days of unskilled labor (800$)
|
| Rent for a "Spacious apartment" with lots of bells and whistles
| was 50$/yr (25-100$/yr) so about 50 days of labor per year.
|
| Now, look how far we've fallen in the last 200 years: at 100$ a
| day for unskilled labor The average house now costs 3000 days of
| unskilled labor plus another 2000 days for property taxes over 50
| years. -> that's 5000 days almost 6 times more than 200 years
| ago.
|
| Apartments: for 50 days of unskilled labor, thats 5000$ a year,
| you couldn't even rent a room for that much.
|
| * The spacious apartment Henry described included the following:
| "Rumford fireplace, Venetian blinds, Copper pump and many more
| things"
|
| Our standard of living for providing shelter has dropped so
| significantly, that now it takes 30 years to pay off a house
| whereas back then it took only 10 years, with higher interest
| rates too! thoreau felt even this was too long and too much of
| burden, so we went off into the woods and built himself a nice
| little cabin for just 28$ (cost of building material)
|
| And yes, they didn't have electricity and some of the things we
| have today. so, there are some differences.
|
| Did we simply get worse at building shelter? No, of course not.
| The problem is all regulation and zoning and land use policy. Are
| our regulations so precious that we would give up so much?
|
| Shelter and housing whether its for business or residential
| doesn't need to be so scarce or hard to come by: it's a political
| choice people have made.
| buscoquadnary wrote:
| I agree it's those damn regulations like lousy "worker
| protections" and boring stupid taxes like SS and "unemployment"
| back in my day you'd show up to a group of men pick out the
| 5-10 strongest and give em 5 bucks at the end of the day if
| they survived. I don't understand why we can't go back to that,
| I mean I hear people complaining about lead all the time but I
| drank out of lead plumbing all my life and am fine.
|
| I mean seriously this minimum wage crap to makes things so
| expensive, plus I lost half my workforce when I couldn't send
| 12 year olds down to the mines anymore.
|
| Like I am sympathetic to your argument but to compare the
| standard of living between now and Therou using one variable
| and then blaming it on regulations is absurd.
|
| Also you say no electricity very flippantly I don't know about
| you but the thought of not having to start a fire in the
| morning when it is 3 degrees outside in order to have warmth is
| appealing toe.
| jjk166 wrote:
| I mean if I could get a mid 1800s house for 800 days of
| unskilled labor (~80k) and hire someone to wire it for
| electricity (~20k) that would be an excellent deal compared
| to what's available.
| throw8383833jj wrote:
| EDIT: I think you're saying that the overall compensation for
| workers was lower then (due to fewer sick days, all the
| things you mentioned etc) than now due to lack of regulation.
| What the stats say, is that compensation was actually much
| higher back then than now. You got paid 1/800th of a house
| per day whereas today, you get paid 1/5000th of a house per
| day.
|
| The regulations I'm talking about that account for the cost
| of housing are things that allow builders to provide more
| cost effective buildings. Afterall what other inputs are
| there: land, cost of labor, building materials and the cost
| of dealing with regs (non-labor related).
| anomaly_ wrote:
| You understand that the relatively low cost of living until the
| last 50 years or so was built on the systematic oppression of
| minorities and women, right?
| throw8383833jj wrote:
| That's an interesting theorey. If it's correct that could
| explain it.
|
| But, I just checked the demographics in Massachusets in the
| 1800s and it shows that there were 0 slaves. And it looks
| like minorities were in very very small numbers:
| https://en.wikipedia.org/wiki/1800_United_States_census
|
| I don't think the labor supply of oppressed minorities was
| influential enough to drive down the cost of labor. Yes, for
| railroads sure but not for construction of buildings.
| xboxnolifes wrote:
| Are you claiming there are no other sources of price changes
| between now and 200 years ago than the social changes for
| women and minorities? And that the changes from the last 50
| years or so caused the 6x price increase in housing?
| adrian_b wrote:
| Maybe that would be an explanation for USA, except that the
| same phenomenon occurs in many other countries, all over the
| world, where the current generation is no longer able to buy
| houses as easily as their grandparents, even if in those
| countries it cannot be said that 50 years ago or 80 years ago
| there was any kind of systematic oppression of minorities and
| women, which could have affected in any way the ratio between
| house prices and salaries.
| jemmyw wrote:
| Is it regulation though? Back then there were far fewer people
| and major social changes were happening - agriculture was
| rapidly transforming, industrialisation was was just starting,
| America was a frontier.
|
| Now there are too many people trying to live close to available
| jobs, agriculture has mechanized meaning there are fewer jobs
| in rural locations, America industrialised then peaked and de-
| industrialised a bit, companies are automating processes. All
| these changes, I don't think you can confidently point to
| regulation as a single or primary issue.
|
| Rather than look that far to the past, it would probably be
| better to identify policy that can help in the present and
| future. Sure, the past can provide lessons, but we can't
| idealize it or just transfer what worked when there were only 9
| million people in the USA.
| thunky wrote:
| > The problem is all regulation and zoning and land use policy
|
| I don't think that's it. There is more than enough affordable
| housing and developable land in the US, but it's in places that
| nobody wants to live - because the local economy is crap. It's
| crap because jobs there are gone. They all moved to dense
| expensive cities.
