Daydream I - The SEC and bank regulators start requiring banks (& such) to disclose how badly their portfolios are impaired by $Pretend/month "rents" that nobody is paying.
Daydream II - When local zoning authorities require ground-floor retail in new developments, but the local vacancy rate for such space is over (say) 5%, then the developer receives a "lease put option" - allowing him to rent that retail space to the zoning municipality at (say) 80% of the then-current local rental rates for similar spaces. If the municipality fails to pay up, it loses its zoning authority.
> When local zoning authorities require ground-floor retail in new developments, but the local vacancy rate for such space is over (say) 5%, then the developer receives a "lease put option" - allowing him to rent that retail space to the zoning municipality at (say) 80% of the then-current local rental rates for similar spaces. If the municipality fails to pay up, it loses its zoning authority.
I see what you’re getting at but for all of americas zoning woes, I don’t think the answer is to make a patchwork of laws that say “if current zoning causes a bad outcome, cover their losses or lose your zoning authority”
Trying to understand what you are going for here. In my experience in 2 separate cities, lack of ground floor retail leads to barren neighborhoods of luxury condos that aren’t in walking distance of anything meaningful. And frequently, the ground floor retail that is put in is priced unreasonably so as to stay vacant. But you think that we should encourage everyone to overprice so as to increase the put option value? And you like the idea of vacant space?
they're building these ground floor retail everywhere here.
the only useful one is a grocer that sources labor from volunteers for discounts on food.
the rest appear empty or have bars /(also empty) or some other useless high expense niche purpose.
it's definitely a situation that zoning alone won't fix. I'm definitely in a food desert and the closest grocer is a coop that probably doesn't support low cost food options.
there's no capitalism or market based fixes here. you need to actually get your hands dirty if you want to improve quality of life
zoning and business laws prevent market based solutions, so we don't know that there aren't market fixes. The retail space prices are so absurd because there was only a limited part of the city where you can do retail. Go to 'third world countries' and there are plenty of groceries in neighborhoods as well as street vendors that are illegal in the US.
You’re right, if we have this authority we could just radically relax zoning laws in the first place. Most of the things people are using zoning for, like not living near noise or pollution are already directly regulated, and directly regulating the bad thing works better anyways.
As a landlord, I could rent to a tenant for $2k/mo with all the risks and wear/tear from that lease - or I could hijack the rent to $20k/mo, let the property sit empty for the predetermined time, and then force-feed the lease to the city.
>80% of the then-current local rental rates for similar spaces.
That is to say, you benchmark it. If someone across the street is renting their place for $1000, and the city says you cant rent yours, they would have to pay you $800 to keep it empty.
Benchmarking sounds complicated, but is extremely common. My city reassesses my property value using benchmarks every year to determine property taxes. Of course, they use totally unrealistic numbers, and I have to call them out on it, and then they back down because they are indefensible.
I think your first proposal addresses the root cause.
But the second proposal - forcing municipalities to write options with unlimited potential losses - is silly. The whole point of the zoning authority is to say "it'll be best for the neighborhood in the long run for there to be some retail shops here", and it makes sense whether you're talking about a lot or the first floor of a building. If the development isn't profitable with the ground-floor retail requirement, then just don't build it.
Some sort of option might work, but it would have to be something like: the municipality can choose to rent the space for a fixed price if it's vacant for long enough. This encourages the landlord to rent it for some higher price.
If a property is vacant for 6 or more months out of a year, the (government regulating this) can forcefully change the 'offered' terms to be as good as the best for any active lease's term item among all leases within 10 miles, and also go beyond with up to 50% discounts on any monetary restrictions imposed in those terms. This includes deposit and lease rate.
The former part is to break unusually onerous terms that might exist which I'm not aware of. The latter is the club to encourage flexibility and settling on not long term national retail clients.
> Daydream II - When local zoning authorities require ground-floor retail in new developments, but the local vacancy rate for such space is over (say) 5%, then the developer receives a "lease put option" - allowing him to rent that retail space to the zoning municipality at (say) 80% of the then-current local rental rates for similar spaces. If the municipality fails to pay up, it loses its zoning authority.
The ground-floor retail thing in residential developments seems to be a dud. There's a huge amount of such retail being built in Silicon Valley, but not much interesting moves in. I've been looking at Google Earth. Nail salons, phone stores, ice cream, and rental offices that stretch half a block to fill up the space. No place to park, and the buildings themselves won't generate enough traffic for their ground floor retail.
Even in areas with much foot traffic, such as downtown Redwood City, about a third of the retail space is vacant.
Part of the problem is that the new retail spaces are very large. They get built out to the size of a chain pharmacy or bank, because chain tenants are like the golden ticket of stability, yet very few businesses can profitably, reliably fill spaces that large.
If you look at thriving ground floor retail in traditional cities, often the storefronts are as small as 25 feet wide.
Parking availability can increase retail patronage but the parking actually has to turn over.
Free street parking that is occupied all day by the same car results in at most one net new customer, which isn’t good, and most street parking in the US is either free or priced low enough that people park too long.
These retail places have no parking at all usually. Some have parking in the garage of the building where they are located but this usually involves driving around the block, taking one specific entrance and then driving inside the garage to a designated spot following cryptic signs, it's not unheard of having to take a ticket to be validated by a shop later. These arrangements are not much better than just plain absence of parking, IMHO.
Almost as bad is street parking: even if it's turning over it does not matter since you have a very limited number of spots and no place to wait for a spot so most people will just move on if they don't find a spot (and won't go to such a place intentionally as the chance of catching a free spot is miniscule).
at least part of the idea is that the area should become dense enough that foot traffic either from the home or transit should become the lion's share. At the end of the day parking lots are worth less and generate less tax than developments.
with most of America though, it's hard work because actually getting to that level of density is chicken and egg; and then of course in California the ghost of Prop 13 rears its head and discourages residential densification in particular.
I can only talk about the observable reality, where a retail shop without parking is a very low revenue enterprise even in an expensive area. E.g. West Los Angeles has plenty of dinky shops with no customer in sight next to busiest places in the city. It's pretty hard to raise money for a business on the hope that Santa Monica will turn into Manhattan, I imagine.
Parking costs a lot of surface area. Especially parking lots.
If you just removed the parking and replaced it with nothing, that wouldn't increase patronage.
But if you used that area to increase density instead, that could increase patronage. Especially if you go dense enough for the area to become a destination in itself and to make public transport a sensible option.
But there are no parking lots to remove in these first-floor retail spaces so you cannot increase density. The outdoor shopping malls, on the other hand, with enormous parking lots and no housing nearby somehow manage to get a lot of custom. It could be that the idea that a retail without parking is set to thrive is just wrong?
