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Comment by jseliger | Hacker News Reader

At least the writer understands incentives:

Since California passed Proposition 13 in 1978, property tax rates for those San Franciscans who owned property back then have been severely capped. Owners may pay Nixon-era property tax rates, while renting out those spaces at rates that have exploded in the last 40 years. They, too, can afford to let buildings sit empty.

There have also been vacancy taxes proposed: https://reason.com/2019/12/10/san-francisco-ballot-measure-w..., but Prop 13 reform would seem to be the more obvious route.

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From the Reason article:

> "The majority of the building owners, and certainly retail brokers like myself, all are aggressively trying to fill these vacant spaces," wrote Hansson. "In almost all cases, the rent is not the stumbling block; it's the high cost of starting the business, strict government regulations, and the risk of ultimate success."

I don't buy that argument fully. Why is the place vacant in the first place? Usually because the pervious, sometimes long-term business, could not afford the double, or triple rent increase. The question is, Did the owner of Sparky's really want to close, or were they not able to afford the rent increase? And now, we are suppose to believe that the place is empty only because a new business wants to pay that new amount and they're just waiting on permits?

The Castro area has more retail vacancies than most. Many of the vacancies are owned by a single landlord, last name is Natali I think. He kept the Patio Cafe space vacant for something like 15 years. Thanks to Prop 13 it costs him very little to do so and he has plenty of profit from the other buildings. There is a pattern of landlords raising rents to a level that existing businesses will not be able to afford, and then leaving them vacant. Supposedly there are big brands that will pay these rents, but they are kept out by a San Francisco law against chain stores. Without this law, the Castro would turn into a sort of high end rainbow themed mall. Some of the writing about Greenwich Village in NYC captures this dynamic better - there are national brands that can afford to run a flagship store in a tourist neighborhood, at a loss. The granolashotgun blogger has pointed out that in much of the US, there is simply more retail-zoned space than is necessary in the delivery age. I don't think that's what's going on in the Castro though. Prop 13 is a massive market distortion and the distortion is only growing, just as it was designed to do. That which is not sustainable must end, preferably before it gets worse.

>there is simply more retail-zoned space than is necessary in the delivery age

Although higher-end malls in growing cities are mostly doing pretty well, there's certainly no reason to think that urban retail in general should be immune from at least some of the same forces that help create the "dead mall" phenomenon.

I was walking through Cambridge yesterday for the first time in a while. In addition to a non-trivial number of empty storefronts my sense was that there was at least a bit of a shift away from retail and towards trendy-looking restaurants.

Best case it will apply to commercial properties. I dont foresee changes to prop 13 for residential. They would also have to undo rent control, which is sort of like non-owners prop 13.

What about a long time family-owned pizza place that owns their space. Does it seem right to raise their property taxes?

There's probably a stronger argument for "it's just business" than forcing grandma to move out of the house she grew up in because she can no longer afford the property taxes. But, yes for better or worse, it's certainly an aspect of gentrification when the long time family-owned pizza place gets forced out to be replaced by a trendy bar, Starbucks, or a bank branch.

Poor little small businesses will always get crushed and it's just a matter of who by. I often see this kind of what-about argument trotted out against regulation (if we ban polluting cars, what about the poor folks who can't afford to get their old car serviced?). But if we're so worried about the pizza joint, are we going to protect them if a chain restaurant offers cheaper pizza? What if the neighborhood changes and now people don't like pizza as much? I think the answers to all these questions are the same.

Not if the society makes an effort to keep the pizza place.

Why should they make an effort to keep an overpriced pizza place when people prefer Mexican food now?

You’d have to ask them.

Society already makes an effort by using their money to vote on whether they like that particular pizza place.

Yes that’s exactly the practice that I am pointing out you can replace.

Yes?

Seems alright to me.

Definitely yes.

Property taxes should be proportional to the value of the property. We shouldn't give special breaks to one group or another just because we like them more.

Remember that SF's rent stabilization ordinance was the renter's response to Prop 13, enacted one year later. It shouldn't be used as an excuse to preserve a bad law.

This is going to be difficult to unwind fairly but it is only going to get worse if we don't.

Won't forcing property taxes up just force lower income owners to move?

You buy a home in a poor neighborhood. Twenty years later the value quadruples... and now the cost of living skyrocket?

Also, would make retiring tricky.

I think yes, it might. But most policies have positives and negatives.

For example, because property taxes are essentially capped, CA needs to rely more on sales taxes, which are notoriously regressive.

Yes which is why most proposals for reforming Proposition 13 would leave the current system in place for primary residences.

There is no reason why the percentage rate cannot come down as the property values increase.

Yeah, that's why prop 13 passed in the first place... "Oh how am I going to retire if my property taxes keep going up on my small 2br apartment in the Castro?"

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