[HN Gopher] Empty storefronts are killing neighbourhoods ___________________________________________________________________ Empty storefronts are killing neighbourhoods Author : pseudolus Score : 189 points Date : 2021-07-24 11:07 UTC (11 hours ago) (HTM) web link (thewalrus.ca) (TXT) w3m dump (thewalrus.ca) | m0llusk wrote: | Amazing that Henry George's proposed Land Value Tax is still the | right answer to so many pressing problems. | hourislate wrote: | There are a few incredibly wealthy family offices buying up most | of the apartment building and commercial space in Toronto and | across Canada. I'm not sure but the two guys mentioned (Stephen | Shiller and Danny Lavy) could be the group I was told are funded | by very wealthy Israelis. There is also a German family office | that owns about 5 billion (in 2010 money) in commercial space in | Vancouver, Toronto and Montreal. These are just two that I know | of for sure through people who own large amounts of commercial | real estate in Toronto. In Toronto the goal is to accumulate | enough of these store fronts that you can basically demolish a | good part of the street block and build a Condo. Politicians are | only concerned about tax revenue and not the character of a | neighborhood, a Condo brings in far more property tax $$$ than a | storefront. | | People don't understand how a Landlord would rather leave a space | empty than keep it full because 5-50k a month lease (in Toronto) | or whatever they are paying seems like a lot but the reality is | you're talking about billionaires who are playing a long game and | are acquiring land for development and not rental money which | indecently is a pittance for them and not worth the effort. | hahajk wrote: | "his new landlord told him that the store's monthly costs--rent, | taxes, insurance, and maintenance--would go up an impossible 150 | percent, to $5,000 a month." | | I've never owned or rented commercial real estate so I guess I | never knew how much things cost. $2k seems cheap? I would have | expected a storefront in a hip Montreal neighborhood to be much | more. | locopati wrote: | it won't be a hip neighborhood much longer if only global chain | stores can afford the rent | maxerickson wrote: | What do the global chain stores do differently that they can | justify the rent against the store revenue? | blevin wrote: | Large co's play different games than mom & pop. They can | afford some near-term losses if they can make the case it | prevents competitors from gaining a foothold. Banks can | justify rent on a seemingly empty branch in an expensive | retail area if it supports catchment area of desirable | clients that visit in person once every 18 months. Etc. | treis wrote: | I think people just like chain stores better. Plus they can | take advantage of bulk buying for materials, services, | advertising, etc. | canadaduane wrote: | It could simply be brand recognition. Visitors to a city | will know which chain stores to visit to get what they | need, glossing over (or avoiding) unfamiliar stores. | | So mom&pop stores get local customers, while chain stores | get local PLUS just-visiting customers; multiply by | months and years. | seafoam wrote: | Scale in distribution, especially marketing / brand / name | recognition | acomms wrote: | Rents in Montreal are historically cheaper than other major | metros (in Canada). I am currently looking for commercial space | in Toronto and despite lots of empty spaces, rates remain high. | fencepost wrote: | Louis Rossmann's video series about his search for a new | location in NYC may have a lot of relevant lessons even in a | different city. | orcasushi wrote: | The problem is that these neighborhoods were build when the | global population was half the size it is now and spending | behavior was way different then it is now. | | It is no longer profitable to have a shoe repair shop in the | neighborhood. Nobody repairs shoes, everyone buys new online. You | cannot get these old times back. | | The solution? Look at the Asian urbs. High rise apartment | buildings with the first 1 or 2 floors shops. The dense | population will make these shops attractive again because dense | population causes high demand for convenience-shops. The shops in | turn will make the neighborhood attractive for city dwellers. The | shops also cause the streets never be empty so crime / vandalism | drops. Then it attracts tourists and creates jobs. | | Now move all the parking and roads underground and make all the | roof tops green public parks and voila! But, what do we do | instead? We yank car-oriented flat suburbs and shopping malls all | over the place. Those will be the trash-towns of tomorrow. | Gimpei wrote: | I definitely see this in San Francisco. 24th street in Noe Valley | is an odd combination of empty store fronts and shops selling | hippy tchotchkies. There was a huge supermarket size space that | was empty for fifteen years. They tried to make it into condos | early on but the neighbors complained about "gentrification". Now | it's a high end spa. Another win for Noe Valley. | legerdemain wrote: | This is what laws favoring tenants do to local commercial real | estate. It is more risky for a landlord to allow one bad tenant | than to miss the opportunity to rent to five good ones. It's the | same reality in tech hiring. | MichaelZuo wrote: | " While vacancy rebates provided some businesses with a needed | reprieve in fiscally difficult times, they were criticized for, | in Bradford's words, "incentivizing owners to keep stores empty | while they waited for values to get high enough for | redevelopment." A review ordered by the Ministry of Finance | showed that the policy had exacerbated the issue of "chronically | vacant" street-level commercial real estate. A well-meaning | initiative to help struggling property owners had been thoroughly | negated through exploitation and speculation." | | The deleterious second order effects would have been clear to | anyone in the real estate industry, and I imagine the senior | people in the Ontario Ministry of Finance, at the time. Catchy, | feel good, measures almost always do. | | So the tone isn't productive, since to expect commercial | landlords from refraining from using a sizeable tax rebate | specifically targeted to their needs is a bit absurd if it stays | on the books. Same on the flipside with renters and rent control. | Weakest link of the chain, etc. | | There is a good point buried in the article about the negative | externality of empty storefronts collecting dust affecting nearby | properties. A negative externality tax of some sort makes a lot | of sense. | newsclues wrote: | This policy isn't just foolish, it is horribly corrupt. | | "Help struggling property owners" | | Real estate prices in Ontario have gone up astronomically, if | you are a property owner you aren't struggling since you own an | asset that's price has gone up significantly recently. | delfinom wrote: | Privatize profits, socialize losses and free coke for the | rich | cascom wrote: | Seems that from an economic perspective the "solution" might be | to shorten the length of time that a storefront could be leased | by statute - thereby reducing the incentive of landlords to hold | out for higher rents if there is more frequent repricing. | rdtwo wrote: | Why not just tax empty stores at a ever increasing tax rate. If | you can't fill a property in a year taxes double till you do. | They keep doubling till they hit 20% property value or till | rented out. Empty stores are a Bligh and should be charged | accordingly | zihotki wrote: | That's probably the case when local municipalities should take | care of the situation by making it illegal to have empty | storefronts and apartments for a long periods of time. | another_story wrote: | Not illegal, but taxes should be higher for unoccupied | buildings in commercial areas. That rate could be determined by | any number of things, from the tax revenue of other nearby | businesses, residential housing prices, etc... | chrisseaton wrote: | > illegal to have empty storefronts and apartments | | How do you comply with such a law? If nobody wants to rent your | space at any price, maybe because it's a terrible location or | there isn't the demand to support any business at the moment, | what are you supposed to do? | dfadsadsf wrote: | Tax foreclosure and town now owns the building? Happens all | the time with abandoned buildings (both residential and | commercial) all over the country. | | The thing though is that there are empty storefronts in very | desirable locations including SOHO in NY. There is definitely | lots of people who want to rent it - just may be not at | 40k/month. | syops wrote: | I don't know the consequences of doing this but I think if no | one wants to rent the space at any price then giving up the | property seems feasible. The investment went bad. Unused land | should go back to the community and be repurposed. | chrisseaton wrote: | How's the community going to pay your tax? | syops wrote: | They don't. The property would be sold at auction just | like tax foreclosed properties are now sold at auction. | chrisseaton wrote: | Why would you buy a location that the previous owner had | to sell because it came with a crippling tax burden and | no source of income? | syops wrote: | Well, presumably because you could buy it at a price that | made the investment feasible. That price could be $1. | Maybe the land truly is worthless. In which case the | auction is for nought. Then the community might decide to | form a small playground for the plot of land or a | community garden. Maybe the land could be used for | housing instead of for commercial purposes. | specialist wrote: | IIRC, North America has ~3x the amount of retail per capita | compared to the EU. Prior to e-commerce, prior to the pandemic. | | This reckoning was a long time coming, accelerated by recent | changes. | | The intent of mixed use was noble. But like all land use, left | hand meet right hand. | | Today, we should be repurposing retail. Get creative. | | Every zip code needs more child care. Any city wanting to be more | "family friendly" should do whatever it takes to seed day cares. | | I'm sure there's dozens of similar ideas. | | I know the prevailing context led to "efficiency" and big box | retail. But ffs why do I have to drive to the pharmacy? To get | some bananas? Etc. | opportune wrote: | Mixed use is still not a bad idea at all IMO, the problem is | that there is just too much dedicated land zoned commercial | already, and most mixed use development has too high a | commercial:residential ratio for it to make the problem less- | bad. | | The solution could be to convert the zoning for large big box | stores that go out of business to residential. | specialist wrote: | That's a pretty good idea. | nickthemagicman wrote: | Agree with you about the repurposing of retail. I'm actually | happy to see shopping malls all over being switched to other | uses. | | I just don't understand how ANY business can afford rents that | extreme. | specialist wrote: | Supply and demand, right? Rents should be plummeting, right? | Where are those Freedom Markets(tm) we were promised? | | The OC says high rents are being maintained by speculators | removing inventory from the market. (I'm sure there's | multiple factors at play.) | | One proposed remedy is a vacancy tax. I don't know anything | about that kind of thing. | | I do know I support whatever it takes to repurpose these | spaces. | rtkwe wrote: | There's also that building values are partially determined | by the price of renting it so for loans and selling owners | are encouraged to keep rent prices as high as possible. | the-dude wrote: | > Every zip code needs more child care. | | Why is this? Are there many more children? | bradleyjg wrote: | On the contrary. But over the last several decades there have | been two relevant culture shifts: | | - a strong move to professional child care over care by | relatives | | - a dramatic increase in the age at which children are | considered able to be unsupervised | rdtwo wrote: | Yeah also it's very difficult to make a comfortable life on | one income. | bradleyjg wrote: | During the years when childcare is needed the numbers | often work out better with one income than two. Market | labor is taxed and then post tax dollars have to be used | to pay for professional childcare (which is then taxed | again). | | However, the issue comes after the need is over. The | employment market heavily penalizes a decade plus gap in | work history. On a lifetime basis it can make sense to | work and pay for childcare even if it comes out net | negative on a year by year basis. | | Even more important than these financial considerations | are cultural and social expectations. | rtkwe wrote: | Seems like that should only be the case if the cost of | childcare is greater than the post tax wage of the lowest | earning parent. | bradleyjg wrote: | That's the basic idea but you also need to include the | net costs of working (clothes, commute, lunch, etc.) | | It's more likely to work out that way with disparate | earners and in high tax states. | owenversteeg wrote: | That's true. It's pretty rare to see people mention cost | of working, but it is a very real cost. For many on HN | working from home in a job without a dress code, | clothes/commute/lunch aren't more than being unemployed, | but there are other significant costs around flexibility. | Not working gives you flexibility and time, which can | save huge amounts of money. Travel, flights and hotels | can get easily 3x cheaper in the off season. By going | midday, midweek when everyone else is working, you can go | to tons of things half price, from ski lifts to movie | theaters. Americans spend $680B/yr on travel, so between | the 122M households that's an average of $5600/year spent | on travel - by having flexibility you can easily save | quite a bit right there. Then keep in mind that a penny | saved isn't just a penny earned - for most people it's | around 1.6-2 pennies earned after taxes and benefits: | https://news.ycombinator.com/item?id=25382210 | | That said, there are also costs to being unemployed. The | big one of course is what to do with your time - whatever | you do with those extra 40 hours a week will probably not | be 100% free. Then there are potential risks: if you're | unemployed and not on unemployment, and a pandemic | strikes, then you might be stuck without any income for | far longer than you expected, all while everyone else | that got laid off gets unemployment. There are also | career costs: a years-long gap may seriously hurt your | career prospects when you return to the workforce and | dent your lifetime earnings. Then there are the commonly | forgotten benefits to working, such as building up Social | Security (both for retirement, and disability.) The max | SSDI, which you will get if you're making around $100k | for some years, is around $3000/month. If you become | disabled and haven't been working, you get far less. | Obviously being unemployed makes lending money far harder | (credit cards, personal loans, car loans) so you better | have some cash set aside. Naturally you won't be able to | buy a house, and renting a new place will be very | difficult with no job. But there are other options: maybe | you already own a place, maybe you can live with your | parents, maybe you do van life. | | ---------- | | If you add everything up, you may be surprised to see | unemployment win out. This is, of course, the exact | discussion taking place for millions of Americans in | poorly paid service jobs, and the reason for the current | labor shortage. It's not that young people are being | lazy: they're being smart. If you're working a poorly | paid job, the cost of working is disproportionately high | to your income. $7.25/hr x 40hr/wk is $1160/mo, minus | taxes somewhere around $1000/mo, and then you have to pay | for a car to drive to work, gas, etc etc. On an income | like that, you're basically just surviving, barely | keeping your head above water if that. Sure, if you quit | your McDonalds job you can't afford rent, but rent's so | high you probably had a pretty crappy place anyway, so | why not move back in with your parents, like 52% of | Americans aged 18-30 do? [0] On top of that, many of | those costs to being unemployed don't really factor in if | you're in one of these poorly paid jobs. Gap on a resume | doesn't matter for fast food. Social security - how many | young people believe it'll be around in 40 years? It's | pretty much a no-brainer, if I was working a poorly paid | job I'd also quit and opt out of "the system" like | millions of my fellow Americans. | | [0] https://www.pewresearch.org/fact- | tank/2020/09/04/a-majority-... | sokoloff wrote: | We went down to one income for a period of time when we | had two kids pre-school-age. Even with the lower income | being substantial [white collar professional], the effect | after taxes (this income would be taxed entirely at our | highest marginal rate, of course) would be "working for | no net cash every month, missing the kids' youngest | years, having dramatically reduced household flexibility, | and the only benefits being gap-less employment and | retirement account contributions". | | That seemed like a terrible trade, so we opted out. | Opting out was by far the best decision for our family. I | might have to work one extra year to fill in the gap of | the "missed" retirement contributions. Or maybe I won't, | if we scale back our retirement lifestyle aspirations or | are willing to take slightly more risk/leave less | inheritance, any of which are still better for the kids. | rtkwe wrote: | > this income would be taxed entirely at our highest | marginal rate | | So your one income alone was large enough to put your in | the top marginal rate for a couple alone? That's going to | be a pretty rare situation. | | I wish more people could afford for one person to stay | home and for the reaction to a guy taking paternity leave | wasn't so stigmatized. | sokoloff wrote: | Sorry, the top of whatever our bracket was was my point | (that this is a marginal income decision, meaning | marginal bracket analysis applies). | | It was the 33% bracket federally, which wasn't the top | bracket overall, except perhaps in years with | exceptionally good capital gains. | stevekemp wrote: | Hopefully if there were more choices for childcare the | costs would fall. | | I know that childcare in many parts of America, and the | UK, can eat up a whole parent's salary. Here in Finland | we pay EUR250/month for Monday-Friday daycare 7:30-4:30. | That's affordable, and means two parents can easily | continue to work. | | If you pay $1500/month for child-care it becomes a | tougher choice to send your child/children there. I know | people in the UK where lesser-earning parent has been | persuaded to quit their job, because it was "cheaper" | than paying for childcare. | bradleyjg wrote: | There must be some kind of subsidization involved at that | price, right? I don't see how a business owner could | possibly make the numbers work charging that little. | the_lonely_road wrote: | Very high taxes. Works out great if you have children. | Does not work out so great if you don't have children. | The state should use taxes to subsidize the behavior it | wants its citizens to engage in. Population growth is | generally considered 'very important' (and historically | it