|
| The answer shouldn't have to be that we need to cram more
| people in those cities, and then require everyone there to get
| a masters in CS in order to live well.
| Krisjohn wrote:
| Couldn't or didn't? When I worked IT at a real estate place,
| tenants routinely didn't pay rent until chased up by the asset
| managers.
| rednerrus wrote:
| Isn't this testing the elasticity of rent prices? Some of what's
| going on inflation wise is that companies are finding their
| prices to be more elastic than they previously thought. It seems
| that we are entering the edge of elasticity with the potential
| that the whole thing might snap.
| bArray wrote:
| Just 3 weeks ago people were mocking me about the incoming
| recession [1]. These companies that can't pay their bills are
| going to lay-off staff just to stay afloat. Unemployment is
| about to skyrocket.
|
| [1] https://news.ycombinator.com/item?id=33149381
| autoexec wrote:
| > These companies that can't pay their bills are going to
| lay-off staff just to stay afloat.
|
| Companies have been aggressively cutting staff for a very
| long time, often requiring a single person to do the work of
| two of three people. How much can they lay people off and
| stay in business at all?
| [deleted]
| ROTMetro wrote:
| I wouldn't really call that mocking.
|
| Black Friday is typically the day when business' get 'into
| the black' for the year. Things typically get tight in
| October with having to both prepare for a November increase
| while being a lean month.
|
| This doesn't seem all that different than the position all of
| the startups and small businesses I have worked at or had
| insight into from the past.
|
| What is different is the Fed, media, and large corporations
| are trying really really hard to talk down the economy into a
| fear based recession this time, complaining loudly about the
| growing cost of labour and how that is the end of the world,
| yet bragging about record profits taken 'under the guise of
| inflation' on their earnings calls.
|
| Meanwhile, consumer confidence is the highest since Feb.
| https://www.bloomberg.com/news/articles/2022-09-27/us-
| consum....
|
| I'll go with consumer sentiment and historical knowledge over
| an artificial narrative and fake hysteria along with a Fed
| push intended to increase unemployed to keep down labor costs
| for companies posting record profits in this horrible (yet
| record setting) economy.
| kelseyfrog wrote:
| I don't get it. If they are struggling to pay rent, can't they
| just get a second business?
| spoils19 wrote:
| Sounds to me like this is just the free market in action. Don't
| like it, leave!
| bhaney wrote:
| Or just buy some more money until they have enough for rent?
| bombcar wrote:
| Debt _just is_ buying money, heh. And that pipeline got
| crimped but hard.
| duxup wrote:
| The article talks about rents going up 10 to 20%.
|
| Have we seen situations like this where we then see rents drop as
| far as historical patterns go?
| jupp0r wrote:
| Not even in the completely insane property market downturn in
| 2008 did rents go down, so no, this basically never happens.
| [deleted]
| twobitshifter wrote:
| >Almost half of car repair shops and auto dealerships were not
| able to meet their rent this month, the report said.
|
| I'm very surprised that dealerships are having troubles. Haven't
| they been charging all time high markups?
| curmudgeon22 wrote:
| My (relatively uninformed) understanding is that they are only
| able to charge these markups because of a similarly "all time"
| lack of inventory, leading to scarcity of vehicles to sell. The
| increase in transaction value isn't making up for the decrease
| in transaction volume.
| beckingz wrote:
| (chuckles) I'm in danger.
|
| Nothing profitable makes it out of the near future I suppose.
| mech422 wrote:
| Obligatory:
|
| https://imgur.com/gallery/XS5LK
| mech422 wrote:
| heh - guess we're the only 2 memer's :-P
| skyyler wrote:
| As much as I wish it were the opposite, I have a feeling that
| the near future will venerate Nick Land in a lot of ways.
| bombcar wrote:
| Venerate? Like worship him as the patron saint of
| Accelerationism or something?
| skyyler wrote:
| Worship is way too far, but I feel like he will slowly be
| seen as less "crazy" as time goes on.
|
| Unless something dramatic changes.
| mech422 wrote:
| Not sure if people don't know the "I'm in danger" meme(1) or
| just have no sense of humor :-P
|
| 1) https://imgur.com/gallery/VQWPsBS
| O__________O wrote:
| Direct link to related survey report, which has a lot more data
| than what is mentioned by the press:
|
| https://www.alignable.com/forum/rent-delinquency-jumps-7-to-...
| bombcar wrote:
| > In September, rent delinquency was at a six-month low, as
| optimism for Q4's earning potential was high and some small
| business owners reported increased sales.
|
| > But now, a month later, 37% of small business owners in the
| U.S. were unable to pay their rent in full and on time in
| October, compared to just 30% in September.
|
| So 30% was a six-month low, and 7% more is a record surge. This
| implies that a surprisingly large percentage of small business
| owners are _always_ behind on rent.
|
| Another thing to remember is that the landlord gets paid last -
| if you miss a wage payment to your staff the local government
| will crawl right up your arse and explode, if you miss a tax
| payment the IRS will do something similar (though a bit later).
| If you start stiffing your suppliers you'll have nothing to
| sell, and if you fall behind on utilities you'll get them cut
| off.
|
| But if you stiff the landlord he's not going to evict you right
| away, especially if you make a partial payment (note the "in
| full") and he has nobody better to rent to, anyway.