Malls in the US are suffering from a retail apocalypse as well.
Really the root issue is that there is too much retail square footage in the US. Retail sq ft per person is 23 sq ft, compared to 2-5 in Europe and Japan. In that context building new retail is a fool’s errand. https://www.statista.com/statistics/1058852/retail-space-per...
Those spaces are wacky. There isn’t enough density to support wages of a person working there and not enough parking to pull in outside customers. They would make good personal studios for the locals but the landlords want too much or too onerous of a lease agreement.
Not sure about even studios - if this had been viable somebody could have made profit by taking over a commercial lease and sub-leasing the space to individuals under more suitable terms (a lot of of rental apartments seems to be ran this way already, the entity that leases them is often not the actual owner of the building).
My theory is that they build the first floor facing the street as "retail" because they don't think an apartment in such a location will be profitable (much less so a condo) as it's going to be a very hard sell for the prospective tenants/owners. It's much cheaper than residential space and if somebody leases it - you get some profit but if not, you are not losing much.
Seems like women have been indoctrinated to think that nails are important. Sorry, they are not. No man ever considers nails when regarding a woman. Only women look at nails when looking at other women.
The supposed attraction of long nails is like the pale-skinned attraction in all agricultural communities: pale skin means you are a rich lady-of-leisure, living inside the big house, not a farmer or laborer working under the sun in the fields.
This prejudice used to be true in western societies before the Industrial Revolution. But now it is reversed, with pale complexion meaning you are poor and work in a factory, but sun-tanned complexion meaning you are rich enough to holiday in Spain or Thailand to get sun in the winter, or now even get UV radiated on a sun-bed.
(As long-haul flights have come down in price, sunbeds are even cheaper, and warnings about skin cancer hit home, the inverse prejudice may be reverting back to the original pale-skin preference).
However, the farm-based prejudice is very much alive in East Asia (Japan, China, Korea, Thailand, etc.). Women from these countries carry parasols whenever there is a hint of sun, even if they have paid a lot of money to go to the sun on holiday, in say, Thailand or Bali.
[So there is the bizarre contradiction of western women paying for UV sunbeds, even as eastern women carry parasols on a hazy day.]
Nails are like that: you cannot have long nails if you are a farm worker, or craftsperson, or work in a laundry or a kitchen. Long nails mean you are lady of leisure, hence enviously regarded by other ladies.
Long decorated nails are not an indication of attractiveness to men, they are always and everywhere a signal of class, from one lady to another.
You know that nail salons ain't about making your nails longer? (At least the vast majority of what they do is not about installing nail extensions are anything like that.)
> Only women look at nails when looking at other women.
That's the same as men going to the gym and working hard on their biceps and triceps. (Many women do appreciate some muscles, but when you talk to them you will learn that the butt is the are you should focus on, if you want to maximize attraction for most of them. Leg day, every day.)
But there's nothing wrong with doing anything just for a kind of beauty that opposite gender by and large doesn't care about. As long as you care about it, that's fine.
> However, the farm-based prejudice is very much alive in East Asia (Japan, China, Korea, Thailand, etc.). Women from these countries carry parasols whenever there is a hint of sun, even if they have paid a lot of money to go to the sun on holiday, in say, Thailand or Bali.
I live in Singapore. You are right that many people here don't like to get too much sun. Me included. (But that's far from everyone here. Some people don't care too much.) I don't think there's much of an overlap between people going to sun themselves in Bali and the kind of people who carry a parasol.
Back to the nails: I just clip mine myself, and they honestly look fairly terrible. I could go for the same length but have them done nicely. Not even with decoration or nail polish, just nice and with clear lines and perhaps some polishing. (And whatever else they can do.)
If I worked in a customer-centric job, that would be absolutely vital. Or if my hands showed up on video a lot etc.
None of this has anything to do with long nails or attraction by the preferred sex.
Fun fact: the preponderance of nail salons can be credited to an American actress having her manicurist teach Vietnamese refugees how to do French manicures so that they could find gainful employment. https://www.bbc.com/news/magazine-32544343
In Seattle it’s a lot of dentist offices and new 150-seat restaurants, or at least a revolving door because no restaurant fills that size and they inevitably go under.
The solution is actually an "occupancy tax". If you aren't renting out a space within some number of months, you start owing tax on what your financial agreement says is your "rent". The longer you go unoccupied, the higher that tax should get since your unoccupied front winds up contributing to "blight".
That’s precisely what our current inflationary monetary policy does.
You can argue whether that’s good or bad but we have governmental policies that encourage productive use of assets so it’s not out of bounds to suggest other policies for land assets.
I readily admit I have no idea if this would be feasible in practice, but what's to stop landlord ABC, Inc from skirting the law by setting up shell company XYZ, LLC, and then leasing the vacant space to that company? In this scenario, XYZ would essentially just pay themselves rent causing ABC to avoid the vacancy tax.
Is that not fine? You are collecting tax on rental income so there is still a strong incentive to put someone else in there.
And, if you have a financing agreement, you will have to shuffle around (and pay tax on) the rent that you officially declare in the financing agreement. You can't just put a nominal rent on it or that violates the financing agreement.
The overall point is simply to make reducing the rent to attract a tenant more attractive than leaving the place empty for multiple years.
Then you would violate your financing agreement as the rent would be below the capitalization threshold and you would have to cough up money to the bank.
I don't think you understand the issue.
The issue here is that many of these financing agreements specify a minimum rent and if you fall below that you are in violation of the capitalization requirements and you owe the bank money. By contrast, missing rent is considered a temporary condition and can be tacked onto the back end of the financing agreement.
So, zero rent does not cause capitialization issues, but lower rent does. Thus, landlords have a perverse incentive to leave a place unrented rather than lower the rent.
An occupacy tax breaks that perverse incentive.
The goal isn't to grind up landlords. The goal is to cause rents to come down when they should. Right now, the back end financing agreements are keeping rents artificially inflated.
Hmmm... how many of these financing agreements specify a minimum rent? I've never seen this or heard of this (but this is way outside my wheelhouse, so I'm 0% confident I would've). My initial searching doesn't give me the impression it's common.
There are plenty of other reasons too, and I can’t find any evidence of minimum rents being common in financing agreements, so without that this reasoning looks really flawed.
> SEC and bank regulators start requiring banks (& such) to disclose how badly their portfolios are impaired by $Pretend/month "rents" that nobody is paying
You are looking for non-performing loan reporting. The FDIC collects these in detail to the degree that, should you want to override GAAP, you have sufficient model inputs to calculate in the aggregate.
