Barcelona Fines Landlords Who Let Buildings Sit Empty
citylab.com
citylab.com
Amsterdam has (or used to have, perhaps) a pretty healthy squatting culture. Many squatters are ideologically driven and improve the neighbourhoods they're squatting in.
I still think it's a very pragmatic way to fight real estate speculation. But my impression is that Amsterdam doesn't have a big problem with buildings sitting empty, so if squatting is illegal again, I guess they've found a different way to prevent it? I have no idea what that is, though.
Houses still get squated, but less often and the squatters have to leave much quicker.
A quick translation of a Dutch article explaining how squatting is still possible:
>Today, squatting is illegal. This means that if a building is squatted and the owner makes a declaration, a procedure is started by the Public Prosecution Service that can result in evacuation. The squatters must be informed in time, so that they have the opportunity to institute summary proceedings. That does not mean that the squatters can just be removed from a building once they live there. That is only possible if they seriously misbehave, break house peace, get in the way of the activities of a company, or are at risk because the building is in poor condition.
How did you quantify the improvement?
Your assertion makes zero sense even if we accept your thesis at face value. For example, it's absurd to leap from "society mut at least partially benefit" from private property to assert that private property not being used in compliance to your personal taste to be theft. That's just plain nuts from any angle.
You can consider that position nuts, but given the amount of public support and legal backing for a current initiative in Berlin to enact eminent domain against entities that hold > 3000 flats, “plain nuts from any angle” seems to be slightly exaggerated.
Most private property was at some point converted to private ownership by violent acquisition. Owning land is not a natural right -- of you're not using it for societal improvement it seems right that society can cease to recognise your right in that land.
A similar thing happens with IPR, whereby governments can coopt it in times of need.
Looks really ugly.
Says who ? Not that I don't believe you or that I believe it's false but are there more than one account of that happening ?
* Opportunistic squatters: they simply need a place to live, would like it to be nice and cheap, but don't have the time or dedication for any sort of activism. Mostly students and young unemployed people. Artists possibly, though they can also fall in the next group.
* Ideological squatters: they have political opinions about housing policy. They tend to know the law, but may also disagree with it. Likely to organise information meetings, protests, but also provide services like community centers or soup kitchens. Tend to take good care of their squats in order to show this can work, but the more militant type may organise riots. Amsterdam had a lot of "krakerrellen" (squatter riots) in the late 1970s and early 1980s, but that hasn't really happened since the situation got normalised. Though there has been the occasional evacuation where quatters had to be forced out. They usually leave of their own accord and obey court orders, though.
* Criminal squatters: don't care about the law, or may be very aware that they're breaking it. Probably doesn't care about the state of the house. Possibly involved in various crimes. I'm not aware of real criminal squatters in Amsterdam; crime happens more on the real estate owners side: lots of organised crime in Amsterdam is involves in the real estate business. That said, I imagine militant anarchists may also cross over from ideological to criminal squatters. And of course this is the group most likely to keep a low profile.
There's grey areas between all of them of course.
Spain suffered the worst housing bubble in 2007, and even now talking about building more is anathema. For Colau is even worst, as she built his political career fighting against the bubble.
Sources, please?
Also, less than 500 in 237657 were illegal touristic lodgings, so it seems Airbnb and such can't be blamed either.
So doing this in Barcelona actually makes sense then?
There are few empty houses NOW. That is why, if Ada Colau was also NOW passing a law to fine people for keeping houses empty, that would probably be a political stunt.
HOWEVER, today's news is not about any law being passed, but about the consequences of a law passed in 2007.
With that in mind, let's see if that law has been effective at decreasing the amount of empty houses since then, as that's the relevant time frame for this news story (below I'm just quoting the figures from[1], first shared by [2], AFAIK):
(2007: the anti-empty-houses law is passed) 2011: 80,000 empty houses (9.6% total over the 2019 total housing number, so probably underestimated) 2016: 31,000 (3.7%) 2019: 13,000 (1.52%)
This trend is far more interesting, as it strongly suggests that the law managed to unblock 8% of the total housing in Barcelona in under 8 years, making it 6 times smaller than it was. Make any problem you have 6 times smaller and you'll understand how big a deal this is.
So, clearly not a stunt: Ada Colau is just following the rules given to her and everybody else. She may be the first one taking those rules seriously, actually, but in any case, if the fines were not issued, all the landlords in the 8% that did comply with the law, could sue the government, and rightly so.
More generally, Colau cannot possibly be responsible for all problems currently plaguing Barcelona. They have been brewing over years of incompetence under governments both from the left-wing unionist party and the right-wing religious nationalists alike, who have all been stealing from the middle class for their own profit for the last thirty years or so, just as the political elites of virtually every major Western country.