| mschuster91 wrote:
| > But if you stiff the landlord he's not going to evict you
| right away, especially if you make a partial payment (note
| the "in full") and he has nobody better to rent to, anyway.
|
| I'm not shedding tears for landlords. Most of them charge
| exorbitant rent while still enjoying absurdly low interest
| rates of the last decade on their loans and doing the bare
| minimum (or none at all) of maintenance or investment into
| improvements (e.g. bring electricity and water grids or
| insulation up to code).
|
| I seriously hope that the current market crash brings down
| rents massively to affordable prices, but as long as
| landlords can get tax advantages for un-rented units
| especially large corporations don't have an incentive to
| lower rents - it will take _a lot_ of no or partial payments
| to force their hands. An alternative would be vacancy taxes,
| but these are hard to pass if half the legislators are bought
| off by large real estate investors and their banks.
| bombcar wrote:
| Commercial landlords are often renting triple net to big
| companies, and smaller businesses sublease from the larger
| ones (those stores you see _inside_ Walmart are an example,
| but the stores stuck on the outside of larger stores are
| often that way, too).
|
| It's part of the reason every valuable downtown is now
| coffee shops, banks, and lawyer's offices, nothing else can
| pay the rent (best use? probably from a money perspective,
| not from any other).
| Splizard wrote:
| These businesses should be paid by the landlord to occupy (and
| therefore maintain) the property for them. This notion that you
| can own land without occupying it (or paying somebody to occupy
| it) is an absurdly backwards idea that is responsible for a lot
| of suffering and exploitation in modern society.
|
| We've constructed a bit of a euphemism for this. "I just want to
| make a living to put food on my plate". Except it's not the food
| that's expensive. It's the rent. Which in many places, for low
| income earners amounts to greater than 50% of their take home
| pay.
|
| In my city there are dozens of empty stores in the CBD "for
| lease" as if there is no demand for use of these properties.
| Absolutely ridiculous. Strangely enough, everyone thinks that
| renting a home or workplace to occupy is a perfectly normal thing
| to do.
|
| Would be great to have a discussion on this.
| bsder wrote:
| > This notion that you can own land without occupying it (or
| paying somebody to occupy it) is an absurdly backwards idea
| that is responsible for a lot of suffering and exploitation in
| modern society.
|
| That's called an occupancy tax and it stops most of the idiocy
| in the commercial renting sector _really_ quickly.
| swighton wrote:
| Building and maintaining commercial properties is absurdly
| expensive. A landlord takes on the cost, risk, and time of
| building and maintaining that property in exchange for
| businesses not having to deal with that.
|
| The idea that a landlord should invest serious capital to build
| a business park and then pay people to use it is nonsense. In
| that arrangement zero business properties would be made. People
| who wish to start a business would have to foot the bill to
| purchase or build a space for their business.
| ethanbond wrote:
| Landlords != developers
|
| Landlords != developers
|
| Again, landlords != developers
|
| Some entities are both of these things, but the economics and
| incentives of the two modes of business are completely
| different.
| [deleted]
| jjk166 wrote:
| Yeah but who pays for the developers?
|
| Besides initial construction you also have maintenance,
| acquiring tenants, property management, renovations and
| improvements, etc.
|
| If a company has the means and desire to do all this
| themselves, there's nothing stopping them from buying the
| land themselves instead of renting, but it's generally more
| efficient for a business to focus on what they are good at
| and leave the real estate issues to a company that
| specializes in it.
| pc86 wrote:
| If you can't make your point without repeating yourself,
| it's probably not a point worth making.
| amflare wrote:
| The developers do not just eat the cost of building a
| property, they pass it on in the sale price. So yeah,
| landlords still end up having to deal with it, on top of
| the day to day maintenance.
| ruined wrote:
| The landlords do not just eat the cost of purchasing and
| managing a property, they pass it on in the lease. So
| yeah, tenants still end up having to deal with it, on top
| of the day to day maintenance.
| Plasmoid wrote:
| Landlords aren't in the property business. They're in the
| liquidity business.
|
| I know it sounds weird but that's their function in
| society, they are one of the many "business lubricant"
| sellers that allow modern society to work.
|
| A liquidity provider is someone who makes transactions
| easier. The insurance company will insure you against
| risk does this. The lender who provides loans does this.
| The landlord who rents property does this.
|
| You can run an economy without them, but things will cost
| more and take longer to happen.
| throw8383833jj wrote:
| the problem is: we require people to either own land or pay
| someone else that owns land.
|
| That alone wouldn't be an issue without the second requirement:
| You can't have any land because all of it belongs to the
| government. Even CA, one of the most overpopulated states in
| the US has more acres of land than people.
|
| We need to start opening up land for development: mainly by
| starting cities in new underdeveloped states and creating
| incentives for companies to move there. Once people spread out
| a bit more, we'll see that there's enough land for everyone and
| it doesn't need to cost a huge amount to own land or real
| estate.
| gremlinsinc wrote:
| We also need to stop building homes w/ 1900s tech and
| methods.
|
| You can build just as sturdy/sound a home for 10k using
| earthbags as you can 200k w/ a contractor, albeit there's a
| lot of hard work, but if you can do it, then you should be
| allowed to, but zoning laws don't always look favorable on
| homesteading.