Why not just force land lords to lease out the space at whatever the market will bear even if that amount is near zero. That way we can have local art space or makers or pottery spots or just cowork spaces? Most of those land lords are asking more than market rates hence the vacancy
In NYC a corner lot at 55th street and 8th avenue sat vacant for nearly 30 years while a developer waited for the leases in the surrounding buildings to expire and those tenants could be removed.
30 years of us neighborhood residents suffering with a blighted, overgrown lot so that a developer could build their overpriced high-rise. During a good chunk of those 30 years, criminals used the unlit, boarded up lot as a convenient place to victimize passersby from the street.
Right in the middle of Midtown Manhattan. Land Value Tax needs to happen.
How would a land value tax change this? The developer was paying a property tax the whole time, and this tax explicitly considers the value of the land.
A vacancy tax may have helped but maybe not. A useful disincentive would need to reduce the developers anticipated return on combining the parcels - and it’s not even clear that this would be a good goal
The idea is that a land value tax would have a far higher rate on the value of the land. The empty lot, dilapidated building or surface parking lot, right now, pay far lower taxes than a big building sitting next door. With a land value tax that is revenue neutral, those that own underdeveloped land get blasted, as they now pay the same as the as their neighbors, instead if orders of magnitude less.
I wasn't using the term incorrectly. I was very intentional about what I said.
Property tax doesn't adequately tax the value of the land. That's the whole point. This was a vacant, unbuilt lot in the heart of New York City. For ~thirty years. That shouldn't even be a thing ever.
Currently the building pays about 20M/yr in property tax. Having a vacant lot there for three decades is many millions in property tax that the city never recieved.
I know you were not using the term incorrectly. My problem is with the term, altogether.
As you've said, you wish to have a higher tax on land. That is very reasonable, and a policy position that one could examine within the established context of our property tax regime.
> Property tax doesn't adequately tax the value of the land. That's the whole point. This was a vacant, unbuilt lot in the heart of New York City. For ~thirty years. That shouldn't even be a thing ever.
No tax will prevent this behavior if the final benefit to the owner is high enough.
How would a land value tax on three adjacent parcels stop an investor from waiting 30 years for the chance to combine the parcels and unlock far greater value?
> No tax will prevent this behavior if the final benefit to the owner is high enough.
Well, naturally. But a speculative bet that a un-/under-developed piece of land will become vastly more valuable in 30 years looks less and less appealing the more the owner is taxed on the value of the land itself, vs. the value of the improvements upon it, which for a undeveloped parcel is by definition very low.
I don't know the specifics for NYC, but I do know that there is effectively no jurisdiction within the US that even comes close to a full LVT as imagined by Henry George.
>How would a land value tax on three adjacent parcels stop an investor from waiting 30 years for the chance to combine the parcels and unlock far greater value?
The goal isn't to stop a developer from combining parcels, or whatever their development objective is — LVT changes the calculus on speculative investments, and hopefully benefiting tax payers as well.
If a developer wants to sit on a parcels for 3 decades, they're still able to do so but they'll also need to pay up for keeping high-value land vacant. That money can then be reinvested into the community.
> If a developer wants to sit on a parcels for 3 decades, they're still able to do so but they'll also need to pay up for keeping high-value land vacant. That money can then be reinvested into the community.
How is that different from what happens now?
It sounds like what you are saying is that you don't believe that property taxes are high enough since there exist vacant buildings.
That is a fine thing to believe but there is nothing about the current structure of property taxes that goes against this, in principle, besides the tax rate.
I'm not arguing for specifics in implementation, rather the outcomes: Better use of productive land and infrastructure.
If the current structure isn't providing that, then perhaps LVT is the way to go over our current structure. If it turns out LTV didn't provide the desired outcomes, then let's try something else!
The current status quo of letting developers speculate endlessly while holding back growth or even providing negative economic externalities doesn't seem to be working as well as it could be.
You and I are in agreement (see my responses earlier in the chain).
All of this has nothing to do with a land value tax; instead, some people believe that cities should not allow vacant properties. This is a fine opinion, but it does not need to invoke a 100 year-old theory on taxation
Property tax has a low tax value for the land itself and a high value for the improvements on the property. This means a very valuable, but empty, plot of land has a low taxable value in most jurisdictions in the US.
The vast majority of the neighborhood in question is 4-8 story buildings. A lot of them being walkups.
The tax system allowed a developer to take a 30-year speculative bet that eventually they would build their skyscraper. Their plans almost completely fell through the year before construction started because they were planning an even bigger building than they built but couldn't lock up enough tenants. They settled on a 40-story, 1 million square foot tower that stands there today and dwarfs all of the buildings at its feet.
I hear you, and I can sympathize as someone who has lived in cities that have changed rapidly.
However, I can see a long-term venture fund taking the exact bet you suggested. If the value of the new building that combines parcels is high enough, there is no way a land value tax would address your desire to stop landlords from waiting for opportune development projects.
What you would like is a punitive vacancy tax, perhaps combined with a required sale after a certain amount of vacancy.
My ultimate question is why you might want this. A land value tax is supposed to encourage the highest and best use of a parcel. This developer recognized that the highest and best use of a parcel might actually include the use of adjacent parcels. Shouldn't we encourage this?
The problem is that it’s too difficult to get rid of tenants. The incentive should be to hold the building in a non vacant state until it’s time to combine the lots and build the mega tower. The reason it was vacant is because New York tenants have unreasonable rights.
Do you have examples from any of these cities we can look at? I am in Seattle, for example, and the land my property is on is 1/10th of the total taxed value. The real value is inverted.
Look at bcassessment for a great website that shows the property values of British Columbia with land and improvements broken out. It’s updated annually as the assessments are updated
Looking at Vancouver for an example it’s easy to see how often the houses themselves are insignificant when compared to the value of the underlying land.
I don’t have examples but in my coastal city, land values (for homes) are near 20% of the improvement. Edit: I'm seeing 40% land value compared to total assessed value for homes in my neighborhood, incidentally
Couldn't one argue that the property owner is maximizing value by not renewing leases and waiting for everyone to leave to build a high rise? Seems the issue here is tenant laws preventing the property form maximizing value. (resulting in this drawn out process in the meantime)
If there was a land value tax implemented, it seems like we would need even less tenant laws in order for the property owner to properly maximize the value of the land to pay the hefty taxes they can't control (such as immediate eviciton if a better use for that plot comes about etc).
Or do we expect the property owner to have all the responsibility for this "land value tax" but none of the authority to update his proeprty to meet the new cost in a timely manner?
>During a good chunk of those 30 years, criminals used the unlit, boarded up lot as a convenient place to victimize passersby from the street.
This sounds like a problem with the police system, if criminals managed to keep getting away with using the building for many years when it was known they operated from there.
