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Comment by biznickman | Hacker News Reader

When I lived in San Francisco, the newly built condo building across from me was fully empty (but fully sold) for all the years I lived there. This is a tower in SOMA. There was only one apartment which appeared to be a corporate one that was occasionally utilized.

The rise of foreign money parking money in real estate has screwed things up on a global level. San Francisco has felt the brunt of this due to their insanely restrictive development laws.

Frankly, for the 7+ years I was in San Francisco I was always saying they should pass laws to prevent foreign investment in real estate or at a minimum require people live there for X% of the year.

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I used to be instinctively against stuff like this, but I actually think it’s pretty reasonable now. People outside of a given city/country/etc. have no inherent right to participate in that place. Local residents should only allow outsiders to participate if they derive some benefit from it. Now, that said, there may be unintended consequences to eliminating foreign purchases of real estate.

Vancouver, BC passed something like this a few years ago - it’s a 20% tax on all non-resident home purchases. It has actually stopped house prices from rising so fast, but there are still a bunch of empty homes.

Sounds like the tax is too low then. If the vacancy tax is high enough, landlords will have no problems finding a tenant. This is vancouver and sf we are talking about, snap your fingers and you will find a tenant if the price is right. Too many greedy people.

Just tax the vacant homes at high rates and use that money to build even more housing. Win/win for the city.

tough to do when the councilman has two or three piece of property too

I call bullshit. Say what tower it was, and when it was built, and what time frame you are actually talking about so we can verify for ourselves whether it was actually empty or not, or even if it was empty whether it was empty for a good reason (e.g. not having it's habitability permit). Otherwise this is the worst kind of anecdata - not even enough detail to verify that the anecdote is true, nevermind whether it is actually a representative sample of a larger issue or just an odd case.

I'm all for backing up claims, but drive through Pac Heights and Cow Hollow at night - you won't see many lights on in those mansions. Drive by during the day and all you see is construction workers and gardeners tending to the properties there. It's pretty obvious people don't live there more than a couple months a year. These are the ultra rich with property in the most expensive cities all over the world.

> I'm all for backing up claims, but [...] you won't see many lights on in those mansions.

I'm with you 100%. I lived in SF from 1998-2006, then again for a few years in the 2010's, and when rental prices are high landlords seem to prefer holding out rather than lowering their rates. I assume this is to avoid locking a potentially valuable rental unit into a low, rent-controlled lease. (On a side note, this is why many economists believe rent control is bad overall for rental markets: http://freakonomics.com/podcast/rent-control/)

Mansions in Pacific Heights and condos in SOMA are very different. If mansions in Pacific Heights are indeed vacant (which, to be clear, I doubt they are) that would suggest that a better use of the space would be to split them up into new, more affordable, units.

If they live there a couple of months a year it's a vacation home, not a vacant home.

Cannot speak for SF, but that was definitely the case with highrises in downtown Vancouver. Saw quite a few of those next to the waterfront that had 90% of the apartments (visible from the ground) completely empty or even have the plastic cover on the windows on the inside, with very few (i could count less than 5 of those out of about 30 being visible enough to judge) having anything on the inside.

A few starter ideas:

(1) Repealing prop-13 is probably a non-starter but we could probably get away with repealing it for non-owner-occupied homes. Prop-13 was meant to prevent people from being driven from their homes by property tax increases, not to protect speculators from being taxed.

(2) Levy a substantial additional property tax on residential properties that are not currently occupied by either the owner or a renter (for more than e.g. 6 months). These should at the very least be on the rental market.

(3) Subject all real estate purchases and investments to KYC/AML and other rules. AFAIK one of the things driving this loony real estate speculation is that RE has become a preferred vehicle for money laundering after KYC/AML made other financial investments less attractive for that.

(4) Tax foreign (non-US-citizen) purchases of residential real estate. Yes they'd set up shells and recruit locals to be proxy buyers, but at least this would give them more hoops to jump through and would probably reduce the extent of the problem.

> (1) Repealing prop-13 is probably a non-starter but we could probably get away with repealing it for non-residents. Prop-13 was meant to prevent people from being driven from their homes by property tax increases, not to protect speculators from being taxed.