|
| There's a family on youtube who has like 5 homes (1 for each
| kid, more like little studio apartments as their bedroom),
| and a big office. All built for <10k each.
|
| Imagine if you could buy 20 acres of land, and put a bunch of
| outside-the-box homes and apartments and charge minimal fees
| (like maybe 300/month HOA).
|
| You could build homes using: Earthbags, earthship,
| dome/concrete, containers, etc.
|
| Any home that uses earth also has the huge advantage of it
| being an awesome insulator. Earthship homes manage to
| fluctuate between 50/80 regardless of location or climate
| (winter/summer respectively).
|
| Creative homing I think could be a big solution to the
| problems if more people team up and build their own rentals
| on co-op'd land, then rental prices would go down a lot
| because demand would go down, or landlords would simply go
| broke because nobody will rent from them.
| thot_experiment wrote:
| random thoughts about this without too deep consideration:
|
| When you rent a place out some portion of the rent should be
| legally required to go toward an ownership stake. The landlord
| should have to buy you out if you leave, and you should have
| the option to buy the landlord out as well. Empty properties
| should slowly fall into public domain and be re-sold to the
| public at a low cost based on a lottery system or similar.
| While renting-collecting-systems aren't necessarily bad,
| they're usually bad and we should really seek to limit the
| ability of people to create them.
|
| P.S. yes this should also apply to SaaS
| GaylordTuring wrote:
| > These businesses should be paid by the landlord to occupy
| (and therefore maintain) the property for them.
|
| Please, ELI5, how would there be any landlords left if they had
| to pay their tenants (rather than the other way around)? Or
| maybe you're arguing that there shouldn't be any landlords?
| pessimizer wrote:
| There would be as many landlords left as there were people
| who had a need to keep up the maintenance of property that
| they couldn't currently use, but planned to. The same reason
| why you would pay a housesitter.
|
| I hope you're not implying that society should make rules
| based on the preservation of the passive income of
| landowners. Landlords don't add value to anything; they
| speculatively purchased a title, and are trying to _extract_
| value from it.
| gremlinsinc wrote:
| I'm a libertarian socialist, so while I agree landlords are
| often evil, I'm also a pragmatist, and don't see the entire
| system just changing overnight.
|
| A better more practical approach would be guaranteed basic
| income, and a land value tax that's somehow tied to average
| rent prices, so if rents go up, the land value tax goes up
| so much that it probably would've been better to keep rents
| lower than pay the higher tax.
|
| Since the money from the LVT goes towards GBI, and people's
| rents are being offset, the one incruing a lot of the costs
| is the landlord, and they don't just have a free for all.
|
| They need to double the tax though on airbnb and
| 'hospitality' designated residences that do short-term
| leases instead of long-term leases.
|
| I'd even say give some lenience for people w/ less than 3
| homes (i.e. you get your home/land free/clear and 1 rental
| you get 10% of normal LTV, instead of the full tax), then
| maybe graduate it up... 4-10th house you pay 50% on, 10th+
| you pay 100% on.
|
| Foreign investors should pay double the tax, if you want
| investment property in America, then pay other Americans
| who can't use those homes.
| PragmaticPulp wrote:
| > These businesses should be paid by the landlord to occupy
| (and therefore maintain) the property for them.
|
| Maintaining the property and occupying the property aren't the
| same thing. It doesn't make sense to equate the two.
|
| Landlords are responsible for maintaining the property.
| Maintaining commercial real estate is actually quite expensive.
|
| It's definitely less expensive to own and maintain an empty
| property than to own and maintain a property with $0 renters
| who are putting wear and tear on it.
| etchalon wrote:
| Depends on your lease terms.
|
| Many, if not the majority, of commercial leases, including
| mine, are Net leases, which have the business maintaining the
| property (and paying the property taxes in the case of a
| triple Net lease). And many, if not most, commercial leases
| are not year to year, but over three or five years.
| jakogut wrote:
| > These businesses should be paid by the landlord to occupy
| (and therefore maintain) the property for them.
|
| While I do agree that property needs maintenance, why would a
| landlord _pay_ somebody to occupy their property? What 's the
| incentive to own the property at all then?
| rubyn00bie wrote:
| I think the argument is, the landlord is not contributing
| anything productive and is attempting to freeload off of
| other's productivity. Most businesses both agree to pay rent
| and make improvements to the property. When a landlord is
| demanding both, they are not contributing anything but still
| seek payment. It is a form of "rent seeking" in the economic
| sense:
| https://www.investopedia.com/terms/r/rentseeking.asp#toc-
| wha...
|
| And so what would be the incentive then to own property? Well
| if you cannot be productive with it, or otherwise enjoy it
| for personal reasons, then you wouldn't have any reason to...
| which would let people who can do something productive with
| it the opportunity to do so.
|
| Can a landlord contribute something productive? Sure, but
| that's probably more akin to a property management company's
| value proposition than a landlord's.
| amflare wrote:
| > the landlord is not contributing anything productive and
| is attempting to freeload off of other's productivity
|
| This is patently absurd. Does the Miller not provide
| anything productive when he brings flour to the Baker? The
| Landlord provides both a Good and a Service. Just because
| his contribution is not necessarily concurrent with the
| Tenet's, does not mean that he is not contributing anything
| productive.