unquestionably was #1, but today its questionable). | The U.S. attempts to do the same thing through its tax | code with lots of additional subsidies for parents. Keep | in mind that a large portion of childcare expenses are | directly reimbursed on those parents tax returns so the | $1500 in America weighed against the $250 in Europe needs | to be adjusted for the very high tax in Europe (as high | as 59% I think, but am no expert in the EU) and the large | reimbursement in America in order to get a truly | comparable price point. | | Of course reality is much more complicated than that and | there will cohorts of 'winners' and 'losers' under both | systems. You need to take into account the various | cohorts if you want to know which system is better for an | individual scenario (ie the lived experience we all see | the world through): Poor/Rich No children, 1 child, 5 | children etc. Grandparents living next door, Grandparents | living across the country. And many other factors. | nkrisc wrote: | I think it does work out or in your favor even if you | don't have kids by having a functioning society and a | stable generation after yours to care for you as you age. | Who do you think your doctor will be when you're old? | Today's kids. | stevekemp wrote: | Bear in mind salaries in the EU are lower, so even if the | taxes go higher the "average" person will never hit those | peaks. | stevekemp wrote: | The city council runs them, and there are income based | subsidies. | delecti wrote: | There are fewer households with one parent working and one | parent staying home to raise the kids. | pueblito wrote: | No, rather there is practically no child care | refurb wrote: | Someone mentioned that 3x before and it's mostly due to | megastores, not small storefronts. | | When you can build a bunch of multiacre big box stores in each | town I'm not surprised the US has way more square footage. | Causality1 wrote: | Empty buildings should incur a tax that increases every month | they remain unoccupied. | inglor_cz wrote: | This would not work e.g. in my native city which lost some 12 | per cent of the population since 1990. In such conditions, some | properties will inevitably stay vacant for long periods of | time. Fewer people, less demand for services. | tomjen3 wrote: | If the price of the services go down enough, that should | cause people to move to your city, because it has cheap cost | of living. | inglor_cz wrote: | Well, I am going to move back next year, and indeed the | reason is a combination of "much lower real estate prices" | and "I can do my work remotely most of the time". But the | second condition does not apply to everyone, so the job | market will always play a role. My wife, for example, will | probably make much less there. | rtkwe wrote: | It doesn't have to be completely blind, the local council | could have options to waive or adjust the taxes or the law | could include ways to show the landlord is trying to attract | tenants by lowering the rent or something. Also most of the | places this is suggested for aren't significantly shrinking. | kec wrote: | Rather than a sliding scale, why not something like x% of the | 12 month average asking rent? If x is high enough that should | be a great incentive for landlords to find and stay at the | market clearing price. | chrisseaton wrote: | Lol what would you do if just nobody happens to want to rent | your unit? You have to pay an increasing tax for the rest of | time? You couldn't sell it because who would want to buy it. | | Not a sensible idea. | dukeyukey wrote: | Tie it to a percentage of the land value. | | So, units in areas of high land value get taxed more and | more, incentivising either using the lot for something people | want, or selling it to someone who will. Whereas units in | areas of low land value get taxed much less, reflecting the | higher difficulty in getting good value from it. | chrisseaton wrote: | Who's assessing the land value? | | Can I assess the value of your house at $5, and then tax | you for not selling it to me at that price? | | Bizarre. | nmca wrote: | One proposal I like for this is "cost" from the book | radical markets - owners have to state a price for their | property quarterly, are taxed according to that price, | and must accept offers to purchase at that price. | ww2buff wrote: | I love comments like this. Condescending, confident, | completely ignorant of extremely basic concepts relevant | to the topic under discussion, like the 300 year | existence of property tax assessors in every county in | north america | CyberDildonics wrote: | If that's what you love then I think you have found your | graceland friend. | dukeyukey wrote: | > Who's assessing the land value? | | Presumably the local government, they already do this to | calculate property tax across North America, and getting | only the value of the land is easier than the value of | the land plus property on top of it. It really isn't | changing much in this regard. | throw0101a wrote: | >> _Who 's assessing the land value?_ | | > _Presumably the local government_ | | Actually it's an independent agency of the provincial | government: | | > _The Municipal Property Assessment Corporation (MPAC) | administers property assessments and appeals of | assessment in the province of Ontario, Canada.[2][3][4] | MPAC determines the assessed value for all properties | across Ontario. This is provided in the form of an | Assessment Roll, which is delivered to municipalities | throughout the province on the second Tuesday in | December. Municipalities then take the assessment roll, | and calculate property taxes for each individual property | in their jurisdiction. MPAC complains that taxpayers | often confuse MPAC 's role as an assessment agency for | taxes; MPAC responds that it only provides assessments. | Municipalities set the tax rates and distribute the tax | burden based on the assessed values provided by MPAC._ | | [...] | | > _Every municipality in Ontario is a member of MPAC, | which is governed by a board of directors composed of | taxpayer, municipal, and provincial representatives.[6]_ | | * https://en.wikipedia.org/wiki/Municipal_Property_Assess | ment_... | DecoPerson wrote: | In Australia, property valuation is a regulated | profession. We have state-run land registry departments | that tell the tax office what value to assume for each | piece of land for tax purposes. If you disagree with the | valuation, you can pay for your own private one (from a | registered valuer). | | Local government taxes ("shire rates") are indirectly | based on "Gross Rental Value" (that is, if the rented out | the property at market value, how much would you expect | to receive per year?). | | There is also land tax, which is based on undeveloped | property value. | | Most commercial leases have the tenant pay the rates & | taxes. If you own a property with 10 equally-sized shops, | and one of them is empty, then you by law must pay 1/10 | of the rates & taxes (and any other outgoings, like | repairs). You cannot split the outgoings nine ways. This | acts as a vacancy disincentive. | hellbannedguy wrote: | Just fill out a "No interest" form with the county. | | Penalty for lying would be steep. | | I don't think lack of interest would be a big problem in most | areas. | | Yes--there will be skirters of the tax, but would it be worth | a big fine? | jl2718 wrote: | For every solution, there are 10 new problems created that | require new solutions. It never ends. It never goes | backwards. Bureaucratic parkour. | | Software engineers should understand this. Imagine if it | was 10x harder to delete a line than write a new one. Also, | no forking and no starting over. | partomniscient wrote: | Eventually you'd have to sell it cheap enough that someone | would buy it, or, rent it cheap enough so that someone will | use it preventing your tax. | | It doesn't seem totally unreasonable. Is there an equivalent | of adverse posession (squatters rights) for retail? | tenebrisalietum wrote: | Then the unit is in a bad place and shouldn't be there. It | should be demolished and turned into a park, surrounding | social issues addressed, or maybe combined with an adjacent | unit. | shadowgovt wrote: | You would eventually render it to the state. | | There are pros and cons to this idea. | chrisseaton wrote: | Why would the state want it? Wouldn't they have to pay the | same tax as other people? | shadowgovt wrote: | Pay tax to whom? The state? | | If the state owns the property, they lose the opportunity | cost of taxes paid by a private owner. So, they're | heavily incentivized to return it to private ownership as | soon as possible... Or to consolidate several such | properties into something that _is_ sellable, or to | repurpose the property into something people need, like | more housing. | asdfasgasdgasdg wrote: | If the value of the property is so low that I you can find no | one to rent it at or above your costs, there is always the | option to abandon it. At least in the US, you don't have | obligations toward property you have abandoned. | rdtwo wrote: | Then you need to donate the space to a community organization | or pay taxes. The donation can come in yearly increments | until you fill it. | valine wrote: | If no one wants to buy you drop the price until they do. Not | saying it's a good policy, but it would drive down real | estate speculation and lower rent. | chrisseaton wrote: | What if you drop the price to zero and still nobody has any | use for it at the moment? | valine wrote: | Presumably the vacancy tax would be tied to the value of | the property. If the property really is worthless you | won't be paying taxes on it. | chrisseaton wrote: | > Presumably the vacancy tax would be tied to the value | of the property. | | > increases every month | | It can't be both things at the same time. | | And who's setting this land value? If it's on the market | and nobody's buying then we don't know the value. | robinson7d wrote: | Why can't it be both? Could have a logarithmic scale, | could have it increase by a fraction of a % of $(value - | currentTax) so that it increases more slowly over time. | | Not saying I agree with the underlying idea, just | confused about why "increases ever month" necessarily | means it cannot be "tied to the value of the property" in | a `calculateTax(propValue, timeEmpty)` sort of way. | tomjen3 wrote: | That would require that nobody has any extra use for | free/cheap space. It would mean that nobody needs | additional storage space, nobody needs space for a studio | or an office. | | This would essentially only happen if you rented in a | mega high crime area, which means landlords would be | incentivized to do something about crime. | datastoat wrote: | How about making the tax increase each month the unit is | unoccupied, but also making it proportional to the asking | rent? No one has any use for it, high asking rent => high | tax. No one has any use for it, very low asking rent => | low tax. | rdtwo wrote: | Then you use a percent of asking rent | [deleted] | ectopod wrote: | If nobody will buy the property for $1 then it's | worthless. Gift it the local authority and then you won't | have to pay the tax. | chrisseaton wrote: | People won't buy it _because it comes with a tax burden_. | They might buy it to redevelop it if it didn 't. | dwater wrote: | That does not seem like a realistic problem for very many | places. If a jurisdiction contains land with so little | value that it won't support the taxes required for upkeep | of the jurisdiction, then the jurisdiction could | dissolve. Which is what happens to a ghost town I would | imagine. That is not likely to happen to New York City. | effingwewt wrote: | Good, then it will go to someone who needs a house, not | another rent-seeking parasite. | ectopod wrote: | So over time the vacancy tax is increasing and the sale | price is going down. Obviously the vendor needs to sell | or redevelop before the price hits zero. If they fail to | do so then they lose the property. Speculation sometimes | fails. What's the problem? | motohagiography wrote: | Property taxes are a cost passed on to renters or potential | renters, so an increasing empty-building tax proposal means | increasing the price of something people don't want until the | owner is forced to sell it. This is the quality of logic of tax | policy advocates, and it needs to be addressed directly. | | I'm all for churning unoccupied spaces, but there are better | ways. | hellbannedguy wrote: | This is technically a property tax. | | I don't like most property taxes. | | That said, an unoccupied tax makes sence now. I would throw | residential apartments, homes, into the mix. | | (Single owner properties would be exempt. Realestate | investment trusts would be targeted with this tax, along with | foreign investors--rich people whom are not citizens whom buy | our land, and let it sit.) | motohagiography wrote: | So long as you understand that all taxes get passed on in | the gross price to the renter, and this causes bubble of | inflation in the very thing you intend to make accessible. | | While I don't necessarily advocate it, I'd say | disqualifying empty buildings from insurance would do more | to that end, as no bank or lender will take an uninsured | asset as collateral on leverage/debt. The ones who do lend | against that uninsured asset will impose interest rates on | the debt to where it is cheaper for the owner to just rent | the space. | | It would be anti-inflationary as well, since it would | reduce the amount of free money caused by cheap debt in the | economy. | | When you see empty buildings, you have to ask who benefits, | and in the end, it's always the banks. | toast0 wrote: | > While I don't necessarily advocate it, I'd say | disqualifying empty buildings from insurance would do | more to that end, as no bank or lender will take an | uninsured asset as collateral on leverage/debt. | | Unoccupied buildings generally require different | insurance than occupied buildings, and it's often | significantly more expensive. Although, apparently, not | more expensive enough to balance the incentives to leave | property empty. | nemo44x wrote: | It's private property - the owner should be free to use it as | they see fit. | Causality1 wrote: | Real estate is not a generated asset. Nobody made it in their | shed. It was there and somebody walked up and declared that | no one else but them was allowed to use it. Land is as | fundamentally a common property as the air we breathe. | nemo44x wrote: | Maybe in your imaginary utopia but property rights and land | ownership are fundamental freedoms in the West. | cbm-vic-20 wrote: | Where did that land come from? | mikepurvis wrote: | Having it empty is a negative impact on the surroundings, not | dissimilar to a bad smell or loud noises. It's perfectly | reasonable for the city to have a say in this. | refurb wrote: | You really want to go down that path? Negative impact is | pretty subjective. Maybe we should tax all the dog owners | too? To offset the noise and dog poop that doesn't get | picked up? | inglor_cz wrote: | Dog taxes are actually levied in some places, including | developed countries. | | https://www.iamexpat.de/lifestyle/pets-information- | germany | dukeyukey wrote: | Part of a government's job is to play a role in shaping | laws and society in ways that make it nice to live in, | and if (for whatever reason) the current set-up is | incentivising a lot of unused land even while pricing | people out of the area, then taking action against it | sounds reasonable. | | It might not gel with your (I imagine) rightish | libertarianish beliefs, but it certainly fits with the | general idea of the role of government, especially local | government. | nemo44x wrote: | Why not just let the market take care of it? I'd support | not incentivizing vacant property (via the tax code, | limiting deductible losses and/or write offs on real | estate) but absolutely do not believe government has a | right to force a property to rent their property out. | That's tyranny. | | And what wound stop the property owner from just creating | a "business" that is open "by appointment only"? There | would be many ways around it. | rtkwe wrote: | The market only achieves the idealized results in ideal | situations where supply and demand can freely change with | minimal costs. Real estate in cities is inherently supply | limited because you can't magic more land out of nowhere | and building a larger building only kind of works for | retail because upper floors make for shitty retail | spaces. | | There are also a lot of forces pushing building owners to | keep rents high, principally because building value is | partially determined by the rental rates of that | building. So if an owner is angling to sell or get a loan | they have a strong incentive to not lower rents so long | as the rents are in line with the 'market' rate because | it immediately lowers the value of their property if they | do, potentially driving them underwater on any loans. | | > creating a "business" that is open "by appointment | only" | | The law could easily address this with requirements about | public accessibility. It's disingenuous to pretend the | law has to use the broadest, most abusable definition of | any word to create loop hole counter arguments. | dukeyukey wrote: | > Why not just let the market take care of it? | | Because land is an awful example of a free-market | commodity. It's not like you can set up a land factory to | drive prices down (outside the Netherlands and Singapore | I suppose...), and it's something everyone needs to live | an even vaguely decent life. | | And even worse, someone who owns land doesn't need to do | a damn thing to make it increase in price; it's the | businesses and people living around it that do that. So | money sitting in real-estate is far less useful to | society than money invested into productive businesses. | refurb wrote: | There is nothing that says the free market doesn't work | for scarce and limited resources. | | You don't have to be able to "set up a land factory" for | the free market to work. | rdtwo wrote: | Because free market isn't free. The reason these | properties aren't rented out is tied to some off | financial/financing incentives that encourage this | activity. | rdtwo wrote: | Seattle has a dog and cat tax | cascom wrote: | I find it pretty interesting that this comment would | downvoted | dwater wrote: | It is a very simplistic, low-effort idea with no supporting | argument. It does not take much thought to come up with | reasons why society would not permit every single | individual complete unrestricted domain over their | property. Like, what if any of the actions you take on your | property have an effect on your neighbors? | nemo44x wrote: | It was within the context of forcing a property owner to | rent their property of be fined. Not within a context of | a property owner should be able to do anything on their | property. | | So the idea was presented succinctly. I really don't | think I need a long explanation on why it's an absurd | idea to force someone to sell their space at a price | lower than they think it's worth. | refurb wrote: | That sounds like a great way to get people to replace retail | space with a more productive asset. | reidjs wrote: | I'm lucky enough to live in a neighborhood that has the following | within 3 short blocks of me: | | Organic grocery store, park, church, dentist, urgent