I definitely think Colau can be criticized on a number of things, and I generally agree she's an awful major, but nobody can blame her for problems whose magnitude is so big that they obviously took decades to fester.
[1] https://www.20minutos.es/noticia/3299445/0/barcelona-detecta... [2] https://news.ycombinator.com/vote?id=19429961&how=up&auth=23...
There are a couple problems with implementation. First, DCRA is such a fucked agency that they widely miss out on rating properties as vacant. The property two doors down from me has been vacant for two years and I’ve reported it a couple times and they still won’t rate it vacant (and I’m an elected official). The DC Auditor released a report last year highlighting this problem, which costs DC tens of millions a year. Second, most developers will create a separate LLC for each property and they’re happy to not pay taxes and have a lien put out, etc., on the probability that they’ll be able to flip it before foreclosure happens. If they do run into problems, the LLC lets them cut their losses. DC needs to move faster and blacklist two-bit developers who do this (I have a blighted property in my district where this has happened, and the District is out of options).
DC’s new short-term rental restrictions might help free up some apartments. We’ll see.
It’s hard to find information about that
[1] https://www.sfchronicle.com/business/article/With-SF-s-retai...
I think they didn’t go far enough.
https://www.toronto.ca/services-payments/property-taxes-util...
Quote from [0]:
Each year, one owner of residential property in Vancouver is required to submit a property status declaration to determine if their property is subject to the tax.
Properties deemed empty will be subject to a tax of 1% of the property’s 2018 assessed taxable value.
Most homes will not be subject to the tax, as it does not apply to principal residences or homes rented for at least six months of the year; however, all homeowners are required to submit a declaration.
Net revenues from the Empty Homes Tax will be reinvested into affordable housing initiatives.
End quote
[0] https://vancouver.ca/home-property-development/empty-homes-t...
Because of how inflated the values of homes in Vancouver are, V is huge. So E/V is much smaller than the rest of the country. In 2018, the tax rate for residential properties was 0.246826% [2]. A 1% surtax would more than quintuple the amount of taxes owed.
[1] It's a bit more complicated than that. Residential and commercial properties have different tax rates for example. But not too much more complicated. Municipalities are not allowed to charge sales or income taxes like they do in some other countries.
[2] https://vancouver.ca/home-property-development/residential.a...
I wish places would do graduated property taxes - I don't know of any place that does that (with the exception of relatively meager homestead exemptions and a few "mansion taxes"). I.e. if you really want to invest in affordable housing, why not have, say, first 100k have very low tax, 100-500k a reasonable tax, etc. Many municipal water and electricity bills work this way and they work well in promoting conservation.
It means that if the valuation of all the properties in the city double you continue to pay the same property taxes because you pay the same percentage of the whole
https://hoodline.com/2019/03/board-of-supervisors-passes-leg...
Taxing unused spaces sitting idle makes a lot more sense than income (ie: people’s work).
what's the difference?
Fines (at least, non-criminal ones) and taxes, while sometimes procedurally distinct, are essentially functionally equivalent.
Leave the fines for when taxes aren’t self-assessed.
I also prefer sales taxes over income taxes with cheques to counter their regressive nature.
And carbon taxes over sales and income taxes. Taxing destruction is a good thing.
Taxes serve as a discouragement, so let’s tax the harmful things first. Then those that can afford it without any real harm to quality of life, then lastly everyone else.
An underused property tax hits the first two really well.
I fear it won’t be big enough so they didn’t say it, but I don’t know Spanish culture.
Bad if the officials are corrupt and will use that power to extort money for personal profits.
Good if the officials are democratically elect, supported by the public, do what people want them to, and the public is mostly good people.
Have no idea about Barcelona's officials nor society.
The money gets split amongst the non-tax paying teams, with the idea of balancing competition between wealthier teams and poorer teams.
Relatedly, I got a ~$5k state refund last year and I'm not paying additional federal tax on it this year because the SALT deductions are now gone under Trump's tax changes, so my state tax burden doesn't affect my federal tax burden anymore.
Since you won't be deducing SALT in 2018, any state refund in 2019 wouldn't be reportable for federal tax year 2019.
If this were otherwise, people would have purposefully massively over pay to the state in 2017, claim a large deduction in tax year 2017, get a large refund in 2018, and not have to pay back the deduction they didn't really deserve.
If I steal an apple from Walmart, should the fine be 1 percent of the value of the apple? Clearly not.
That case was about a $5000 a day antitrust fine, which had accumulated to $1.6 million, but had not forced compliance with the law. The Supremes concluded that the fine was not excessive, because the business was doing well enough not to comply despite the fines.
The fine would have to be grossly in excess of what it would take to force compliance by a reasonable business. A fine that amounts to a doubling of the property tax would almost certainly not be a violation of the Eighth amendment.
