This is a great reason to have a local-level tax on vacant space. Both commercial and residential.
I want long term growth on a multi decade scale, ergo, I have to take lower immediate returns to support the ecosystem which generates those returns.
Your view is myopic, not perfectly rational.
And is an example of what goes wrong with hill climbing algorithms: local gradients can lead to globally unwanted outcomes.
Here’s how that would work: 1. A couple stores owned by a landlord close down due to a recession or something.
2. Landlord has to keep the vacancies for awhile while he finds other renters.
3. He get’s levied the extra taxes due to the vacant properties. Now he really needs to get it off his books or find a renter.
4. He can’t find a renter because the economy is bad. So he tries to sell the properties.
5. He either doesn’t sell it, or sells it a big discount because the buyer needs to price in the tax premium.
6. Rinse and repeat.
> Here’s how that would work: 1. A couple stores owned by a landlord close down due to a recession or something.
> 2. Landlord has to keep the vacancies for awhile while he finds other renters.
> 3. He get’s levied the extra taxes due to the vacant properties. Now he really needs to get it off his books or find a renter.
> 4. He can’t find a renter because the economy is bad. So he tries to sell the properties.
> 5. He either doesn’t sell it, or sells it a big discount because the buyer needs to price in the tax premium.
> 6. Rinse and repeat.
If this is truly "rinse and repeat", since each subsequent sell results in a price discount, wouldn't the price eventually settle on what the market can bear?
Btw I also think excessive rents are strangling society, but it’s not as simple as it seems to fix.
> Btw I also think excessive rents are strangling society, but it’s not as simple as it seems to fix.
But if the property is vacant, isn't the effective rent $0? I have no experience with commercial mortgage lending and appreciate more details on the Bad Things and why they don't occur without repricing rent.
Of course this means in some cities you have entire blocks with half the store fronts for lease at "market rate" sitting there for years. This is clearly lousy for everyone, so these perverse incentives ought to be fixed, but to be honest I have no idea how to do that practically and equitably.
Public benefit and the profit margin are inversely correlated. The idea that you can encourage any benefit without having public competition is laughable. There is no market effect that can encourage people to care about the public benefit over profits. The key is to remove the landlord from the equation entirely and de-commodify real estate, especially residential real estate.
I suppose it might be disappointing if the rents dropped and all it lured in were payday loan shops, and I imagine any tax enough to effect behavior will also induce some landlords to just fake occupancy to dodge the tax without the liabilities/risks of an additional business running onsite.
I'm a little skeptical (but maybe not pessimistic?) about how plausible it is to engineer public-benefit outcomes for this kind of space?
A non-vacant used property will provide a city with money in the form of sales taxes, jobs, growth, fees and in general prosperity. A town with a ton of small independently owned shops and restaurants (a side effect of forcing property on the market) is more attractive than one with strip malls filled with franchises. It will make people want to live there and drive prices up.
Why should a vacant property pay the same tax? It's taking up the same and paying less, in fact, in many cases, the vacant property is pulling down the value of the city. It's only fair for the vacant property owner to have to pay to blight his community. Such an arrangement is dealing with externalized costs, which is one of the best functions of government.
New wealth can be created, we don't need yours. If your investment real estate is contributing $1/square foot in property taxes but everyone else's occupied property is contributing $5/square foot in wages, sales tax, property tax and municipal fees... then it makes sense to charge the free loaders. This isn't even dealing with the blight and community development points. Just from a financial perspective it makes sense.
The way I see it; an added tax will just be an encumbrance on the budding entrepreneur, who worked two jobs, and begged to get the financing on that property. She has dreams, passion and a vision--she rolled the dice and will be bankrupt if she doesn't execute and have a bit of luck.
> which is one of the best functions of government
In a free society, perhaps the best function of government (which is nothing more than a random collection of random people) is to be as invisible as possible, and not to try to ram their (here again--this random collection of random people) agenda down everyone else's throat, every single chance they get.
Where I live they are elected.
And while I feel for the entrepreneur, this type of tax won't affect them if they lease it out.
There is no way for everyone to be happy. Needs have to be prioritized (like the need of the city to be prosperous over the need of the landlord to squeeze a few more cents out of a place)
Random people run for office and random people are elected. Some of these random folks Are even qualified for the posts they hold.
> this type of tax won't affect them if they lease it out.
That is simply not true. In your scenario my mythical entrepreneur has no choice, she can't afford to not lease it out to the lowest bidder.
> like the need of the city to be prosperous over the need of the landlord to squeeze a few more cents out of a place
You seem to have a bit of disdain for business owners and complete faith in your elected officials. My point of view is totally the opposite--it's the business owner's money, Not your elected random peeps money. Furthermore, do you think the business owner fervently desires her property be locted in a prosperous city--of course she does, but that doesn't mean she wants incompetent people who are smooth talking just wasting it.
If you choose to state something that is demonstratively false, then we can't converse. I truly wish you the best.
You appear to believe that there is a systematic method in place for people who may or may not decide that they want to run for a political office: I submit that no such system exists--it is truly hit-or-miss, and utterly indiscriminate, or to put it another way; random people run for office and some of them are elected.
I too wish you well... ttyl
A vacancy tax is an attempt to correct for those externalities and encourage better behavior from landlords. This is a situation where just having something is noticeably better than nothing at all.
Of course there is waste, this is part of the cycle of boom and bust. The people that mistime the market will overbuild and lose their investment.
When the frenzy passes, house may stay empty, but the market will adjust. Fewer new houses will be build and people who stayed out of the market will have a chance to buy at cheaper prices.
The market controls growth. Of course many factors manipulate the market (interest rates...). Boom/Bust is always going to be a factor because it isn't possible to know perfectly how much space we need before we need it. Boom/bust isn't even all bad, those who need space after the bust can get it cheap and start something interesting that they wouldn't otherwise) - artists for example need cheap space if they are to start a studio.
That sounds beautiful in theory. In practice, whoever has surplus capital controls it. Growth ends up a product of a few people's bets, and they can afford playing against the 'invisible hand' and making big mistakes. The human cost will be paid for by the communities where the game plays out.
In short I reject your pessimism.
> Of course there is waste, this is part of the cycle of boom and bust. The people that mistime the market will overbuild and lose their investment.
> When the frenzy passes, house may stay empty, but the market will adjust. Fewer new houses will be build and people who stayed out of the market will have a chance to buy at cheaper prices.
Why would there be new development in places with high vacancy? Wouldn't the community want new development to be hindered if most of downtown is empty already?