If a landlord has a storefront that he's letting sit empty, paying the mortgage on the property (and also the existing taxes, if they aren't part of the mortgage), and the insurance, and the security... why do you think that a land tax is going to change things? Especially if a land tax replaces a land-plus-improvements tax, which may come out a wash for many storefront-owners? (And, if it's a ground-level storefront in a highrise, their taxes may go down, because the land is a lower part of the value of their property.)
Don't change the incentives (very much) for this particular behavior, and watch the behavior not change.
They're probably not paying a mortgage on a property that may have been purchased decades ago, especially if they were buying cheap land before it came into high demand. Insurance and security for vacant buildings and especially vacant lots is pennies; certainly much cheaper than for a developed property with tenants. The only serious cost of a non-productive property for a landowner are property taxes, which are currently structured such that developing a property causes them to go up, while leaving a property undeveloped keeps taxes low.
Taxing the land value is a major change to the incentive structure.
If tax is based on land improvement, a flat parking lot in a busy area is profitable, even if it doesn't provide optimal value to the community. The owner may wish to add some buildings to the lot, but land improvement tax means they have to pay extra to have and keep those buildings, even if a recession keeps them empty.
Land value tax flips this, removing some of the risk of adding value to a property while discouraging hoarding.
I don't see how this can work in practice. You grant the government infinite power to come in and say that your land could surely be used to build a 50 story luxury apartment building and therefore you now have to pay tax on a $50M imagined value. Even though the land might actually only be worth far less on the open market.
This is basically just a way to arbitrarily take away land from owners without any controls, since nobody can afford to pay taxes on imaginary buildings that don't exist.
The government isn't coming in and saying what you could build and taxing you based on the value of the building. It's just taxing the value of the land without any improvements at all. The developer is going to pay the same taxes no matter what they build, so they rationally should make as efficient use of the land as possible, but that most efficient use is determined entirely by the free market, and they are free to make less efficient use so long as they are comfortable leaving money on the table. If you're not going to do something with the land that generates more value than it being left alone, then you just leave it alone.
> It's just taxing the value of the land without any improvements at all
> rationally should make as efficient use of the land as possible
These two statements are contradictory.
The value of the bare land (just pure dirt) is low no matter where it is.
But the second statement is where the consequences show up. The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.
So, tell me how is that not a tax that is based on something that doesn't actually exist today? The assessor can say: Sure, it's just bare dirt, worth nothing right now, but you could have a skyscraper there and if you did, it'd be worth a lot. So we'll pretend it's worth a lot and tax based on that.
The other bad consequence of LVT is that it's supposed to force every bit of land to the most financially productive use. Do you want to live in such a society? Something like a free playground is never the most income-generating use for a patch of land, but it's a wonderful thing to have in towns.
> The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.
This is fundamentally incorrect. It is a tax on the bare land. While the value of bare land is substantially less than the value of both the land and improvements, the land is by no means free. It is a scarce resource. Just try getting someone with an acre lot of beachfront property in a resort town to trade you for an acre of remote and barren tundra.
Let's say you have a vacant lot that you purchased for $25k. You want to build a $300k home on it. Let's say there is a standard property tax of 1%. Before you build your home, your property taxes would be $21 per month. After you build your home and your property gets re-appraised, your property taxes would go up to $270 per month, more than a 10x increase. While this is small compared to the cost of a mortgage, it is owed in perpetuity, even long after the house has been paid off. By leaving the land undeveloped, a landowner can keep their tax burden low.
Conversely with a LVT of say 5% you are paying $104 per month for the vacant plot of land. Build a $300k home on it and your taxes remain $104 per month. Thus there is no tax benefit to leaving the land undeveloped. Note that at no point did the potential use of the land get assessed, other than the free market value of the bare land.
Further, an LVT does not force every bit of land to be optimally financially productive, it just doesn't incentivize unproductive uses. Under the current system, it's better to have an empty lot full of garbage than a free playground, because by cleaning it up and putting in basic amenities you have increased its tax burden. Under an LVT, the land being a public park is the default, and the public gets just compensation for giving up any such spaces to other uses.
> This is fundamentally incorrect. It is a tax on the bare land.
A tax on bare land based on what?
I find these LVT discussions fascinating because we seem to be using same words to mean different things; while I see the LVT proponents truly believe what they say, I can't wrap my head around how that meaning comes from the statements.
Let me try a different thought experiment.
Let's say I own that acre of beachfront property in a resort town. Completely undeveloped. For some historical reason, there are restrictions on that land which prohibit any development of any kind in perpetuity. It must be left as-is forever, untouched by human hand.
All the surrounding acre lots are valued at $100M (those lots don't have any restrictions, so they are built up with luxury condos owned by celebrities).
Under LVT, is the tax on that acre very high or very low?
Later something happens, let's say a constitutional amendment is passed which outlaws and overrules all such land restrictions. My bare plot of land is still bare, nothing on it. Under LVT, does the tax skyrocket overnight due to the constitutional amendment?
> The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.
Yes and no. You're not taxing the land as if it was bare or as if it was full; you're taxing it based on the perceived value to a developer.
> So, tell me how is that not a tax that is based on something that doesn't actually exist today? The assessor can say: Sure, it's just bare dirt, worth nothing right now, but you could have a skyscraper there and if you did, it'd be worth a lot. So we'll pretend it's worth a lot and tax based on that.
The value of an empty lot is approximately equal to the value of the developed lot right next to it. This is already being done.
> The other bad consequence of LVT is that it's supposed to force every bit of land to the most financially productive use. Do you want to live in such a society? Something like a free playground is never the most income-generating use for a patch of land, but it's a wonderful thing to have in towns.
Government-owned land could be tax-free since (in theory) it's being used for public good.
> The value of an empty lot is approximately equal to the value of the developed lot right next to it. This is already being done.
So I feel like you just agreed with my premise, no?
The value (and thus the tax) on my empty lot with nothing but dirt is going to be set by the tax of the developed lot right next to it, which might contain a highrise apartment building.
So you're saying I will be taxed on the value of an imaginary building I don't actually have, just because the neighboring lot has one. So there's no way I can afford to pay that since the bare dirt doesn't give me any income. So I will lose this land due to the tax.
> So I feel like you just agreed with my premise, no?
Maybe. I can't tell if we're talking past each other.
> The value (and thus the tax) on my empty lot with nothing but dirt is going to be set by the tax of the developed lot right next to it, which might contain a highrise apartment building.
Yes, the empty lot will be higher because of the highrise apartment next to it, BUT...
> So you're saying I will be taxed on the value of an imaginary building I don't actually have, just because the neighboring lot has one.
No, because the appraiser wouldn't include the building's value; they'd only be appraising the average value of land in the area.