care, bars, | restaurants, hardware store, barber, liquor store, outdoor gym, | and others. | | The only problem? No parking. So I sold my car. I have never | lived in such an amazing neighborhood and I think most people | never will because they feel compelled to live miles away from | cities. I think it's because most city neighborhoods aren't like | my neighborhood where everything is so accessible. | rufus_foreman wrote: | I have most of that around the same distance in my | neighborhood, but if I walked 3 blocks right now I would be | completely soaked in sweat, and would likely have a few | mosquito bites also. | opportune wrote: | Exactly the same with me. I have everything I need in walking | distance, the car is not necessary. | | I guess the problem is how do we get neighborhoods to "evolve" | in this direction naturally? My neighborhood I think was | essentially built in the 20s before cars were common household | items. The lot sizes are small, there are no setbacks or tree | mandates. | | It seems hard to get a suburban area to morph into a walkable | neighborhood like that unless the location is highly desirable | (which, to be fair, applies to huge parts of the SF Bay Area | from the Peninsula to South Bay, but not the whole country), | which would incentivize wide-scale new construction enough for | people to put up with the short term pains of living in | something built for walkability in a larger community that is | still car-based. | bart_spoon wrote: | I'm not sure it happens naturally at this point. It requires | conscious action. I recently moved back to my suburban | childhood city, and under the mayor's directive over the last | 10 years, they've been attempting to overhaul the town from a | truly stereotypical American suburb of big box stores, chain | restaurants, and completely unwalkable neighborhoods, to | something denser and less car centric. | | They've encouraged a lot of development to the "downtown" | area, which used to be basically town hall and the library, | to a place with a large central park/amphitheater with | biweekly free concerts, a farmers market, and town festivals, | lots of mixed use apartment/retail/business buildings, | extensive bike/walking paths, etc. They've torn up an old | train rail that was in disrepair that cut through the city | and turned it into a pedestrian nature trail that connects | the northern and southern parts of the city to the downtown | core. They've partnered with private enterprise to develop a | "test kitchen" that acts as a sort of incubator for chefs | before they establish their new restaurant to encourage more | varied and unique culinary experiences. They've developed an | "IoT" lab to act as an incubator to attract tech startups to | the area, as well as a makerspace/trade hub to connect | employers and people seeking training in the trades. They've | been working with developers to buy up old single family | homes in the downtown area to develop into denser townhome | and apartment complexes. They've done a lot of this over the | complaints of the usual loud minority who screech about any | and all change. | | It isn't all perfect, and there's much to be done, and part | of it was enabled due to the fact that it's a relatively | wealthy suburb, but it's blown me away how they've taken what | used to be the epitome of an American suburb and turned it | into a city in track for something more sustainable. I could | never have walked anywhere growing up, but since moving back, | I've bought a bike and am strongly considering selling my | second vehicle due to lack of use. But the point is that it's | all been active development by the mayor and the city | council, at times over fierce objections by others. | zwkrt wrote: | > how do we get neighborhoods to "evolve" in this direction | naturally? | | Get rid of cars and people will quickly find they like | walkable neighborhoods. | notsureaboutpg wrote: | People feel compelled to live away from cities because they | don't want to pay $1 million to live in a 2 bedroom apartment | with kids and rely on public transit that cuts lines because of | pandemic related financial stress and have to dodge drug usage, | feces, and mentally disturbed individuals on the streets | (thinking about SF here). | | In cities that are not NYC and SF lots of families live in the | city centers and love it because it's somewhat affordable and | not ludicrously dangerous for children. | hnuser847 wrote: | Another article blaming speculators instead of central banking | policy. The author never bothers to ask, why has every asset | class, from residential real estate and RVs to penny stocks and | junk bonds, dramatically increased in value since March of 2020? | rcpt wrote: | A lot of this is property taxes which has nothing to do with | the banks | asah wrote: | +1 to this - it's fruitless to build public policy on | businesspeople behaving economically irrationally, and worse | can you imagine if they did? | | It _is_ reasonable and useful to pitch businesspeople on | sacrificing short term gains for clear, low risk, long term | benefits - and proof lies all around us from empty storefronts | that could be leased at lower rates, to homeowners locking in | 30 year mortgages. | | Greater time horizons require much greater stability to control | risk. | canadianfella wrote: | That's a great question. Do you know what the answer is? | boondaburrah wrote: | This has definitely been a problem long before last year. Heck, | in 2018 Harvard Square lost a great cafe everyone liked that | had been there for years because a landlord firm off in North | Carolina figured they could charge triple the rent if they | brought a VC-backed NYC chain restaurant in. | cbm-vic-20 wrote: | All the while the long standing institutions that make | Harvard Square what it is continue to shut down, only to be | replaced by bank branches and national chains. This isn't | really a new development, it's been happening since at least | the 1980s, but has become much more apparent in the last 15 | years. | delfinom wrote: | The joke is several bank branches are starting to close in | NYC because rent is too high. Hah. | freddie_mercury wrote: | If a new tenant can afford triple the rent then they are (at | least) 3x as productive. Why do you want to reward less | productive businesses? Do you also enjoy working with | coworkers who are have 1/3rd the productivity you? | jdavis703 wrote: | Because lots of less productive businesses still provide | excellent products or services. I can think of lots of | local restaurants, bookstores and cafes near me that are | less productive than McDonalds, Barnes & Noble and | Starbucks, but non the less have better food, curation or | coffee than their competitors. | dan_mctree wrote: | Many of the common reasons that make companies able to pay | more rent do not align well with preferences of locals. | They could have higher prices, pay employees less, use | lower quality ingredients, give less personal attention or | externalize costs through say noise pollution. They also | often have competitive advantages through brand recognition | or company support, that don't actually increase quality | anigbrowl wrote: | Capitalists love quoting Adam Smith until they encounter someone | familiar with his views on usury and landlords, at which point | they want to drop him like a hot potato. | | https://www.barrons.com/articles/the-trouble-with-adam-smith... | | I'm broadly in favor of a land value tax, think landlords deserve | no special protections, and generally have a 'use it or lose it' | attitude. I strongly support the idea that squatters can gain | tenancy and even property rights through mere occupation, and | reject the notion that landlords should be able to have court | decisions enforced by police. Though no doubt a small number of | decent and kind small landlords exist, they are outnumbered by | the much larger number of rent seekers. | epicureanideal wrote: | Make it easier to build new things, and people speculating on a | nearly fixed supply of existing structures won't be able to gouge | their tenants as much. | | As usual, the solution is the same. Let people build more. | fundamental wrote: | In a similar vein Louis Rossmann has been walking through NYC | showing current commercial storefront vacancies. While each video | focuses on one street the rates of empty spaces seem to be higher | than in the posted article. The rents do seem to be very steep as | well, which you might expect out of NYC ($40,000/month is one | price which stuck with me). One root cause cited in NYC, which | isn't mentioned in the above article, is that commercial loans | may prohibit leasing a space at a lower rate without lender | approval (as it impacts the value of the building), though I do | not know if the same issue applies in Canada. | | Most of the videos are long-form content which fits well into the | background if anyone is interested: e.g. | https://www.youtube.com/watch?v=Zjd1WNhGliY | https://www.youtube.com/watch?v=Q53Wxx7aLrs | https://www.youtube.com/watch?v=kuALRyGI3Ho | delecti wrote: | I've heard that bit about the value of buildings being impacted | by units with lowered rents, but I've never understood why that | wouldn't also apply to units bringing in _zero_ rent. | | I'm sure there are details I don't know, but naively it seems | like enforcing those same valuation consequences for empty | units too would incentivize filling units. | thrav wrote: | Purchases can be made on expectations of returns based on | comparable properties, or prices may be assumed based on | other filled units. Filling at a lower rate definitively | lowers those expectations. | | On a 30 year model, small fluctuations have big consequences, | and they cascade even further if there are multiple units. | delecti wrote: | > Filling at a lower rate definitively lowers those | expectations | | Not filling at all should too though. | dwater wrote: | It just depends on the difference between what you can | get today, and what you expect to get in the future and | when. | | If you discount it to 80% today and then rent it at that | rate for 10 years, you'll lose 10% compared to if you | leave it empty for a year and rent it for 9 years at 100% | of asking price. Obviously financial calculations have a | lot more complexity than that, but it illustrates why | someone would prefer a vacant property. It's based on | expectations of future income. | bilbo0s wrote: | And that doesn't even factor in what also happens a lot | in NYC, owners wanting to redevelop. Your building sits | empty for a while, as horrible as it sounds, it can speed | approvals that you might not get if they were full. Never | miss an opportunity to take advantage of a crisis, and a | crisis like the pandemic doesn't come along very often. | | The fundamental problem is everyone wants in on the big | money. No one really wants to serve the lower end. And | the lower end would be upper middle class in some cases | in a lot of other cities. Definitely all of it will | concert to make parts of NYC the exclusive domain of the | wealthy soon. (Actually, parts already are, I guess I | mean _more_ parts.) | [deleted] | underseacables wrote: | A tax on vacant property is an exceptional idea. | busterarm wrote: | My rent stabilized building in a desirable and convenient part | of midtown manhattan is sitting at almost 30% vacant. This is | completely unprecedented and wasn't even like this in the 80s. | I'm leaving myself soon. | | New York is in serious trouble and everyone is acting like | things are somehow normal again. | tekstar wrote: | What happened? Mass exodus of people from NY due to covid / | work from home? | | Serious question, I haven't seen any articles about this so | just guessing | notjustanymike wrote: | Mass exodus from Manhattan into the other boroughs. The | biggest sacrifice you make in Manhattan is space, but you | make it to be near your job. | | Now that a lot of places are remote, the people who could | afford a Manhattan apartment don't need it anymore and got | tired of living in a shoebox. | | You still get all the benefits of New York in the other | boroughs, just in a 1 or 2 bedroom instead of a 5th floor | studio walkup. | g00gler wrote: | I'm from the NYC Metro. | | Insane pricing pushed us out initially. | | Philadelphia is such a horrible place, pre-covid I was | longing to go back. | | COVID restrictions and now the fallout from that don't make | it feel like a good idea. | | Really thinking about Florida now. | akudha wrote: | I too am thinking of FL. Any particular city you are | interested in? | jeffbee wrote: | Philadelphia is a wonderful city of great beauty and | culture. What do you find so horrible? | gavinray wrote: | I moved from Boulder to Florida maybe 2.5 - 3 years ago. | | After a year in Orlando, I moved to Miami, so have been | here just under 2 years I think. | | We are seeing so many people from California and other | tech-heavy areas migrate here lately, it's insane. | busterarm wrote: | In two months I'm joining you. Finding an apartment was | hard too -- buildings are at 99% occupancy and go within | hours. | xxxtentachyon wrote: | What makes Philadelphia "horrible" in your eyes? As | somehow who has lived in what I think were nice but not | luxurious parts of both urban cores, I found Philly every | bit as livable and probably more pleasant and friendly, | but I'm in New York now for social and work reasons | sylens wrote: | Lived in Philadelphia from college years in the mid 2000s | up until about 2019. | | It is a great city that is extremely walkable, has | passable public transit, a tech giant (Comcast) and lots | of hospitals and universities boosting the local economy. | It saw a rebirth beginning with revamping its Center City | district and Broad Street in the late 90s/early 00's that | has radiated outward to other areas. | | The problem with Philadelphia is that it is a city that | is unable to take the next step to maintain its pace of | improvement. The mayor and city council are unwilling to | perform city-wide street cleaning out of fear of blowback | from South Philly lifers who would then have to move | their 6 cars once every two weeks. They currently cannot | even collect residential trash on time on a weekly basis | due to an overworked and understaffed sanitation | department. Their transit is underfunded, partially due | to them being a blue city in a state where most of the | legislature is from rural red counties that would rather | build barely used highways than extending their subway or | commuter rail. And last but certainly not least, the | opioid crisis makes the area around Kensington and | Allegheny look like something from a third world country. | The city seems to have no solution other than evicting | the addicts from their current encampment every year or | so, which just results in them setting up shop a few | blocks over. | underseacables wrote: | Perhaps voters should consider another party in the city. | If your leaders are not making the right decisions, why | don't you vote for different leaders? Being completely | married to a single party seems to lead to these types of | outcomes. No matter how bad the politicians do, no one | will vote against them because they are married to the | party, for better or worse. | rdtwo wrote: | Delta loves Doris Florida are you ready for it? | bradleyjg wrote: | Florida to me will always be the place that people's | grandparents go when they get too old to deal with NYC | winters. I realize that's foolish but there it is. | | If I was going to be a tax exile I'd be more inclined to | look at parts of NH within the metro area of Boston and | Texas (especially Austin). Maybe Nashville. | AtlasBarfed wrote: | Florida is an ecodisaster slowly unfolding. I get that a | winter hovel is a nice thing, but a permanent move to | Florida? Between sea rise, and temperature rise.... | | As stated elsewhere... Slowly boiling frogs. | delfinom wrote: | If you are wealthy with fuck you money, a summer home in | Miami is pretty good spend even if it sinks. Anyone else | however should strongly consider their plans on how long | they intend to live there. | opportune wrote: | Florida is also extremely suburban, even in its biggest | cities the truly "city" like parts are quite small. That | lifestyle is not for everyone. | Someone wrote: | My educated guess: internet shopping, combined with | property owners that don't want to face reality and tell | their accountants their shops aren't worth what they used | to be (a 100% guess is that's sometimes due to incorrect | incentives. If a property manager gets a bonus based on the | (perceived) value of a property, more so than on the income | it generates, raising prices can be the optimal short-term | strategy, even if it means shops close left and right) | | I don't think it will happen in the USA, but I think a | solution would be to tolerate squatting, if the squatters | improve the neighborhood. | sickcodebruh wrote: | Can only speak anecdotally, but... | | A significant number of our friends and family moved since | the start of COVID but they went in different directions. | We're all mid-to-late 30s working in tech, mostly, so this | is in no way representative of all the people making moves. | | Some people moved out of the city entirely. All of these | people have good jobs with high pay but decided that this | was their opportunity to get the big house in a different | area. In all but one case, these were renters who bought | when they moved. That last case was a family that sold | their place for more than asking price in 7 days and then | bought a new place. | | Others were renters who bought in the city. This includes | me and my wife as well as two of her siblings. We have a | handful of friends who either bought or are trying to buy. | We and everyone I know doing this identify as "city people" | who just don't want to leave and are using this as an | opportunity to upgrade space and take advantage of the | benefits of home ownership. Many of our friends who rent | took the opportunity to find a bigger place at a better | rate or strong armed their landlords to get better deals. | | So the tldr here: in our group of friends, the people who | left were those who wanted to leave anyway and didn't have | the opportunity until now. The people who stayed are those | who grew up here and/or just want to stay in the city long | term. | throwawaysea wrote: | Do you feel the ones who moved out are doing so | permanently? From coworkers I know who did this, it seems | they are all "city people" but are finding that they | really like single family zoned neighborhoods, more | space, and a slower paced environment. It seems to me | like what began as an experiment is likely to be a | permanent change for them. Anecdotally, my sense is that | these are people that never gave living outside the city | a chance, or had preconceptions about it, but with this | pandemic driven experience they are figuring out their | actual tastes or priorities. | AtlasBarfed wrote: | I don't know about commercial, but a few years ago it | seemed half or more of the new construction condos sat | empty because they were investment speculation, foreign | investment/hiding, and other real estate shenanigans. | | The fact that quant spreadsheets extend to commercial is | unsurprising. | | The spreadsheets forget that you need people to make a city | work. | switz wrote: | Maybe