Why? Because apparently they need some more incentive to keep units occupied. Also, even though a property might be vacant, there’s still imputed rental income there. Its owner is just receiving it in the form of enjoying the unit for himself instead of receiving an actual rent check from a tenant. That imputed rent ought to be taxed like any other income.
Income tax when you aren’t receiving an income is a weird idea.
It sounds like the author wants a land tax, but hasn’t ever heard the term.
Another term is a vacant homes tax, something Vancouver and Toronto in Canada are using.
These sorts of narrow, “feel-good” taxes are the wrong way to go. People find loopholes to avoid paying them.
Georgist land value tax (LVT) is straightforward and cannot be avoided. It incentivizes owned land to be utilized, otherwise it becomes a huge liability. It does not disincentivize improvements (building stuff) because taxes are tied to underlying land values, not improved property value.
For those who are interested enough to read some fairly dense text on the topic here is a website for you. land value taxation: urban land values
Isn’t that just effectively another property tax where it’s needed? Afaik the issue isn’t people sitting on empty land, it’s sitting on empty housing.
Property taxes discourage building. Empty land is really cheap, property tax wise. Once you build on the land, property taxes go way up. This discourages you from building on the land.
Land value tax is the opposite. The tax you pay is based on how much the land is worth, based on its location and supply/demand. An empty lot in NYC would cost the same in LVT as if it had a big apartment full of renters. This makes it very expensive to hold on to unless you’re going to build on it.
The same applies for improvement. If you own a plot with a single family house on it in an area where demand is skyrocketing, your LVT is going to shoot up along with it. This encourages you to either tear it down to build apartments or sell it to someone who will.
The really interesting part about LVT is that it paradoxically makes housing more affordable. One of the biggest problems with the current property tax system is that people’s taxes don’t go up when the value of their property increases. This leads to little old ladies sitting on multi million dollar homes and paying almost no taxes at all in places like the Bay Area. Land Value Tax would force tons of those houses onto the market, causing prices to go down due to increased supply. Truly expensive areas would also have to have apartments built to cover the tax.
The other nice thing about LVT is that landlords can’t pass it on by raising rent. Since the cost of rent in the area directly determines the value of the land, rent increases just turn into tax increases. At some point landlords have to stop increasing rent otherwise everyone would move out and then they couldn’t afford the taxes, so this leads to an equilibrium.
The only thing left to solve in this system is to make sure taxes are used to benefit regular people and not wasted.
Empty housing is empty land. It just has a house on it. And there are times and places where landowners will spend decades sitting on infill waiting for land values to go up. Additionally, land that could be developed into high density housing but is being held at low density at the behest of the area’s politically connected residents, is kind of like “empty” land. It isn’t a binary.
Owning a house that you don’t inhabit is weirder.
So renting a house for your vacation is also weird?
It’s certainly wasteful. If people are going without any proper shelter, then having extra, mostly vacant housing to yourself should be discouraged.
This right here. The US averages some thirty unoccupied houses for every homeless person. A lot of those are just owned by investment firms who will sit on them because housing is treated as an investment first and a human need second. It’s not a supply problem, it’s a fucking greed problem.
The owner of an apartment is always receiving income from it, either in the form of the rent check or whatever utility it provides for him to keep it to himself.
I don’t like land taxes and other property taxes because I don’t think there’s a good way to apply those taxes progressively. Rather, if we just take the imputed rent of a given asset (land, building, car, etc.) and add that to the taxpayer’s income, the the progressive income tax can just do its thing.
No, he’s receiving value from it. That’s not the same thing as income. You can’t tax a percentage of value, only actual money.
You’re guessing how much rent he could be collecting and taxing a percentage of the imaginary rent payments… You’re really bending over backwards here to implement a property tax or vacancy tax but with a bunch of extra steps.
Wrong. Basically everyone who’s ever paid property taxes has been taxed on value. Even though I haven’t sold it or nor plan to anytime soon, I owe increased taxes because the estimated value of it has gone up.
Basically everyone who’s ever paid property taxes has been taxed on value.
Right, but you pay property taxes based on the assessed value of the property, you don’t also pay income taxes on property unless that property is actually generating an income.
For example, you don’t have to figure how much you could hypothetically rent your home for if you weren’t living in it and add that to your income, even if you are wealthy enough to have a second home or summer home or something. It really just sounds like NY should significantly raise the property tax rate for unoccupied residential properties other than a primary residence, especially unoccpied residential properties owned by a commercial entity.
