In Amsterdam, any property that has been empty for over a year can be legally squatted, and once in, legal squatters may be hard to get out. For this reason, landlords tend to rent out their empty properties cheaply as "anti-kraak" (anti-squat), on the condition that the tenant moves out when the landlord needs the property again. This is quite popular for students because you often get a ridiculous amount of space for very little money, though it may come with excessive restrictions.
Amsterdam has (or used to have, perhaps) a pretty healthy squatting culture. Many squatters are ideologically driven and improve the neighbourhoods they're squatting in.
That's possible. I admit I haven't been keeping up, and my knowledge of squatting stems mostly from the 1990s, when I was a student.
I still think it's a very pragmatic way to fight real estate speculation. But my impression is that Amsterdam doesn't have a big problem with buildings sitting empty, so if squatting is illegal again, I guess they've found a different way to prevent it? I have no idea what that is, though.
Not wrong and not 30 years but 9 years out of date.
I still think its noteworthy, that Amsterdam had such a rule for a long time until very recently. It shows that there are precedents for how to deal with empty buildings.
I think its noteworthy, but in the opposite manner. Amsterdam tried such a rule and then got rid of it. What do the Dutch know about the costs of this rule that isn't in this conversation?
Well, this is not always how it works: many factors can lead to a reverse of legislation, such as stonger lobbying, backfire from a government held together by strong opposite ideas, or simply the measure might have solved the problem and a different rule might have been adopted (btw, assuming you are from the US, I think the idea of undoing medicare is a good example).
I have lived in the NL just when the change in squatting legislation was happening (2009-2015). My impression was that more and more parties that were ideologically against it got popular and this changed the agenda of policymakers, given also the pressure estate investors that were hunting for a treasure. But existing squats were definitely well integrated with the cities I lived in (Utrecht, Amsterdam), sign that this law somehow became part of the city identity.
It was mostly the right-wing parties (CDA and VVD) that wanted to ban squatting. No idea why they didn't succeed in banning it during the 1980s. From what I read about the history, I can't find anything about a law that explicitly allowed it; it seems it was simply the high court that didn't consider it breaking and entering when it was in a building that wasn't being used, presumably considered a building unused when it hadn't been in use for a year, and anyone living in a house for some time got the same legal protection as a legal tenant.
Conservative parties considered this a loophole in the law, progressive parties probably thought this worked quite well to prevent housing speculation.
But it appears it may have originated from a legal accident rather than explicit legislation. Still, during the 1990s it was explicit policy at least in Amsterdam to tolerate squatting within these conditions.
> But it appears it may have originated from a legal accident rather than explicit legislation.
See, this is something I never fully understood: people told me the same, but I mean, when somebody is allowed to go to the gemeente (town hall, kind of) and say "hello, I want to register as a legal resident of this address, I don't have a contract or anything and in fact I am squatting the building. Can I?" and the answer is "ok", I consider this somehow "explicit legislation", at least in practice, no?
There's a difference between legislation and policy. Legislation means there's a law saying so, policy means it's what the executive branch of the government does.
Though I'm sure there are big fuzzy areas between the two.
It wasnt a cost benefit analysis. It was a moral opposition to the idea of squatting after a rise of the far right into parliament and reporting that put squatters in the corner of left wing terrorists.
We can learn that certain people oppose the idea of squatters on a moral level. I dont think thats a surprising new finding.
Thats as helpful for a general discussion as a communist calling private property theft or a libertarian calling taxes theft.
We currently have rules in quite a few countries that allow nationalisation as well as expropriation under certain conditions. Not using your plot of land could get you expropriated in the Netherlands, just as you can get expropriated if the government wants to build something important enough on your plot of land. You know, like a border wall. You might get some compensation, you might not. Depends on the country and the laws of that region as well as the circumstances.
There are manuals out there called "It's still possible" in the Dutch squatting community.
Houses still get squated, but less often and the squatters have to leave much quicker.
A quick translation of a Dutch article explaining how squatting is still possible:
>Today, squatting is illegal. This means that if a building is squatted and the owner makes a declaration, a procedure is started by the Public Prosecution Service that can result in evacuation. The squatters must be informed in time, so that they have the opportunity to institute summary proceedings. That does not mean that the squatters can just be removed from a building once they live there. That is only possible if they seriously misbehave, break house peace, get in the way of the activities of a company, or are at risk because the building is in poor condition.
Yes there is, and it's fairly common as far as I can tell, but it's not universal. Roughly speaking, my impression at the time is that there are roughly three different types of squatters:
* Opportunistic squatters: they simply need a place to live, would like it to be nice and cheap, but don't have the time or dedication for any sort of activism. Mostly students and young unemployed people. Artists possibly, though they can also fall in the next group.
* Ideological squatters: they have political opinions about housing policy. They tend to know the law, but may also disagree with it. Likely to organise information meetings, protests, but also provide services like community centers or soup kitchens. Tend to take good care of their squats in order to show this can work, but the more militant type may organise riots. Amsterdam had a lot of "krakerrellen" (squatter riots) in the late 1970s and early 1980s, but that hasn't really happened since the situation got normalised. Though there has been the occasional evacuation where quatters had to be forced out. They usually leave of their own accord and obey court orders, though.
* Criminal squatters: don't care about the law, or may be very aware that they're breaking it. Probably doesn't care about the state of the house. Possibly involved in various crimes. I'm not aware of real criminal squatters in Amsterdam; crime happens more on the real estate owners side: lots of organised crime in Amsterdam is involves in the real estate business. That said, I imagine militant anarchists may also cross over from ideological to criminal squatters. And of course this is the group most likely to keep a low profile.
The German constitution mandates that (property) ownership brings obligations for the public good. Ownership is a construct secured by society, so society as a whole must at least partially benefit. As such, keeping a building empty can be considered theft, too.
> As such, keeping a building empty can be considered theft, too.
Your assertion makes zero sense even if we accept your thesis at face value. For example, it's absurd to leap from "society mut at least partially benefit" from private property to assert that private property not being used in compliance to your personal taste to be theft. That's just plain nuts from any angle.
You’re absolutely welcome to make an argument how a building kept deliberately empty of tenants over years benefits society.
You can consider that position nuts, but given the amount of public support and legal backing for a current initiative in Berlin to enact eminent domain against entities that hold > 3000 flats, “plain nuts from any angle” seems to be slightly exaggerated.