If local zoning already governs what may be built or operated on a property, what principle allows a government to levy fines for lack of use of a property that has been built and maintained to the required zoning? (if to all other requirements, the property is not derelict, in poor condition, a blight or public nuisance?)
I didn't think that you could be compelled to be a landlord.
(By the way, Oakland also is attempting to put in place such a regulation, but to my knowledge, they have dumbed it down with so many exceptions -- elderly, destitute, social justice, etc. etc. that it's meaningless)
"The law the city is using, which gives it scope to fine negligent landlords after two years of leaving a property vacant, has in fact been in place since 2007 (before Colau’s election) but wasn’t implemented until during her tenure."
If a law's enacted by voters, and no law of a higher political body contradicts it, then that's what the government is allowed to do.
If someone would implement a law or rule like the one in Barcelona (or probably Vancouver) in Germany, it would probably be based on such a consideration.
IANAL, mind.
"3. Nadie podrá ser privado de sus bienes y derechos sino por causa justificada de utilidad pública o interés social, mediante la correspondiente indemnización y de conformidad con lo dispuesto por las leyes."
"No one shall be deprived of their goods and rights but for a justified reason of public utility or social interest, with fitting compensation and conforming to applicable laws".
It's the exact same: social interest and public utility are enshrined in the constitution for the exercise of eminent property.
Leaving a property empty to wait for price appreciation is clearly not residential use.
What I'm saying is that it would make sense to me if a zoning code (or other regulations) were to include a requirement to actually use the land/property for the designated purpose (if possible) or swiftly sell it to someone who will. That wouldn't compell anyone to be a landlord.
In my view, such a rule would be completely consistent with the usual meaning of the words "use" and "purpose" and it would be consistent with the fine.
I was recently able to travel to China for the first time and was fascinated to learn about their housing market. Apparently the Chinese government doesn't have a property tax.
For men in China, owning a home is already incredibly important. It's practically a requirement for getting married, to the point where a woman's family would almost certainly disapprove of a marriage if the man doesn't own a home (which, keep in mind, would be called an apartment in the US). So that coupled with China's huge population means there's already a major demand for owning a home.
China is also experiencing incredible economic growth. Local governments are pouring money into "economic development areas" where you can find modern shopping malls, skyscrapers for businesses, and lots and lots and lots of (what we would call) apartment buildings.
And this isn't just happening in Beijing or Shanghai. There are "tier 3" cities in China with populations the size of LA and NY where you see clusters of dozens and dozens of 40-50 story apartment buildings shooting up.
I was told that the value of homes in these economic development areas -- even in "tier 3" cities -- is going up by an absolute minimum of 10-15%/yr (that's being conservative). So if you have money in China, of course you invest in housing. There's no property tax.
When I see these clusters of apartment buildings popping up all over the country, I really wonder how many people are actually living in them, and how many are just getting turned around year after year for a profit. Chinese people have an unfathomable amount of trust in their government (from a westerner's perspective), so when I asked some friends about this, their response was basically, the government will take care of it. Regardless, very interesting place!
Same thing is happening in India. Frightening pace of urban development.
Its happening around the world. The rich realize that one of the scarcest resources is space and land and are powerful enough to manipulate governments into just letting them hoard their money in housing. Because for the states where this happens everyone loses except the rich - housing becomes prohibitively expensive for the working class, rising property values leech productivity and growth and stall out consumerism, and all the money that created the situation could have better been used creating productive business rather than rotting in a cyclic property investment bubble.
China restricted capital mostly because it learned from the 1998 Asian Financial Crisis that rapid capital inflow and outflow is extremely destabilizing. The problem is now Chinese capital is basically a pot boiling over, and if you crack the door open enough capital will flow out that could destabilize the global economy and pop the Chinese bubble. The hangover would eclipse the previous big deflation of the Japanese economy.
It helps a lot when the government refuses to register sales when the price is under the guidelines. If you put a price floor in the market can stay irrational even longer than normal during a bubble.
You can't argue that they are greedy for buying land but not greedy enough to squeeze more money out of it.
The answer is somewhere else.
It’s not unusual to buy tenants out in SF before putting the home on the market. Spend $50k to get them to leave and the value of the home goes up $200k.
If you know you’re going to sell in a few years, basically the value of the rent (adjusting for buyout) is way less than the incremental profit from selling an empty building.
I write that in a somewhat tongue-in-cheek way usually, but getting and caring for a tenant could, in some cases, be more expensive than leaving the space vacant. If you own the property outright, it's a measure of the cost of extra wear-and-tear, property tax, any other fees and fines, and maintenance (like this new one) against the rent you collect.
It's not always the case that the rent is going to be a bigger number than tax, fines/fees, and extra wear-and-tear, especially if you own the property outright. If you add in rent control and a rising trend in rental prices, some landlords would rather leave the space vacant for a while to wait out the market for higher prices.