I have never lived in California, and Prop 13 passed before I was born anyway, so I don't know much about the political backstory. That said, if this was the purpose that got it passed, why is the exemption so broad? How does capping Safeway's property taxes keep people from being driven out of their homes?

The corporate protections are unintended consequences of the original proposition. They really weren't on people's radar. (This is why California residents should almost always vote against propositions, even if the idea and goals are good: Fixing the unintended consequences is extremely difficult. It would be better to find other ways to implement the idea.

But getting anyone to fix proposition 13--even in this very limited instance of not protecting corporations anymore--brings out all the apocalyptic messaging (from basically everyone, but especially the corporations) that the old folks who bought in 1970 and have lived their whole lives there will be out on the street when their property taxes go up 10x.

There is no nuance in these messaging battles. And quite frankly, what property owner wants to take any kind of risk with this?

If they went up 10x that means they are out on the street with north of 500k in their pocket. Should be plenty to pay rent at the senior center for the next dozen or two years.

Make it a year, not six months. The problem is investors, not vacation homes or snowbird homes.

> (4) Tax foreign (non-US-citizen) purchases of residential real estate

So permanent residents and visa holders cannot buy property and are instead forced to rent? What a terrible idea.

We should really just repeal prop 13 for commercial and non-primary home real-estate.

edit: forgot to add non-primary home.

Repeal it for everything except owner-occupied residences. That's the way homestead works in Florida.

Fuck at the very least yes. This is the most ignorant law I have ever seen. It blows my mind everytime to think that it not only applies to non-owner-occupied but also businesses.

Repeal it for everything.

Just do what Texas does and allow deferred property tax payments for when the owner dies or sells.

Why should we be giving tax breaks to people who have seen incredible appreciation of their homes. Those are the last people who should be getting tax breaks.

This. The original stated intent of Prop 13 was people not being able to afford to stay in their homes due to rising property taxes. OK fine, but when you sell your house for $2 million, you most definitely can afford it, and you should pay up, with interest.

This is what I've been saying for years. I didn't know anyone had implemented it.....looks like they have an 8% interest rate, that's crazy high for the situation.

There's a product called a reverse mortgage that accomplishes the same thing. Having the government offer this instead of foreclosure nullifies the "I lost my house because of high property taxes" argument, but there's no need for the interest rate to be especially competitive. If you can get a better deal on the private market, go get it.

Texas also has a value increase cap for owner-occupied residences, though not as generous (10% per assessment, since the state uses three-year assessment periods).

> Why should we be giving tax breaks to people who have seen incredible appreciation of their homes. Those are the last people who should be getting tax breaks.

It's about not forcing people to move because he area they live in appreciates suddenly. Basically, the same argument as rent control. That an owner gets to cash out some value is cold comfort when their life is uprooted against their will.

It’s a common method in Canada as well.

The end result is, if the owner chooses, they can continue paying the same property rate until they die or sell. The govt eventually collects the full tax from the equity of the house (or estate).

You solve the issue of people being forced from their homes while at the same time being more equitable in terms of tax burden.

Maybe your parents didn’t teach you empathy when you were growing up, as is so prevalent these days. There are millions of retired people on fixed incomes who bought their homes when they were normally priced. For example, my grandparents bought a house in Los Gatos for $30k in 1969 and now it’s priced at $1.4M. Is that their fault? Why should elderly people, who cannot take the stress of being uprooted and moving, be forced to sell their homes and lose their balance sheet savings in the process? If anything, discounts on capital gains and property taxes should be based on both income and balance sheet apart from real estate ownership. What if that were you?

If that were me I'd be smiling ear to ear paying 30k taxes on 1.4 million dollars. That's like the deal of a life time. You can't even find a 30k home in cleveland.

Who said anything about uprooting?

In your grandparents case, they could freeze their property taxes, but when the houses switches ownership, they’d need to pay all the back taxes they avoided with the cap.

Why shouldn’t your grandparents have to pay current property taxes? They just had a windfall increase in property value.

Wait till you see what Props 50 and 68 do.

Prop 50: pass your current tax rate on to your children.

Prop 68: pass your current tax rate on to your grandchildren.

wilshire country club in LA is probably taxed like its 1880 and covered in cattle shit again.