There's more to life than property rights. Keeping buildings empty in an area where there's high demand for buildings is harmful, and real estate is inherently subject to regulation already. Opponents of squatting do indeed complain that it's theft of some sort and should be illegal, and that's hard to deny, but at the same time it's a very cheap and pragmatic solution to a problem: one way or another, it ensures that buildings are kept in use.
Most private property was at some point converted to private ownership by violent acquisition. Owning land is not a natural right -- of you're not using it for societal improvement it seems right that society can cease to recognise your right in that land.
A similar thing happens with IPR, whereby governments can coopt it in times of need.
Not sure about the Netherlands, but from other places I know, if the empty building was dirty and falling apart, with broken windows and such, with junkies and other such people frequenting it, and the squatters painting it, made repairs, started doing community stuff (from soup kitchens to concerts), allowing some homeless/poor people to stay in, and so on, I'd qualify it as improvement over an idle building sitting there...
I don't, but I can qualify it. Some squatters run neighbourhood projects or cultural projects of some sort, workshops, art-related stuff, community center, information meetings, that kind of thing.
I don't know. From what I understand, they don't have normal tenant rights, so can be evicted pretty quickly. Yes, that sucks. That's the downside that comes with cheap space. You've got to pay the ridiculously overpriced costs for student rooms if you want stability.
I noticed in Egypt that are a lot of inhabited unfinished buildings everywhere. From what I understand, that's for tax reasons: you don't pay tax (or pay less) if the building is still under construction, but you can still live there.
A lot of text, but didn't read the obvious: Spain is having three elections in the next month. This is an electoral stunt with no reality behind. The statistics show that Barcelona (and Madrid) are at a historical minimum of empty houses available, yet the spanish population is migrating from smaller cities to the big ones. This is pushing the rents up, and the politicians are obligated to "do something". Colau, Barcelona major, has already fought against AirBnB last year, turned Barcelona in a heaven for squatters, and now this. Rents keeps going up, as the problem shown in the stats is the lack OF NEW HOUSES.
Spain suffered the worst housing bubble in 2007, and even now talking about building more is anathema. For Colau is even worst, as she built his political career fighting against the bubble.
There has never been as few empty properties as there is now (according to parent comment). As such, it should be less of a problem now than before? Not the other way around?
> The statistics show that Barcelona (and Madrid) are at a historical minimum of empty houses available, yet the spanish population is migrating from smaller cities to the big ones
> The statistics show that Barcelona (and Madrid) are at a historical minimum of empty houses available
There are few empty houses NOW. That is why, if Ada Colau was also NOW passing a law to fine people for keeping houses empty, that would probably be a political stunt.
HOWEVER, today's news is not about any law being passed, but about the consequences of a law passed in 2007.
With that in mind, let's see if that law has been effective at decreasing the amount of empty houses since then, as that's the relevant time frame for this news story (below I'm just quoting the figures from[1], first shared by [2], AFAIK):
(2007: the anti-empty-houses law is passed)
2011: 80,000 empty houses (9.6% total over the 2019 total housing number, so probably underestimated)
2016: 31,000 (3.7%)
2019: 13,000 (1.52%)
This trend is far more interesting, as it strongly suggests that the law managed to unblock 8% of the total housing in Barcelona in under 8 years, making it 6 times smaller than it was. Make any problem you have 6 times smaller and you'll understand how big a deal this is.
So, clearly not a stunt: Ada Colau is just following the rules given to her and everybody else. She may be the first one taking those rules seriously, actually, but in any case, if the fines were not issued, all the landlords in the 8% that did comply with the law, could sue the government, and rightly so.
More generally, Colau cannot possibly be responsible for all problems currently plaguing Barcelona. They have been brewing over years of incompetence under governments both from the left-wing unionist party and the right-wing religious nationalists alike, who have all been stealing from the middle class for their own profit for the last thirty years or so, just as the political elites of virtually every major Western country.
I definitely think Colau can be criticized on a number of things, and I generally agree she's an awful major, but nobody can blame her for problems whose magnitude is so big that they obviously took decades to fester.
You're right that people should keep partisan swipes out of their comments here. However, the other comment did include other information, while yours didn't; that's probably why yours got downvoted.
DC has a punitive property tax rate for vacant (and even more so for “blighted”) properties. Seems like it works ok, though there are loopholes and questions about how well it’s implemented. Also means that a developer who actually wants to clean up a blighted property and flip it now has to go through extra steps, since they surely don’t want to pay steep taxes in the meantime.
ANC Commissioner here. You can get an exemption from the vacant property status with a building permit.
There are a couple problems with implementation. First, DCRA is such a fucked agency that they widely miss out on rating properties as vacant. The property two doors down from me has been vacant for two years and I’ve reported it a couple times and they still won’t rate it vacant (and I’m an elected official). The DC Auditor released a report last year highlighting this problem, which costs DC tens of millions a year. Second, most developers will create a separate LLC for each property and they’re happy to not pay taxes and have a lien put out, etc., on the probability that they’ll be able to flip it before foreclosure happens. If they do run into problems, the LLC lets them cut their losses. DC needs to move faster and blacklist two-bit developers who do this (I have a blighted property in my district where this has happened, and the District is out of options).
DC’s new short-term rental restrictions might help free up some apartments. We’ll see.
How long does flipping take? The tax is only 3.3 percent per year for a vacant property. And while you're making improvements you can get exemptions. For 'blight' you need to make sure the outside of the building is intact; that shouldn't take particularly long.
I would like to see this in my city center (Oviedo, Spain) but for another reason. Commercial store front is sitting empty and rents are not getting lowered to match the demand. I suspect it's due to funds or banks owning the property and not caring. However for the city itself this is bad as it hinders new economic activity as well potentially leaves blight in the near future.
Each year, one owner of residential property in Vancouver is required to submit a property status declaration to determine if their property is subject to the tax.
Properties deemed empty will be subject to a tax of 1% of the property’s 2018 assessed taxable value.
Most homes will not be subject to the tax, as it does not apply to principal residences or homes rented for at least six months of the year; however, all homeowners are required to submit a declaration.
Net revenues from the Empty Homes Tax will be reinvested into affordable housing initiatives.
In general, municipalities are not allowed to run a deficit in Canada. Since high taxes which would result in having a surplus are politically unpopular, usually municipalities get just enough tax to fund their programs. That is when they are writing their annual budget, they define their total expenditure E, the total assessed value of all properties within their municipality V, and set the tax rate for the year by dividing E/V [1].