You could easily lose money if you don't recognize and account for all of the costs.
I’m in Cambridge MA and the Harvard square movie theater sits empty 5+ years and i can’t think why excepting financial shenanigans. (Though apparently there is finally a plan to redo the building)
The real reason buildings would stay vacant is either ownership attempting to charge above market for rent, or land speculators who are looking to hold and flip, without developing it enough so it can be used in the meantime.
B) Buy another property: sit it empty
C) First property rent is higher than the rent of 2 properties
The real reason is to economically disencentive land speculators holding uninhabitable land, who were planning on flipping it without developing it after several years.
The useful information that high priced vacant housing communicates to me is that there is an anticipation of significantly higher future demand that isn't satisfied by current supply. That should signal for others to build more housing, as there is a lot of money to potentially be made. Or it could be signaling that there are too many things hampering construction of new housing.
* Real estate investors can borrow against the long term income of their properties, and often value that above the short term rents. They also tend to be highly leveraged to build the next project. This creates situations where high vacancies and poor returns are worthwhile because they can pretend they'll fill the building at their price eventually, and therefore borrow against the building as though it would return that price X all their units X however many years.
* A lot of people seem to think (I haven't dug into the true scale of this) that enormous amounts of money from China is being parked in Western real estate as some sort of protection against seizure by the government.
Therefore, the owners have little imperative to offer the properties for rent, with all the associated hassles, to meet their limited expenses. The properties are often poorly maintained for this reason.
They can instead treat them as stores of value, which they might even be able to leverage into cash flows via other financial instruments.
I think this is more the case for commercial properties than residential, but the problem exists to a degree in the residential market also.
In SF, rent control resets to market rates automatically when a tenant moves out, and doesn't apply to single family homes or condominiums.
An unoccupied apartment can be leased at market rates.
Here in Spain it takes months, even a year to get a judge to evict a tenant that has stopped to pay rent. In the meantime, you need to keep paying for utilities or you will be fined, not the person not paying their rent. Even when you get them out, you could find a destroyed property, just for the sake of it, and you have to pay for the repair work. So just one stroke of bad luck with a tenant will make you lose years of profits.
The laws are extremely weighted in favour of the tenant: there is a minimun contract of five years, that the tenant can broke just telling the renter a month before, but the renter can't. Just a few weeks ago, the government approved a new law so if the renter is a company and not an individual, the minimum contract period is 7 years, and in this time you can only rise your price to keep with the official inflation index. So basically investors are tying themselves for seven years with these contracts. Of course they have the option to sell, but selling a property with a tenant that has the right to live there for years with a fixed price is difficult, so you'll need to sell for a lower price.
At the end all of this regulations makes the renters very careful, so they prefer to have their properties empty or wait months to find a suitable tenant. And that means that the price is higher and only people who can show they have an stable high paying job are able to rent.
The agency parasites are the worst - charging 10% of the annual rent just for giving you the keys and printing a copy of the contract.
I was fortunate enough to be able to rent my flat from a family friend, who was afraid of okupas if it was left empty.
That said I live far-out from the centre (which I prefer) and it is still much more expensive than when I arrived just 4 years ago.
I live in 30 store high new condo that is pretty much bought out by chinese investors and few seasonal tourists. There are probably 200 people living here and on my floor I have 1 neighbour. There's a pool, sauna and a gym in the building and with so few inhabitants you often have it all somewhat private.
As an expat I definitely benefit from this. I've tried to look into what locals think of this and couldn't really find any strong opinions. In fact I've noticed a trend that locals tend to invest into condos themselves nowdays.
It's an intersting contrast to the problem Barcelona and San Francisco is facing - leaving housing empty might not be the core issue here at all as it clearly works perfectly fine for some places.
That doesn't sound like my childhood dream, but it sure sounds like a fun Hollywood flick. :)
EDIT: Also I'm always down to make new developer friends in the area. If you've got time for a chat, my email is in my profile.
I think there's always going to be a flux of people who aren't "keeping up" with the increase in costs as much as others are, and having to drop out of the most expensive areas as a result. and likewise, there's people from the rest of the country who are improving their situation and can move up to the "big time".
I put it down to a combination of consistently low interest rates (both in the short term and in the long-term trend), coupled with cumulatively worsening construction deficits. Wouldn't be surprised if not all of that withstood comparison with actual data, though.
I really don't think there's anything that special about what we're going through right now. I'm sure the Romans were complaining about rising prices in Rome as the city filled up and real estate became scarce.
Truth be told. This is the first time in history this happens. There has never been as long a period without war or calamity. Properties were never inflated to the point of being not affordable within multiple decades of income.
You were trying to give the 20's as an example. 1920 is just after the war, property had zero value after most of them were destroyed and most tenants are dead. Fast forward less than 20 years and it's world war two, it's all reset again.