| skyyler wrote:
| The miller operates the mill to provide his value.
|
| What does the landlord do? The miller isn't merely
| holding a millstone captive, he (or another miller) is
| required to operate it.
|
| If the miller dies, someone else has to operate the mill.
| What happens when a landlord dies? What meaningfully
| changes?
| [deleted]
| frgtpsswrdlame wrote:
| >While I do agree that property needs maintenance, why would
| a landlord pay somebody to occupy their property? What's the
| incentive to own the property at all then?
|
| To live in or use? That seems like a way better situation!
| amflare wrote:
| What about the people who need some land to live in or use
| but can't afford the costs that come along with it (either
| purchase or maintainance)?
| wildrhythms wrote:
| They can't afford the costs because the landlords have
| inflated the costs. It's a cycle that doesn't need to
| exist.
| amflare wrote:
| That doesn't answer the question. An 18 year old who has
| literally never worked a day in his life can not afford
| an apartment no matter what the price, inflated or not.
| Should land owners be obligated to lower the price to
| $0.25 so that this teenager can buy the property with a
| coin he finds on the street? Should it be $20 so that his
| first paycheck can be used to buy lodging? Should all
| plumbers and electricians offer their services for a
| couple dollars so that every teenager can keep their new
| property maintained?
|
| You have created a false reality, and then cried foul
| when real life didn't play ball.
| Plasmoid wrote:
| How do you know it's the landlords that inflated the
| costs? That's a major premise that you haven't
| demonstrated.
| flash28 wrote:
| Landlords buying land does not unilaterally inflate the
| cost of land. Arguably in the long-run, the price of land
| just reflects the discounted cashflow of its future
| rental value. City centre land is expensive not because
| of landlords, it's expensive because so many different
| parties are able to derive so much utility from occupying
| it, and are willing and able to bid large amounts to
| capture that utility.
|
| Arguably there are two big problems with the market for
| land/housing, and landlords aren't one o them:
|
| #1 Increases the value of land due to neighbourhood
| effects accrue to the owner when they do little to
| deserve it (you can tackle this with land-value taxes).
|
| #2 Various planning controls inhibit the market's ability
| to respond to high accomodation prices with the
| construction of more accomodation, keeping rents at a
| higher level than they would otherwise be without this
| government intervention.
| jjk166 wrote:
| Land is a finite resource, and developed land in a useful
| location all the more so. While speculation might skew an
| areas value somewhat, the cost of purchasing, developing,
| and maintaining a property would definitely not be zero
| if renting were abolished. There are still going to be
| lots of people who can't afford to buy outright even if
| costs went down several percent.
| gremlinsinc wrote:
| Land should be a public commodity, nobody should be able
| to own the land, or the resources under them, or the
| lakes, or the sky, etc.
|
| Buildings should be 'permitted' to be built on land, and
| people can own the land insomuch as they pay land value
| taxes for the utilization of the land. If it's a primary
| purpose and they don't get income from it, then the tax
| would be nil, if it's a second home they'd get 90% off as
| they're still a 'small fry', maybe 3-10 homes is 50% of
| full tax, and 10+ is the full tax.
|
| LVT can then be funneled into housing programs, housing
| assistance funds, or straight up basic income.
|
| Land value tax is the tax of the value the owner gets
| from the land, so if you're airbnb'ing you'd pay more if
| you make 10k per month in airbnb, then if you're renting
| long-term for 2k/month. If you still have a mortgage, you
| could maybe have some sort of deduction - but again
| that's only if you're owning 3 or less homes, anyone
| leveraging credit for 10+ homes should be able to afford
| mortgage out of their normal cash-flows, or they're over-
| levereged and need to dump a property or two.
| [deleted]
| jjk166 wrote:
| So someone who uses land very inefficiently and thus gets
| very little value out of the land should have it for
| close to free, whereas someone who would use it
| efficiently and thus derive lots of value from it should
| have to pay large sums to keep using it that way?
|
| Seems like a perverse incentive to me.
| Ekaros wrote:
| How would that even work? Why would anyone own or build
| property if it didn't generate money?
|
| And why aren't these small business owners buying and building
| their own property as it would be cheaper for them in long run.
| skyyler wrote:
| >And why aren't these small business owners buying and
| building their own property as it would be cheaper for them
| in long run.
|
| Why don't homeless people just build their own houses?
| etchalon wrote:
| Capital, and access to it, and the costs associated with
| raising it, is a thing.
| NovemberWhiskey wrote:
| Right. The failure rate for restaurants is (depending on
| who you believe) up to 60% in the first year. That's the
| kind of business that would simply cease to exist if
| prospective business owners had to convince lenders to fund
| large capital costs.
| pessimizer wrote:
| Restaurants existed before current capitalization
| structures and traditions, despite this being impossible.
| jjk166 wrote:
| Renting property dates back to ancient times. It
| certainly long predates the modern restaurant. We have
| records of rent contracts 300 years older than the first
| known instance of a place where people could buy freshly
| prepared meals.
| NovemberWhiskey wrote:
| If you're OK with your model for entrepreneurship
| starting with "first, be wealthy" then you can absolutely
| have restaurants that way - yes.