in Manhattan, but Brooklyn is booming - apartments are | being snatched up in days and rents seem to be trending | towards all time highs right now. "New York" is bigger than | just Midtown Manhattan. | | I don't think we need the FUD; Manhattan (especially midtown) | will be on a bit of a downswing as some companies get rid of | their office space and people switch to semi-remote work, but | it will survive and thrive just fine. | delfinom wrote: | Brooklyn has been booming for some time. Hell if I had | piles of money, I would never buy a property in Manhattan | and have to deal with tourist hell prepandemic. Brooklyn | still has 'real residents' as the majority roaming about. | busterarm wrote: | But New York isn't just Brooklyn either. The rest of the | city and the state (especially the state) are cratering. | Brooklyn, or at least the wealthy, fashionable parts can | keep their heads down and act like things are great for a | while but eventually poor conditions in the city will reach | them. | | And people will leave. | isbvhodnvemrwvn wrote: | For someone not familiar with NYC at all, what was going on | in the 80s? | yardie wrote: | Suburbaniztion in the 70s hollowed out the middle class | leaving just the extremely wealthy and extremely poor. | Crack epidemic and the War on Drugs and the resultant crime | accelerated the exodus. With the loss of tax base the city | was going bankrupt, cutting back services (like police), | and the infrastructure began to rot. | | It wasn't all bad. Some of my favourite artists and | musicians lived in the city of that era. They were paying | low rents or squatting while working on their craft. | | Once the disinvestment had run its course developers | swooped in and bought some of the most desirable property | for cheap. New buildings went up. A generation of kids | raised in the suburbs discovered cities were awesome. And | those starving artists either became successful or were | forced to move out. | | The working poor and working class who built the city, | maintained the city when everyone else walked away they | were discarded. Sent to live in unfashionable suburbs hours | away. Rising ever so briefly as "essential workers" while | COVID wrecked the economy and ravaged the cities knowledge | workers. | busterarm wrote: | This is pretty much it exactly except what really gutted | the artistic community wasn't pricing but HIV. | | Drug use and HIV infection went hand in hand in those | days and there was just so much death. | nemo44x wrote: | Lots of crime and cities not thought to be attractive | places to live. Crack is often cited as the main driver of | urban decay but there myriad reasons cities like nyc began | a decline in the late 60's until the early 90's when cities | began to be sought after again. | | What happens is as the tax base leaves the city has less | money to take care of itself leading to more people | leaving, etc. The opposite happens as people move back in. | | I'd never count NYC out but it was clearly in need of a | correction. After the riots and the regime in charge | supporting it, the increase in muggings and robbery, and | the blandness to much of what Manhattan has become, I know | a few people that left. Especially with remote work being | more viable. | ww2buff wrote: | The police riots were indeed awful but unfortunately I | don't think there's going to be a correction- as they | showed when they were cracking skulls in Washington sq | park the NYPD can operate basically independent of the | civilian authorities | delfinom wrote: | The problem is NYC has learned nothing. In fact, it | passed a record multibillion budget for this year after | federal aid. Everyone is putting their head in the sand | pretending everything is back to normal. I expect the | city to crash and burn financially in another year or | two. Or start begging for a federal bailout. | | And I don't say this as a twisted conservative wanting to | see liberal cities burn. I'm pretty fucking liberal and | NYC is going pretty much off a cliff at the moment. | bradleyjg wrote: | For a few decades NYC settled into a truce---things would | be good for real estate moguls, bankers, jet setters with | 2nd/3rd/5th houses in the city, etc. | | In exchange no one would complain that city government, | the state authorities, and trades would be fantastically | overpaid and overstaffed. | | This was also good for people that worked in industries | that cater to the rich (waiters, doormen, weed delivery | services, etc, etc). | | Things were hardly perfect but aside from the very poor | and people being squeezed out of neighborhoods due to | gentrification most groups were doing well enough to be | satisfied. | | The problem is that the whole thing depends on a few | thousand very wealthy people sticking around. If they no | longer care enough about the restaurants, museums, clubs, | private schools, house parties, whatever to want to be in | NYC pay taxes and spend lavishly then the whole thing | falls apart. The worst part is that there's no way to | gracefully dial back---wages and benefits are sticky. | ezconnect wrote: | I have a friend who is an NYPD and he retired early along | with his batch mate, he cited the cities policies is | increasing crime and it's becoming dangerous to be out | there. One of his mate got shot and died after he retired | this year and he said that guy was also retiring soon and | got unlucky. | busterarm wrote: | Commercially zoned real estate was at 80%+ vacancy for more | than a decade. Business only concentrated in a few areas. | | Most of midtown manhattan storefronts were just boarded up | and covered in graffiti. | base698 wrote: | https://mobile.twitter.com/GodCloseMyEyes/status/1415029183 | 2... | | Thread about the decay in general. | underseacables wrote: | This article is more about Canada, but it does have some | applicability to America. The rising cost of rent, coupled with | the desire for greater returns over stability, I just pushed a | lot of small retailers out. I think this is also a problem of the | walk-ability issue in America: it's very hard to walk to | anything. European cities Are easier to walk to the corner shop. | Not so in America. If you are able to live in one of these | walkable communities, it's often too expensive to have something | like a bookstore. | herf wrote: | We should remember that one of the problems with retail right now | is wages that are too low, so low that many restaurants can't | hire enough workers. These businesses are often paying for prime | retail and then paying _again_ for customer acquisition from food | delivery or other online services. | | If property owners manage to capture such a large portion of | revenue increases (or even to increase prices in a declining | retail market), it is a zero-sum game with many other important | parts. Apart from cute mom and pop stores being replaced by | national chains, the other costs are the lack of capital for | investment in new concepts, lack of funds to pay employees | through fair wages, and also lack of resilience in a downturn. | banada1 wrote: | The problem is real. Entire blocks of retail spaces in my | Vancouver neighborhood stayed empty for 5 years. Now I'm leaving, | it's sad to think about what could have been. | | Not a single mention of zoning or construction in this article. | rcpt wrote: | Vancouver also has ridiculous property taxes that incentivize | land banking and speculation. | | https://www.policynote.ca/vancouver-property-taxes/ | TazeTSchnitzel wrote: | Zoning can be a problem but it's not the be-all-and-end-all of | property market problems. Maybe existing landlords need to be | less greedy rather than sitting on empty properties. | refurb wrote: | Exactly. Those employers who can't find employees? Maybe | employees should be less greedy? | inglor_cz wrote: | I am not even sure what sense does it make to sit on an empty | property for five years. | | Lower rent income is still better than constant 0. At least | it covers necessary repairs. | | One would expect that after some months of making nothing, | the landlord would start to have second thoughts. | [deleted] | rdtwo wrote: | It's a financing thing. You can pretend a building is worth | more if the asking rent is high but the unit is empty vs if | the unit is full for a lower rate | inglor_cz wrote: | Can you explain that to me in more detail? This is | interesting, and I am not experienced in that black | sorcery. | | If you need a loan or so, won't the bank actually | investigate if the units are vacant? | CydeWeys wrote: | The key thing to understand is that commercial real | estate is valued as some multiplier on rent (exactly the | same as evaluating a bond by the interest rate it pays | out). If the rent you're charging goes down then so too | does the valuation, which can out you underwater on your | loan and then you're just screwed. | | Some kind of regulation that imposed an equation that | increasingly devalues property from its last rented price | the longer it remains vacant would do wonders here at | correcting the market distortions. Another way to | implement that would be to value vacant properties using | the total rents charged over the past 5 years -- so the | more vacancy there is in that, the more your total rent | suffers. | | Lenders can (and should) make this change too. It doesn't | even need to be imposed top-down by the government. | bombcar wrote: | Commercial loans can also often be called - unlike home | loans - so if you go underwater the lender can say "cash. | Now." | shiftpgdn wrote: | Because they don't care. The loan is collateralized and | sold as a financial instrument and the bank is no longer | involved. The loan holders should care but the loans are | owned by hundreds or thousands of organizations and | individuals who don't have the mechanism to see what the | underlying assets in their financial instruments are | doing. | | The movie "The Big Short" actually does a great job of | showing this but for the 08 financial crisis. | dwater wrote: | The bank makes a loan based on what they think is likely | to happen in the future, and you the borrow can influence | that. You can say, I'm going to buy this commercial | building in the highly desirable neighborhood, which has | seen continuous growth for the past 10 years, and it will | continue to grow for the next 10 years, so I can charge a | rent of $X, which will support a loan payment of $Y, so | you can safely give me $Y. | | The problem arises when predictions about the future | don't come true. Like a pandemic lowers the value of | living in a city, so the amount of rent you can charge | goes down. Do you admit that to the bank and let them | change the terms of the loan (or have them foreclose), or | do you pretend everything is fine, keep your asking rent | high, and hope things turn around before the bank calls | you? | eigen wrote: | it seems that somehow $0 is not less than say 5% discount | on rent. perhaps unrented is counted a NULL for these | calculations. | MereInterest wrote: | > Lower rent income is still better than constant 0. | | Depends on the terms of the lease and the expected changes | in the future. Suppose you're negotiating a 5-year lease. | There aren't too many new businesses at the moment, and so | the market price is 25% below typical rates. If you take it | and rent right away, then you get 3.75 normal years worth | of rent over the next 5 years. On the other hand, if you | expect that things will get back to normal in 6 months, | then you might want to wait and rent in 6 months instead. | Over the next 5 years, you then get 4.5 normal years worth | of rent. | | The numbers vary based on location, and what the crystal | ball tells you about if/when the prices will change, but | there can be a financial incentive to keep things empty | until to avoid locking yourself into a low rate. I'd agree | with other posters that there should be a tax on vacant | commercial properties, so that it tips the equations in | favor of renting now vs waiting indefinitely. | inglor_cz wrote: | Yeah, a 5-year lease is a big commitment, for both the | landlord and the renting business. | | I would imagine that a string of 2-year leases would work | better in that case. More flexibility. | | "if you expect that things will get back to normal" - | sure, but after several _years_ of vacancy you are deep | in red numbers, so it would make sense to reevaluate that | position. That is a reason why I would not expect to see | long-term vacant properties in places that do have | reasonable demand. | CydeWeys wrote: | Unfortunately, unlike with residential, there's a | substantial amount of upfront build-out time and costs | that go into retail. For most retail renters it simply | doesn't make sense to sign a short lease. | MereInterest wrote: | The expectation can be significantly different from | reality, because that's how humans work. We form an | expectation of what something is intrinsically worth, and | then get surprised when market conditions change. People | still see that pinned price as the "true" price, and any | differences as temporary fluctuations soon to be | corrected once people change their minds. | | I agree that it is illogical to expect a significant | change in market price after several years of low demand. | However, I don't think people behave perfectly logically, | and so it is important to also determine what people are | likely to do. | landlordy90810 wrote: | Actually making 0 means you have a rather fixed assets | depreciation and some base appreciation that follows the | market. | | We don't rent a place because there is a cost in managing | the renter too, and a single bad renter would probably wipe | all the gains. | georgeburdell wrote: | Are empty storefronts worse than no storefronts? My city seems to | think so, and mandates all buildings in a particular area be | mixed use. The developers view it as a tax to get housing units | built | swayvil wrote: | The recent "covid crisis" crushed several nice businesses in my | town. All small businesses, locally owned. | | Walmart didn't even blink. The big chains are just fine. | | In fact, the failure of small business has provided big business | with opportunities to scoop up cheap properties. Not to mention | the removal of competition. | | And by "covid crisis" I actually mean the policy and propaganda | ostensibly generated in response to the "covid crisis". | | Because compared to the damage done by our politicians and media, | the damage done by covid was actually quite small. | | Put that in your pipe and smoke it. | kgin wrote: | I'm curious how much retail space is integrated into | neighborhoods in the United States at all as opposed to strip | malls down a 6 lane highway set back in a sea of parking. | | Most of the country doesn't even have the ability to even have | this problem. | chrisseaton wrote: | > mobilized a book-buying protest | | Consumerism as a form of protest! | xrd wrote: | I came here to read the inevitable second-order effects | discussion, that is to say, if cities enact things like vacancy | rate they will cause extra unforeseen problems. | | But, I've never seen anyone discuss second order effects from | hedge funds, or rich developers. | | Can someone explain why second order effects are only relevant | and as powerful when it is a government entity. Hedge funds and | large corporations often seem like they have more power and often | much more agility than governments. And, they have impacts far | greater as well at times. | | Is this a relevant question? What am I missing? | User23 wrote: | > Hedge funds and large corporations often seem like they have | more power and often much more agility than governments. | | They don't. Hedge funds and corporations don't have powers like | eminent domain and men with guns authorized to use violence to | enforce them. | | The vacancy rates actually are a second order effect of the | banking industry. You'd think landlords would reduce rents | because some income is better than none. However commercial | property is valued as a function of the rent, so reducing rents | 20% could reduce the value of the property 20% too, potentially | leaving the commercial mortgage underwater. But leaving it | empty with a rent the market can't bear keeps that from | happening. | | Therefore the correct solution is changing banking regulations | to eliminate that perverse incentive, not to try an ad hoc fix | at the city level which probably won't work as intended. | sokoloff wrote: | That provision is because commercial property is often valued | by reference to a cap rate (essentially a net-operating- | income multiplier to get to the property value). This is not | a property of the banking system but of the market for | commercial property. | | The banking angle is to ensure that loans on property aren't | durably underwater, such that the bank has a high likelihood | of ending up owning underwater property. (The bank is in the | money business; anytime they get into the real estate | business with a REO, someone screwed up.) | | Preventing banks from doing this is likely to lead to a lot | more bank-owned properties (REOs), which is generally a bad | sign for a real estate market. | krisoft wrote: | You seems to be understanding this better than I do. | | I understand that if a commercial property gets rented out | at 80% of its previous rent that causes a reduction in the | valuation of the property. What I don't understand, | shouldn't not-renting it out cause an even bigger dip? | | An 80% reduced property brings in 20% less income to the | owner, but if the property is empty that means the owner | has to pay for maintenance out of their pocket. | (maintaining the roof, keeping the squatters away etc. | However cheap these expenses are, it is clearly not zero | dollar.) The property becomes from an asset to a liability. | (in the colloquial sense at least, as you can hear I'm not | well versed in economics.) How does that not decimate the | valuation like crazy? | sokoloff wrote: | Commercial property as a category has some characteristic | vacancy rate. (For office and retail, this can be around | 10% under typical market conditions. It's not at all | weird for "good" property to sit vacant for 18 months at | a stretch.) | | The valuation is based* on looking forward multiple | decades. If you think COVID (or recession or other short- | term event) is a blip in the future prospects, you aren't | overly concerned if a property sits vacant for a year or | two, when you're looking at the overall income over the | next 30 years. | | On the other hand, if you drop the rents 20% because | you're feeling an urgent need to fill the property now, | your fixed costs don't change (property tax may | eventually go down slightly), you have 20% less income to | cover them and leave a profit, and your next 10 years' of | rental income outlook is now nerfed by about 20% (and | profit by perhaps 30% or more). | | It's the reason that rent rebates are a thing. You don't | drop the monthly rental rate; you instead credit free | months of rent over the initial period of the lease, give | larger allowances for landlord-paid improvements, or | other "one time" credits. | | * - every market participant does something slightly | different, of course, but they're all more or less | looking over a multi-decade period to judge what the | property is worth now. | User23 wrote: | As you say, it means the bank's