My dense, desirable neighbourhood in montreal couldn’t be build elsewhere in north america. But itnisn’t a safety ir code thing. The local zoning is actually reasonable: it’s just the laws are more anti-urbanist elsewhere.
Example: https://www.citylab.com/life/2018/06/sleepy-in-songdo-koreas...
Classic example of massive misallocation of resources.
Anecdotally, my parents did well during the recession using it as a time to purchase assets "on sale" as my dad put it. Now, 10 years later they've done well on everything they bought, and are seeking new places to put their money.
They've had success with real estate their whole lives and see no reason to change what works. As a result they are buying anything they can collect rents from.
The cycle continues.
Just to give you an example, when i moved in my current condo back in 2017 my rent was $1700/month. 2 years in and my landlord wants to suddenly "move back in" and now the rental price for similar units are around $2200/month. I find it hilarious top brass of Y Combinator talk about things like UBI and rest and meanwhile Airbnb actively tries to screw over the locals when it comes to renting a place and won't even assist local government in enforcing the rules.
Rent has increased significantly in Toronto recently. How do you know Airbnb is a significant factor?
[0] http://fairbnb.ca/wp-content/uploads/2019/01/Final_Fairbnb-U...
Yes i know fairbnb is backed by a hotel lobby but that doesn't mean the reports are inaccurate.
It might be crazy, yeah. I guess buildings receive "abuse" in the same way as rental cars get more abuse, except that here regular tenants suffer.
Lets say anyone renting out their unit for less than half a year wouldn't have put the unit on the rental market anyways. If you download and dive into the data, you'll see that there are ~9550 "Entire home/apt" listings, of which 5992 are available for less than half the year, leaving only 3558 units. In a city the size of Toronto, that seems negligible.
Data: http://data.insideairbnb.com/canada/on/toronto/2019-03-07/vi...
Even if we took Fairbnb's number at face value, it still seems small relative to Toronto's total number of rental units.
Here is a report published by McGill's School of Urban Planning, commissioned by the Hotel Trades Council, that found Airbnb responsible for a 1.3% rent increase over a 3 year period in New York: https://mcgill.ca/newsroom/files/newsroom/channels/attach/ai...
I dug through insideairbnb more and it's actually 12,374 (65%) units that are listed as entire unit in Toronto. That absolutely is a very significant amount of units. Only about 7k of the listings are either shared room/private room.
Data: http://insideairbnb.com/toronto/?neighbourhood=&filterEntire...
> Lets say anyone renting out their unit for less than half a year wouldn't have put the unit on the rental market anyways
See, that's a valid point though in Canada it is difficult to get a mortgage and there are people now buying a second unit to treat as an airbnb property and generate income. Chances are that if the unit is sitting idle for > 90 days and < 180 days, people might be forced to sell it. Sure not everyone but there will be units that will come to the market.
You say it's negligible but you have to remember that we have one of the lowest vacancy rates.
source: https://dailyhive.com/toronto/vacancy-rate-toronto-ontario-c...
So forget about affordable rentals, there even is a shortage of just units in the market over here.
Also, just go on r/toronto and search for Airbnb and you'll see an overwhelming majority of people echoing the issues that i've been saying.
Source: https://www.toronto.ca/legdocs/mmis/2015/pg/bgrd/backgroundf...
I had filtered out the 3300 "Entire home/apt" listings that were available for 0 days a year. Not sure why it's part of the dataset, but I assume it's for people with previously active listings.
I'm not really understanding the mortgage point, but you bring up an interesting point of treating "multi-listing" hosts as bad actors. If we approximate it by saying 45% of 9550 are bad actors, that's still only 4300 listing. That's still tiny relative to the Toronto rental market. To be fair, the realistic number could be a lot lower since a multi-listing host might be hosting multiple bedrooms in a single house and inflating the # of multi-listing hosts, or they might be hosting their primary residence and an investment property where only the investment property is a bad actor.
>You say it's negligible but you have to remember that we have one of the lowest vacancy rates.
I don't deny that Airbnb has an adverse affect on rent prices, but it appears to be quite small relative to other levers affecting the housing crisis. I wonder if a study may exist that shows the economic benefits of Airbnb in communities, keeping more of the income within local residents, patronage to a larger spread of local businesses, greater financial independence from self-employment etc...
>just go on r/toronto
I'm pretty active in the community, but less and less these days. It's become a major echo chamber where fact based level headed discussion is quickly down voted if the rhetoric doesn't fit the majority's views. Just look at the comments the next time Airbnb is brought up :). In all seriousness, having an overwhelming majority of people agreeing with you isn't always indicative of "being correct". For any viewpoint, there's probably an active internet community out there that feels strongly one way. Take r/the_donald or r/The_Mueller/ for example.