Because of how inflated the values of homes in Vancouver are, V is huge. So E/V is much smaller than the rest of the country. In 2018, the tax rate for residential properties was 0.246826% [2]. A 1% surtax would more than quintuple the amount of taxes owed.
[1] It's a bit more complicated than that. Residential and commercial properties have different tax rates for example. But not too much more complicated. Municipalities are not allowed to charge sales or income taxes like they do in some other countries.
Wow, thanks for this, I did not know this and now it makes much more sense as to why international investors saw Vancouver real estate as a piggy bank. In Texas many localities have property taxes of about 2.5% (though no state income tax).
I wish places would do graduated property taxes - I don't know of any place that does that (with the exception of relatively meager homestead exemptions and a few "mansion taxes"). I.e. if you really want to invest in affordable housing, why not have, say, first 100k have very low tax, 100-500k a reasonable tax, etc. Many municipal water and electricity bills work this way and they work well in promoting conservation.
I like the idea, but I think you would end up with many lots getting subdivided so that more of their tax would be at lower rates. And then the small lots cause logistical issues later.
We do the same thing in NZ - property tax (rates) is partially made up with a user pays service component (garbage etc) and a valuation component - you pay v/V (v is your valuation, V the total valuations of all the properties in the city) of the amount the city has decided to raise.
It means that if the valuation of all the properties in the city double you continue to pay the same property taxes because you pay the same percentage of the whole
That is just a proposal, right? Did it pass? Last I heard, London Breed was looking at other avenues to tackle the problem (reducing bureaucracy, expanding multi-use space allowances, etc.)
This is specifically about commercial vacancies. According to this article from the SF Chronicle[1], her approach to addressing commercial vacancies mirrors her housing strategy, but I'm not sure what's actually been implemented so far for either situation.
Fines seem to be more flexible in their enforcement and cancellation, possibly as negotiation tactics. The label, as opposed to 'tax', comes with the idea of punishment and can more logically be increased to higher levels in ways not possible if considered a cost of doing business.
Relatedly, it'd be interesting to see a tax with a built-in ratcheting up effect each year. Imagine if you had a tax that doubled each year a property remained vacant -- that'd be similar to how they're using these fines.
Sounds like how the repeater tax works in the NBA; each year you are over the salary cap,you have to pay a penalty per dollar over, and you pay a higher percentage each time you are over. Once you get under the cap, it resets.
The money gets split amongst the non-tax paying teams, with the idea of balancing competition between wealthier teams and poorer teams.
In the US fines are not tax deductible, so that's one fiscal difference between taxes and fines. I have no idea if Spain considers fines to be tax deductible or not.
On the other hand, in the United States the Eighth Amendment forbids imposing excessive fines, and a very good argument could be made that some of these fines could be classified as “excessive”.
The aim of laws is compliance. If the low and medium fines of previous years have failed to achieve compliance, and fines eventually escalate to high, I'd argue it's far from excessive. If it were excessive a much lower amount would have achieved general compliance with that particular law, would it not?
Nobody does, really. It has to be defined in context of the 'gravity of the offence'. I'm sure someone could make a good argument that 1% of the value of a property is reasonable.
As a 'fine', 100 or even 200 percent of a property could be argued reasonable. 'You aren't using this property as the law intended, so you have to give it to us and pay a penalty'.
If I steal an apple from Walmart, should the fine be 1 percent of the value of the apple? Clearly not.
It is exceedingly rare for a fine to be struck down as a violation of the Eighth Amendment. The standard as articulated by Waters-Pierce Oil Co. v. Texas, 212 U.S. 86 (1909) is that the fine must be "so grossly excessive as to amount to a deprivation of property without due process of law."
That case was about a $5000 a day antitrust fine, which had accumulated to $1.6 million, but had not forced compliance with the law. The Supremes concluded that the fine was not excessive, because the business was doing well enough not to comply despite the fines.
The fine would have to be grossly in excess of what it would take to force compliance by a reasonable business. A fine that amounts to a doubling of the property tax would almost certainly not be a violation of the Eighth amendment.
Well I would counter argue that if previous lower fines failed to influence anyone then a larger fine is not really excessive. I think the problem is that everyone always thinks it will be the other guy first and that why should they act before anyone else. Well the message is pretty clear now hurry up before the crap hits the fan we are serious and coming for you.
As these are investment funds, they would generally sell off the SPV holding the property. Whether they are tax deductible or not ultimately doesn't matter, as they are not collecting rent (i.e. they'd only pay tax on the gain).
Interestingly, tax refunds are not always tax deductible, either. I paid federal taxes on the previous year's state tax refund this year. How does that make ANY sense?
It makes sense because you didn't pay federal taxes on that amount last year. Ideally your withholding should have been perfect last year and your refund would have been $0, and then you would have paid the federal tax amount on it last year.
Relatedly, I got a ~$5k state refund last year and I'm not paying additional federal tax on it this year because the SALT deductions are now gone under Trump's tax changes, so my state tax burden doesn't affect my federal tax burden anymore.
Into the weeds a bit here, but if you deducted your payments to the state in 2017 on your federal 2017 tax return (filed in 2018), and you got a refund from the state in 2018, you should be entering that on your federal 2018 tax return.
Since you won't be deducing SALT in 2018, any state refund in 2019 wouldn't be reportable for federal tax year 2019.
If this were otherwise, people would have purposefully massively over pay to the state in 2017, claim a large deduction in tax year 2017, get a large refund in 2018, and not have to pay back the deduction they didn't really deserve.
Yup. I happen to be in an AMT situation where the state refund from last year isn't taxable this year, but it might still be for others as you point out.
If you park in a car park for too long but no one notices you can drive off and be totally fine. If you don't pay taxes someone could work it out and look in to history to catch you out.
Maybe fines offer more discretion for officials (easy to impose, revise, and target specific landlords) as opposed to a tax which would be more rigid (slow to implement, difficult to change)?
That's fair but I don't think, at least with empty buildings, the revenues would be anywhere close to being able to replace a significant portion of income taxes. The scales are vastly different. But I should apologize for an overly snarky initial comment.
Depends on how much unused real estate there is, and what counts as unused. There are beautiful places out there filled with cottages that are unused 80-90% of the year, while the locals struggle.
Taxes serve as a discouragement, so let’s tax the harmful things first. Then those that can afford it without any real harm to quality of life, then lastly everyone else.
An underused property tax hits the first two really well.
While we are at it, lets tax the vacant hours of the unemployed - those evil speculators who are consipiring to restrict the supply of labor. That will encourage them to work and thereby be able to afford all that brand new housing!