underwriting process | failed. It makes more sense to me that they eat the loss | caused by their error and auction off the property at a | price the rental market will bear. Papering over bad | underwriting with dishonest valuations doesn't strike me as | worth sacrificing cities' commercial vibrancy for. | sokoloff wrote: | That's the thing the bank is (sort of) "trying to do" and | the landlord is seeking to prevent them doing. If the | landlord lowers the rent such that the property would now | be in violation of the loan covenants, the bank has the | option to foreclose on the loan and auction the property | off. If the landlord does not lower the rent, they can | avoid being in violation of the loan covenants and the | bank does not have the right to foreclose and force an | auction (provided the landlord keeps making the loan | payments, of course). | | If the bank has a loan on the books that's being paid-as- | agreed and is in compliance with the agreed ratios, it's | not at all clear to me that there's been an underwriting | mistake and consequently I don't think that giving them | the power to foreclose is in the public or borrower's | interests. (Giving them the _option_ is technically | always in the bank's interests, but if the loan's being | paid, they're not likely to exercise the option anyway.) | User23 wrote: | > I f the bank has a loan on the books that's being paid- | as-agreed and is in compliance with the agreed ratios, | it's not at all clear to me that there's been an | underwriting mistake and consequently I don't think that | giving them the power to foreclose is in the public or | borrower's interests. | | This view is implicitly premised on the notion that banks | exist purely to make a profit. I take the view that | banking licenses are issued by the government | representing the public and that licensees should act in | a way that benefits the community in which they are | licensed to operate. Using a dishonest valuation scheme | that blights urban commercial districts violates that | public purpose. I have no strong opinion on how the | lender and borrower ought to work out the costs of | accepting reality, and I acknowledge that it probably | needs to be handled with finer granularity than some | blanket policy. | sokoloff wrote: | The question remains "how [and when] do we determine that | _this specific property_ is being valued _dishonestly_? " | | If commercial property commonly has 2 year vacancies (as | a matter of the inherent friction in finding a user who | needs exactly that amount/mix/configuration of space), | how does one determine that 123 Commercial St that's been | vacant for 9, 12, 15, or even 30 months is being | incorrectly valued or valued at less than the bank's | note? | | It sounds to me like you're perhaps pulling on the wrong | rope. If your concern is encouraging occupancy, go | directly to policies that encourage occupancy rather than | concluding that this is banking problem at its root. | Maybe it is; maybe it isn't, but rather than trying to | puppeteer an outcome by tweaking something in banking, | there might be more direct policy frameworks that would | help more. | User23 wrote: | This is circular reasoning. These multi-year vacancies | exist precisely because the present regime encourages it. | One determines the appropriate vacancy rate and then | tunes the regulatory framework to remove barriers to | achieving that public purpose. | | The most direct policy framework would be wielding the | sledgehammer that is eminent domain. However, I think | government should use the lightest touch possible to | achieve the public purpose, so I'd prefer setting the | rules in a way that maximizes freedom while still | achieving the public purpose of having non-blighted | commercial districts. | sokoloff wrote: | It's not just banking ratios that cause this behavior, | though, but rather in part the owners of commercial | property, often let out for 5 year terms with 2 5-year | renewal options, who don't want to be too quick to lower | their rental base for possibly 15 years for a 1-2 year | recession. | | Property with no bank note on it would behave the same | way. (It's just exceedingly rare, especially in an easy- | borrowing, money-printing presses running environment. | itronitron wrote: | I expect that companies create larger second order effects than | governments. However governments last longer than private | companies so they are a more reliable target for criticism. | When a company messes up it can morph it's constituent parts | into something else. | qwertycrackers wrote: | It's definitely a matter of what the commenters view as | "right". Obviously everything affects everything else, to | infinite degrees. But assuming an American perspective, hedge | funds and developers are both dealing in their own private | assets, that being their reserves of capital and valuable | labor. So whatever they do with those things is... primarily | their business. Of course most reasonable people accept some | small intrusions to this situation, but the overall perspective | remains the same. | | Whereas land use regulations and the like are a public commons, | and everyone is entitled to a say and should have their needs | meet. So all the ramifications of any public policy like this | are of great significance and the affected feel they have a | right to be heard. | | Private actors with very strong claims on things like their | labor and capital can just do what they will, and the second | order effects aren't discussed because they are not relevant to | the stakeholders. Everyone is a stakeholder of public policies | like this. | Ericson2314 wrote: | To start, the huge elephant in the room is that it is _insane_ | that cities are more expensive when city dwellers consume less | resources and incur fewer environmental externalities, and are | more productive. If our only hope is continued | "suburbanization with li-ion characteristics", as so many | people seem to believe, we're fucked as a country. | | So this preposterous fact those that all manner of incentives | have gone wrong. | | For example, we now know rent control isn't bad, just like | minimium wage: https://jwmason.org/slackwire/considerations-on- | rent-control.... To flip this around, that these neoclassical- | economics-defying conclusions are true means the housing market | and labor market are terrible markets. | | We do need to abolish bad zoning and things, but we also need | more public housing. The simple fact is we need to build enough | dense housing to "devalue" the existing events in terms of | their rent revenue, and the private sector will be loath to do | that. | | Another thing is public transportation. Public transit is | extremely valuable, but the private sector is unable to provide | because a) it's a natural monopoly we can't trust the private | sector with (except for Japan, where a bunch of things relating | to land use are really different). It works best when cars are | _beaten back_ (investments in one hampers the utility of the | other), see https://pedestrianobservations.com/2019/09/18/cars- | and-train.... The private sector is too impatient without the | prospect of terrible rent seeking to wait out a transition from | cars, and is also powerless to eradicate lanes and do other | things that might driving rightfully harder | (https://www.youtube.com/watch?v=ORzNZUeUHAM). | | So people saying every government intervention has unwanted | side effects are just shills for the continued retrenchment for | the state. The fact is the market cannot coordinate on a scale | needed to "turn the ship". At the same time, the emaciation of | the administrative state decades across across the US means we | have a weak and incompetent pubic sector that's currently | incapable of administrating the necessarily infrastructure we | need. | | Hard problems all around, but the former is a hard fact, while | the latter is fixable. | Mc91 wrote: | > public transportation | | I have spent some time in the San Francisco bay area and a | lot of time in New York City. | | Looking at BART and Caltrain schedules - the last Caltrain | train leaving San Francisco is three minutes after midnight. | The last BART train leaving San Francisco leaves at 1041PM! | The BART website says they will add slightly later trains | next month, but still - it was like this before Covid too. | | In New York City, PATH and subway trains run all night. | Metro-North, LIRR and New Jersey transit trains run fairly | late as well. It's a larger city, but many people commute 40 | miles or more every day, and it's no big thing - get on a | train in Bay Shore, Suffolk, New York in the morning, and in | a little less than an hour you walk out of Penn Station, over | 40 miles away. If you want a faster commute, then live 35, or | 30, or 25 miles away - still plenty of room for one family | homes and lawns if that is your thing. | | I have taken the BART from SFO into the city during the day, | and that worked well enough when I did it, but expanding | BART, Caltrain etc. could solve a lot of the Bay's problems | of insane rent for a small place in a neighborhood that is | not that great. | Ericson2314 wrote: | NYC is better, but there is still to much sprawl there too. | | The A train is < 40 miles, and Manhanttan is roughly in the | middle, so subways commutes are less long. | | There is nothing wrong with long regional rail commutes | per-se, but the the problem is US "commuter rail" is set up | so the richest surburbanites in the biggest homes drive for | the rest of their lives (and are the worse green house gas | emitters in the country), and _just_ take transit to get to | their 9-5 midtown office jobs. | | This is bad for the environment, and regressive. Transit | should serve all classes, and be paired with dense | development around stations (think more flushings) so | people living far out might have more room for kids, but | need not rely on cars to any greater extent. | | See https://pedestrianobservations.com/2021/03/09/the- | hempstead-... and linked posts for plans about this sort of | thing. | dasil003 wrote: | Last BART train going to the East Bay left Civic Center | after midnight, not sure if this got dialed back for Covid, | but I used to take this all the time. | zootboy wrote: | Indeed. The pre-COVID schedule was that all active lines | had their last train leave from the end of their line at | midnight. The last SF to East Bay would be the SFO train, | which would hit Civic Center around 12:30 am. | sgregnt wrote: | > In a setting where the supply of new housing is already | limited by other factors - whether land-use policy or the | capacity of existing infrastructure or sheer physical limits | on construction - rent regulation will have little or no | additional effect on housing supply. | | I find this sentence to be crucial. So 3/4 of the way into | his speech it seems like he mentions perhaps the most | important assumption he is making: he is assuming a situation | where the supply and demand of housing is already largely | fixed regardless of whether there is or there is no rent | control. | | That's a bit funny, if that the case then it's almost by | definition, the rent control is not going to have much effect | in this case... | | Even if he is right about what he is pitching for under these | assumptions, the discussion seems incomplete unless he also | treats the situation where the supply of housing is flexible | enough. | | What happens then? Does rent control has effect on supply in | this case? | | Maybe the problem is actually too much regulation to begin | with. Which then leads to very reduced flexibility in the | market response. So he is not arguing about policies to reach | global optimum, just policies to adjust for a local optimum | under heavily regulated market assumption. | sudosysgen wrote: | Actually, that is not his position. He includes economic | constraints to construction, ie, the price of the land | being too high. | [deleted] | Ericson2314 wrote: | Keep in reading, including the comments such as the | author's in https://jwmason.org/slackwire/considerations- | on-rent-control... : | | > I'm not entirely unsympathatic to your point of view. If | we could do more to boost the supply of affordable housing, | there would be less need for rent control, that is true. | | > But, first, less need is not no need. I don't think it's | even physically possible to get a perfectly elastic housing | supply at the local level, so when local demand rises some | people are still going to face displacement from rising | rents. And I think they deserve protection from that. | Second, and more important, I am not at all sympathetic to | the idea that we should remove protections that people very | much need today, because they would need them less in a | quite different world that we may reach someday. | | I'd say what you are talked about is exactly addressed. | Sure, it would have been good to include in the article | _this_ audience, but that wasn 't the audience of the | original speech. | tonyedgecombe wrote: | >the huge elephant in the room is that it is insane that | cities are more expensive when city dwellers consume less | resources | | 50% of the world lives in cities yet they consume 70% of the | worlds energy. | aqme28 wrote: | What are those numbers for American suburbs? | | We're not comparing to the third world here, we're | comparing across models of living in the developed world. | Swizec wrote: | Is that because the 50% who don't live in cities spend half | their typical day in the nearest city? | tonyedgecombe wrote: | I assume it's because people in cities are richer so they | tend to consume more. | othello wrote: | To enjoy modern standards of living, medium to high density | urban arrangements are much less resource intensive than | suburban sprawl, which the relevant comparison point. | | The figure you quote, aggregated at the global level, | entirely results from a comparison of city lifestyle with | pre-industrial countryside lifestyles in developing | countries. By contrast, living in the countryside or in | suburbia in rich nations is much more environmentally | damaging than in dense urban areas, which is what gp was | referring to. | Ericson2314 wrote: | Also keep in mind that turning nature into agriculture | also has huge environmental costs not captured in energy | usage. | | If "developed cultured" is fixed by pricing the | externalities, it would be absolutely better to pack | people in cities, replace subsistence farming with | sustainable industrial agriculture (no tilling, no | aquifer depletion, etc.) and _decrease_ the portion of | land devoted to agriculture. | akiselev wrote: | _> The figure you quote, aggregated at the global level, | entirely results from a comparison of city lifestyle with | pre-industrial countryside lifestyles in developing | countries._ | | _Literally_ pre-industrial [1]. Last numbers I saw from | the UN estimated 2 billion subsistence farmers as of | 2015, all living without the benefit of modern | agriculture except the occasional bag of fertilizer or | engineered seeds. The future is very unevenly | distributed. | | [1] http://www.fao.org/3/i5251e/i5251e.pdf | jimmaswell wrote: | > it is insane that cities are more expensive when city | dwellers consume less resources and incur fewer environmental | externalities, and are more productive | | If people in the city earn more on average than people | elsewhere, then everything will cost more, just supply and | demand. Not sure what you can do about that besides put price | controls on literally everything. | | That and the extra taxes and other business costs. When the | hot dog vendor has to pay a million dollars a year for their | spot at central park then they're going to have to charge | more. | saddlerustle wrote: | It's not "just supply and demand". Supply can increase to | match demand! The production of almost everything in our | lives has _economies of scale_ , so it's surprising that | this isn't the case for cost of living in cities. | | It also use to be true! The main thing that changed is | government policies increasingly _restricting_ supply. | kube-system wrote: | The amount of land in a given area of a city in largely | fixed. You can build upwards to create more usable space, | but there are no economies of scale in doing this. The | relationship is the opposite --- taller buildings are | more expensive per unit of area as you go up. Space is a | multi-floor building is not constructed marginally like a | widget in a factory. Each floor must support the floor | above it. | Ericson2314 wrote: | > there are no economies of scale in doing this | | False. Yes, taller buildings are more expensive per | floor. But the benefits they bring in far exceed those | costs. | | You have to account for the whole system, or track your | externalities if it's not closed. And if our current | economic systems don't do that, they need to be fixed. | kube-system wrote: | I was responding to the parent comment about the | economies of _production_ specifically. | Ericson2314 wrote: | OK, fair enough. I read "production" to not just be about | the production of housing in isolation, but it is | ambiguous. | bobthepanda wrote: | While this is true, the expectations of the US have also | overshot. The US is an outlier in terms of square footage | in new homes, American homes are very large. And | personally I don't want some 2000 sq ft McMansion because | that means all the cooling, heating, cleaning, and | maintenance of such a large space that I've only ever | seen really used to accumulate lots of stuff. | | We don't need to go to extremes (a Parisian studio can go | as low as 100 square feet!) but house size in the US has | mostly crept up as a function of minimum lot sizes in US | zoning. | kube-system wrote: | Those homes aren't in cities where space is a concern. | They're in sprawling suburbs where land is highly | available. The construction costs of those 2000 square | foot homes is cheaper than 1000 square foot on the 25th | floor of a building. | | People in the US have a choice between the two, and | they're largely chosen to put up with a commute from the | suburbs in exchange for more space. Those lot sizes | aren't just wasted space. Lower density also translates | to more green space, lower noise, fewer shared spaces, | etc. | Ericson2314 wrote: | People are choosing suburbs based on costs. The aver | person has little ability to choose based on any other | reason. | | This is why it's incredibly important that we fix this | stuff. Rich environmentalists' "sacrifices" achieve | nothing. It is also why I am incredibly sad the current | infrastructure bill is slated to fund so much stupid | suburbanization. | amanaplanacanal wrote: | The costs are out of whack. Environmental externalities | are paid for by everybody instead of the person creating | them. We need carbon taxes to fix that problem. | | This is on top how much zoning craziness distorts the | market. | perl4ever wrote: | I think that discussion about "suburbs" tend not to | accomplish much because the word isn't really defined. I | mean, in common parlance, but also in the US government I | believe that things like the census divide everything | into urban and rural. | | I live within city limits, in a multifamily building. But | the edge of the city outside of which is presumably | "suburban" is literally a few dozen feet away. Also, my | neighborhood has a layout