So, here's another article i found on BBC, and tbh i hadn't even considered this point. A lot of airbnb units usually are in more desirable neighbourhoods, thus decreasing supply of rental units in these areas and in turn increasing the price of available units to rent. Renting on Airbnb nets you 2-3x the median long term rent. In LA, almost half of Airbnb listings were clustered in seven neighbourhoods, where rents increased a third more quickly than the city average.
Now if this is isn't a direct enough proof, i'm pretty sure i won't be changing your point of view.
Source: https://www.bbc.com/news/business-45083954
> wonder if a study may exist that shows the economic benefits of Airbnb in communities, keeping more of the income within local residents, patronage to a larger spread of local businesses, greater financial independence from self-employment etc...
I haven't really thought of that, but you also have to remember that this is Toronto (specifically near and around downtown) , and it is going to get tourists regardless of Airbnb. And what happens to local shops when a unit is vacant for 4-5 days a week?
>t's become a major echo chamber where fact based level headed discussion is quickly down voted if the rhetoric doesn't fit the majority's views
Yeah, to be really honest I can't deny that.
You could have just summarized your entire post up with just that one word. You have no conclusive proof that airbnb is the sole cause of the rent increases you have observed.
So, all popular big cities experience this influx of people moving there; expats have more and more options nowadays, so they also move to only cool places, therefore, it creates this problem. Not only it raises rents, expats can bump them a lot! They earn a lot of money, so for them extra $100 is not a big problem.
And urbanism – I guess more and more people move to cities nowadays, so it brings even more people who want to live there. Nobody really wants to live in the outskirts (unless it is USA), so major hubs, subway stations, downtown gets huge demand.
At some point, the effort required to cover up the lack of occupancy is equivalent to renting out the place.
Utility bills for example. Is the electricity utilization random enough or a little too constant? What about water? Natural gas? Pay the garbage collectors to rat out homes that never leave anything out.
Are the windows always left open even on the hottest days and no A/C?
Is the keyfob for entry never used?
Ultimately, every tax can be evaded. Income, sales, corporate. This one won’t be any different.
I do wonder who might rat out their completely quiet neighbour though.
The real tell will be the every 5 minute reports that smart meters can generate on usage: much harder to fake with timers.
It's hard to off-shore property in a tax haven too.
It's one of those policies that is popular with virtually everyone right until the moment they get into power and meet the wealthy landowners/donors.
Which is that it's keeping the space open for more productive use in the long term.
Suppose you own a storefront or apartment that could fetch $5K/month right now, but you think it will fetch $10K/month in 3 years, and that leases are 10 years long.
Well, the people/businesses who can afford $10K/month are by definition more economically productive: the people must have higher-paying jobs, and the businesses must be more productive economically.
If economic trends are such that you expect them to show up in 3 years ago but not right now, it's overall more productive for society to keep the properties empty for 3 years, and then get 7 years of the doubled rent.
Otherwise, if you were forced into 10-year leases now, then in 3 years' time, all those people and businesses won't have locations they can move into. Because of supply and demand, the small remaining inventory will be pushed up to, say, $20K/month, which will be unaffordable, and the city will be left with less economically productive people/business locked in, and economic growth will happen in other locations instead.
Now, certain laws/zoning/factors can distort this in possibly undesirable ways, and if you don't like gentrification then you won't like that either. And all this depends on where the market thinks the economy is going -- landlords are taking a bet, and there's no guarantee they'll be right, but that's the case with any investment.
But as a general rule, landlords letting properties sit vacant are actually providing an economic service, by ensuring future availability when it's even more valuable. Yet articles about vacant properties rarely seem to mention this. I'm not sure why.
Obviously there's an economic incentive here (why else would anyone leave the apartments empty?) but it just doesn't mean it's not a problem for the cities and their citizens.
But i also can see, why citizens (if we talk about housing) might object, if there is no affordable housing right now, if everyone were betting.
But then again, if i look at prizing over the last 100 years, and if citizens back then would have to look at prizes today, they would be outraged or at least be worried about their offspring. While, when one is working today and does not have to live in popular areas, in my anecdotal experience, many do pretty ok.
If there were literally more people in Spain than there were housing units to hold them, then yes of course that would be a problem.
But it certainly doesn't appear to be the case here. This is mainly about small price differences -- forcing a small increase of short-term availability that will have the cumulative effect over lowering prices in one segment of the market slightly in the present.
It's not about finding physical space to house the homeless, for example, in a city bursting at its limits. That would be a legitimate moral problem, of course.
I mean you can make the argument that by being more efficient at rent collection over some time horizon you funnel more money to yourself and other local industries but isn't this basically just a cost to everyone else at every other scale of time and space?
The idea is that letting the space empty now makes it available for “more productive” activities later.