Much easier to beg for votes saying we "fined these evil landlords" instead of saying increasing taxes on empty buildings. I think there will be many fires in Barcelona this year.
I'm curious about the legal grounds for such a tax or fine.
If local zoning already governs what may be built or operated on a property, what principle allows a government to levy fines for lack of use of a property that has been built and maintained to the required zoning? (if to all other requirements, the property is not derelict, in poor condition, a blight or public nuisance?)
I didn't think that you could be compelled to be a landlord.
(By the way, Oakland also is attempting to put in place such a regulation, but to my knowledge, they have dumbed it down with so many exceptions -- elderly, destitute, social justice, etc. etc. that it's meaningless)
"The law the city is using, which gives it scope to fine negligent landlords after two years of leaving a property vacant, has in fact been in place since 2007 (before Colau’s election) but wasn’t implemented until during her tenure."
If a law's enacted by voters, and no law of a higher political body contradicts it, then that's what the government is allowed to do.
Well, that's basically what I'm interested in. Whether this law would stand if challenged with a constitutional due process (or other appropriate) claim.
Can only state the case for Germany, here, the constitution explicitly states that "Ownership entails responsibilities" and that ownership is not absolute but subject to greater good considerations.
If someone would implement a law or rule like the one in Barcelona (or probably Vancouver) in Germany, it would probably be based on such a consideration.
"3. Nadie podrá ser privado de sus bienes y derechos sino por causa justificada de utilidad pública o interés social, mediante la correspondiente indemnización y de conformidad con lo dispuesto por las leyes."
"No one shall be deprived of their goods and rights but for a justified reason of public utility or social interest, with fitting compensation and conforming to applicable laws".
It's the exact same: social interest and public utility are enshrined in the constitution for the exercise of eminent property.
I suppose if local zoning laws require a property to be used for residential purposes then not using it for residential purposes would be breaking the law.
Leaving a property empty to wait for price appreciation is clearly not residential use.
It may well be a misinterpretation of Barcelona's zoning code. Apologies if I gave you the impression that I was familiar with that law.
What I'm saying is that it would make sense to me if a zoning code (or other regulations) were to include a requirement to actually use the land/property for the designated purpose (if possible) or swiftly sell it to someone who will. That wouldn't compell anyone to be a landlord.
In my view, such a rule would be completely consistent with the usual meaning of the words "use" and "purpose" and it would be consistent with the fine.
I was recently able to travel to China for the first time and was fascinated to learn about their housing market. Apparently the Chinese government doesn't have a property tax.
For men in China, owning a home is already incredibly important. It's practically a requirement for getting married, to the point where a woman's family would almost certainly disapprove of a marriage if the man doesn't own a home (which, keep in mind, would be called an apartment in the US). So that coupled with China's huge population means there's already a major demand for owning a home.
China is also experiencing incredible economic growth. Local governments are pouring money into "economic development areas" where you can find modern shopping malls, skyscrapers for businesses, and lots and lots and lots of (what we would call) apartment buildings.
And this isn't just happening in Beijing or Shanghai. There are "tier 3" cities in China with populations the size of LA and NY where you see clusters of dozens and dozens of 40-50 story apartment buildings shooting up.
I was told that the value of homes in these economic development areas -- even in "tier 3" cities -- is going up by an absolute minimum of 10-15%/yr (that's being conservative). So if you have money in China, of course you invest in housing. There's no property tax.
When I see these clusters of apartment buildings popping up all over the country, I really wonder how many people are actually living in them, and how many are just getting turned around year after year for a profit. Chinese people have an unfathomable amount of trust in their government (from a westerner's perspective), so when I asked some friends about this, their response was basically, the government will take care of it. Regardless, very interesting place!
Policies like that are going to backfire in the long run though. If the wealth being generated by productive exports is being hoarded in unutilized housing there are long tail effects that will slow down the economy - the housing sitting idle isn't productive, and when the investors try to capitalize on their property in the future they will just be rent seeking the difference between the construction price and their sale price.
Its happening around the world. The rich realize that one of the scarcest resources is space and land and are powerful enough to manipulate governments into just letting them hoard their money in housing. Because for the states where this happens everyone loses except the rich - housing becomes prohibitively expensive for the working class, rising property values leech productivity and growth and stall out consumerism, and all the money that created the situation could have better been used creating productive business rather than rotting in a cyclic property investment bubble.
There are two huge reasons why China has so much investment in property; it is very hard for Chinese to invest outside of China, and the domestic financial market is extremely cyclical and untrustworthy. Money that in the US would be in 401ks, IRAs, funds, bonds, and general brokerage accounts is all shoveled into anything that looks like it could maybe result in any return. It's why China has had big bubbles in financial fads; yesterday it was P2P lending and today it's
crypto.
China restricted capital mostly because it learned from the 1998 Asian Financial Crisis that rapid capital inflow and outflow is extremely destabilizing. The problem is now Chinese capital is basically a pot boiling over, and if you crack the door open enough capital will flow out that could destabilize the global economy and pop the Chinese bubble. The hangover would eclipse the previous big deflation of the Japanese economy.
I wouldn’t underestimate citizen confidence in the government as a means of propping up housing prices. Investing in property is the main way people give their vote of confidence in the current global plutocracy.
>There are "tier 3" cities in China with populations the size of LA and NY where you see clusters of dozens and dozens of 40-50 story apartment buildings shooting up.
Same thing is happening in India. Frightening pace of urban development.
> I was told that the value of homes in these economic development areas -- even in "tier 3" cities -- is going up by an absolute minimum of 10-15%/yr (that's being conservative). So if you have money in China, of course you invest in housing. There's no property tax.
It helps a lot when the government refuses to register sales when the price is under the guidelines. If you put a price floor in the market can stay irrational even longer than normal during a bubble.
It doesn't make sense to me why they'd WANT to leave them empty?? If I were a landlord, I'd be doing my best to keep the rentals occupied as much as possible.
According to the article, is mostly speculators betting that the property values will rise faster than the market consensus (these speculators don't want to be locked into leases that will soon undervalue the property). Also, it is arbitrageurs who think they can profit by repurposing the units (e.g., hotel/airbnb conversion).
When laws are very tenant-friendly (impossible to evict, caps on deposits etc), having tenants becomes a liability, which depresses the value of the building, especially if you only want to hold on to it for a few years.
In places with rent control, having a tenant reduces the value of the home. Sometime substantially if their rent is locked at a low rate.