| [deleted]
| kelseyfrog wrote:
| This is literally the reification of property-cum-captial.
| Like when people talk about social constructivism, this is
| what they're talking about. Please don't.
| spartanliving4u wrote:
| stick to coding because you do not seem to understand basic
| economic and business principles
| amflare wrote:
| Owning property is a longterm commitment that limits
| flexibility and comes with some hefty costs. Rent solves these
| problems. A small company thats growing might need 2000 sq/ft
| today and a projected 10,000 sq/ft next year. But if you have
| to purchases and maintain 10,000 sq/ft for a year, that to be
| prohibitively expensive to the point that they can't afford to
| grow that much.
|
| Why then is it ridiculous for me to own 10,000 sq/ft and parcel
| it out to 5 business that need 2000 sq/ft? I'm taking on the
| costs of owning and maintaining the property, as will as taxes
| and other assorted costs. It is fair for me to pass those costs
| on to the actual tenets of the property for as long as they
| choose to reside on the premises. They get flexibility and
| scalability, and I get money for my time and effort to provide
| their needs.
| pc86 wrote:
| You're taking on the cost of purchasing the property, which
| is certainly not nothing. But as a commercial landlord, your
| tenants pay all the costs of owning and maintaining it, they
| pay all the taxes, they pay everything. Every commercial
| lease is structured this way.
|
| You have an outlay of capital to acquire the property up
| front, and you have a minimal amount of risk if a large
| portion of the property goes unrented. But even a brand new
| owner will typically only need to reach 30-40% occupancy by
| square footage in order to break even, and the unrented
| portions can be written off for a tax credit.
|
| I would love it if the commercial landlords I've rented from
| in the past were providing services for the exorbitant checks
| they were getting every month, but the only different I've
| encountered between commercial landlords and residential
| slumlords is that there are generally government protections
| for the tenants of a slumlord, commercial tenants not so
| much.
| ejstronge wrote:
| > Every commercial lease is structured this way.
|
| Triple net leases are quite desirable for landlords but by
| no means are the sole kind of commercial lease. The most
| common splits some of the costs of building maintenance (a
| 'modified gross' lease)
| pc86 wrote:
| Good luck trying to negotiate any gross or modified gross
| lease when everyone else in the building is on triple
| net. They're better off taking the tax deduction than
| cashing your rent check.
| amflare wrote:
| Maybe they pay all the costs, but thats when there are
| tenants. The landlord is taking on the risk of being the
| one the bank will come to when a mortgage needs to be paid.
| And the effort of maintenance (and cost, then there are no
| tenants). All the tenant needs to do is show up and sign a
| check, they have no other worries. Thats the trade-off.
| ryanwaggoner wrote:
| Can you tell me more about this tax credit that you
| supposedly get for unrented property that you own?
| pessimizer wrote:
| > I get money for my time and effort to provide their needs.
|
| This is a pretext. You get money, give as little of it as
| possible to the people who are doing what you claim to be
| doing (maintaining the property), and pocket the rest. Owner
| is not a job.
| latortuga wrote:
| This....is not how the majority of commercial leases work.
| Look up "triple net" leases.
| causality0 wrote:
| Agree. Imagine if someone claimed dominion over a chunk of the
| sky or an acre of water. You'd call him a fool and ignore him.
| The only way land is different is that it's easier to
| demarcate.
| NovemberWhiskey wrote:
| Please look up "air rights".
| dwaite wrote:
| Nations generally do claim dominion over their waterways,
| coastlines, and airspace, and maintain military forces which
| can enforce such things.
| gremlinsinc wrote:
| Nations, but people and corporations aren't nations. Can
| apply institute a no fly-zone over their HQ?
|
| Edit: meaning land, air, water should belong to the people
| of said nation, and should be taxed as such and divided out
| to the people as guaranteed basic income.
| yucky wrote:
| Imagine if someone claimed dominion over a chunk of the sky
| or an acre of water. You'd call him a fool and ignore him.
|
| Well, governments do exactly that.
| bergenty wrote:
| What incentive is there to develop properties then? So you
| spend millions on building a commercial property and then...
| you pay people to occupy it? What about rewarding people for
| building things? This is an asinine comment.
| ben_w wrote:
| Adam Smith and Carl Marx both agree with you.
|
| > As soon as the land of any country has all become private
| property, the landlords, like all other men, love to reap where
| they never sowed, and demand a rent even for its natural
| produce.
|
| and
|
| > No sooner is the exploitation of the labourer by the
| manufacturer, so far at an end, that he receives his wages in
| cash, than he is set upon by the other portions of the
| bourgeoisie, the landlord, the...
|
| > Nevertheless in the most advanced countries, the following
| will be pretty generally applicable. 1. Abolition of property
| in land and application of all rents of land to public...
| robertlagrant wrote:
| I don't think that's what Adam Smith was getting at. He was
| saying that gathering food that grew freely shouldn't be
| taxed by people who put a fence round it and did nothing to
| make it grow.
| skyyler wrote:
| How is that different than what landlords do? Genuine
| question.
| Animatronio wrote:
| Yours is a very strange idea indeed. I guess if you're alright
| with this then you agree to negative interest for deposits (you
| pay the bank to keep your money). Yes rent is a major cost for
| businesses that depend on foot traffic, so landlords take
| advantage of that to extract more money. It's just the way
| _capitalism_ works.
