Vacant Homes Are a Global Epidemic, and Paris Is Fighting It with a 60% Tax

The problem is that for every story about bad tenants, I can find a story about a shitty landlord. And, often, then shitty landlord affects WAY higher a number of people since shitty landlords all too often have multiple properties.

This is actually a bit of dilemma in small towns in the US. Many small towns have a very poor rental market, so they have many tenants who can barely pay. This also means that the landlords need to keep rental prices very low--which translates into shitty slumlord rentals. However, if regulation steps in to make the place better, it effectively bankrupts the landlord who then abandons the place and now the city gets the joy of what to do with the abandoned property.

Gold is also hoarded and not used because it is scarce and valuable, not regulation. It feels odd to have to point that out.

There is basically one (good) solution to this problem: tax land values higher (e.g. raise property taxes). That doesn't eliminate scarcity but it reduces the incentive to hoard and it reduces speculation. Increased land value (which in cities is created by the community) would instead accrue to the community via taxes. Hoarding and not using land would lead to heavy losses.

Property investment would become more of a normal business where high quality construction matters more than making lucky gambles (like the kind that made Trump rich).

But the main issue, in the large, with the epidemic of vacant apartments isn't that these people all just happen to be going away for a year or two. It's that the apartments are bought solely as vehicles of speculation (or to store and/or launder wealth) -- and are effectively no longer "living spaces", in any meaningful sense.

Then it's now fashionable to frame this as a xenophobic "rich foreigners come and hoard our apartments and cause housing shortage".

Yet there's a lot of evidence that this is exactly what's happening (substituting "exacerbate" for "cause"). And it's not "fashionable" or "xenophobic" to call something what it is. It's called speaking plainly and directly.

And if you leave someone in your apartment/house at least sign a contract.

However, even if it takes 3 years to elect someone that's not even close to 1M in damages.

The owner is a member of the building association. She agreed to pay maintenance and renovation charges. That is an agreement between her and the association. The tenant did not make that agreement so has no say in it.

There is a process to evict someone. This owner sounds like she doesn't want or can't be bothered to follow it. It's a long heartbreaking process that involves courts and police. And due to abuse in the past the judges and police want to be sure every step is followed.

The solution to regulation is always more regulation.

From that money, the city can finance things useful for the actual city inhabitants.

Just a thought... Make the annual penalties rise exponentially with each passing year for any home with sub-50% annual occupancy. At the very least, the ratcheting will provide extremely high tax revenues after a few years, so that absentee owners can subsidize govt affordable housing efforts.

That sounds amazing. I hate the cars on my street, and walk or cycle everywhere I need to go myself.

This is extremely unlikely. If it is true, then the empty apartments should be considered money fountains and used to spread prosperity all over the world. Do you mean that they are already taxing to an extent where direct financial incentives to politicians have reached a level that prevents any further tax rises?

I don't see the problem.

The solution with fines for vacant retail space seems very inefficient and a bit unfair, since the developer can probably do very little once they sold appartements, and has little influence on whether they are vacant or not.

Or, one can always count long term vacancies, and be done with the subtleties of not-actually-vacant homes...

For example in Toronto based on official statistics rental vacancy is 1.2%. 2011 census provides the rest of the required data: there were 1,112,929 private dwellings in Toronto out of which 476,085 were rentals. 1.2% of that is 5,713 units, out of 100,000 estimated vacant.

Imagine what difference on a rental market increasing available vacancies 15 or 20 times would make..

Generally most of the local governments in the data sets used only consider homes vacant if it's not considered someone's primary address. It's normal to have some vacancies (especially in a global city), but usually not that many. To contrast what a normal-ish number is, Paris has half as many vacant units as all of England. New York City has more than all of England.

A large part of New York City's vacancies has to do with the last real estate crash there. I literally know people that can't remember where their place in New York City is, because they purchased it 15 years ago and didn't want to lose money. Now it just sits as a line item in their assets.

Note: I wrote the article, so I'm bias in defense here.

Except the numbers showed vacancy rates at similar levels in expensive, "investment friendly" boroughs like Kensington and Chelsea compared to boroughs where large portions of the rental market is social housing where the council gets tenants in ASAP after cleanup/refurbishment.