It’s not unusual to buy tenants out in SF before putting the home on the market. Spend $50k to get them to leave and the value of the home goes up $200k.
If you know you’re going to sell in a few years, basically the value of the rent (adjusting for buyout) is way less than the incremental profit from selling an empty building.
It can also happen without rent control but due to other pro-tenant laws. For instance, in some countries landlords cannot terminate the rental contract unless the tenant is in serious arrears. This depresses the market value of a rented house, as the buyer can't live in in his newly purchased house if it's already rented out.
Because renting it is extra work and extra risk. You have to deal with finding someone to rent it to and then you have to keep inspecting the house to make sure they haven't wrecked it and then you have to fix any issues they report. Where as buying and selling later is very low maintenance.
If the value rises considerably in a few years for you to make a decent profit, then its mostly a headache (and operating costs, wear and tear etc) to have tenants .
I write that in a somewhat tongue-in-cheek way usually, but getting and caring for a tenant could, in some cases, be more expensive than leaving the space vacant. If you own the property outright, it's a measure of the cost of extra wear-and-tear, property tax, any other fees and fines, and maintenance (like this new one) against the rent you collect.
It's not always the case that the rent is going to be a bigger number than tax, fines/fees, and extra wear-and-tear, especially if you own the property outright. If you add in rent control and a rising trend in rental prices, some landlords would rather leave the space vacant for a while to wait out the market for higher prices.
You could easily lose money if you don't recognize and account for all of the costs.
My guess is that these are unsanitary, and renovation is too expensive. So they let the building sit there until they find a buyer, speculating for an increase in value. Possibly a buyer who intends to demolish the building in order to build something else.
I suspect some of it is tax liability. (I am not an accountant) but I think you can deduct the “loss” of rental income you didn’t get against other properties you may own. If the ammount of the loss is “rent you could have gotten but didn’t” instead of “market rate”, you’ll just keep the rent high.
I’m in Cambridge MA and the Harvard square movie theater sits empty 5+ years and i can’t think why excepting financial shenanigans. (Though apparently there is finally a plan to redo the building)
You know how some people say that if you're going for investors for your start up, it's better to sell them on user engagement & growth rather than revenue, because revenue brackets what you're potentially worth? I bet it's something like that. If you rent at a certain price, that brackets the property (and depending on the lease, maybe even locks it in).
The value of the property is based on its rentable value so if the landlord drops the rent to get a tenant in they immediately take a big loss on the value.
It sounds nice, but the real question is why are people letting these building sit empty. There is probably a good reason for it. Maybe some renter protection laws that went too far?
When I've seen these discussions before the two big factors cited are:
* Real estate investors can borrow against the long term income of their properties, and often value that above the short term rents. They also tend to be highly leveraged to build the next project. This creates situations where high vacancies and poor returns are worthwhile because they can pretend they'll fill the building at their price eventually, and therefore borrow against the building as though it would return that price X all their units X however many years.
* A lot of people seem to think (I haven't dug into the true scale of this) that enormous amounts of money from China is being parked in Western real estate as some sort of protection against seizure by the government.
Not just China, but Arabia and Russia too. The Manhattan Skyline is increasingly defined by enormous residential skyscrapers with condos that sell for hundreds of millions of dollars, and sit empty year-round.
It doesn't need to be a large amount of money to meaningfully impact the market, because housing is so illiquid. Most people are not moving at any given time.
I can only speak for my area (in California), but in many cases the properties are owned outright (no loan), and have their property taxes essentially fixed at rates that were set decades ago due to Proposition 13, with only small adjustments thereafter.
Therefore, the owners have little imperative to offer the properties for rent, with all the associated hassles, to meet their limited expenses. The properties are often poorly maintained for this reason.
They can instead treat them as stores of value, which they might even be able to leverage into cash flows via other financial instruments.
I think this is more the case for commercial properties than residential, but the problem exists to a degree in the residential market also.
Here in Spain it takes months, even a year to get a judge to evict a tenant that has stopped to pay rent. In the meantime, you need to keep paying for utilities or you will be fined, not the person not paying their rent. Even when you get them out, you could find a destroyed property, just for the sake of it, and you have to pay for the repair work. So just one stroke of bad luck with a tenant will make you lose years of profits.
The laws are extremely weighted in favour of the tenant: there is a minimun contract of five years, that the tenant can broke just telling the renter a month before, but the renter can't. Just a few weeks ago, the government approved a new law so if the renter is a company and not an individual, the minimum contract period is 7 years, and in this time you can only rise your price to keep with the official inflation index. So basically investors are tying themselves for seven years with these contracts. Of course they have the option to sell, but selling a property with a tenant that has the right to live there for years with a fixed price is difficult, so you'll need to sell for a lower price.
At the end all of this regulations makes the renters very careful, so they prefer to have their properties empty or wait months to find a suitable tenant. And that means that the price is higher and only people who can show they have an stable high paying job are able to rent.
Probably makes more sense for these companies to reduce supply and rent for a higher price than have to rent or provide a lower price to renters. Speaks more to the market structure and power of both sides here.
I really doubt that landlords have conspired like this. Not sure what monopoly legislation looks like in Europe but I doubt this behavior would be legal.
The real reason is to economically disencentive land speculators holding uninhabitable land, who were planning on flipping it without developing it after several years.
Don't think it's collusion, it is probably just the reality of things. I've noted that my original comment made it sound like this was insidious collusion but what I mean is that it is likely just the stark reality.
If there is no market collusion or abuse of monopoly, than there is absolutely no way it makes economic sense to withhold properties from the market to inflate the market. If you have a minority market share you won't be able to make up for the lost revenue, because the majority of the rent inflation is just going to be recognized by the other parties.
Right, it seems like this only works if they conspire or if there are large property holders. Maybe it’s the latter? If I own two houses and left one empty it certainly wouldn’t change the total supply enough to comeback out ahead.
Or, this doesn't work. Such a conspiracy would easily be covered by anti-monopoly laws in the US, I'm sure that there would be some equivalent law in Spain.
The real reason buildings would stay vacant is either ownership attempting to charge above market for rent, or land speculators who are looking to hold and flip, without developing it enough so it can be used in the meantime.
How strictly and often are those laws enforced? I don't think anyone is suggesting that they gather together in a back-alley kitchen to talk shop with the Joker. Rather, it's not unreasonable to think that many of the people involved in an area's real estate market are connected, socially, and share their independent strategies in the course of socializing.