| quadcore wrote:
| _you pay the bank to keep your money_
|
| That's 100% the case actually. With the added subtlety we
| agree that the bank can pay itself by leveraging the money.
| Or more precisely, the competitive bank will tell you "I keep
| it for free and will even give you interests" cause it knows
| it can pay itself by leveraging the money.
| throw8383833jj wrote:
| Yes but capitalism can also work to make things much much
| cheaper to almost no cost at all. You simply increase the
| amount of land available and make regulations that allow for
| cheaper buildings. 200 years ago, humanity had no problem at
| all making buildings cheap. Why now all the sudden we're so
| obtuse that we won't allow it any more.
| pessimizer wrote:
| > you agree to negative interest for deposits (you pay the
| bank to keep your money).
|
| You say this as if paying someone to take care of something
| for you is a patent absurdity instead of commonplace.
| [deleted]
| jupp0r wrote:
| What's the base rate for this to compare it to? Ie what
| percentage of businesses can't pay all their rent normally?
| paxys wrote:
| But I'm sure the new luxury car the owner bought using their
| taxpayer-funded PPP "loan" is working great.
| mschuster91 wrote:
| That's a matter of enforcement and audits. The problem is IRS
| [1] (and their equivalents in other Western countries, e.g.
| Germany [2]) are _horribly_ understaffed which means that small
| businesses get hit the hardest by audits, while large-scale tax
| fraud gets ignored routinely - simply because fighting a large
| corporation is more expensive for the IRS as the effort
| required to sift through the data is way higher and the
| corporations have a ton of very expensive lawyers on retainer
| that can drag out cases for years.
|
| [1] https://www.businessinsider.com/tax-season-outlook-
| analysis-...
|
| [2] https://www.spiegel.de/wirtschaft/soziales/unterbesetzte-
| beh...
| aaomidi wrote:
| Yep. And right now we have the right thinking we're setting
| up a gestapo because we want to fund the IRS.
|
| To be honest though the IRS has an awful track record of
| focusing on lower income people :(
| kyralis wrote:
| That awful track record has a lot to do with priorities
| driven by political talking points and who has the power to
| complain about the IRS.
|
| The book _Perfectly Legal_ by David Cay Johnston has a good
| chapter on this. (The book as a whole has its ups and
| downs, but the history of IRS management I found
| particularly interesting.)
| mschuster91 wrote:
| At least to me, a partial cause for that is the Scientology
| "church" in the 1970s and later [1]. When the IRS backed
| down due to their threats instead of hitting them with
| fines, that sent a _very_ bad signal: if you 're big and
| aggressive enough, we'll let you continue making a joke out
| of the tax code and focus on smaller fishes instead.
|
| [1] https://en.wikipedia.org/wiki/Tax_status_of_Scientology
| _in_t...
| wskinner wrote:
| The IRS has over 74,000 employees and a budget of nearly
| $14B. What would be the appropriate level of funding and size
| of staff for this organization?
| mschuster91 wrote:
| Whatever is needed to do their job in a _fair_ manner,
| obviously. Current plans are at 87.000 new employees [1],
| although a bunch of that is replacement for workers aging
| out or quitting due to being overworked [1]. The IRS
| actually used to have 117k employees back in 1992 with
| _fewer_ taxpayers [2] (both due to population growth and
| due to women entering the workforce as a result of the
| breakdown of gender roles / SAHMs). It's estimated that
| bringing the IRS up to decent staffing levels could bring
| in 204 billion dollars at a profit of 124 billion dollars -
| so the ROI on each new agent or staff is about 50%. That's
| a margin way better than most companies have!
|
| [1] https://www.cnbc.com/2022/08/31/irs-is-not-hiring-an-
| army-of...
|
| [2] https://www.politico.com/news/2022/08/16/irs-spending-
| new-mo...
| NovemberWhiskey wrote:
| The IRS also had to deal with basically all filings being
| on paper and very basic technology support, which is very
| definitely not the case today.
| paxys wrote:
| There's an easy way to go about it - keep increasing
| funding while every incremental dollar still has a positive
| ROI, and then stop. There's probably no other government
| agency where you can measure the value of an employee so
| objectively. By all measures we are very far from that
| limit.
| sokoloff wrote:
| Suppose each new IRS agent costs $100K all-up. If they
| bring in just $100,001 (across direct enforcement and
| secondary compliance), is that a good expansion of the
| federal government?
| paxys wrote:
| What if each agent cost $100K and was bringing in $900K?
| Would that be worth it to you? Because that's what the
| Congressional Budget Office's estimate actually is.
| https://www.cbo.gov/publication/57444
| sokoloff wrote:
| > What if each agent cost $100K and was bringing in
| $900K?
|
| From the first paragraph of your link: CBO estimates that
| portions of the Administration's proposal to increase
| funding for the IRS by $80 billion over the 2022-2031
| period would increase revenues by approximately $200
| billion over those 10 years.
|
| Later in the article is the argument that the IRS says
| previous multiples were 5-9x at peak and then immediately
| goes into why those numbers would not hold for future
| incremental investments in enforcement.
