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Deosnt have to be old money. Investors can get stuck in a weird catch-22, too.

For example, suppose you have buildings valued at 10 million, 8 million in mortgages, and 2 million in the bank. That looks like a healthy company. Now, a tenant leaves. If you lower the rent, you have to lower the value of the building in your books and, possibly, for other buildings in the neighborhood.

Before you know it, you have buildings valued at 6 million, 8 million in mortgages, and 2 million in the bank. That's close to bankruptcy.

Another approach is to guess that the lack of demand at the asked price is temporary and sit it out. That may cost you a few hundred k in lost rents a year, but keeps your balance sheet healthy for at least a few years. Problem, of course, is that your pockets may not be deep enough to outlast the bust period.

Is that denying reality? You only know after a few years. If the market rebounded soon, it was a good business move. If it doesn't, you are on a slow trajectory to nowhere.

"Looks like a healthy company" to who? Any businessperson worth their salt will look at operating cashflow, current/quick ratios, and P&L/income statement.

It's interesting, I think there's a lot of psychological parallels between the Japanese "lost decade" and these investors in the US. In both cases, large nonperforming assets (loans, or buildings) were held for a long time because the owners didn't want to admit defeat by selling at a big markdown -- in the case of the banks, due to capital requirements where a significant remarking of their assets might cause regulatory non-compliance.

Valuing things is hard.

Perhaps property taxes in this area are not high enough? There needs to be more than just 'opportunity cost' for squatting on valuable space.

No. No. No.

The power of government should never be used to force people from their property. Eminent domain is already horribly abused with seizure laws no person's property is safe. Why do others become so draconian when its other people's stuff? It is easy being generous when its not your pocket that is being emptied.

This isn't about forcing people from their property.

This is about a building with a certain code (retail) which has a particular purpose, and that purpose isn't being fulfilled. Taxing to change this mis-behavior is good.

I'd compare this more with someone buying a large hydroelectricity project and just stopping production. Land is a finite resource. However, I struggle with this because following this logic, is it OK for Argentina to seize bank accounts in foreign currency and pay them one unit of local currency for every US dollar seized because us dollars are a limited resource there?

The problem with trying to use taxes to punish what's seen as bad behavior is that it can punish people who aren't behaving badly. If the owners of the derelict property can currently afford their property taxes, they can probably still afford it after it's raised. But others who actively use their property and perhaps aren't as rich could face losing what's theirs.

If you want to talk about using the law to prevent situations like this, then it needs to be a law unto itself rather than something incorporated into the tax code.

People who are actively using their property would not pay the vacant retail property tax.

vacant vacant retail property tax everyone!

I'm not especially well-informed on these matters, but from the outside looking in, raising property taxes looks to me less like punishment or force, both of which are kind of indulgent as terms, than like a community of people using democratically-created and democratically-approved non-violent means to align resources and incentives. Being a property owner doesn't exempt someone from democracy.

>The problem with trying to use taxes to punish what's seen as bad behavior is that it can punish people who aren't behaving badly.

Agreed. I know that the businesses still surviving in my Downtown are doing just that. Surviving.

If property taxes increased on all retail buildings in the downtown, rents would surely increase as a result, and the businesses that can make a buck currently would probably have to close up shop and move farther out into the city.

Perhaps raising retail property taxes on buildings that sat empty might be a better solution? But then I suspect that all of those empty buildings would become filled with "fake" retail businesses... like a shoe shop that only opens up for 1 day a month or something.

I'm not so sure. It might take another 50 years before the buildings in my Downtown change ownership to more concerned owners, but it will happen on it's own eventually I would think.

Where my town in concerned, there is indeed a LOT of old money and I suspect that the current owners are too busy spending their family fortune... which will run out eventually if they neglect the family's historic rental properties.

This isn't about confiscation, it's about tuning one parameter of our society to achieve a more optimal result. The tax code is already heavily used to encourage some behavior and discourage others. While I would agree that it is being overused for this purpose (thus producing the crazy complex code we have now), at least property taxes are fairly simple.

It's like tuning the inflation rate or monster respawn rate of an MMORPG to get the most enjoyable game. Property taxes should be high enough to discourage ineffective use of space, but low enough so as not to discourage effective use of space. Too far in either direction and you end up with empty buildings.

If you called with a serious offer, do you think you would be turned down?

Though I guess stuff like this happens even in sf. Que Tal -- a coffee shop in mission -- got kicked out by their landlord massively increasing rent in August 13. I walked past their old location a month ago and it was still empty, and it didn't look like there was construction going on. So the landlord has eaten 17+ months of rent so far.

Seems like potential gains aren't as motivating as actual costs.

In the case of the beautiful old bank building that sat vacant for 20 years. There wasn't even a number to call.

Everybody just walked past it for decades saying "I wonder what if anything they'll ever do with that place?".

I'm assuming you had to know the "right people" to even get an appointment to purchase or lease, but I'm not sure why.

I think this problem is present in most large, well to do cities. The Guardian ran a similar story a couple of months bank.

http://www.theguardian.com/society/2014/jan/31/inside-london...

No. London is suffering from foreign investors buying freshly listed properties solely in order to squat on them. Currently, the value is pretty much guaranteed to rise so they're actually fairly good investments for the buyers.

I think the more typical downtown vacancy problem is better characterized by 'Someone' in the comment above.

And this is why property tax should be charged as a percentage of sale price when selling and a percentage of asked rental price when rented.

on property tax & speculative hording: http://www.gamasutra.com/blogs/RaminShokrizade/20130405/1899...