I doubt property ownership is concentrated enough for this to be possible. Tacit collusion can work with a duopoly but by the time you get to five participants in a market it doesn’t work unless cartel agreements are legally enforceable and I doubt there are less than 5,000 residential property owners in Barcelona.
I think you're missing the point. It's not collusion, it's simple socialization. But it's inherent in the station of being a property owner to want to extract as much out of one's property as possible, and through this simple socializing, ideas about what most effectively achieves that aim can spread through the networks of interested parties while largely remaining inside of them.
There doesn't have to be a "conspiracy" when the incentives of several powerful institutions with a lot of real estate property (banks, Church, big families with relatives in the Town Hall, regional and national parliament) align like that.
It seems to me that the speculators are legitimately communicating useful information, and fining them is hampering that communication and discourages other investors from building more housing.
The useful information that high priced vacant housing communicates to me is that there is an anticipation of significantly higher future demand that isn't satisfied by current supply. That should signal for others to build more housing, as there is a lot of money to potentially be made. Or it could be signaling that there are too many things hampering construction of new housing.
I live in one of such buildings in Thailand and I love it!
I live in 30 store high new condo that is pretty much bought out by chinese investors and few seasonal tourists. There are probably 200 people living here and on my floor I have 1 neighbour.
There's a pool, sauna and a gym in the building and with so few inhabitants you often have it all somewhat private.
As an expat I definitely benefit from this. I've tried to look into what locals think of this and couldn't really find any strong opinions. In fact I've noticed a trend that locals tend to invest into condos themselves nowdays.
It's an intersting contrast to the problem Barcelona and San Francisco is facing - leaving housing empty might not be the core issue here at all as it clearly works perfectly fine for some places.
Of course, you benefit from empty shared spaces and the investors benefit of parking their money in a safe investment. The thing here is that this is supply that could lower the price for the population if you incentivize investors to rent and tries to not benefit only a select few.
Is this not spooky? No noises? The drops of water somewhere? And you always start to wonder who this might be, who landed at my floor with the elevator? It actually triggers one of my childhood dreams. To be alone in a skyscraper. :)
My take on it is that there aren't enough desirable cities available to employ and house all the people who want to live in them. This can be addressed by either increasing the capacity of those cities, by making existing undesirable cities more desirable, or just creating new desirable cities where no city currently exists.
Spot on. I think zoning is a big part of it. It would be illegal to build most of the world’s desirable cities now. Local zoning requires less mixed use, wider streets, more mandatory parking, etc
My dense, desirable neighbourhood in montreal couldn’t be build elsewhere in north america. But itnisn’t a safety ir code thing. The local zoning is actually reasonable: it’s just the laws are more anti-urbanist elsewhere.
I think it is a consequence of globalization. I don't have any statistics to prove it, but I think that people in general are not very keen to dig very deep, therefore everybody knows about certain number of "cool" cities, which everybody travels to and tries to move.
So, all popular big cities experience this influx of people moving there; expats have more and more options nowadays, so they also move to only cool places, therefore, it creates this problem. Not only it raises rents, expats can bump them a lot! They earn a lot of money, so for them extra $100 is not a big problem.
And urbanism – I guess more and more people move to cities nowadays, so it brings even more people who want to live there. Nobody really wants to live in the outskirts (unless it is USA), so major hubs, subway stations, downtown gets huge demand.
I can't actually validate your claim, but the Federal reserve increased their rates by 0.25% in December, which translates to some % increase in prime mortgage rates, which ends up restricting the average home buyer's price window by some %, some other things I don't understand, and uh, prices drop?
While Airbnb is not the sole reason, it definitely is one of the factors if not a major factor for the steep rents here in Toronto.
Just to give you an example, when i moved in my current condo back in 2017 my rent was $1700/month. 2 years in and my landlord wants to suddenly "move back in" and now the rental price for similar units are around $2200/month. I find it hilarious top brass of Y Combinator talk about things like UBI and rest and meanwhile Airbnb actively tries to screw over the locals when it comes to renting a place and won't even assist local government in enforcing the rules.
Here, according this[0] report Toronto has around 6200 entire units as airbnb units. That's at the very least 6200 less rental units in the market. And you know very well how supply and demand works. Anecdotal, but the couple in my neighbouring unit recently bought a condo and moved out. Guess what happened to that unit. It's a full time airbnb unit now. My floor has 12 units, and out of it 3 are full time airbnb units. And this is just 1 floor out of ~45 floors. And mind you, I still haven't started to list all the problems that airbnb tenants bring to the building.
I think it's reasonable to assume Airbnb reduces supply. I don't see how you can conclude the 30% rent increase you experienced was largely driven by Airbnb.
Lets say anyone renting out their unit for less than half a year wouldn't have put the unit on the rental market anyways. If you download and dive into the data, you'll see that there are ~9550 "Entire home/apt" listings, of which 5992 are available for less than half the year, leaving only 3558 units. In a city the size of Toronto, that seems negligible.
Even if we took Fairbnb's number at face value, it still seems small relative to Toronto's total number of rental units.
Here is a report published by McGill's School of Urban Planning, commissioned by the Hotel Trades Council, that found Airbnb responsible for a 1.3% rent increase over a 3 year period in New York: https://mcgill.ca/newsroom/files/newsroom/channels/attach/ai...
First of all, appreciate the level headed discussion and some very sound points that you bring.
I dug through insideairbnb more and it's actually 12,374 (65%) units that are listed as entire unit in Toronto. That absolutely is a very significant amount of units. Only about 7k of the listings are either shared room/private room.
> Lets say anyone renting out their unit for less than half a year wouldn't have put the unit on the rental market anyways
See, that's a valid point though in Canada it is difficult to get a mortgage and there are people now buying a second unit to treat as an airbnb property and generate income. Chances are that if the unit is sitting idle for > 90 days and < 180 days, people might be forced to sell it. Sure not everyone but there will be units that will come to the market.
You say it's negligible but you have to remember that we have one of the lowest vacancy rates.
>it's actually 12,374 (65%) units that are listed as entire unit
I had filtered out the 3300 "Entire home/apt" listings that were available for 0 days a year. Not sure why it's part of the dataset, but I assume it's for people with previously active listings.
I'm not really understanding the mortgage point, but you bring up an interesting point of treating "multi-listing" hosts as bad actors. If we approximate it by saying 45% of 9550 are bad actors, that's still only 4300 listing. That's still tiny relative to the Toronto rental market. To be fair, the realistic number could be a lot lower since a multi-listing host might be hosting multiple bedrooms in a single house and inflating the # of multi-listing hosts, or they might be hosting their primary residence and an investment property where only the investment property is a bad actor.