Agreed, I’d drastically increase the vacant property taxes such that they might approximate income taxes for a leased property. Seems simpler for the same effect.
Don’t bother. This post is quickly becoming a circlejerk; they’re not interested in learning, just bitching and stroking each other off.
That’s not true. If I receive artwork, a car, shares of stock, room and board, free tuition, etc., then that is income on I which I will owe taxes. Figuring out the value of these things isn’t a guess. It’s an estimate based on actual market data. It’s actually kind of easy in the case of a rental property since the landlord will have advertised the rent amount. So, if he wants to pay lower tax then he can just lower his ask.
Btw Switzerland had this low though they are planning to get rid of it soon
Land value taxation is inherently progressive. That’s probably why it’s never been implemented.
Is it really? Isn’t a land value tax suppose to be flatly applied to the value of land and not change with respect to the adjusted gross income of the land owner?
You don’t need to adjust for income. How do you get high value land with a low income? How do you own high value land and not derive an income from it? You’re imagining an extreme edge case of some family that’s been passing high value land down, generation after generation, without ever leveraging this advantage into financial success.
The more valuable the property, the larger a component of that value that tends to be in the value of the location itself, as opposed to the capital improvements to that location. Low income housing, as cheaply built as it is, is built in an even cheaper location. Conversely, a house but for higher income people is built more expensively, but even greater is the access to good schools, jobs, shopping, low (blue collar) crime rates, and so on that a high value location provides.
And that’s just residential real estate, which is almost people even think about. With commercial and industrial sites, location becomes even more important.
People who talk this way don’t know what land value is. They imagine there is a relationship to quantity, when location is almost the entire driver. Maybe a thousand square feet of space in upper Manhattan or San Jose or something is comparable to a hundred acres in rural Wyoming, or wherever.
And what about the poor in cities? They already pay a land value tax… to the owners of the land. You will say that if the owners are taxed, they will raise rents… but if they can just raise rents like that, why haven’t they already? Normally, a tax can be “passed on” because a tax on a thing affects the supply of that thing: the tax raises costs, which lowers profits, which drives capital out of that industry and into another, which reduces the amount being produced, which allows the higher price.
But land is fixed in supply. If you’re imagining a way of increasing or reducing the supply, you’re not thinking about land, but capital improvement to it. The supply can be neither increased nor decreased. Its existence is not dependent on any industry or thrift or other service on the part of the landowner and, as such, any income derived simply from owning a location and leasing it out to others is unearned. It’s essentially extortion, one person renting to another the “privilege” of existing, and if there are any landowners not collecting the full value that can be collected, it is either because they haven’t found the highest price yet, or out of the kindness of their hearts.
I’m not sure what you’re getting at. My property tax bill has separate components for the land and the improvements upon it. I’m sure that a larger portion of my income goes to paying it than some of my neighbors.
That’s what I think too. A law where you pay more tax for additional properties you own on top of your first home. I don’t know enough about the housing market to know if such a law would actually help, but at first glance it does seem like it’d break up some of the corporate slum lord businesses around the US
“Income tax on their properties whether they’re rented or not” is just a long way of saying “land value taxation”.
I disagree. Land value taxes are flat unlike a progressive income taxes. Therefore, a land value tax can be unfairly burdensome to people with low incomes who happen to own land. If imputed rent is taxed as income, then the tax burden is more fairly shared. It also creates more insentive to keep rents low and units occupied.
deleted by creator
There are so many empty business spaces in my town because landlords can just sit on them – and potentially rake in tax credits – even though no one wants to rent at their rates.
Needs to stop.
That’s why San Francisco implemented a vacant storefront tax.
But getting commercial landlords to comply has been a struggle.
I was just in SF a month ago for the Dead & Co shows, and it really is astonishing how empty a lot of storefronts are, especially where we were staying up near North Beach/FW. Also too, the lack of late night food; in all the years I’ve been going to SF, you could always count on a noodle bar in Chinatown at 12-1a to be open, but not anymore. Not really anything except fast food. COVID wrecked that town. I’ve also never seen so few homeless people walking around, but I didn’t head over to Oakland.
It’s not just San Francisco.
Vancouver BC and nearby towns have a similar problem, and are working towards their own empty storefront tax.
they could repurpose those buildings (difficult but possible) to dwellings, which would revitalize the downtown businesses - but no, they’ll hold out desperately for a return to office that, if it was going to happen, would have happened already.
Meanwhile, there ain’t enough housing. Everyone pays more and the core rots.