and look that I think a lot of | people would consider suburban. No businesses, mostly no | sidewalks, mostly a cookie cutter development. On the | other hand, it's super quick to go from where I live (by | car that is) into the middle of the city where I work, | which is kind of against the stereotype of suburbs. It's | also much cheaper than the "actual" suburbs, probably | because it's part of the city school district. | Ericson2314 wrote: | A suburb is where people's work aren't tied to the land | (agriculture, logging, etc.) And virtually all transport | is done by car. | | There, did it. | | Sounds like your place has some nice benefits, but since | you drive everywhere (you mentioned work, and stores not | being in the neighborhood, so that's a safe assumption, | right?), It's suburban. | perl4ever wrote: | I'm within easy walking distance of a bus stop. However, | the bus goes mostly east and west, rather than north to | where I work. | | I could also technically walk to a convenience store or | perhaps a supermarket. It doesn't take that long to walk | a mile or two. | | Point is though, it's clearly not rural, and it's within | a recognized city, so any time people are talking about | "urban" it includes this sort of setting. It doesn't | matter if you think it _should_ be classified as urban, | the fact that it is, means that 's where the statistics | show up indirectly. | | There is a distinct separation in property value between | my neighborhood and surrounding suburbs with single- | family housing at double or quadruple the price. | | Furthermore, as a matter of geometry, any city that is | more or less a roundish blob, is going to have more space | near the edges than the center. So it seems plausible to | me that it's more representative of a city lifestyle. The | very center in several cities I've been in is almost | completely commercial. | kube-system wrote: | They're choosing suburbs for value, not cost. There are | plenty of apartments available in cities at rents lower | than the average suburban mortgage payment. | | If we want revitalized cities where people want to live, | we don't just need low cost housing, we need high value | housing. The middle class didn't leave cities on cost | alone and they're not going to move back to cities on | cost alone. | throwawayboise wrote: | But there are many many things you cannot do living in an | apartment that you can do with your own home/property. | It's not simply a calculation of value in a $/sq-ft sense | that people are making. | kube-system wrote: | Yes, that's part of what I mean by value as opposed to | cost. | Ericson2314 wrote: | Sure, value not costs. | | > There are plenty of apartments available in cities at | rents lower than the average suburban mortgage payment. | | But what is the floor area? Saying people don't need | McMansions is not the same as saying additional bedrooms | for kids isn't nice. | | > If we want revitalized cities where people want to | live, we don't just need low cost housing, we need high | value housing. | | It's very easy to tear down walls making bigger units. | Focusing on the cost of housing is the key part. Value | comes after. | | Also remember that suburbs and driving is _massively_ | subsidize, even separately from the externalizes. It 's | not fair to expect cities to compete completely on costs | without that being fixed. | | Go read https://www.strongtowns.org/ for urbanism for | small-scale romantics if big cities still sound "just | bad". | kube-system wrote: | I agree with everything here except I'm not sure that | value will necessarily result from focusing on cost. | | I think if you focus on cost alone, you're going to build | poor neighborhoods and jump start a cycle of poverty. | | I think the key is to build diverse neighborhoods. You | want poor, rich, and middle income housing all in the | same place. The segregation of incomes is how we got into | this mess to begin with. | Ericson2314 wrote: | I'm not sure poor neighborhoods are _built_. Most | construction these days is shit quality, with just a few | cheap trappings making something "luxury". | | Other than physical dividers like highways, I don't | really think segregation is _built_? | | One big exception is we certainly want the public housing | to not be congregated in ghettos. That was another | terrible NYCHA (and others) practice. | kube-system wrote: | The congregation of public housing into one place is an | example of what I'm referring to as "building poor | neighborhoods". In contrast, you can build rich | neighborhoods depending on the structure and how the | land-use is controlled. | nobodyandproud wrote: | Real estate isn't instantly scalable. It takes years of | planning and decades of execution to create a truly | scalable city. | | With stores, they're squeezed on both ends: Pressure from | online retailers and then exorbitant rents. | | It's not unusual to have monthly rents that go into mid- | five figures for a small store at ground level. | | Few small businesses can sustain that in the long term. | perl4ever wrote: | I think you're (and Ericson2314) confusing/conflating two | different ideas. | | Big cities obviously have economies of scale, so, say, | the chicken lo mein is fresher and hotter due to higher | volume. Or, the first time I had a cup of plain coffee at | a random cafe in NYC, it was stunningly good. Any | reasonably successful business has much higher volume | than in a less populated area and is pressured by | competition more too. They can and must do better. | | But people make more money on average in a big city, and | that means they spend more. If the exact grade of | hamburger available everywhere is 20% cheaper, that | doesn't in any way prevent your meals from being much | more expensive. The whole point of being in a city is so | you can get stuff you can't otherwise. | | If you are living and working in NYC, are you going to | just have the same fast food you could get in Albany, | that's incrementally better? | | Don't mix up "city dwellers use less resources for a unit | of a given thing" with "city dwellers use less resources | _period_ ". | Ericson2314 wrote: | For green house gas emissions, at least, it is absolute. | See https://coolclimate.org/maps. | | True rural and true urban (with public transit | predominating) is good. But the suburbs where most people | live are absolute trash. | BurningFrog wrote: | The dominant factor making US cities expensive to live in | is that they ban housing construction. | | Legalizing a healthy housing supply would improve this | country more than anything I can think of. | jimbob45 wrote: | There are enough houses to house everyone in the US. The | problem is that half of them are for rent which enriches | one person off the dime of another. | | We don't need more houses unless we want to continue | wrecking the environment. Better to block renting and use | what we have. | beerandt wrote: | Then we should repeal the majority of Dodd-Frank. | BurningFrog wrote: | Repealing zoning is the more common answer :) | | What in Dodd-Frank stops housing construction? | Ericson2314 wrote: | > Why this reminds me of treating workers as caged hen? | Dense in the sense of building complexes of decent size | family homes? That I could support, but building blocks of | shoebox flats, should really be eliminated. | | Affordability is the _ratio_ of income to prices. Nobody is | saying city prices should never be higher in absolute | terms, they simply shouldn 't keep up with the higher | incomes. | [deleted] | varispeed wrote: | > The simple fact is we need to build enough dense housing to | "devalue" the existing events in terms of their rent revenue, | and the private sector will be loath to do that. | | Why this reminds me of treating workers as caged hen? Dense | in the sense of building complexes of decent size family | homes? That I could support, but building blocks of shoebox | flats, should really be eliminated. | | The supply of residential housing should be at a level, where | buying or renting from a private sector could be considered | an option, not a necessity. Local governments should be | allowed to rent houses from private investors, but pricing | should be strictly regulated, so that residential property is | not viewed as an investment, but rather as a way of getting | maintenance money for idle properties. | | Residential property investment should be treated as carts | and horses of economy and become the past. | iamstupidsimple wrote: | It's not families living in San Francisco. It's single, | urban professionals and engineers. I don't like that people | aren't really having families anymore, but just pretending | that it's still the 70s doesn't exactly work either. | Ericson2314 wrote: | Actually, many of your points are good, just not your first | one | | > The supply of residential housing should be at a level, | where buying or renting from a private sector could be | considered an option, not a necessity. | | That's actually good. | | > Local governments should be allowed to rent houses from | private investors | | Nah, there's no value for the private sector to add, and | huge risk of regulatory capture here. | | We avoid NYCHA failures be saying public housing != low | income housing. Allow the average rent to meet costs so | public housing is self sufficient. Having average rent not | meet costs is moronic politics, basically committing | seppuku for the right. | | > So that residential property is not viewed as an | investment, but rather as a way of getting maintenance | money for idle properties. | | Also true! | | ------- | | > Why this reminds me of treating workers as caged hen? | Dense in the sense of building complexes of decent size | family homes? That I could support, but building blocks of | shoebox flats, should really be eliminated. | | Saying density means less space for people is dead wrong! | Less land space too, but taller buildings can mean _bigger | units_. | | Back yards don't scale. Ensure people city and natural park | access (which the Bay Area has lots of), and then build the | buildings as big as possible to give people humane floor | space. | | Ultimately it's single family homes that make people caged | hens....in tents. | rcpt wrote: | > we now know rent control isn't bad | | Huge ask that we all accept that conclusion from the speech | you linked. | opportune wrote: | Yeah. One has only to look at the housing market in Berlin | to see that it can be bad. Of course that is one extreme | and there are many different ways to implement rent | control. Overall I think this is a whole other can of worms | in itself though | Ericson2314 wrote: | Ideally we should build enough public housing that rent | control isn't needed, just as ideally we should have | strong enough unions that minimum wages aren't needed. | | But we fail miserably on both those counts, and denying | the next best thing does not strike me as useful | accelerationism. | ItsMonkk wrote: | What Prop 13 does for owners, rent control does for | renters. Both gives huge advantages to current residents at | the expense of future residents. It's obvious why current | residents would vote for such a change. This allows current | residents to ignore problems as they occur, so these | problems grow out of control. | | We can't keep giving benefits to certain populations of | people. You need to work out the negative externalities and | tax it. You need to work out the positive externalities and | subsidize it. Anything else leads to perverse incentives. | If you happen to have a surplus as a result of taxing | negative externalities, you should take the tax money and | give it back to your residents as a dividend. | | If you want to have parking minimums, if you want to have | certain setbacks and limited building height, if you want | to disallow building train-tracks through your backyard, | that's fine. But those are externalities on the community | and they should ultimately show in the Land Value and that | needs to be taxed. When it is not taxed it is incentivized, | and those perverse incentives only lead to more bad | policies. A Land Value Tax would instantly turn most NIMBY | voters into YIMBY voters. Fixing all of these follow-on | symptoms would go from an up-hill battle to a downhill | breeze. Focus on the disease, tax negative externalities. | Lammy wrote: | > What Prop 13 does for owners, rent control does for | renters. | | Economically trap them in their home/apartment forever, | thus achieving segregation with extra steps? I agree. | sudosysgen wrote: | Rent control doesn't just benefit current residents, any | sane rent control policy carries forwards when tenants | change. Those that don't are ineffective on purpose. | | Beyond that, lowering rents benefits even future | residents and homeowners-to-be as they lower property | values and dampen speculation. | Ericson2314 wrote: | Please. | | This is from an actual economist, not some political hack, | and links have been added to the underlying studies. | Disparaging this for being originally a speech is | intellectually lazy. | clairity wrote: | the more compelling critique of rent control is that it's | a tiny patch on a heavily distorted market--just enough | bone to keep the riff-raff distracted from the naked | engorgement of capital on real estate. if we had highly | dynamic, fair, and transparent real estate markets, we'd | have no need for rent control, because a high-functioning | market keeps prices just above the cost to | create/provide, that is, a fair market price. | slibhb wrote: | There are actual economists who think rent control | doesn't hurt supply. And there are actual economists who | think the opposite. Given that, saying "we now know rent | control isn't bad" is quite a stretch. | | Personally, I don't understand how rent couldn't hurt | housing supply. I do understand that there is empirical | evidence suggesting it doesn't but I'll remain skeptical | until there's some theory explaining how that could be | that I can understand. | sudosysgen wrote: | We know, _empirically_ , that rent control, when it | satisfies some key constraints, is effective. | | Unless you are one of those that thinks that economics | isn't subject to the scientific method, reality trumps | theory. And it's false that we have no theory of why rent | control is effective, we absolutely do. | slibhb wrote: | You and the above poster are overstating your case. Your | post boils down to "don't u believe in science lol?" | | I agree with this comment: | https://jwmason.org/slackwire/considerations-on-rent- | control... | | I think that if rent control doesn't hurt housing supply, | it's because of various regulations that are distorting | the market. Enacting rent control instead of reforming | those regulations seems silly to me. | sudosysgen wrote: | It's on you to show an example of a city where these | various regulations are absent and where rent control | hurt housing supply. Good luck. | | I'm being serious here, if you think that a vague, purely | theoretical argument, from theories that we already know | are very far from complete, is a match for empirical | evidence, then you are not treating economics as a | science. | slibhb wrote: | There's nothing vague about the argument against rent | control. Further, I don't agree with your view of | science. Empirical evidence matters but the pure | empiricism that you're advocating is not convincing to | me. | | I think we would be better off reforming regulations that | are preventing people from building than enacting rent | control. That seems like a very reasonable opinion with | plenty of support from economists. I find your posts in | this thread overly dismissive and aggressive. | sudosysgen wrote: | No, the argument is indeed vague. There are plenty of | situations where intervening in the market actually | increases efficiency - for example, patents, state | monopolies on utilities, minimum wages, etc... | | Simply pointing to "supply and demand" and operating by | maximalist principle is a vague argument. You have to | actually engage with the fact that housing can never be | an ideal markets and that inelasticities are indeed | great. | | Again, if you think that these regulations are both more | effective and exclusive to rent control, you can find | empirical evidence. | | I'm not being a pure empiricist. A basic theory made an | empirical prediction - that rent control would decrease | supply - and the theory is wrong. You can't then use the | same theory that made an already incorrect prediction to | make a second prediction that is this time almost | impossible to evaluate empirically. Find another theory | and make an original prediction, without ex-post-facto | retconning, and we can judge that theory on the merits. | | As it is, we already know that simple neoclassical market | theory does not apply to markets with significant price | in-elasticity and friction, and the housing market is and | will always be like that. | | It's theory that is often wrong, that is wrong here | again, you can't rely on it over the empirical evidence | by retconning your predictions after the fact. That's | just bad science. In another field that would get you | laughed out of the room. | bregma wrote: | Regulatory capture is like boiling a frog. Hedge funds and | developers make us warm wet and happy until it's too late. | krisoft wrote: | > But, I've never seen anyone discuss second order effects from | hedge funds, or rich developers. | | I think we do. We discuss startup culture, unicorns, huge | companies with no revenue, the effects of quarterly reporting | on long term thinking and many similar topics. These are all in | my opinion second order effects of how business is financed | nowadays. If you can think of other second order effects which | are not widely discussed please do write about it. They are | usually all super interesting and more insightful analysis is | always welcome. | | > Can someone explain why second order effects are only | relevant and as powerful when it is a government entity | | I don't think that they are only relevant when it is about | government. See my previous point, but it is easier to talk | about governments in this sense. Our governments in the "free | and democratic" world are very transparent. We have freedom of | information laws, the laws and policies of our countries are | published, and politicians leak info like a sieve. Of course | there are secrets, and backroom deals, and honest to goodness | conspiracies too. But when you compare how transparent our | governments are to how transparent hedge funds are it is day | and night. It is much easier to talk about what you can | observe, therefore there is more discourse around the second- | order effects of transparent government action than the | intentionally more opaque hedge funds. | | Likewise people discuss more what they can influence. At least | in theory we all can influence our governments. I'm not voting | on hedge fund managers. They don't really care what I think. | They care enough to not anger so many people that they grab | pitchforks, but the opaqueness and lack of information helps | them there. Curiously the easiest way the average Joe and Jill | can affect a hedge fund is by convincing the government to | enact and enforce some law. This is another reason why people | might be talking about the second-order effects of government | action more. | jl2718 wrote: | There is only