>You say it's negligible but you have to remember that we have one of the lowest vacancy rates.
I don't deny that Airbnb has an adverse affect on rent prices, but it appears to be quite small relative to other levers affecting the housing crisis. I wonder if a study may exist that shows the economic benefits of Airbnb in communities, keeping more of the income within local residents, patronage to a larger spread of local businesses, greater financial independence from self-employment etc...
>just go on r/toronto
I'm pretty active in the community, but less and less these days. It's become a major echo chamber where fact based level headed discussion is quickly down voted if the rhetoric doesn't fit the majority's views. Just look at the comments the next time Airbnb is brought up :). In all seriousness, having an overwhelming majority of people agreeing with you isn't always indicative of "being correct". For any viewpoint, there's probably an active internet community out there that feels strongly one way. Take r/the_donald or r/The_Mueller/ for example.
>I'm not really understanding the mortgage point, but you bring up an interesting point of treating "multi-listing" hosts as bad actors. If we approximate it by saying 45% of 9550 are bad actors, that's still only 4300 listing. That's still tiny relative to the Toronto rental market. To be fair, the realistic number could be a lot lower since a multi-listing host might be hosting multiple bedrooms in a single house and inflating the # of multi-listing hosts, or they might be hosting their primary residence and an investment property where only the investment property is a bad actor.
So, here's another article i found on BBC, and tbh i hadn't even considered this point. A lot of airbnb units usually are in more desirable neighbourhoods, thus decreasing supply of rental units in these areas and in turn increasing the price of available units to rent. Renting on Airbnb nets you 2-3x the median long term rent. In LA, almost half of Airbnb listings were clustered in seven neighbourhoods, where rents increased a third more quickly than the city average.
Now if this is isn't a direct enough proof, i'm pretty sure i won't be changing your point of view.
> wonder if a study may exist that shows the economic benefits of Airbnb in communities, keeping more of the income within local residents, patronage to a larger spread of local businesses, greater financial independence from self-employment etc...
I haven't really thought of that, but you also have to remember that this is Toronto (specifically near and around downtown) , and it is going to get tourists regardless of Airbnb. And what happens to local shops when a unit is vacant for 4-5 days a week?
>t's become a major echo chamber where fact based level headed discussion is quickly down voted if the rhetoric doesn't fit the majority's views
Just to throw some additional context on these numbers, Toronto has over a million housing units. At the upper bound of 12k AirBnB units, that's about 1% of all units.
You could have just summarized your entire post up with just that one word. You have no conclusive proof that airbnb is the sole cause of the rent increases you have observed.
Not sure why you're getting downvoted. This is absolutely a cause.
Anecdotally, my parents did well during the recession using it as a time to purchase assets "on sale" as my dad put it. Now, 10 years later they've done well on everything they bought, and are seeking new places to put their money.
They've had success with real estate their whole lives and see no reason to change what works. As a result they are buying anything they can collect rents from.
Is this new? Was the same thing not happening in, say, any other urban boom time, like the mid 1920s?
I think there's always going to be a flux of people who aren't "keeping up" with the increase in costs as much as others are, and having to drop out of the most expensive areas as a result. and likewise, there's people from the rest of the country who are improving their situation and can move up to the "big time".
Price to income ratios have indeed gotten worse in many places. I don't know how widespread that effect is, though.
I put it down to a combination of consistently low interest rates (both in the short term and in the long-term trend), coupled with cumulatively worsening construction deficits. Wouldn't be surprised if not all of that withstood comparison with actual data, though.
But surely this isn't the first time they've gotten worse, right? They've increased many previous times in many previous places throughout history, right?
I really don't think there's anything that special about what we're going through right now. I'm sure the Romans were complaining about rising prices in Rome as the city filled up and real estate became scarce.
>>> But surely this isn't the first time they've gotten worse, right? They've increased many previous times in many previous places throughout history, right?
Truth be told. This is the first time in history this happens. There has never been as long a period without war or calamity. Properties were never inflated to the point of being not affordable within multiple decades of income.
You were trying to give the 20's as an example. 1920 is just after the war, property had zero value after most of them were destroyed and most tenants are dead. Fast forward less than 20 years and it's world war two, it's all reset again.
Which is actually the enabler here: just register a friend or relative as living in your apartment, and you're done. And of course, you're doing that as a favor, so you're not charging them any rent that might be a subject to taxation.
Utility bills for example. Is the electricity utilization random enough or a little too constant? What about water? Natural gas? Pay the garbage collectors to rat out homes that never leave anything out.
Are the windows always left open even on the hottest days and no A/C?
Is the keyfob for entry never used?
Ultimately, every tax can be evaded. Income, sales, corporate. This one won’t be any different.
I do wonder who might rat out their completely quiet neighbour though.
In this conversation, it seems like people ignore the fact that there's a societal benefit to leaving buildings empty, at least in economic theory.
Which is that it's keeping the space open for more productive use in the long term.
Suppose you own a storefront or apartment that could fetch $5K/month right now, but you think it will fetch $10K/month in 3 years, and that leases are 10 years long.
Well, the people/businesses who can afford $10K/month are by definition more economically productive: the people must have higher-paying jobs, and the businesses must be more productive economically.
If economic trends are such that you expect them to show up in 3 years ago but not right now, it's overall more productive for society to keep the properties empty for 3 years, and then get 7 years of the doubled rent.
Otherwise, if you were forced into 10-year leases now, then in 3 years' time, all those people and businesses won't have locations they can move into. Because of supply and demand, the small remaining inventory will be pushed up to, say, $20K/month, which will be unaffordable, and the city will be left with less economically productive people/business locked in, and economic growth will happen in other locations instead.
Now, certain laws/zoning/factors can distort this in possibly undesirable ways, and if you don't like gentrification then you won't like that either. And all this depends on where the market thinks the economy is going -- landlords are taking a bet, and there's no guarantee they'll be right, but that's the case with any investment.
But as a general rule, landlords letting properties sit vacant are actually providing an economic service, by ensuring future availability when it's even more valuable. Yet articles about vacant properties rarely seem to mention this. I'm not sure why.
Hmm. Maybe I'm missing something. I don't understand how more efficient rent-collection (and literal rent-collection at that) is productive. I mean, isn't it definitionally not "productive"?
I mean you can make the argument that by being more efficient at rent collection over some time horizon you funnel more money to yourself and other local industries but isn't this basically just a cost to everyone else at every other scale of time and space?