> So there's no way I can afford to pay that since the bare dirt doesn't give me any income. So I will lose this land due to the tax.
That's intentional. If the land is only profitable for highrise apartments, then you should sell it to someone who can afford to build some. Note that this would help with the housing crisis.
Earlier you said it is intentional, which to me is the same as saying it is a goal.
> What is the advantage of letting people possess empty lots?
Maybe not too bad if it is truly an empty lot. I've been using empty lot in the thread as it is the minimum possible value, but LVT hurts people particularly when the lot isn't empty.
Imagine that lot contains your home, one you've lived and loved for decades and raised your family in and you're rather fond of it. Just because an 8-plex goes up next door, shouldn't mean now you are forced out because they start taxing your little house as if it was an 8 unit building.
LVT is based on the cold clinical idea that land is nothing but an investment that must be squeezed to it's maximum possible profit at all times, without any consideration given to what would be nicer to have there. I would hate to live in a society like that.
Taken to it's logical conclusion, LVT means we should bulldoze Central Park in NYC and fill it with tall apartment buildings. Just imagine the trillions of dollars of increased value!
> Imagine that lot contains your home, one you've lived and loved for decades and raised your family in and you're rather fond of it. Just because an 8-plex goes up next door, shouldn't mean now you are forced out because they start taxing your little house as if it was an 8 unit building.
Except your house wouldn't be taxed like it was an 8-unit building. The tax would only go up if the 8-plex increased demand for the land itself. If it's a poorly-placed 8-plex, the opposite could actually happen; but if the land value does go up, it would only go up a little bit unless they started developing a lot in your area, at which point you'd have the same sorts of problems either way.
> LVT is based on the cold clinical idea that land is nothing but an investment...
No. LVT discourages land investment. LVT is based on the idea that land belongs to everyone, so no one should profit just off of owning land.
> nothing but an investment that must be squeezed to it's maximum possible profit at all times
Sounds like that is exactly what LVT is. It becomes unaffordable (due to taxes) to do anything other than squeezing the maximum profit out of every square meter of land.
The result would be every lot in town is built to the same profit-maximization potential and the moment something more profitable comes along everyone is encouraged (due to increasing taxes) to tear all down and build the new thing that squeezes even more profit out of it.
It sounds like a terrible dystopia, I still haven't heard any argument that makes LVT sound like it would lead to building a nice town to live in. The US is already far too concerned about profit above all else to the detriment of mental health, imagine LVT on top of this squeezing maximum profit from land at all times.
> Uh huh, so you’re taxing land based on some theoretical “highest and best use”?
Someone has to eat the opportunity cost of sub-optimally used land. Would you rather it be corporations and house-flippers, or renters and homeowners?
> Pure academic nonsense.
Several places have implemented LVT (eg Pennsylvania). What's nonsense is treating it like idle theory-crafting when there's evidence to judge.
> Punishing people for not doing what YOU want with THEIR land.
Not all societies believe in land ownership to begin with. Owning land keeps other people from using it, so it should come with a sense of duty.
Also, no one under either system is arbitrating the correctness of land use to pick winners and losers. The free-market still decides what is or isn't effective land use; it's just that under LVT people are disincentivized from speculating on empty land.
At that point couldn’t the local government use eminent domain and just seize the property? Then build public housing units that benefit all instead of the landlord sitting on a vacant lot.
That assumes the government will make optimal use of the land. With a land value tax, there is still total freedom to do whatever you want to improve the land, you just make more money if you use it more efficiently. A landlord can still sit on a vacant lot if they so wish, or do any other inefficient thing with the land, but they are constantly feeding money into the public coffers for the privilege of doing so. Perhaps the money could be spent on affordable housing projects, but it could also be spent on any number of different things that may be more useful. The system is fundamentally flexible to a community's needs.
A good example is the Additional Buyer's Stamp Duty (ABSD) in Singapore. It's an additional tax on foreigners or Singaporeans who buy multiple homes. There is a normal stamp duty when you buy a home, which is 5%.
In order to "tamp down" the housing market, the ABSD in Singapore is now 60% for foreigners. Yeah, the tax on a home is 60% of the purchase price. So a $1M home would have a $650,000 tax when you purchase it ($50,000 BSD + $600,000 ABSD).
Does that stop rich foreigners from buying multi-million dollar properties as investments? Nope. In fact, one wealthy Chinese guy bought a whole building for $293M and had to pay $60M in ASSD (it was only 20% back then).
Say, how does housing get built in Singapore? Do they have weird taxes and just hope that developers deign to build housing,
or does the government there do something more direct, in order to get housing built?
Land is taxed? It’s called: property taxes. Most of the value of property in NYC is the land itself. A land value tax isn’t going to magically change that.
Once taxes pay for basic government services, this brings up the question of to what extent it's your land. Sure, you can't step on your neighbor's rights with lots of noise or something it isn't zoned for, but I feel like if you can't use it for nothing, it's not really yours.
Land ownership is indeed an illusion. Your "ownership" of real estate is contingent on the existence of a suite of government apparatus that can verify the authenticity of that piece of paper you call your land title. It's contingent on the existence of a military force that holds the border of your country, such that a foreign entity does not just come in and install a different land office that doesn't recognize that piece of paper you call your land title.
This is one of the core principle of Georgism, that the value and usefulness of a piece of land is tied to the infrastructure that the government has built around it. Therefore the titleholder should pay for the upkeep of that government and infrastructure, hence the idea of the land tax as a single tax.
Land and property taxes are different and they’re different in exactly the way required to yield really, really stupid outcomes.
If you have two identical lots, one that’s developed into apartments, a restaurant, and some office space, and the other that’s left as dirt surrounded by a chain link fence, which one has the lower tax bill?
If you have a 20+ year investment horizon, which approach allows you to more easily capture the appreciation created by all your neighbors who are working their asses off to build restaurants and offices and attractions?
While introducing some entropy is great in theory, the result in reality would be a de facto rent which is just passed further upstream. Please play the game Monopoly and you'll see what I mean.
You've got it backwards, that stuff doesn't even exist in Monopoly™: There is no property tax nor land-value tax, because once you've purchased some land you can hold on to it forever for no additional cost. (Fees from moving across the board doesn't count, those aren't tied to how much you own.)
That's not an oversight either, the original game was made to demonstrate that landlords were bad and with gobble everything up to become despots if not stopped.
Even if those factors did exist, the rules still don't allow players to arbitrarily raise rent, otherwise you could just demand infinity money from another player and it would be a short game indeed.
It's ironic you would cite Monopoly given its connection to Henry George, the historical figure who first proposed the land tax the poster you're responding to was certainly referencing.