I'm sure there are areas with problems, but many pleases it seems to me that the problem is more one of flawed assumptions. E.g. articles about the situation in London have more than once talked about dark streets and no children out playing.

But if there is one thing that has always been different between rich and poor areas, it is density and likelihood that the occupants will be spending money on activities away from home vs. playing around the block. I remember that distinction well even from growing up in Norway with class distinction far flatter than anywhere in London - the "normal" working class neighbourhoods I grew up in were lit and surrounded by kids playing outdoors in the evenings, while e.g. when I went to visit my grandparents in one of the wealthier parts of town, it was always darker - the flats in their building all had two living rooms and a couple of bedrooms with windows facing the road, and more rooms facing the inner courtyard. Even when people were home at night, there would be far less lit windows for the simple reason there were not enough people there to use all the rooms at once.

It seemed to me like people had started from a flawed feeling, and gotten hold of the statistics and asked no critical questions whatsoever about why the numbers where similar in the poorer areas and similar for social housing.

It's appealing story because it "explains" the high house prices people have to deal with by blaming it on some undefined evil absentee investor which won't show up to defend themselves.

I'll note that I've not looked at the issues related to Paris etc.; maybe it's different there and they have a genuine issue, but even if these numbers were abnormally high, "solving" that problem would not in any case be enough to drive the house prices down to affordable levels - no matter what it's clear that if governments want these prices down to affordable levels, they either have to resort to regulation or to stimulate housebuilding, whether by easing regulations or pouring money into it. But it's much easier to blame people for leaving properties empty.

Perhaps he needed better inspection before purchase.

Your friend however bought an industrial site and the compliance rules there are likely a lot stricter than in residential.

Because, over the last century, the non-liquid surface area of the planet remained roughly constant while the human population tripled.

And that happened because some incredible portion of the humans believes that birth control is wrong.

Was it most or was it 10%?

Edit: I got downvoted for being confused? Please read my comment as pleasantly-toned, not snarky.

Bad tenants should definitely be easier to evict. In some parts of the world, if you're 24 hours late paying the rent you can get evicted manu militari, in France, it can take years.

Frankly anybody who is airbnb'ing his house or apartment in France is playing with fire. He could be stuck with squatters for years, there is nothing he could do about it.

Some - actually very few.

Fixed-income securities are less attractive when there is increasing inflation. A bond that returns 1% will still only return 1%. You don't want your money stuck in 1% bonds when seeing double digit inflation.

Interest rates basically go up to either counter or prevent an increase in the rate of inflation. It's difficult to target a single market to head off a speculative bubble with the tool of interest rates alone, especially if inflation is low and stable.

The rental rates for these (mostly new) apartments are so high that they don't address the shortage of housing in the low to mid income range. And the owners (corporate, mostly) prefer to keep the units empty instead of lowering the prices.

So, in a sense, Los Angeles has both too few and too many housing units.

http://theprovince.com/business/real-estate/mysterious-wheel...

These are mostly empty apart from a couple of months when the princes of the middle east come to escape the heat. I find it very sad to see things of such beauty being occupied by people who have stolen a countries wealth away from their poorest.

Consider a $20 million Manhattan apartment. Even if it has a "management fee" of $5k per month (not uncommon), that's still only 0.3% per year. Far less than you'd pay to a hedge fund or other investment manager to hold on to the money.

Ultimately I think it will be self-defeating. If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there.

As to why they don't rent it out when they aren't in town, I can think of a few reasons: they don't want the risk of items in the house being damaged, they don't want "other people" in their house, they like visiting on short notice (even if it's only a few times a year) which isn't compatible with renting.

We ended up buying a house so that we can use it for eight weeks every year when we're back in the US so that we can feel like we're in a home for the duration of our stay and not interloping on someone else's home. From our point of view, it's a valid use case.

My wife and I own a condo in the Philippines which we use 1 month out of the year. Why buy when we could just rent or get a timeshare? This place is ours forever, it has already appreciated 50% over what we paid 4 years ago, it is always available when we need it, and we got to decorate it the way we wanted.