one thing that distinguishes the difference | between government and all other social entities: | | A monopoly on the use of force. | [deleted] | aqme28 wrote: | A government is also accountable to the citizens while a | private company is only accountable to its shareholders. | That's a pretty big difference. | jl2718 wrote: | Private companies and governments can both exist without | accountability. | sudosysgen wrote: | There is literally no government in the world that isn't | somewhat accountable to citizens. | | Meanwhile, there are many multinationals that are not | accountable at all to the citizens of countries they | operate in. | csomar wrote: | > There is literally no government in the world that | isn't somewhat accountable to citizens. | | Actually, there might only be a few government that are | accountable to citizens. Maybe most governments _care_ | for their citizens, but accountable? I don 't think so. | AtlasBarfed wrote: | Companies are dominated by the major shareholders, | basically the rich. | | Guess what the us government is dominated by? | Apocryphon wrote: | Sufficiently wealthy private entities can buy access to that | force, which makes it more of an oligopoly than a monopoly. | Not to mention there are private security services who are | also granted force. | HWR_14 wrote: | > But, I've never seen anyone discuss second order effects from | hedge funds, or rich developers. | | There is a huge body of research on it. When private entities | do it the term used is an "externality". | juanani wrote: | Greed(capitalism) is killing neighborhoods. FTFY. Not just | neighborhoods either. ThE GrEaTeSt SyStEm EvEr | lordnacho wrote: | Why not just make a law that says the old tenant can keep paying | until the new tenant who is gonna pay 10x arrives? Seems like | there must be some other explanation as to why the landlord | doesn't just keep the little guy until he finds someone who will | pay more. | nostromo wrote: | Overly restrictive zoning is killing neighborhoods. | | North America needs more housing and less retail. But the market | can't respond because zones are too restrictive. | jmclnx wrote: | As I said in the past, when a rental property goes vacant and | stays vacant for more than 1 year, the property tax goes up for 5 | years minimum equal to the amount of the rent that was previously | paid. Increasing 15% every year until rented. | | This is for every unit that is vacant. | johnnyApplePRNG wrote: | I've thought about this for a long time. | | I grew up in a town that had a booming downtown strip for as long | as I can remember growing up. | | Then around 2008 you started noticing stores closing up. | | Word on the street was that rent was just too high to make a | profit, and a lot of the retailers who had been in the same store | downtown for decades closed up shop forever. | | Fast forward to today, all of those stores and more are | shuttered... the rent is still too damn high... and the absentee | landlords that own these buildings are actually rewarded with | property tax benefits for keeping them EMPTY! | | How crazy is that? | | Some rich guy owns almost every single building downtown, is | asking $75/foot, and gets property tax breaks when his buildings | sit vacant... slowly smothering the downtown vibe with an air of | death. | | The value of his building's keep increasing so he doesn't care. | He doesn't live here. | | IMHO retail properties should be taxed MORE if they sit vacant | for too long, and that increased tax burden should go up | exponentially every year that the building sits vacant. | | A vacant retail building should be the landlord's problem, not | the town's. | whall6 wrote: | What property tax breaks are you talking about? | emodendroket wrote: | > Bradford brought a vacancy tax to the council in early | 2020. Similar measures were put forward at roughly the same | time in other areas, including New York, Boston, and | Montreal. But many of these efforts are on hold while cities | grapple with the impact of the pandemic on their budgets. A | vacancy tax sounds like an easy balm to the problem of | chronically vacant storefronts, but counterintuitively, | cities have instead often given tax rebates to the owners of | vacant property. Until recently, Ontario mandated a flat 30 | percent tax break to owners whose buildings had been empty | for at least ninety days, with no maximum time limit. It was | a measure born of the '90s recession, intended to help ease | the effects of economic downturn and falling property values. | | > While vacancy rebates provided some businesses with a | needed reprieve in fiscally difficult times, they were | criticized for, in Bradford's words, "incentivizing owners to | keep stores empty while they waited for values to get high | enough for redevelopment." A review ordered by the Ministry | of Finance showed that the policy had exacerbated the issue | of "chronically vacant" street-level commercial real estate. | A well-meaning initiative to help struggling property owners | had been thoroughly negated through exploitation and | speculation. | ethbr0 wrote: | What is the public good here? | | I'd imagine: having shops, instead of vacant properties. | And extending to residential: having more housing supply. | | So we want to (1) incentivize landlords to put their | property to use, instead of letting it lay vacant & (2) | avoid making property owning so risky that no one wants to | do it. | | It seems like a non-use tax + national economic hardship | exception takes care of that nicely. | | Taxes on your limited-supply property (e.g. city cores) | increase at 30/60/90/180/360 days of vacancy. Where vacancy | is defined on average across a timespan (to prevent | resetting timers with faux leases). And then coupled to an | external index (e.g. national occupancy rates for property | type) that decreases the increased tax if there's a | deteriorating economic period. | | We want it to be financially _painful_ to not have a tenant | in your property. To the extent that landlords are | incentivized to go to the trouble to offer their property | to the public for use. | el_nahual wrote: | I have never met a landlord that would rather have a building | sit empty than renting out to "save on taxes." By definition, | the income from renting a property is greater than the taxes | one could have deducted, because tax rates are not over 100%. | | This is sort of the same myth as the "I shouldn't take more | money because it will bump my tax bracket" (which makes no | sense since tax brackets are marginal)[1]. | | However, it _is_ true that landlords will often have properties | empty with rates at what seems to be higher than the market- | clearing price. | | The only explanation for this I've heard that makes sense is | that rents/tenants are bimodal: the average is misleading. | | There's one group of tenants (cafes, indie hardware stores, | hobby shops, etc) can afford one rent, while Starbucks, | Citibank, and Panera can afford a second, much higher rent. | | Which tenant you get is a lottery, so as a landlord it may be | short-term beneficial to set the rent at the higher mode and | "wait out" a high quality tenant. And yes, long term this can | be a collective detriment. | | [1] Except for things like the EITC, and this was a strong | criticism of it. | s0rce wrote: | I'm sure you'd make more money after takes renting it out but | you have more costs associated with having a tenant (and | risks). If you can just sit on a vacant property get some tax | rebates and watch it appreciate you don't need to do | anything. Your tenant won't break stuff, you don't need to | find new ones, its just appreciating slowly and requires less | hands on management. | xhrpost wrote: | > By definition, the income from renting a property is | greater than the taxes one could have deducted, because tax | rates are not over 100%. | | I think the issue is more with capital appreciation. Yes, | month to month you're still losing nominal dollars for not | having a tenant, even with lower taxes. However, that | land/building are likely still seeing appreciation, even in | markets that aren't "hot". | | Some friends of mine recently bought a building to open a | restaurant. I'm pretty sure it had been vacant for more than | half its lifetime, yet trying to negotiate with the owner was | a nightmare. They simply didn't want to budge and were | apparently very content with saying 'No' to offers and | letting it sit there for well over half a decade empty. | awillen wrote: | It still appreciates if it's rented out, so that doesn't | change anything. When it's rented, you get appreciation | plus income, and when it's not rented, you get appreciation | only. | anigbrowl wrote: | Appreciation only + tax deductions can be a great combo | in a hot market. why deal with the hassle of tenants when | you can have rapid appreciation, and the more property is | off the market, the higher the prices become? | kflzufkrbzi wrote: | If appreciation is 99% and rent is 1% does it change | anything? | djrogers wrote: | That's a bit of a straw man, as that degree of market | imbalance would completely end renting. | nend wrote: | Isn't that what this thread is about though? The complete | end of renting in this downtown strip. The buildings are | sitting empty and not renting. | 55555 wrote: | The risk-adjusted return differential is much less than | appears at first glance. | franciscop wrote: | The thing I learned recently that happens in Spain is that | if you have a property sitting empty, the government will | calculate a "virtual rent" so to speak and charge you based | on that (normally lower than actual market rate, but not | much). If you rent it out, you get taxed based on what you | actually make and not on this potential rent. Real estate | taxes are apart/independent. | | This makes people really want to rent out places, and you | see a much higher occupancy than in other countries (you | still have squatters, which is a big issue, pushing in the | opposite direction so it's still not perfect). | 6510 wrote: | It should be much more harsh. If you own a building where | a store should be but aren't using it as such you should | be made to pay an insane tax for lowering the value of | the entire shopping area. | pxeboot wrote: | I can only speak to residential, but when I worked in the | industry, it was extremely rare for rents to go down because | many existing tenants would see the new rate and demand a | discount or leave. | | It was perceived as cheaper to have a few vacant units at | $2000 a month instead of renting them for less and lowering | the rate for anybody renewing their lease. | BeFlatXIII wrote: | I now have the mental image of a tenant moving one unit | over to start "new" and get the discount lease rate. Thanks | for brightening my day. | m-ee wrote: | A friend of mine did this during the pandemic. Asked for | a rent reduction and the landlord refused but offered | them an identical unit in the building at the lower | price. | TeMPOraL wrote: | That's how you deal with mobile phone operators :). | Threaten them to leave if they won't give you a better | offer, and if they don't, then just leave... and come | back some time later, to get the much better "new | customer" treatment. | awillen wrote: | This is definitely true in large apartment buildings, where | units are very comparable and leases are identical. Not so | much in commercial where lease terms may vary widely, and | even units in the same building may be meaningfully | different in value based on how they're currently | configured and who's looking to rent (e.g. if you want to | rent a space to start a restaurant, and it was previously | set up as a restaurant, you've got a lot of infrastructure | there already, so it's more valuable to you as a tenant | than it would be to someone who wants to use it as a | hardware store). | conjecTech wrote: | There may be other factors besides what they nominally | "want". Depending on their source of financing, landlords | changing the rent on these spaces can be both logistically | difficult and may cause a huge negative cashflow shock | because of the way it effects capital requirements on | commercial loans. Louis Rossmann covers it in a video | (https://www.youtube.com/watch?v=NdfmMB1E_qk) based on this | reddit comment (https://www.reddit.com/r/nyc/comments/innhah/ | nearly_twothird...). | smsm42 wrote: | Small point on [1] - it's not only EITC, there are a number | of benefits that are income-dependant where a small income | increase could make you ineligible for a ton of benefits. | Effective marginal tax rates for people right around poverty | line is crazy high for their income - because each additional | dollar earned turns into lost benefits. | https://fee.org/articles/the-welfare-trap-labyrinth-of- | progr... | | The tax rates still aren't 100% there but even something like | 50% may seriously discourage people. | burlesona wrote: | There is actually a phenomenon colloquially called "extend | and pretend," where it's better for commercial properties to | sit vacant or half-vacant than lower the rent. | | The reason is, the building is financed based on it's | calculated property value, and commercial property value is | simply a multiple of the listed rent. Whether or not you're | collecting the rent is immaterial -- after all it's perfectly | normal to buy a vacant lot and built a building on it, or to | buy an old warehouse etc. and refurbish it, etc., such that | the bank has to make the lending decision based on projected | rent rather than actual rent. So this is what they do. | | The problem is only when the projections are proven false, | such as when you lower the rent to fill the space. If you do | that, the bank must now lower the value of the building, | which can easily make the building worth less than the loan. | | Further complicating things, commercial properties are | usually on short-term financing, for example a 5-year | "revolving" loan where the developer pays interest only for | 5-years and then is expected to pay off the loan all at once | (unlikely) or refinance (99% of the time). | | So, suppose the building has a $8M loan based on a | theoretical $10M valuation. The developer is making the | payments, whether from the partial rent, or his personal bank | account, even though the building is vacant. The loan is now | due to be refinanced. | | If the developer says, "I'll get a tenant in here any day | now," the banker can nod and say "I believe you," and | refinance the building. The developer keeps paying the | payments and doesn't have to go bankrupt. The banker doesn't | have to foreclose and write off the loan as a loss. | | Conversely, if the developer had cut the rent in half to get | the building full, the banker now has to lower the building's | value from $10M to $5M, and therefore the maximum loan is | reduced to $4M. But the developer owes $8M to the bank, and | doesn't have the money to pay it off. Not even the $4M to | cover the difference and refinance the rest. | | In this scenario, the developer goes bankrupt and the bank | has to foreclose on the property. | | Thus both parties choose "extend and pretend" as the rational | action, even though it's not good for the developer and | terrible for the surrounding community. | | From my friends in the real estate business, my understanding | is that a shocking percentage of commercial real estate is | currently operating in this "extend and pretend mode," which | ironically just reinforces the pattern, since all the players | involved know that if the banks started forcing the issue | they would likely kick off a chain reaction of bankruptcies, | write-offs, and a destabilized real estate market that would | lead to huge losses for most or all of them. | | So instead, "this is fine." | el_nahual wrote: | This makes a lot of sense--it seems that the real problem | is rent "stickiness." | | And there's a lot of factors making rent sticky: the | financing structure you mentioned, maybe the bimodal | distribution of tenants I'd hypothesized. | | In residential there's also the "unintended consequence" of | quite a few tenant's rights laws that makes rent extra | sticky (why do you think NYC landlords require proof of 40x | monthly rent as income?!) | | But what doesn't seem to bek the case is simply chalking it | up to "tax breaks" which is a common boogyman. | clairity wrote: | there is certainly a tension between the bank and the | developer/owner over potential default, but the mechanism | isn't simply the developer/owner presenting financial | projections and bankers being relegated to only accepting | their word and being stuck with a bankruptcy ultimatum if | the deal goes sour. commercial appraisers must validate the | assumptions and calculations based on prevailing conditions | and comps. | | the question is really who should take the risk of getting | the projections wrong, and the answer is straightforwardly | the bank, although the developer/owner has to act in good | faith in both the financing and the operations. a new | development is basically a finite business, and projecting | the cash flows, and therefore the ultimate valuation, is | risky. loan officers' principal job is to assess (and | accept/reject) that risk. | | all that said, we need to stop propping up banks and loans | gone bad. without real downside consequences, we get | misallocation, as we plainly see in many commercial real | estate markets. | pasabagi wrote: | It seems to me that real estate is the locus of a colossal | regulatory failure that has already created one trainwreck | (2008) and will just continue to spawn more until people | start taking a look at the system and honestly evaluating | how much of it is rational. | | Making everybody who wants to live in a stable home get | involved in the real estate market is sort of like making | everybody who wants a computer buy tech stocks. It's | insane, and leads to a completely insane market. I own a | house despite the fact I know nothing about houses and | don't want to own a house, because the alternatives are far | worse. | | When you get a situation where the incentives are all set | up to make people act in a way that's not only destructive, | but also blatantly unsustainable for everybody involved, it | means the government is sleeping at the wheel. | drewg123 wrote: | Is this also why apartment complexes seemingly refuse to | lower the rent when demand slumps, but rely on one-time | incentives? | | I'm talking about the "move in special!" "one month free | rent", etc. It would seem more rational to reduce the rent | by 1/12th... | JMTQp8lwXL wrote: | If rents are bi-modal, as one of the parent posters | suggests, then how can all properties be valued based on | the higher end (e.g, tenants with deep pockets) when not | all tenants actually have deep pockets? Shouldn't the | entire demand curve be considered when deriving the | multiplier and therefore the price of the commercial | property? | | Not everyone can get the deep pocket tenant. The staggering | number of empty store fronts reflects that. | ChrisMarshallNY wrote: | If you say the rent is $100/sqft, then the tax break is for | $100/sqft of unrealized rent. | | If you rent at a reasonable (for the area) rent (say, | $15/sqft), then you get the money, true, but it may not beat | the tax break. | | Accounting is weird. | | I learned this, back in the late 1980s. I was wandering | around Ann Arbor, and marveled