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Comment by mchannon | Hacker News Reader

I suspect, as in Vancouver, a lot of foreign-originated dirty money is getting parked in SF real estate, where the structures sit vacant.

One of Vancouver's innovative approaches was a special tax assessment on vacant structures.

I honestly wonder what percentage of SF, including its commercial office space, is simply a vehicle for money laundering. Switzerland and the Cayman Islands have nothing on Uncle Sam when it comes to real estate opacity.

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> I suspect, as in Vancouver, a lot of foreign-originated dirty money is getting parked in SF real estate, where the structures sit vacant.

That's not the case. Vacancy rates in San Francisco are very low, at 3.6%: https://www.forbes.com/sites/erincarlyle/2015/04/16/san-fran...

You can see this in the rent-to-buy ratios. While high in the Bay Area, it's nowhere near the out-of-control bubble levels of Vancouver and, to a lesser extent, Toronto. Housing prices are high in the Bay Area because people actually need to live here.

Those appear to be vacancy rates calculated from submissions by landlords, but what about absentee owners who don't want to be landlords?

I don't think we're measuring the real figure of merit here.

There are plenty of companies that will take care of finding tenants, doing maintenance and generally handling landlord responsibilities, in exchange for a cut of the rent. Since the rent is quite a lot of money, it would be crazy to leave a building vacant unless you're planning to spend time in it.

But people do it in high rent areas like London, NYC, and Vancouver.

It doesn't make it any less dumb. It's the difference of ~80k / year for free you leave on the table.

It's not dumb, and it's not for free.

If you robbed a bank and had a nice big pile o' cash, how smart would you be to put it in a bank and collect interest on it?

You jeopardize (or devalue) the asset by trying to play landlord. By leaping after $80k/year, you may cost yourself $500k/year appreciation in the asset.

>You jeopardize (or devalue) the asset by trying to play landlord. By leaping after $80k/year, you may cost yourself $500k/year appreciation in the asset.

Unless your tenant literally burns the building down and you don't have insurance, I'm not sure how this works.

A building that would otherwise be subject to rent control or other tenant protections is worth less than the same building that is empty of tenants. By leaping after 80K/year you can massively decrease the value of an empty building, or a building that is likely to soon empty, or a building that can be condo converted without Ellis acting anyone.

The people who are doing this are the kinds of people who lose $80k in their couch cushions.

It's not dumb. Their goal is capital preservation, not income. And once a renter is in there they're extremely difficult to evict if the owner ever wants to move in or sell.

Usually that cut of the rent is pretty high. Like, almost all of it.

It's not crazy. Plenty of people do that because they believe the property will appreciate in value at a reasonable clip, they will get a huge depreciation tax benefit, and they will not have to deal with tenants or wear and tear.

  it would be crazy to leave a building vacant

Once a renter is in place (at least 31 days), it can be very difficult and expensive to end the tenancy (read up on the Ellis Act).

Vacancy rates are units that are un-rented or unsold. The problem is parking money (using real estate as a bank account and not actually living in the community) - popular in Vancouver and NYC. The condos are literally 50% dark all the time but not 'vacant' as in part of the avaiable housing supply. Drives up prices.

You are not accurately interpreting the statistics you cite. Vacancy rates do not take into account units that are bought and never put into the rental market.

Some London boroughs tried taxing empty properties to discourage this. Owners of empty properties just paid the tax. In most cases British law still lets them hide their identity, which is of course why passively owning London property is so preferable over, say, actually doing anything where their identity (as gangsters, foreign leaders who've looted their country to enrich themselves, etcetera) might be revealed.

Well, if the tax is high enough, you can use that money to build affordable units to offset the parking.

is there data to back this up? or will it require a panama papers type leak before we know?

As someone who knows a few property owners in San Francisco this is a common thing. People in tech make peanuts compared to who is holding property in the city. Most of these wealthy people don't rent because rent control will bring down the value of their property (you can't evict the tenants).

We're talking about international levels of wealth, these same people have multiple pieces of property in Hong Kong which makes San Francisco look dirt cheap.

I know a few property owners in San Francisco and this is the first I've heard of it. Sounds like an urban legend.

It happens in other cities, so it would be odd if it's not happening in SF too.

Are the people you know single or two home owners? I’m talking about multi home owners in the Bay Area (4+) with property in the most expensive cities in the world. That’s a very different social class than a Bay Area home owner.

The ones who do rent usually hire an agency to take care of the headaches for them.

I might have been thinking of a different definition of 'common' than you were. I don't doubt that more than one person like this exists, but nobody who has attempted to study this has found that the vacancy rate is significant. e.g http://www.spur.org/sites/default/files/publications_pdfs/SP... (from 2014), https://www.mercurynews.com/2018/03/12/empty-homes-a-califor... (actual data from the Census is at https://www.census.gov/housing/hvs/data/rates.html)

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