The storefronts being talked about are already zoned mixed use, it’s really just the first floor street side storefronts that are barren, with residential apartments 2nd floor on up.
p.s. You gotta know where the late night eateries are.
Here’s a decent list https://sf.eater.com/maps/best-late-night-food-drinks-restaurants-san-francisco
Where do landlords get their money? (the money they exist with).
From renters.
If they have to pay money (as taxes) for rentals that aren’t occupied, where will that money come from?
From renters in the form of higher rents.
Are you SURE you want to go through with this?
The solution is simply for landlords to keep their units occupied and they can increase occupancy rates by lowering rents, which will also have the effect of lowering their tax obligations. I’m not sure what you think the problem is.
That’s certainly the preferable solution, I guess it’s worth asking if it would work out that way.
So for example, I own 100 houses and I earn £100 per month for each one. (Values for purposes of illustration only!)
Let’s assume 10% are empty at one time.
With an income of £9,000 per month I’m paying 20% tax on that, £1800.
Up that tax to £2000 under this scheme, costing me £200 per month.
so do I drop rents by £5 per building which is going to mean my income changes to £9500 minus £1900 tax for a net earnings of £7600
Or do I increase rents by £5 and keep running with 10% empty buildings? Earnings are now £9450 with a tax bill of £2100. Net earnings of £7350 while holding onto hope that I could rent out some of those other empty buildings?
Put simply, if I’m the kind of person who owns a 100 buildings do you imagine my instinctive response is going to be to cut prices or to pass on my costs to tenants?
If you’re that kind of person then you’re already charging as much as the market will bear. I think you would have an easier time doing what you can to fill the vacancies or just selling the vacant units.
If you own 100buildings, the proper tax burden is that you shouldn’t be able to own 100 no matter what the rent would be. The tax burden should be so high that you are losing money for each building regardless of rented status, until you get down to a reasonable number of homes of say 2. And you’ll pay a decent amount for that 2nd one if it’s in an urban area.
Or they’ll just raise rent further like they already do. Landlords already want empty units filled because in their eyes they are losing money on it being empty. They already have incentive to fill the units.
Thinking that’d they’d lower rent to fill more units rather than just raise prices further for current and future tenets to compensate additional expenses is frankily naive.
It’s not like landlords are gonna run out of people to charge more money for. It’s not like people won’t just lower their standard of living further to compensate for the increase like what happens already.
The only solution to high rent and the housing crisis is to loosen zoning laws and allow the building of both more affordable government housing and general housing and apartments in cities and high population areas to have supply meet or exceed the demand. We know from studies and real world examples that this approach works and is very effective.
Imposing a tax on vacant units would make it more risky for potential investors and companies to build more housing and thus the rate and speed of new homes being erected would slow even further due to this tax.
On paper this tax makes sense, but it ignores the reality of how landlords and multinational companies that build houses and apartments currently operate
I get what you’re saying. I agree that there’s no new tax policy that will fix the landlord problem on its own. Ideally, it would have to be combined with a massive build out of publicly owned housing and supporting infrastructure, especially transit.
Its owner is just receiving it in the form of enjoying the unit for himself
What’s actually wrong with that?
I don’t know about anywhere else but in Australia if you are using the unit you can’t claim the expenses as a rental, so there’s no advantage to keeping it empty.
It makes sense for landlords to hold out for higher rents sometimes. In NYC and probably other places, landlords can get tax breaks if they agree to rent stabilization rules, which set the limit for rent increases each year. One way for landlords to take advantage of this arrangement in to keep units off the market until they think rents are relatively high so that they can get the most out of the allowed increases, while still getting the tax break.
Also, with property values increasing, it can be very tolerable just on to hold onto a vacant unit. What do you need an annoying tenant for if the property keeps appreciating and you can even maybe get a line of credit out of it?
In the context of imputed rent, it doesn’t really matter what the owner personally gets out of keeping a property to himself. If the market rent for the unit is $2,000/month, that means the owner is getting $2,000/month worth of some kind enjoyment out of having it. That’s because if he didn’t own it he would have to pay whomever did $2,000/month for the privilege. It’s not immediately obvious, but the income is the rent you don’t have to pay when you are both the owner and possessor of a piece of property.
I just think that this is a type of income that should be progressively taxed like other income and that there will be benefits to doing so.
What’s really fucked up is that selling a rental property doesn’t incur the same tax penalties as selling a lived-in home. Should be the opposite. How ass-backwards can you get?