[0]: https://en.wikipedia.org/wiki/Marginal_utility

being a landlord is a pain in the ass, even if you hire a property management company.

They don't rent any of them out since they like the flexibility to decide at the last minute where they want to spend the night.

They did luck out and buy these homes when prices were depressed.

Something to think about is all countries sell citizenship rights some more explicitly than others, but all do it, and going rate in the 1st world is about a half million on the balance sheet of a new company, and all you need to do is form a SMLLC and have it purchase the million dollar condo, then you're in on an investment visa and its pretty easy to prove your corporation has an asset of a million bucks, its right there in the tax records. Now the government hopes that people who come in on an entrepreneur VISA actually open a real business, but its hard to prove who's a real businessman vs an incompetent businessman, so anyone going thru the documented motions gets in. Anyway at least some million dollar empty condos are the visual manifestation of the weirdest naturalization ritual in the history of humanity. All countries have wide open visa policies if you're a businessmen willing to invest a large enough amount of money, all of them.

Because either

(a) they don't care for it being cheaper, they have plenty of money to spare (I know several such people), or

(b) they still have money, but not enough that they don't care about renting vs buying and living vacant. But they see the vacant house as a stable-ish investment on that property (I also know of this latter category).

Both cases don't care to go through the hassle of renting the house to others.

>In the first case, people are giving away money for nothing. In the second case, people refuse to take money. Why do they do that?

Both of these are concerns of middle/working class people like us. Not the concerns of people that make lotsa money (e.g. 500.000 to several million per year).

And above them, they are people who can afford to have whole castles sitting, waiting for them empty with full staff working there in several places in the world and not think twice about it.

And they could make a lot of aggravation this way if they get a nightmare tenant.

Speculators do add value by making the market more efficient.

For example, if there is going to be a house shortage then speculators will buy it early thus rewarding people for developing houses earlier.

Or, if there are too many houses, speculators can short it and bring prices down and so make housing more affordable earlier.

I don't understand what you mean. We can quibble about the details of this particular tax, but set that aside for a moment.

The best way to fight speculation is to put a tax on it. To see what I mean, imagine these 2 scenarios:

1.) There is a country without any land tax. You see a house that you can buy. You believe prices will be 10% higher within one year. Do you buy the house?

2.) There is a country with a 10% annual land tax. You see a house that you can buy. You believe prices will be 10% higher within one year. Do you buy the house?

In scenario #1 the house is a good investment.

In scenario #2, you would only buy the house if you are going to live in it, or if you can rent it out and make money off of it. In either case, in scenario #2, the house is not vacant.

A land tax forces the owners of land to use the land for productive purposes, rather than just holding it.

Of course, it's because they do provide value: They allow land owners to transform illiquid, risky assets into liquid, reliable cash.

In Paris, they need to come up with a "market rent" figure for each and every property to tax. Do they have those numbers? Using assessment value as Vancouver does, seems a lot easier.

Also, I wonder what's a bigger number: 1% of assessed value, or 60% of market rent. The previous 20% of market rent seems to be a low number, compared to the wealth stored in the property.

How in the world does a service that encourages turning residential housing into hotel rooms solve that problem exactly? Local wanna be residents are going to rent rooms in the homes of the wealthy absentee homeowners? Maybe some, but I suspect a vast majority are fine just letting them sit vacant. Even if they do, that's no way to build a healthy, thriving community. It's fast food housing. I, as well as many others, don't want to live in a building that's part residential, part hotel.

So your solution is "Let AirBnB enable the absentee owner to rent out their place to the local baker that is priced out of owning.", thereby giving the illusion of a solution but really not solving the problem because the fabric of the community becomes provisional at best.

Seems like a fairly poor solution to me. I hate red tape as much as anyone but I've come around to think that well crafted and executed policy that focuses on the common good is a better option to strive for than figuring out how to enable even more wealth concentration than we already have. The trick is "well crafted and executed" which I agree is rarely the case but we already know the end game with unbridled capitalism. Just ask the pope - https://www.theguardian.com/world/2015/jul/10/poor-must-chan...