My preferred policy would be to repeal Prop 13 entirely and end the mortgage interest deduction. Couple that with a statewide ban on rent control, zoning reform, and greatly increased spending on affordable housing, and we'd be in a much better place.

Of course, none of that is going to happen anytime soon…

There are houses throughout the Bay Area sitting empty, just being used as a relatively safe store of value. That goal is already achieved without having to deal with the overhead of managing the property and tenants.

So the homes just sit... empty.

Seems strange. Surely a management company would happily handle all that hassle and provide a secondary income stream. Sign a couple forms and boost investment income by a few percent?

Surely that's not significantly more burdensome than the bureaucratic hassle of purchasing the property in the first place.

I guess there's some significant tax/regulatory difference between capital gains from holding property vs. an income stream from renting said property.

AFAIK, if you CAN rent a property for $X and it remains empty, you can take it as a loss. $X tracks inflation/value, which was a huge problem when I lived in Pittsburgh. Places that were empty for 40 years had ludicrously high rents (4X+ new places), so they just remained empty as tax write offs.

There's large downside risk to renting out property. One bad tenant trashing the place can cancel out years of rent.

And in the Bay Area people invest more for appreciation than rent. The rent/price ratio is much higher elsewhere.

Landlords have insurance too. Plenty of people still rent. If a landlord is struggling to fill their apartment in sf, maybe they should try not asking 3000 a month. The demand is very much there.

SF has a lot more burdensome tenant protection laws than most places. Sometimes you can't kick out a tenant even if you want to move back in. That's why landlords sometimes pay tens of thousands of dollars to their tenants to get them agree to leave if they have a rent controlled unit. Even if the tenant stopped paying rent or broke some other part of the lease, an eviction can take over a year - and you're not getting paid for that time and you don't get to use your house.

> Seems strange. Surely a management company would happily handle all that hassle and provide a secondary income stream.

unfortunately management companies require managing themselves. even if you find a good one, they won't necessarily stay good, so you're firing them, getting new ones, etc.

and i've never heard of one that will let you hand them a property, and then eat all of the risk for you and provide a simple de-risked income stream. even if they'll do a good job of handling 100% of maintenance tasks, they're still going to send you the bills.

Sounds like a new business plan for a new market.

nothing about property management or property management in SF is "new".

anybody who can afford to de-risk a real estate income stream can afford to just buy real estate themselves, they don't need yours. there's no market here.

Surely a management company would happily handle all that hassle and provide a secondary income stream.

Sounds like an opportunity here! The Chinese market for "stores of value" is quite high! There are tons of largely empty high-rise condos in China for this very reason. What about a company that has the connections and know-how to smooth over the transactions, then puts management into place to get AirBNB/rental income?

Renting a home devalues it through normal wear and tear. We see this during housing price drops in our local housing market (Montana) as well. The investors would rather a house sit empty than rent it or sell it at a lower price.

Counterpoint: I live in a newly-built condo building near Mission Bay and I don't know of any vacant units in the building. My neighbors very much exist.

These debates always turn into anecdotes that cover up the real reasons why people oppose or support housing—a preference for the suburban or urban lifestyle respectively. People who argue that newly-built condo buildings are mostly vacant always happen to prefer the suburban lifestyle; people who argue that newly-built condo buildings provide much-needed housing always happen to prefer the urban lifestyle (including me). It's all a facade.

The actual vacancy rate in San Francisco, as we expect, is relatively low for US cities.

Some countries in Asia have restrictions regarding ownership by non-citizens. If you’re not a citizen it basically has to belong to a local —could be a spouse.

On the other hand that can be detrimental to the economy depending on how something like that is implemented.

Why should different rules apply to foreigners in this context? An American billionaire buying a few condos and keeping them empty has the exact same effect as a Chinese billionaire doing so.

Rules around vacant homes are good, though, and I strongly support them.

At least an American billionaire pays some American taxes. If a foreign speculator makes a lot of money they aren't even paying any income or capital gains taxes here.

An vacancy tax deals with both domestic and foreign buyers keeping homes unoccupied. Here is the link to the city of Vancouver’s Empty Home Tax: https://vancouver.ca/home-property-development/empty-homes-t... .

The cynic in me would correct you that neither pays much taxes.

They are still paying plenty in property tax. From the city's perspective, you couldn't ask for a better resident. Somebody who pays full property tax and consumes almost no services (schools, police, etc).