The tax is payed to the state not the banks and would replace some of the patchwork of other taxes they use, many of which indirectly discourage land improvement (by taxing the value of the property built on the land) or being productive (income tax, which does not tax vacant lots, only productive ones)
> Why do storefronts remain empty for more than a year in some of the world’s highest-rent
retail districts? Landlords with vacancies derive option value from two sources of uncertainty.
First, increasing downstream retail demand may drive up market rents tomorrow. Second,
different tenants may have different willingness to pay for the same space, creating an incentive
for landlords to wait for a particularly high rent offer. High move-in costs, search frictions,
and high contract dissolution costs for landlords amplify this option value. We estimate the
model parameters by matching quarterly vacancy rates, lease-up rates, and tenant exit rates
from a comprehensive, high-frequency storefront tracking service, combined with micro data on
commercial leases. In a counterfactual exercise, we find that reducing the variance of the match
quality distribution by 50% reduces long-run vacancy rates by 33% on average, while reducing
the variance of the aggregate state variable has almost no effect. Finally, we use the estimated
model to quantify the impact of a retail vacancy tax on long-run vacancy rates, average rents,
and social welfare. Vacancies would have to generate negative externalities of $18.72 per square
foot per quarter (about 30% of average rents) to justify a 1% vacancy tax on assessed property
values.
> High move-in costs, search frictions, and high contract dissolution costs for landlords amplify this option value.
i was excited to see the number of popups and temporary exhibits / art galleries increase during the pandemic, and was hoping this would lead to the commodification of starting a business in a vacant storefront
turning a lot into an H&M or a bank would definitely require a lot of capital, but is there a way to help encourage short-term businesses like holiday markets and popups to fill these vacancies until a 'real' tenant can take over?
The problem with popups for customers is they pop-off again so the advantage of bricks and mortar is diminished. You need to take the product back in 2 months for reasons, but where? That shop now sells decorative yoga mats and has never heard of you.
A webshop might be gone and broke but it might not be. The friction of shipping isn't offset when the likelihood is that the popup will be gone.
In general the rent is too damn high and popups don't really solve that problem and I don't know how we can.
i'm imagining a warehouse in New Jersey near an office complex that houses the 'physical address' of these brands, and handles things like logistics / shipping / returns, while the 'face' of the business is in a short-term storefront somewhere in the city
Possibly an opportunity in a short term brokerage who has the leverage Spirit Halloween has with landlords, with unsophisticated short term lease seekers with no leverage working with the brokerage. Bin packing problem of sorts.
I imagine for landlords this would be like picking up pennies on the street while hundred dollar bills are flying out of your pocket. Real estate isn’t exactly a “creative solutioning” space…it’s extremely cutthroat.
if you look at real estate as a thing to park cash into you see better what is going on. park your cash in a building (who cares if it is rented out or not just so long as it does not lose much of its value). Then if you need cash borrow against your asset. with low interest rates that was very viable to do as more than likely the building was appreciating in value faster than the rate. now that is much harder to do.
The commercial real estate refinance wall over the next 3 years will bring some sanity to this situation. If not successfully refinanced at current rental income, loan to value, and debt rates, property ownership will shuffle, potentially enabling lower rents.
Beyond scope of this thread, but won't happen due to structural demographics. Fed will achieve soft landing at the cost of corporate profits. 9.6 million job openings as of last month's labor report, 3.6 million Boomers retiring per year, 1.8M deaths 55+ annually (with a majority of those folks still in participation rate). Inflation almost reined in, and we are at full employment. TLDR Can't fight the Fed, and the Fed can't fight demographics.
I do not disagree. The real test will be over the next 2-3 years if we see a lot of commercial real-estate go up for sale. But the real trick is will they find another sucker to buy it.
Also as you point out later on participation rate is going to be interesting within 10-15 years. It does look grim at the moment but that will change companies will have to pay more which will raise participation rate (not as much as I hope but it will raise it). I remember it was during the oil boom a couple of years ago that mc'ds was having trouble hiring people and were paying 20+ an hour just to compete against the oil riggers and that was when min wage was like 7 bucks. Remember scarcity usually raise prices in a market.
I also posit that this is about to be this generations '1970s 1930s' moment. The boomers are hanging in there because they DO remember those moments. But age gets everyone in the end. It is interesting to see people mad about 5-6% interest rates. My parents had to pay 13%+ interest for a house at one point in the late 70s early 80s. I have the paper receipts to prove it.
Commercial real estate is falling in on itself. When you start to notice banks outnumbering actual businesses in your area, it’s already too late. Another thing to look for is development around big box stores. If your only option is to drive there, somebody’s trying to offset or unload.
Can you explain the "Another thing to look for is development around big box stores. If your only option is to drive there, somebody’s trying to offset or unload." part?
I think there are some stores that make lots of sense colocated beside a Home Depot/CostCo/Best Buy/Walmart/Sam's Club/Target/outlets, and some that don't. But of course walkability/car ownership levels are changing.
If you have to ask yourself whether it's more convenient to walk or drive across the sea of asphalt to get there, you're missing the point. Are you seriously going to walk from CostCo to Target? How about from Target to Best Buy? Sure, you might be able to grab something to eat at the MOD Pizza, but you're driving to your next destination. Are you starting to get it?
I remember Louis Rossmann talking about this in one of his [many] rant-against-New York video. In fact, he was talking about a building across the street from where I had just moved in. It was vacant from at least when I moved in in late 2020 to a few months ago.
What do the lenders do when the owner can't make the loan payments because he is not taking in enough rent? They don't want to own vacant property, and they don't want to own delinquent loans.
Here's a very simple example of the problem:
- landlord gets a loan on a building, say 10 shops at $100
- 3 of them go under and are empty, total income still $700, 3 empty ones still valued at $100
- if he rents out those 3 for $50, the bank will revalue everything at $50.
This means he will need to refinance at a reduced asset value, which means either the loan isn't refinanced or at a higher risk (rate).
It gets worse… your other tenants want the reduced rate and you try to sell… but the cap rate will imply a lower valuation that gets realized upon sale and files for bankruptcy. Or doesn’t sell and waits for rents to return.
Due to incredibly low interest rates for the past decade the loan payments haven't been very high so they've been able to kick the can down the road.
Interest rates are high now, but those new rates don't kick in until the loans hit their maturity dates. As rate are kept high, more loans will refinance to higher rates and more of these borrowers will go under.
But this is the market at work, surely? If the lender lent money to someone when the market was good, and then the market changed and the debtor can't repay, then that's just bad luck and they lose their money. That's what's supposed to happen in a market.
> What do the lenders do when the owner can't make the loan payments
Doesn't that cause a repossession?