Landlords generally aren’t going to decline making money. If they’re not renting these units out, that implies that doing so would cost them money despite the rent they would receive. You can force them to rent the units out anyway, but ultimately they’re not going to agree to keep losing money forever. Either they find some loophole that does let them make money, or eventually you end up with abandoned property inhabited by people who can’t or won’t pay enough to actually maintain that property.
I’ve never owned rent-controlled property, but I did own a house which I kept empty for about a year instead of renting out. (Eventually I sold it.) Market rent wasn’t enough to motivate me to do the work and take on the risks associated with having tenants. I know another guy who lives alone in a big two-family house for the same reasons. Some people who don’t own property seem to think that renting it out is just free money, but things aren’t that simple…
If you read the article, they state exactly what you just said. NYC has many unoccupied apartments which are not being filled because the renters concluded that the rent would not pay for cost of upkeep. They’re not selling the properties either, though.
This is occurring in the midst of homelessness being on the rise. A law like this would be to either force the renter to put the property on the market, or fill the vacancy.
Honestly if a potential rental unit won’t cover the costs associated with renting it, I can’t think about how salable it’s going to be. Seems like a market failure and my guess is that it probably has to do with the extensive regulations on rentals in NYC and how hard it is to get rid of a bad tenant.
It may not be salable to a renter but it’s probably going to still be salable to people who actually need a place to live.
Also, yes, plenty of landlords would be screwed into a situation where they’ll lose money either way and will just lose more money from holding onto the property than from selling.
I doubt that. If a properly is salable and isn’t rentable, a landlord will generally just sell it.
What you are describing is the same problem though. If you sell it and someone comes in and renovates it for use as a primary residence, then it is no longer affordable housing.
The point I’m trying to make is that if renting the property out is a net loss and whoever owns it is required to rent it out, there’s almost no reason for a person who intends to comply with the law to want to own the property. Forget selling - why would anyone even take it for free if it was just a permanent money sink?
…why would anyone even take it for free…?
So they could live in it. Why does it have to be a money sink for the new owners if they get it for a good price (or even for free)?
The idea is that properties beyond the first get taxed more heavily. So if you’re going to buy an investment property, you better damn well make it attractive to rent.
Forget selling - why would anyone even take it for free if it was just a permanent money sink
Because it’s a place to live in without having rent being arbitrarily dictated by some random dude. It’s instead a tax you pay based on who you vote for.
Perhaps landowning as an “investment” is a shit idea, and that propety should be owned by HUD, or whatever regional equivalent.
I suspect a lot of it is an opportunity-cost fixation. If I rent this unit to you today at $900/month, what happens if someone comes in tomorrow offering $1300 and I have to say “sold out.”
I know with commercial space, the financing and valuation associated with the properties are dependent on specific rent levels, where it’s better for Wall Street to see an empty $4000 unit than a full $3000 one.
Landlords don’t generally leave money on the table.
Here’s two anecdotes about landlords leaving money on the table.
The thing is, there’s too much hassle and insecurity there for you. The income tax on empty properties would almost certainly change the equation, whether it incentivizes you to sell the building or rent it out, that helps tenants.
I wouldn’t say that I was leaving money on the table. There’s a difference between gross income and net income - my gross income would have increased if I rented my house out, but my costs would have increased as well. Once I accounted for the cost of my time, of the additional maintenance, and of the risk that I would get someone who refused to pay rent, trashed the place, and took a year to evict, I decided that the net income from renting would be negative.
I was just a guy with a house, not a professional landlord. I think a professional would have found a profitable way to rent out a house like mine (because it wasn’t rent-controlled). But these vacant properties are already owned by professional landlords - I’m not sure who you think would find a way to make money off of renting them out if the professionals can’t. And why would someone buy a property that doesn’t make money?
(I suppose some people would buy them for a low price as a bet that the restrictive regulation will be repealed someday. Where I live, you can already get cheap rent-controlled property in very expensive parts of town with the hope that you might eventually be able to get the tenant out of there. But I don’t see this as a viable large-scale solution.)
Either the properties are valuable as rental properties, they’re not especially suited for rental properties, or they’re not fit to live in. If they’re in the first category, great. If they’re in the second, forcing a landlord to sell instead of sitting on an empty property helps, in that it creates more supply of livable homes for people making the leap to homeownership (that’s the answer to who would buy a house that doesn’t make them money: people who want to live in it). If the property is unsafe/unlivable, it should be repaired in a timely manner or torn down.