But they also don’t participate in the local economy and can just blindly vote against anything that impacts their bottom line (e.g. tax increases) rather than having to interact with and see the impact on people who actually live and work there whose lives are impacted by local and regional politics.

They often pay very little property tax, thanks to California prop 13. Long-time property owners are incentivized to just ride the real estate boom with a vacant building that costs them nothing. The city gets almost no tax revenue, and the neighborhood is crippled in its development.

As a bonus those property owners are politically active and fight zoning reform and development/transit projects to protect aforementioned real estate boom.

Why is the city's perspective purely financial? Shouldn't it be driven by the needs of the residents? City residents need housing and the the local business need inhabitants. If you extend your "city" to the limit it would just be a giant physical investment with buildings no one lives in. The city, basically just an investment company would have a lot of money from the taxes and providing minimal services but until that happens the actual residents should drive the policies, in my opinion.

They drive artificial demands which increases the overall price.

At the end of the day, it's not good for the local residents.

It's not as simple as "they're not here thus they're not consuming any services". The resulting effect of sky-high property cost ripples to everything else below it (jobs, transportation, etc).

They do consume one thing: housing stock that would otherwise be available to residents. Whether or not that outweighs the benefits of paying taxes but not consuming city services is a different issue.

The roads, pipes, cables, buses, firefighters, and cops have to go past the empty house to reach the occupied houses on the other side of it.

Even if the empty home consumes no water, electricity, classroom capacity, bus seats, etc., it still consumes police and fire protection services. Someone else's empty home can be used for crime without worrying about civil forfeitures.

A better resident lives in their home, and cares about what is happening in its neighborhood.

American billionaires dont pay much taxes either.

The solution to this is to fix the tax code, not retreat further into nationalism.

> if a foreign speculator makes a lot of money they aren't even paying any income or capital gains taxes here.

False, even if you're not US resident, you still have to file non-resident tax returns and pay taxes on all US sourced income.

https://www.irs.gov/individuals/international-taxpayers/nonr...

> A nonresident alien (NRA) usually is subject to U.S. income tax only on U.S. source income.

Everyone gets to feel good if they can blame "the wealthy foreigners" rather than look at their own crappy housing policies, such as the rampant NIMBYism and huge market distortion from Prop 13.

Faceless "wealthy foreigners" are easier to dislike than their own neighbors who show up at planning commission meetings to rant about someone adding an extra bedroom to their home (this is an actual thing I read about in San Francisco).

Where I live "wealthy homeowners" are the NIMBYs. They suddenly appear out of nowhere to argue in city council meetings against more housing, then leave their homes empty more than half the year (or all year). That most of them are also foreign is incidental: it'd be just as bad if it were Americans doing this.

Foreigners cannot vote, so it seems odd that the city council would pay that much attention to them.

My point is that there's a small but persistent current of thought regarding the housing crisis that wants to pin the blame on "wealthy foreigners buying up all our real estate", as sort of an 'out' for taking a good, hard look at local housing policies.

> An American billionaire buying a few condos and keeping them empty has the exact same effect as a Chinese billionaire doing so.

There are more nuances to this. Chinese millionaires and billionaires don't care about the sales price. They do it to diversify their portfolio to avoid CCP. Some of them did this to launder the dirty money as well.

Their numbers might be small but the chilling effect of outbidding everybody else outrageously will incentivized realtors to spread the "good news" to their customers/clients that "hey... that unit over there is sold $ x million dollars, would you be interested to sell yours as well?"

Suddenly before you know it, the market is f*cked.

> The rise of foreign money parking money in real estate has screwed things up on a global level.

If the property tax is paid and the maintenance is kept up what is the problem created solely by the fact some homes are empty? The only reason these properties have such high values is because there is a demand that is not being supplied. Supplying more housing makes this a non-issue.

> San Francisco has felt the brunt of this due to their insanely restrictive development laws.

This is the real issue. Governments restrict housing supply for whatever misguided reasons and prices go up, those prices make it a good place to park cash. Government should stop picking winners and losers.

If there are homes that are vacant and people that are living on the streets at the same time, that's an inherently unjust situation I think.