So the banks somehow pushed a minimum rent clause to the mortgages, and now they're going to win big by repossessing in a market where the rent doesn't get high enough?
I don’t think winning big looks like owning property that couldn’t be profitably rented out by a professional land lord. Maybe on long time horizons it will, but in the short term that looks like losing your shirt but getting to keep your hat and pants.
It seems that these owners are making these payments somehow. If you have capital, you can maintain the fictional values of your assets (these mortgages) by not accepting rent. This can happen if these owners are big corps/funds and not a regular retiree that needs the rent.
Question is, if they are using these fictional valuations to maintain some other sort of financial schemes that helps them pay the monthly. The whole thing will be a pyramid scheme awaiting collapse.
There’s a lot of problems described here that are resolved by the city auctioning the property when it is not providing the services it is zoned for; at no reserve price, and using the auction price as the amount paid out by the eminent domain process to the owner (as the auction represents the fair market value of their vacant property on the market). The bank will be forced to mark down the loan’s value to whatever they get from the auction, over their objections, as it was their business risk decision to issue a loan for the property that exceeds its fair market value.
Perhaps this is possible in your state, but under the California state constitution eminent domain powers can only be used for enumerated state interests, when there is no other choice than to take private property, and the taking has to be the minimal taking that achieves the purpose.
I know under Kelo eminent domain can be used for any and all purposes in Connecticut, but that's not true everywhere.
Yes, that would have to change. California is definitely turning hostile to wasteful property management in their localities, so I hope they consider it!
One thing I didn't quite understand from the article is why the credit tenants, who are paying rents on vacant retail space, wouldn't just sublet their lease to another tenant to claw back some of their rental costs. With my admittedly limited understanding of the matter, I believe this is common in Sweden where I live, and I have anecdotally not observed any notable amount of long-term vacancies of retail space here.
Are there some rules prohibiting them from doing so?
TL;DR -- The banks demand a certain level of rent and the landlord has no leverage over the bank.
It would be interesting if this sort of covenant was made illegal/unenforceable. The downside to such a move is that it would make banks more cautious about lending on commercial properties, the upside is that landlords would likely optimize for cash flow and that would reduce vacancies. From a public policy perspective I could see it as a jobs creator since these storefronts hire people and create jobs.
What I don't understand is how it benefits the bank for the owner / borrower to leave a commercial property vacant, thus collecting NO rent, which could impact the borrower's ability to repay the loan even more. Possibly resulting in a default.
I guess the bank has the property as collateral. But liquidating the property is also expensive and risky. Generally if you want people to borrow money from you, you want those loans paid back with interest. It can't help business to have customers constantly defaulting and leaving you with physical assets and costly legal and liquidation proceedings.
The other thing the article mentioned was "credit tenants": big chains that will take out long leases and continue to rent even if they close the location and it appears vacant. But while clearly the banks would love these tenants, there wasn't a connection made in the article between "borrower is about to default because they can't find a tenant" and "credit tenant swoops in to save the borrower and bank." The only thing credit tenants seem to add to the story is that they are yet another reason there are so many vacant retail locations. A big chain opens a store, and then closes it because the under-performing location costs less to run out the lease than it does to keep it operating.
AIUI valuation of commercial real estate is driven almost entirely by NPV of rents. The lender loans against a value derived from some expected $/ft rent. If the space is empty, but offered at or above that level, then the landlord (and maybe the bank) might have some issues making payments, but both their balance sheets are the right way up. If the landlord leases some of the space cheaper than the target, then cashflow improves, but the value of the building drops because the current lease sets expectations for future rents. If they lease cheap enough, the landlord and lender might end up underwater and undercollateralized, and be forced to sell at a loss, wipe out equity, etc.
All else equal, both sides prefer paper equity to hard cash, so lose money short term rather than mark the asset to market.
What I don't get is the endgame. When the lack of cashflow makes the landlord go bankrupt and the lender has to repossess, doesn't that look bad for them? If you try to sell me a property with the promise that it can bring in $100/sq foot, but nobody has wanted it at that rate for 3 years, and it's in a neighborhood full of other vacant storefronts, why would anyone believe you? There's gotta be some externality that I don't understand.
>There's gotta be some externality that I don't understand.
The banks are over-invested in commercial real estate, is my guess, and they're attempting to price fix to prevent the price from dropping too quickly and putting the banks themselves under water
If you're betting that the lull in demand is a temporary thing and in the not too distant future people will start paying the prices they did before, then it makes perfect sense.
On a larger scale, even if you know some locations are never going to see the demand they once did, so long as some fraction do recover, then it's an overall winning strategy. Where that breakeven point is exactly is tough to say, but I'm sure you can find a good number of people bullish on long term commercial real estate.
My takeaway (and perhaps I have it wrong too) is that:
1) The bank doesn't have a mortgage on the commercial property, that's the owner/landlord.
2) The bank can tell the owner, "You can't lease this place for less than $100 per square foot".
3) The benefits to the bank from having "this place goes for $100 per square foot" on their books (or, conversely, the negative consequences of not having that one their books) are strong enough to keep the bank locking that rate in place, even if doing so increases the chances of the landlord going bust.
4) Worst self-percieved case for the bank is: "We own a commercial property worth a lot on paper, because on paper it's worth $100 per square foot, which makes it easy to find another buyer."
Kinda smells to me like the banks are trying to engage in price-fixing to keep the commercial real estate market from plummeting too far in value too fast
I have made similar arguments elsewhere on the Internet.
I believe this is the right analysis because the best comeback they have is a straw-man along the lines of "why do you hate Capitalism/America/etc?"
I really can't wait until the Big Bank/Big Real Estate cartel gets busted over this; they almost did in 2008 during the crash and somehow wiggled out of it with minimal losses, while bankrupting Greece, almost bankrupting Spain, and setting back the US economy a decade.
That was touched on in the article and in the report linked in another comment. Basically the bet is as follows:
1) I lower the rent $X and lease to someone now. This has a life time value of lease months * X
2) I leave it vacant, and lease to someone later for a premium rent $Y which has a lifetime value of $0 * vacant_months + $Y * lease_months.
The bet is that #2 is more money. What the landlord fears is that because leases are hard to break, #1 will leave them "stuck" for 'n' years at the lower rent.
In the Bay area during lots of competition for space, one could finesse this, if you were able to move easily, by leasing just "month to month".
I find myself imagining a cyberpunk future: The local Megabuilding is ringed with empty sockets along its ground-floor, bays of various standardized sizes and utility-connections, each waiting for tenants--with their treaded "stores"--to drive along, buy a few weeks, and carefully back in before unfurling their colorful interface to the wallets of the public.