Holding out for a better deal seems like common behavior for anyone. You describe doing it yourself. However, the consequences of withholding housing are pretty bad. We need policies that convince landlords to cut their losses sooner and either accept lower rents or sell to buyers who will.
deleted by creator
Why not simply take the property from the “landowners” and possibly even jail them for being a leech on society? If you own property that you don’t live in, you are taxed at 100% of the property value if it’s not occupied. If you declare bankruptcy you immediately forfeit the property. Easy.
The effect of this would be a massive disincentive for landlords to engage in major remodels or reconstructions to rental units, impeding growth in housing and remodeling of units beyond the kind of basic paint and sweep that is typical between tenants.
Just increase the land value tax.
They’re arguing against imputed income… possibly not understanding how it works… not that rent isn’t income.
I wouldn’t be so sure about that. Landlords should be legally compelled to keep their properties up to snuff and if that’s too much to ask then they need to get out of the business. As for renovations, if they have to do any that would make a unit uninhabitable for a period of time then that would probably warrant a temporary reduction of the taxable rent, which could be addressed in the permitting process. If renovations take longer than what was permitted, authorities could investigate to make sure the owner isn’t actually warehousing the unit, which would be a violation. In any case, tax on the imputed rent of the land would still be owed, so there’s always an incentive to complete renovations quickly.
Edit: as I replied here, I’m not a fan of land value or other property taxes.
Great idea if you want to make poor people more poor.
Why do y’all hate poor people so much? Is it like a racism thing or something?
How do policies that would put downward pressure on rent make poor people poorer?
There is a long history of passing costs onto the consumer. If costs go up for empty units, rents go up on occupied units to cover and / or recoup those costs.
This would also disincentives property owners from doing renovations by adding additional costs, since the units need to be vacant during construction.
Without functional regulations and protections around rents and renters, all of the pressure will just gets pushed down stream to impact the most vulnerable.
That’s certainly a risk, but it might be easier said than done to raise rents if some landlords decide to bring their warehoused units back to market. Of course, if they’re colluding and what’s actually going on is a capital strike, then all bets are off. One way or another, capital needs to be disciplined.
Absolutely, we need regulations to protect tenants and keep rents under control. We also need a massive effort to increase the supply of publicly owned housing. I think part of this has to include public acquisition of private housing, but it will help to start squeezing the landlords before hand with various measures in order to minimize the expenditure.
@CrimeDad @Coreidan I don’t believe this, but I will give it a go in trying to steelman this argument.
If landlords and real estate developers see a sector specific decrease in returns then they would decrease the capital in the sector and thus decrease the housing units made available for rent.
This theory ignores the real world where developers opted-out of low-income housing in favor of luxury real estate that either remains vacant or unoccupied while the owner uses it as value storage
TIL what steelmanning is.
At the end of the day, I don’t think the landlord problem will be fixed by adjusting incentives alone. They have to be combined with a massive project to build lots of publicly owned housing and the supporting infrastructure.
@CrimeDad can I introduce you to Singapore with 80% owned housing units by government
Are there some significant contradictions to their program? I’m not really familiar with Singapore or their housing policies, but it seems like they have a pretty low homelessness rate of 0.02%, which I suppose is a good sign. I know they have a very high population density, so maybe the high portion of government ownership helps with efficiency.
@CrimeDad the low homelessness is due to the highest rate of public housing outside of self-identified socialist countries. The first several decades public housing was primarily for relocated squatters and shanty inhabitants, but since the 1980s they’ve promoted it for middle class and upper middle class improving the public housing stock.
Decreased capital in sector means landlords own fewer rental properties. Would this make home ownership more accessible?
There are lots of ways to tax landowners, but ultimately they all punish landowners for existing (which is a great thing for society) so instead they become weird neo-liberal market based schemes like tax credits for entrepreneurs who own land in a disadvantaged area for at least 3 years. so that the people that will be targetted by the tax are able to avoid it by claiming that they also own the bodega in their slum, thereby making them an entrepreneur.
Ultimately it’s not that the people proposing these taxes can’t come up with better tax schemes, it’s that they are paid to come up with ridiculous schemes that are designed not to eliminate landowners.
So…who should own the land instead?
The occupant should own the land. Absentee landlordism shouldn’t be a thing.
Ah, well OP said “landowners” in general
Well your name has “soviet” in it, so maybe look at the place landowners had in various “soviet” nation states.
So…the government should own all land?