This is one hell of an assumption. Wealthy people hold onto wealth, that's why they're wealthy. That isn't a societal benefit to anyone.
A different argument would be to say that the seller of the property is putting the money to better use, but nevertheless speculation of land, particularly in big cities, is purely a legal issue and regulatory capture. Change taxes to LVT and watch them dissapear.
Is not the whole venturing idea an organized risk minimizing speculation adventure? I do not think anyone willingly spends part of their wealth into something, that they don't think, it's worth investing in.
And i also think it is worth noting, that if there was then a future gain, that it had produced something, that others were willing to spend money on. So it must have been useful?
> And i also think it is worth noting, that if there was then a future gain, that it had produced something, that others were willing to spend money on. So it must have been useful?
Starting by the conclusion here. People also willingly spend money on the lottery, or betting, and although it has some entertaining value, it would be to the detriment of society as a whole if investment were diverted into the speculation of games of chance.
Now they get 3 years of some rent followed by 7 years of double rent.
Most businesses won't sign a lease unless it's for much longer than 3 years -- they need to lock in a known rate long-term to plan a business around.
And with apartments, there are often rent regulations that prevent rent going up by more than x% per year, and you can be sure that if annual increases are 5% but the market doubles, those tenants are going to stay for as many decades as they possibly can.
If landlords could get a profitable tenant for 3 years and then be guaranteed they'd leave, then there wouldn't be the "problem" of vacant properties in the first place.
In fact, that's one of the motivations behind the "pop-up stores" that have recently become a thing in places like NYC -- a business takes over an empty storefront for just a summer or something like that, so the landlord makes a little $, but the tenant is guaranteed to leave. The problem is, there just aren't that many viable pop-up store businesses.
They are richer, not necessarily more economically productive. Making money by hoarding assets isn't my definition of economically productive.
Legalizing squatting in these scenarios is a nice low-regulation way of making sure that property is always being used.
https://www.theguardian.com/australia-news/2017/mar/06/victo...
All these articles featuring all the good things that Barcelona is doing are just marketing...
"Do you have a lease contract?" Easy to get a lot of $1 contracts...
"Did you use water / electricity?" Easy to leave a faucet running or set up bitcoin miners.
If you go on word of mouth? What about false positives -- I travel for work and keep an apartment in one city and my house in another. Would that be a problem?
I don't know how to penalize empty apartments in a way that isn't really easy to game, or unjustly fair for people who don't just live in one place.
Also, what does subsidising renewable energy jobs have to do with leaving residential buildings empty?
Please save yourself the quality of life arguments. Those are post hoc arguments that only express laziness.
What state governments should be doing is “redistributing the wealth” by heavily taxing successful cities to fund and develop less successful counties and districts and towns. When businesses stop clustering and concentrating in places like Silicon Valley and NYC then you know that taxation is at the right level to compensate for the cartel and monopolistic like behaviors and phenomenon of, e.g., Silicon Valley and SF.
In the USA that should look like heavily taxing Silicon Valley and NYC, etc and using that money to fund high speed Internet and education and companies and business centers in under developed regions like rural Alabama or Mississippi or North Dakota.
It is more efficient to have urbanised populations. Rural life is already over-subsidized by urban centers.
Does anyone happen to know if this effect is/can be a thing or do remote workers still flock to big cities anyway? I imagine this could eventually lead to lower rents in cities (but also lower salaries due to increased competition in cheaper places)
Great Idea. But politically impossible.
The other big problem is getting to work. I'm lucky to have a remote career. If that was not the case I'd almost certainly need to commute 2-3h/day to the nearest big city.
From a business standpoint it also makes sense to go to where the action is: startups flock to SF because it's full of VC money, talent, and startup-friendly customers. Given this, the tax rate is just a cost of doing business. You almost certainly want an office in that area if you're intent on raising VC money.
As to the State level problems you describe, the US doesn't work like the EU. Part of the EU budget gets poured into its poorer countries and regions. The US equivalent would be to pour federal money into poorer states and counties. I'm not aware of any such direct cash infusions occurring, nor can I imagine any occurring in today's polarized environment. What seems much more likely, is states doing this work within themselves. Also, ND seems to be doing fine:
https://en.wikipedia.org/wiki/List_of_highest-income_countie...
Property rights are not a mere question of geometry.
There is clear social harm to have cities filled with empty homes while there are people who want homes and can't afford to buy any on the market or are forced to commute long distances.
Using real estate to store money and other speculation does harm to people who want to participate in the market to actually use the limited fundamentally necessary resource.
It makes good sense for property owners who actively use their property themselves to have more rights than those who seek to profit from market conditions or others' use.
Having paid taxes is a weak justification for any freedom.