I already see that happening, except without the Megabuilding. For example, I see lots of semi-permanent food trucks — they park in the same spot every day, running off of bottled propane and a noisy little generator hanging off the hitch, doing brisk business in a busy pedestrian-heavy neighborhood with lots of empty storefronts. This can go on for literally years.
On occasion the food truck will become so permanent that it's up on blocks in a parking lot, has a permanent eating area built next to it, maybe even has a cord running into a neighboring business. But that neighboring business is invariably a small business in an old, single-story building.
I don't know the cause of this obvious inefficiency. I assume it's that commercial real estate companies don't want to waste their time with small tenants. They figure it's more profitable to leave a large space open for ten years in hopes of getting a bank branch or chain restaurant, rather than rent each 25-foot section out to a separate tenant with higher turnover. Maybe they're right. Nobody gets rich running fleamarkets.
They have some interesting "pop up" stalls in downtown Atlanta. I have heard that the 'container village' in Las Vegas was kind of thinking of that too, based on a standard container, you just dropped it down and then moved it when needed.
Not necessarily from the perspective of the bank, but the borrower/owner, I've heard of the concept of `prevailing market rent` to be a driver of this.
If I rent out a space to A, they may have clauses that reference the rent/average rent for the building vs. their space. So it might be preferential for me to wait to fill a space at a higher price, financially.
In addition, renting out at a lower rate may end up turning up in surveys of rent in the area, leading to a lower average, meaning that future renters of space that is currently rented will try and negotiate downwards in the future.
For that explanation to work, the vacant spaces must somehow be excluded from the "prevailing rate" calculation. Perhaps by calculating their rent according to their asking price - which would, interestingly, give (large-scale, at least) landlords even more incentive to hold a few properties vacant - or perhaps by entirely removing them from the equation.
I don't know if GP's description is correct, but if it is then I agree with you (I assume) that $0-income spaces ought to be in some way included in the average.
Difference between building cost and leverage may cover that gap.
Let's say you buy a building with a 50 year mortgage for $50M. You're 10 years into the mortgage, so you've paid off $5M. But real estate in your area has done well, so the building is now worth $80M. If the bank forecloses on you then it's risky for them, but not as risky as it sounds.
They foreclose and fire sale the building for $60M (25% discount to make sure it moves). They get back the remaining $45M on the loan, and the owner gets $15M. Less than the $35M they'd have if they had sold it themselves.
The bank doesn't really care how much the building sells for as long as it's over what they are owed, because that's all they get out of the sale.
It seems like the market should favor a riskier bank who finances builds without such rent obligations. Are there barriers to this in the market perhaps, legal or otherwise, from preventing this theoretical free market approach from solving the inefficiency?
I don't get what's the point for the bank to demand some level if they are getting nothing in result? I.e. isn't less than what they want still better than nothing?
It's about the book value, with both micro and macro incentives.
E.g.
A 20pct rent cut might mean a 100million property portfolio has to be marked down to 80 million dollars for a 20 million dollar loss. That means:
a: lost bonuses for the bankers - self-explanatory.
b: potential balance sheet issues. That loss could mean the bank is now overleveraged and regulatorily required to liquidare assets. It could also drive a bank into insolvency if there are poor risk management practices (think Silicon Valley Bank having to mark down bonds due to interest rates.)
Losing even a few hundred thousand a month in rent isn't that big of a deal in comparison.
Agree with this. One of the more interesting things about following the NY AG trial against Trump is to get a peak into how banks "value" things and what they consider "good" or "not good". The overall value of a property is a function of its median rent, so it seems like if the landlord has no tenants but is asking for a high rent, that makes the property more valuable (algorithmically) than one with lower rents. That struck me as pretty wild but it is also clear why it is hard to get people convicted of misrepresenting values because pretty much there is a lot of "because I say so" in the rules.
Perhaps banks doing less business issuing mortgages for existing real estate would be good thing. For memory, I read that in the UK the banks issue 17 times more loans for existing real estate than for improvements and new construction. If that's true a lot of what banks are doing is generating fees from churn.
This won't make any difference to the number of retail jobs. People will buy the same amount of stuff and the retail industry will stay the same size. Would just be moving retail from one location to another.
That is a counter intuitive take, care to expand? Clearly it absolutely will "increase" the number of retail jobs in the neighborhood where the storefront is by virtue of a vacant space has zero jobs available and a leased space has non-zero number of jobs available. In the SF Bay Area that would also increase sales tax revenue for the city where the storefront was if they were selling taxable goods.
Another subtlety is that "storefront" sounds like "retail" but it really is just a place to do business, it could be a mini-mart, a clothing boutique, or some other goods for sale location, but it could also be a service business like a restaurant, a salon, or pet grooming Etc.
There's been a lot of conversation around rezoning/repurposing office space into residential, but I have not seen the same amount of conversation around retail. Changing a small storefront into a studio apartment seems like a very easy task.
Talk to an architect. Even ignoring zoning and fire codes, new-ish small storefronts tend to be long and narrow, with windows only on the street end. That's not a popular footprint for residential.
> new-ish small storefronts tend to be long and narrow ... not popular
Take a look at the picture of the boarded up storefronts in the article. Those storefronts share the widths almost exactly of the apartments directly above them, all of which seem to show signs of being occupied.
This would be an easy re-purpose and a good idea, but finance isn't incentivized to do so.
Does this have any relationship to little mini banks springing up all over cities?
There's dozens of Bank Of America Financial Center's all over my city. Old storefronts feel like there's a sizable chance they get converted. I'm not sure but many seem to have automated & video services only, albeit you can schedule in-person meetings?
> There's dozens of Bank Of America Financial Center's all over my city.
I wonder if they are also collecting some sort of tax credit for serving impoverished areas, thinking something around the lines of the NMTC: https://www.irs.gov/pub/irs-utl/atgnmtc.pdf (I'm aware of the CRA that's not what I mean, this is different)
TL;DR: Most of these are owned by huge mega-banks, and they are happy to eat the losses and play the long game waiting for real estate to be valuable again.
There are some cities like Austin that are still over-building commercial and residential space downtown.
I'm shocked the regular shopping mall (Barton Creek) is at high occupancy (>95%) and has substantial foot traffic on a weekday. I incorrectly assumed shopping malls were all but dead.
I may be misunderstanding, but I think what GP was getting at is that people were blaming retail vacancies on crime/riots, but that position has become impossible to defend, so now we can talk about the actual reasons. I think you and they are in agreement.
Daydream II - When local zoning authorities require ground-floor retail in new developments, but the local vacancy rate for such space is over (say) 5%, then the developer receives a "lease put option" - allowing him to rent that retail space to the zoning municipality at (say) 80% of the then-current local rental rates for similar spaces. If the municipality fails to pay up, it loses its zoning authority.