at all the "FOR RENT" signs. | The person giving me the tour explained why they were there. | | I am no expert, and don't know much about tax whatnots and | real estate, but that was the story they told me, and they | stuck by it. | busterarm wrote: | I worked doing data entry in my teen years for a tax | certiorari law firm in NYC and I can tell you that one of the | favorite tricks of multiple-building owners is to have a | mostly vacant building (or several) as a tax sink. Most of | the time they would put their family in the units at no | charge and write off the whole building to offset their | others. | | This is especially true of buildings they were holding for | sale to property developers. | [deleted] | qaq wrote: | This is not very accurate you can deprecate the building | offsetting the rent income and only pay the tax if you sell the | building and do not reinvest into a different property. In | reality you can defer taxes indefinitely by just rolling over | into the next purchase. If you need the cash you just take out | a loan against the property. | haram_masala wrote: | As much as I hate _Kelo vs. City of New London_, I can see the | temptation in this case to invoke eminent domain and hand over | those vacant properties to another private owner who will put | them to good use. | AbrahamParangi wrote: | Land value taxes are effectively one implementation. Land value | taxes necessitate that high-value land be put to productive | economic use. | | I think this is a nice taxation strategy given that land can be | considered a common good (and it's finite, and you didn't make | it). | 3pt14159 wrote: | I agree, but not just on land value. If you adjust the base | rate for the land by how wide the plot is on the street you | end up with a MUCH more walkable city. It's like a more | efficient sorting algorithm, because once you get to the | store you need you can just walk right in and find everything | you need. Right, like imagine how stupid it is for us to be | walking by squares. We have to walk across 25% of the | perimeter of every building we go by. If they're thin | rectangles then you only walk by, say 5% until you get to the | store you need. | jaredklewis wrote: | At least in theory, an ordinary land value tax would have | this effect, as if having street side property is | considered desirable by the market, the value of such | properties with more would increase. | | Of course the effect could be amplified by add-on | adjustments, but one of the beauties of LVT is the | simplicity. | 3pt14159 wrote: | In a dense urban environment the LVT wouldn't cover this | case well because the land value of a rectangle of the | same area of a square is roughly the same. It's _access | to the street_ that is valuable, at least for reasonably | sized blocks. | | This isn't really theoretical, I've been to cities where | this type of taxing system was in place and it's | completely different than what I find in, say, Toronto | where giant big box stores take up a huge chunk of major | downtown streets like Queen St. | s0rce wrote: | A LVT doesn't have to be based on the land area. A plot | with more frontage on a busy main street will be more | valuable and hence taxed more. | syshum wrote: | land value tax (or economic land rent) is normally seen as a | REPLACEMENT for all other taxation, not an addition to it. | | "Land" in economics means natural resources. Land includes | three-dimensional space; natural materials such as oil, | water, and minerals; wildlife and genetic endowments, and the | electro-magnetic spectrum. Nature and natural resources are | prior to and apart from human action. | | I would whole heartily support replacing taxes on Labor (aka | income tax), with taxes on economic land, equality and | natural moral law implies equal self ownership. Therefore | they should fully own their own wages and products of their | own labor. However self-ownership does not apply to what a | person has not produced namely natural resources aka economic | land. | | I however can not support adding a land value tax in addition | to our current tax system | thaumasiotes wrote: | > The value of his building's keep increasing so he doesn't | care. | | By what metric? According to you, they're in an area where | people don't want to be and there are no renters. If your | description is even close to accurate, the value of the | buildings is dropping. | rasz wrote: | How would value be dropping if the commercial space has a | $100/ft sticker on it and keeps going up. Its the same | mechanism putting Tesla and shitcoins valuation on the moon. | thaumasiotes wrote: | You can put a sticker on anything you want. You already | know the value is less than that because it's not being | rented at that price. | notatoad wrote: | the value of the building might be dropping but the value of | the land keeps going up. eventually somebody will buy it to | tear down and build condos. | thaumasiotes wrote: | The value of the _building_ drops all the time. The value | of the land is also dropping, as described. Loss of foot | traffic is a blow to the value of the land, not the | building. | | Who wants a condo in the middle of nowhere? The replace-it- | with-condos plan requires the area to be growing, not | shrinking. | minikites wrote: | >A vacant retail building should be the landlord's problem, not | the town's. | | Some municipalities have a "vacancy tax" to address this. | Buildings on good land shouldn't sit idle for years, that's not | a good outcome for society. | 6510 wrote: | IMHO it should be by specific designation and the tax should | be like a fine - for not using it. Say, you can buy a train | station but you are going to have trains stop there. Buy a | gas station and you are going to sell gas. Buy a store front | and there shall be a store. Own farm land? Then farm? It | should be like that even if local politics doesn't want it. | Anything else makes a mockery of city planning and it could | destroy decades of work. | throwaway2048 wrote: | this is visibly happening with retail and commercial | properties, but people here swear up and down it absolutely is | not happening with residential properties. | | The incentives are nearly identical. | sudosysgen wrote: | It would be insanely ideologically inconvenient, yet it's a | known reality. | | The only possible solution is to _make housing a bad | invenstment_ , but that's too unpopular. | ethbr0 wrote: | You don't have to make it a bad investment. You can | differentiate vacant and non-vacant investments. | | I.e. Vancouver's Vacant Homes Tax (11674) | http://bylaws.vancouver.ca/11674c.PDF | dionidium wrote: | This doesn't make any sense. The value of a lease on these | properties vastly outweighs any property tax deduction. | bfdm wrote: | Yes but I think the suggestion is that the taxes ought to | (eventually) exceed the gains from asset value growth. We | should want active main streets, and discourage squatters | with empty space. | dionidium wrote: | A much better solution is to eliminate the zoning | restrictions that lock properties into specific uses and | ease the permitting process that makes it hard to convert | these empty storefronts into something else (while also | discouraging speculation by letting supply naturally grow | to meet demand). | | But, frankly, even if I'm wrong about that, the point of my | original comment is that the OPs claims _make no sense_ , | because, again, the implication that they can come out | better under the current regulations by keeping the units | empty is _incorrect_. It is arithmetically wrong. | | They would make much more money if they leased the units. | | So whatever explains these empty storefronts, it isn't | this: | | > _Fast forward to today, all of those stores and more are | shuttered... the rent is still too damn high... and the | absentee landlords that own these buildings are actually | rewarded with property tax benefits for keeping them | EMPTY!_ | | Unless what OP means by "[they're] rewarded with property | tax benefits for keeping them EMPTY!" is that they lose | money relative to their other options. | | I don't know why this explanation appeals to so many | people; it doesn't survive a second of scrutiny. | notatoad wrote: | you're correct, when considering a single property. | | the problem happens when an absentee landlord owns a dozen | buildings on main street. if a third of their properties are | empty and they lower the rent to the point where people will | occupy them, it drives down the rent for the other two thirds | of their portfolio. if they keep some properties empty to | hold the rents artifically high, and they don't have to pay | property taxes and management fees on the vacant ones, they | can just hold the properties for free while the land value | appreciates. | dionidium wrote: | This still doesn't make any sense! Lower rent is worth more | than no rent and the property appreciates _either way_. | Keeping a unit off the market to keep the rents up is kind | of a silly plan if you never end up actually renting any of | the units. | useful wrote: | My understand is that commercial real estate loans | require additional collateral for lower rents than what | was agreed to when the mortgage was created. Building | value is basically (monthly rent * constant).Accepting | lower than when the mortgage was written will trigger | provisions that value the property differently and | require the building owner to add principal to get back | to 25%. | | If lowering the rent by 10k a year lowers the value of | the building by 100k, the building owner may have to add | 25k that they don't have to keep the building from | falling into default. If you have a completely empty | building and you accept a lower rent in one of ten units, | you could need to put down 250k it of you have many | building under one loan they may want millions because of | how it changes the loan valuations. | ethbr0 wrote: | Any tenant comes with risk. Risk has a financial cost. | | Ergo, lower rent is _not_ always worth more than no rent, | even all else excluded. | | Example: you rent your property to a tenant for $100 / | month, who does $5,000 worth of damage to the property, | and declares bankruptcy when you sue them for recovery, | in addition to the time you spent installing them + | evicting them + dealing with recovery. | [deleted] | ethbr0 wrote: | > _don 't have to pay property taxes [...] on the vacant | ones_ | | Property tax abatement depends on local laws, correct? | | On the other hand, I assume you can claim the usual | boatload of expenses (e.g. mortgage interest, upkeep, etc.) | against vacant properties, thus generating a paper loss to | offset income generated by other properties or activities. | | The real lynchpin appears to be: vacant properties are | allowed to contribute tax losses to their owner(s). | | Whereas in reality, what we _probably_ want is something | more akin to "If you have not fully utilized (i.e. leased | for a percentage of the timespan) a property in the last X | months, you can no longer claim any tax expenses for value- | based (i.e. mortgage, financing, property taxes) components | of the property. You can still claim expenses related to | the improvement of the property (e.g. maintenance, etc.)". | resonantjacket5 wrote: | I don't know which city johnnyApple is commenting on but if | it's American ones what is happening is there a glut of | commerical/retail properties | https://www.bloomberg.com/graphics/2020-commercial-real- | esta... (There was excessive retail even before covid aka | also why many malls are dying). However the land is still | appreciating if it can be converted to residential | apartments/homes though it does depending on zoning laws. | ab_testing wrote: | I am sorry, but I don't understand this logic. The owner still | has to make mortgage and property tax payments on an asset that | is not yeilding anything. Sure the value may be growing but how | fast is it growing if it is sitting empty. Empty building with | no maintenance tend to wear down and often get graffitied and | broken into - all of which involves further mitigation costs. | johnnyApplePRNG wrote: | In this particular case, the owner has had full ownership of | these properties for over 50 years. No mortgages necessary. | | The value of the properties have probably increased 10 fold | above the rate of inflation in that timeframe. | | >Empty building with no maintenance tend to wear down and | often get graffitied and broken into | | That's exactly the reason why they should be incentivized to | get a proper tenant in there ASAP. | | I don't want to walk a downtown filled with barred windows | and security guards behind every storefront. | colechristensen wrote: | The logic is that you either lower the rent until a building | is being used or sell the property to somebody who has a | better idea for something to do with it. | | The idea is making it expensive to leave a building empty to | force down rent prices and property values which is in the | best interests of people who want to participate in the | economy instead of collecting rent from it. | emodendroket wrote: | I am not sure what societal benefit we're getting from | bailing out failing landlords. It's not as though they're | employing a lot of people, or any of the usual justifications | we might have for propping up a failing business. | lumost wrote: | Land is an easily leveraged asset. While an individual can | only typically borrow 80% of the value, a bank/investment | operation could easily leverage the land to 95%+. | | Given that property is returning 8% in competitive districts, | all the landlord really needs is for the property to make | better than 3% return to make money from ownership. | | Actually leasing the property or maintaining it simply adds | costs to the arbitrage. | [deleted] | notatoad wrote: | >The owner still has to make mortgage and property tax | payments | | they don't _have to_. if there is no demand for the property | in its current state, they can redevelop to a use for which | their is demand, or they can sell the property to somebody | who will redevelop it. | JKCalhoun wrote: | No word on the street that the big box stores had moved in and | captured all the local business? | syshum wrote: | it is easy to put all the blame on the land lord, and I am sure | they are partially to blame. | | However in many area's "downtown" is not a good place to be, | there is limited parking, little public transit, high crime, | high vagrancy, and the city does not spend much in keeping up | their end of the bargin either. | | I know more than a few places that left downtown not because of | increasing rents, but because of decreasing customers and other | issues with being downtown, they moved a little outside the | city core where they can have their own parking lot, their own | good signage with out tons of regulations, get deliveries with | out issue, etc... and the business boomed. | | Me personally, I live in the 2nd largest city in my state, I | refuse to go to the down town area. There are plenty of | businesses down there but there is no parking, higher prices, | smaller shops, and it just is not enjoyable to me. I do not | like high density... | golemiprague wrote: | Might be true for American cities with their car based | suburban structure but it is a complete different situation | for European cities. | l33t2328 wrote: | The owner is still paying property tax and not taking any | income from those buildings...their value would have to be | growing aggressively each year for that to be remotely worth | it. | cascom wrote: | While I whole heartedly sympathize with the sentiment of the | article (no one wants to see local institutions forced out, chain | stores move in, or storefronts sit empty), and real estate | developers and "speculators" no doubt make an easy target, it | would seem that the author thinks that neighborhoods can and | should keep their current character and not evolve (for the good | and the bad). | | It somehow always strikes me as odd how some tenants think that | they should not be subject to market forces, if you want to lock- | in prices for more than 1-10 years, buy. | xerox13ster wrote: | > if you want to lock-in prices for more than 1-10 years, buy. | | Many people who are tenants are tenants precisely because they | can't afford to do that when speculators have manipulated | market forces to artificially drive up the prices. | rdtwo wrote: | These aren't real market forces if the properties are staying | vacant. It's likely that the tenants are getting hit by 2nd | order effects of bad regulation like the tax thing or financing | requirements that incentivize leaving properties empty | acd wrote: | I think this is an effect of near zero interest rates from | central banks. With near zero interest rate loans will rice real | estate price go higher and thus rent increase | adflux wrote: | Yup... Wonder what will happen when the bond yields and | interest rates go up | jdavis703 wrote: | There's also the fact that we had a pandemic. Some cities had | an empty storefront problem before the pandemic, sure. But a | lot of places just gave up. | rcpt wrote: | Prices can go up but rent doesn't have to. | | Price to rent ratios are huge in California because speculative | demand far outstrips actual demand. Most landlords are cash | flow negative and own only so they can bet on equity wins. | rufus_foreman wrote: | >> Most landlords are cash flow negative and own only so they | can bet on equity wins | | That's the "Ponzi financing" phase of Minsky's financial | instability cycle. It typically does not end well. | mensetmanusman wrote: | Amazon won economies of scale. The only thing worth selling in | storefronts is services. | | If cities want stores that sell things, they will have to | subsidize them. | lazyjones wrote: | > The only thing worth selling in storefronts is services. | | The downside of Amazon is lack of selection for quality. I | prefer to go to brick-and-mortar stores if I need a minimum | acceptable quality of e.g. bedclothes. On Amazon you get 1000s | of low quality products from China and no real help discerning | better choices (reviews are fake, price is no indicator, | specs/info by the seller is not reliable). | delfinom wrote: | This, either as I get older my demands for quality is | increasing or Amazon is getting increasingly garbage, beyond | Walmart standards. | pessimizer wrote: | Walmart quality is miles beyond mean amazon quality. | Walmart got where they are from brutalizing their vendors, | not their customers. Their vendors are punished for | excessive returns. | Dumblydorr wrote: | Neighborhoods are communities, empty storefronts are just one | symptom of community-waning overall. A lot of things are | declining during covid, like social club membership, in person | gaming, in person sports playing, places of worship, dance clubs, | bars, restaurants, etc. Just so many institutions were battered | into an earlier decline due to Covid. | cowmoo728 wrote: | Empty storefronts were a huge issue in prime manhattan shopping | areas since I moved there in 2015. At least in Manhattan it's | not due to covid. There may have been a brief spike in | vacancies in mid 2020 but the vacancy rate in 2019 was already | extremely high. | | https://www.bloomberg.com/news/articles/2019-08-12/vacant-ny... ___________________________________________________________________ (page generated 2021-07-24 23:00 UTC)