|
| So, no, CBO doesn't estimate that it's a 9:1 return.
| 29083011397778 wrote:
| ~2.5:1 is a far cry from your $100,000 cost with $1
| return though, and GPs point still stands: increasing
| funding, even if just until the return is ~1.5:1 (less
| than the guesstimated ~2.5:1), is clearly a sound
| investment.
| xboxnolifes wrote:
| Yes. That's also not an expansion of the federal
| government. That's just hiring to fill the
| responsibilities that the federal government already has.
| sokoloff wrote:
| If the IRS hires 87K more people than it currently has,
| ELI5 how that's not an expansion of the federal
| government.
| paxys wrote:
| Because the responsibilities of the government stay
| exactly the same.
| sokoloff wrote:
| And the employment payments increase by close to $10B/yr
| from this expansion alone plus the number of employees
| (and therefore families prone to vote for expansion of
| federal employees and/or pay/benefits also increases).
|
| The federal government gets larger as a result of this.
| That might be OK, but we shouldn't pretend it's not the
| case.
| barbazoo wrote:
| It would be funny if it weren't true to a large extend
| apparently :/
| jrs235 wrote:
| https://archive.ph/1zraL
| Cwizard wrote:
| > It's up seven percentage points from last month and is now at
| the highest pace this year, the survey showed.
|
| > More than half say their rent is at least 10% higher than it
| was six months ago, and in seven say rents have increased at
| least 20%.
| fma wrote:
| I can't speak for all business owner, but as a business owner I
| signed a 5 year lease with an option to renew...so I know my
| rent price 10 years out. My price only changes at the 5 year
| market and I knew it when signing the lease.
|
| Who are these people where their rent changes 6 months? When we
| looked around these are fairly common terms...
|
| I mean technically our rate increased last year so we are part
| of some, statistics but it's meaningless.
| wwweston wrote:
| Either this means commercial-use space isn't as overbuilt as
| people have been claiming, or vacancy taxes are _really_ needed.
| bombcar wrote:
| The commercial real estate market is basically nothing like
| what anyone not in the commercial real estate market thinks it
| is.
|
| Everything that applies to single family home rentals and even
| much that applies to apartment/multi family rentals is out the
| window. (Though arguably triple net leases would make sense in
| many cases vis-a-vis home rentals.)
|
| Vacancy taxes would also be the easiest thing in the world to
| get around, you'd just blanket the world with Spirit Halloween
| stores.
| wwweston wrote:
| "Just" seems to be doing a lot of work in that last sentence.
| I'm sure you know the idea behind vacancy taxes is to
| incentivize owners to offer rents that not only serve nominal
| purposes in making finance/accounting work but actually get
| takers so the space is productively used and mitigate any
| weird dynamics where there's simultaneously empty space
| there's no takers on and would-be renters who can't find
| anything they can afford, a situation which presents an
| apparent market failure.
|
| If Spirit Halloween or whatever equivalent you're imagining
| is offered a rent they're willing to pay, then there is no
| market failure and policy is working.
|
| How does that represent "getting around" the vacancy tax? Are
| we imagining that owners are creating Shell Game Seasonal
| Retail Inc(tm) and renting to themselves?
| bombcar wrote:
| Spirit Halloween, small churches, etc all rent at _far_
| below market rates for various reasons, one of which would
| be "avoiding vacancy taxes". The key is they're always
| month-to-month and can be booted quickly if a "real" client
| shows up. I was with a smallish business that rented the
| other half of our building this way as temporary warehouse
| space, for something like 10% what we were paying for the
| warehouse space on "our side of the fence".
|
| I think they could be structured in such a way as to at
| least _help_ the situation, but they 'd for certain be
| gamed.
| opportune wrote:
| My understanding is that you don't get Spirit Halloween
| everywhere precisely because of some of the commercial-
| specific idiosyncrasies like being able to postpone bank
| payments for unrented properties + equity being based on the
| current lease price (or last lease price if unrented), both
| of which encourage keeping commercial rents from lowering and
| incentivize keeping them unrented if the alternative is
| lowering prices
| 3qz wrote:
| Good. Small businesses shouldn't exist
| GamerUncle wrote:
| why ? I think people have the right to start a small venture,
| like out of all the things to hate, why would you hate people
| not serving megacorporations ? I am genuinely baffled and would
| like to know where this opinion comes from.
| bombcar wrote:
| I'll try to steelman a few arguments:
|
| 1. Small businesses under a certain size avoid many
| labor/work related laws - for example, the requirement to buy
| healthcare doesn't apply below 20(?) employees.
|
| 2. Small businesses almost always have actually _worse_
| support overall, but they get away with it because they can
| "fire" customers. Walmart has a better return policy than
| almost anything else in the retail world, for example,
| because they can eat the costs related to idiots scamming
| them.
|
| 3. Small businesses often get away with treating their
| employees _worse_ than larger ones, because nobody is going
| to care of Jane 's Coffee Shop stiffed a waitress on tips on
| Wednesday, but if it happened at a Starbucks it'd be on the
| national news that night.
|
| 4. Small businesses enable people and families to be
| relatively independent of "large control" which is absolutely
| not desired by certain groups.
| SecurityMinded wrote:
| According to the POTUS, "The US economy is BOOMING"
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