If an injustice is one symptom of a deeper problem, is it a good idea to focus on treating the symptom? That approach helps minimize the visibility of the problem while diverting energy (public attention, political capital, financial resources) that could be used in solving the root issue.

The fact that there are so many empty homes should be a bright, shining clue that basic supply vs. demand isn't the only factor at work.

Correlation doesn't equal causation. How would parking money in a depreciating asset benefit a foreign investor? They clearly aren't cashflow positive, so some other outside influence is causing this and it is limited to a few specific cities, so it has to be some localized effect.

Some look at the situation, question what's different about SF that might be causing this, and point to the highly restrictive development laws the city has. These prevent new comers from entering the market leaving only those who are primarily playing the long game and looking to build wide moats. If investors who required a much shorter return could compete, it's assumed the situation would normalize

If this isn't the case, then what is the underlying issue? Simply attacking wealthy people for doing something that is a) completely legal and b) obviously providing them some sort of benefit doesn't solve the underlying problem. To look at it another way, SF has clearly been trying to "solve" this problem through increased regulation for many decades now. Where are the success stories we can point to that show the direct approach is working?

When it's pretty much not legally possible to increase supply, runaway demand explains the problem pretty well.

38000 empty homes is problematic in a city the size of SF with population size 900k. This isn’t just a problem of supply shortage (regardless of the reason for the shortage).

> This is the real issue. Governments restrict housing supply for whatever misguided reasons and prices go up, those prices make it a good place to park cash. Government should stop picking winners and losers.

Restriction of housing is not limited to Government, housing developers also do it:

"[Kate] Barker reached a similar conclusion in her interim report, where she noted that in order to maximize their profits, developers control the rate of production and ‘trickle out’ no more than 100–200 houses a year from a large development. ‘This may not be desirable from society’s point of view,’ she wrote." (from https://www.annaminton.com/bigcapital)

Personally, I trust the reasons that a Government would limit housing more than I would a for-profit company who are probably operating in the interests of investors who don't live in the affected areas.

Even more than Big Government control though, I would prefer the people that live in an area to have the biggest say into how things are run.

Corporations who collude with or otherwise use government/laws to manipulate markets in their favor are even worse in IMO.

The fact still remains though that the housing developers wouldn't be able to trickle out homes at their whim if the government enforced limits on housing weren't preventing other developers from competing.

You can't satisfy demand for speculative assets. China tried to do it by building entire cities, and still failed.

Because they are a contraction on the housing supply in a city with too many jobs and not enough homes. It's an ouroboros; by taking more supply out of existence, prices go up, and the play becomes even more profitable.

The next financial crisis will take them all like a tsunami. I really wouldn't want to be in their shoes.

If they wait it out 5 years they'd probably be back in the black.

There is an easy solution preventing empty homes in markets with a high rate of vacant homes combined with a high rate of involuntary homeless: a tax of 40% of the value as recorded at deed transfer per year of emptiness. Exceptions only given in case of reasonable vacancy (e.g. due to construction works or damages).

If the property ends up vacant for 2 years, government appoints random renters - for a maximum rent no higher than the rate the lowest 10% city-wide is. No possibility of eviction for ten years, except for willful/grossly negligent damage to property or unfit conduct (e.g. disturbing the peace, running drug dens or harassment of other renters). If an owner intentionally does not repair damages to claim the tax exception, government is authorized to do the repairs themselves and recoup costs from the owner.

That should be proper incentive for developers to build housing that is actually wanted and for speculation owners to rent out homes and to keep them intact/rentable.

Edit: for the downvoters, please explain why. This is a system that is the law in Berlin, only with a drastically higher tax rate and lower minimum rent.

I think this is the kernel of a great idea. Empty homes in urban areas especially ought to be relatively rare and we need to have ways to incentivize utilization--with both carrot and stick.

I think the main idea is what's known as a vacancy tax. If people want to park their money in SF property but not use it, that's fine, they'll just have to pay more.

You would have fared much better if you led with the fact that a similar system is already in place in Berlin.

The comment reads as an extreme solution that no one would ever implement. The fact that it is already implemented somewhere gives it a lot more credibility.

Some questions:

Was this system intended for the homeless?

Were there many vacants before?

How has the offer responded to such measures?

How difficult is to evict a grossly negligent or misbehaved tenant?

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