If you are a landlord, you need to rent the place out at the current market price. If you do not want to do that, you can sell the property and get out of the landlord business. Just squatting on it and leaving it empty/boarded up distorts the local property market and should be heavily taxed to discourage absentee landlords from interfering with local markets.
Just to put it in a US perspective, Barcelona as a whole has 10% higher population density than Brooklyn (41,000/sq mi vs 37,137/sq mi).
At night, you walk through that place, its quiet like abandon for very long time, and there won't be any retail stores / business nearby since only ghosts and wondering dogs/cats will be there.
But I also wondering, if the city mayor decided to make this bill work, he need the local city council pass the bill, will this make him lose in next year's election?
Cities are (necessarily) very tightly regulated, because when people and property are packed in so tightly together the possibilities for negative externalities are severe. It's important to optimize the very limited space in a way that maximizes its good for as many people as possible.
You have a lot more leeway to do whatever you want way out in the country if that's what you're looking for, but you should never expect that in a dense city, because you won't find it anywhere.
But to answer your specific question, the most obvious negative externality is increased rents for other people, because an apartment that could be being rented out (increasing supply) isn't being rented out.
Having lots of vacant residences also potentially increases crime, is bad for neighborhood maintenance (we have a huge problem here in NYC of sidewalks not being shoveled in front of vacant properties when it snows), it gives pests a potential home, and increases the potential to damage surrounding residences. Vacant residences are more likely to fall under disrepair and then catch on fire or start leaks, which can damage nearby or underneath residences. If you're touching one then it's bad for your heating/AC bills, because your heat/cold is sapping through the walls into the un-conditioned apartment. Even just simple things like having fewer eyes to watch out for crime and call the police if a burglar or robber is spotted.
There's a huge host of problems associated with having long-term vacant residences in your neighborhood.
What you are describing is not an “externality” in the way that economists use that term.
Owning central land and not using it means that millions of people have to go further to get to their destinations. It also means that construction effort and money is going into a black hole and not turning into supply. Enough of this together makes a powerful negative externality.
Because of high rises and land reclamation, this is a lot less true than you'd think.
Can you create new land?
No. They are completely different things.
https://squattinglondon.files.wordpress.com/2018/01/ominous-...
and it seems obvious to me why that's bad and public policy should not promote it.
As a public policy, along the lines of taxing vacant properties, we could also simply permit any vacant or unused property to be lived in and used by anyone who came along.
for anyone that wants to read further his name is Kawamoto and he was recently arrested for Tax evasion in japan and was forced to sell his Kahala Homes Portfolio
For example, you don't want people doing things that poison groundwater for the neighbors, right?
Anyway, letting property sit idle benefits the landowner but causes issues for neighbors, local government and the free market. It means businesses in those locations get less customers, and local governments less sales tax. If the property is not cared for, there can be additional issues that lower the value of other's homes.
It causes rental prices and home prices for buyers to inflate because of the market distortion, leading to boom bust real estate problems.
Boom and bust effects homesellers and homebuyers, but also, given how often property tax plays a role in government budgets, dramatically affects local and state revenue, (and federal revenue in countries with a federal property tax).
Terminological issues aside, tax is not about fairness. At least not for any one person’s particular definition of fairness, and certainly not mine. Tax, in this case, is about a behavior we want changed, and a means readily to hand by which to change it. Doesn’t really matter if it’s fair.
Can you help me understand this? I've never understood why any property sits idle -- the property would need to increase in value fast enough to counteract property taxes, just for the owner to break even. And that's ignoring the opportunity cost of not filling the property with tenants.
To me, it seems that it would always make more financial sense to try and hit 100% occupancy, even if that means steeply discounting the rent. Wouldn't an empty property be hemorrhaging cash?
Sometimes people lose money, but at the end of the day they can sign a good deal on it (let's say couple of years), and it will compensate their losses extensively. But they will have this "ready immediately" sign all this time.
Another is this: a building nearly full rented has an easily calculable valuable based on its income. A building with a higher price but not trying to rent can, incredibly, claim to have a higher value. Especially if there are several building nearby claiming the same value.
If there is a debt associated with the building, it is especially in the owner's interest to keeping the supposed value of the building high even if they are loosing revenue at the moment.
If a few organizations own a large number of units they can strongly influence a market both of rental rates and building values by doing this. Undoubtedly to a net profit or they wouldn't be doing it.
https://www.citylab.com/equity/2018/11/property-tax-dark-sto...
A great example is rent control. Sure it helps current tenants, but it distorts the rental market such that it disincentivizes putting new homes on the market, and the exact opposite of what you want - higher rents.
What one person does with a property affects their neighbours. This is the theory of why you are not allowed to open liquor stores next to schools.
Until then, all real estate comes with strings attached.
Or you can just pay to make up for the economic damage your wasted space causes. You're not going to get jailed.
I guess it sucks for people that get incorporated against their will or whatever.