Whenever this argument is made, there seems to be this conflation of "economically good" and "x made me money." Just because you make money (or make more money) doing something doesn't mean it's a net good for society.
Of course, but that's a much deeper issue. Today, we generally accept that in a free market without externalities, private profit = public good. If you disagree, you can take that up with Adam Smith and the invisible hand. ;)
Your anecdote covers business leasing when the article discusses housing. Surely having a flat sit empty for years while people don't have any place to live in is a problem, right?
Obviously there's an economic incentive here (why else would anyone leave the apartments empty?) but it just doesn't mean it's not a problem for the cities and their citizens.
I like the future availability argument. It's a good function.
But i also can see, why citizens (if we talk about housing) might object, if there is no affordable housing right now, if everyone were betting.
But then again, if i look at prizing over the last 100 years, and if citizens back then would have to look at prizes today, they would be outraged or at least be worried about their offspring. While, when one is working today and does not have to live in popular areas, in my anecdotal experience, many do pretty ok.
> Surely having a flat sit empty for years while people don't have any place to live in is a problem, right?
If there were literally more people in Spain than there were housing units to hold them, then yes of course that would be a problem.
But it certainly doesn't appear to be the case here. This is mainly about small price differences -- forcing a small increase of short-term availability that will have the cumulative effect over lowering prices in one segment of the market slightly in the present.
It's not about finding physical space to house the homeless, for example, in a city bursting at its limits. That would be a legitimate moral problem, of course.
This is a bonkers line of argumentation. Speculation is not a productive activity. It is also potentially very destructive.
A different argument would be to say that the seller of the property is putting the money to better use, but nevertheless speculation of land, particularly in big cities, is purely a legal issue and regulatory capture. Change taxes to LVT and watch them dissapear.
I am surprised to read on YC news, that speculation is not a productive activity.
Is not the whole venturing idea an organized risk minimizing speculation adventure? I do not think anyone willingly spends part of their wealth into something, that they don't think, it's worth investing in.
And i also think it is worth noting, that if there was then a future gain, that it had produced something, that others were willing to spend money on. So it must have been useful?
Investment is not speculation. Its of course a game of definitions, but generally speaking both economists and financial literature separate them on their usefulness and advice.
> And i also think it is worth noting, that if there was then a future gain, that it had produced something, that others were willing to spend money on. So it must have been useful?
Starting by the conclusion here. People also willingly spend money on the lottery, or betting, and although it has some entertaining value, it would be to the detriment of society as a whole if investment were diverted into the speculation of games of chance.
>Well, the people/businesses who can afford $10K/month are by definition more economically productive: the people must have higher-paying jobs, and the businesses must be more productive economically.
This is one hell of an assumption. Wealthy people hold onto wealth, that's why they're wealthy. That isn't a societal benefit to anyone.
Money that is not being spent is almost always being invested. If cash is literally being hoarded under a mattress it’s neither being spend nor invested but that means that the value of everyone else’s money goes up by some infinitesimal amount. If Bill Gates turned his entire fortune into cash and then set it on fire the assets that that cash used to represent would not disappear. Bill Gates would just have made all other holders of dollars a bit richer.
Most businesses won't sign a lease unless it's for much longer than 3 years -- they need to lock in a known rate long-term to plan a business around.
And with apartments, there are often rent regulations that prevent rent going up by more than x% per year, and you can be sure that if annual increases are 5% but the market doubles, those tenants are going to stay for as many decades as they possibly can.
If landlords could get a profitable tenant for 3 years and then be guaranteed they'd leave, then there wouldn't be the "problem" of vacant properties in the first place.
In fact, that's one of the motivations behind the "pop-up stores" that have recently become a thing in places like NYC -- a business takes over an empty storefront for just a summer or something like that, so the landlord makes a little $, but the tenant is guaranteed to leave. The problem is, there just aren't that many viable pop-up store businesses.
Why fine? Switzerland has a different approach. Regardless if you're keeping your property empty, you rent it or you're living in it, you're palying the same amount of tax - what you'd pay on the rent if you'd rent it. The tax is adjusted evey six months or so with the medium rent.
This is the argument for squatting in a nutshell. Allowing people or organizations to hoard unused property in urban areas is damaging and should be strongly discouraged.
Legalizing squatting in these scenarios is a nice low-regulation way of making sure that property is always being used.
This is also the case (tax not fine) in Melbourne Australia. Largely because of the perception that many high-end properties are being used to park money by overseas investors and left empty.
I think people in Barcelona may want to differ, rent prices have increased a lot due to tourism and expats flocking to Barcelona, while salaries for people outside the tech bubble are almost the same.
All these articles featuring all the good things that Barcelona is doing are just marketing...
"Do you have a lease contract?" Easy to get a lot of $1 contracts...
"Did you use water / electricity?" Easy to leave a faucet running or set up bitcoin miners.
If you go on word of mouth? What about false positives -- I travel for work and keep an apartment in one city and my house in another. Would that be a problem?
I don't know how to penalize empty apartments in a way that isn't really easy to game, or unjustly fair for people who don't just live in one place.
financial mechanisms and utility have diverged many times in history, but now, it takes on new gravity as the human population is at unprecedented levels, with demographics and market forces pushing young adults into cities.
Spain's government is simply trying to hide the fact that it is the #1 problem in the Spanish economy. [after the 2008 recession, economic researchers at Univerisidad Rey Juan Carlos in Madrid put out an analysis of the government's investments in alternative energy, which had been lavish. Results: every alternative energy job created resulted in 2.2 jobs lost in the rest of the economy. The average alternative energy job cost the taxpayer $800,000. Each job in the wind industry cost the taxpayer $1.4 million. The subsidies for photovoltaic installations were such that people would buy a solar panel, which would then qualify them for getting "net metering". They would then buy a gas generator and drive the meter backwards, and make enough money to pay for the generator, gasoline, the disconnected solar panel, and a tidy profit.
Why is no one asking the biggest question; why are people piling into cities when there are towns and smaller cities that could be developed instead and thereby lower cost of living. It’s a global phenomenon it seems, as much as it doesn’t make any sense regardless.
Please save yourself the quality of life arguments. Those are post hoc arguments that only express laziness.
What state governments should be doing is “redistributing the wealth” by heavily taxing successful cities to fund and develop less successful counties and districts and towns. When businesses stop clustering and concentrating in places like Silicon Valley and NYC then you know that taxation is at the right level to compensate for the cartel and monopolistic like behaviors and phenomenon of, e.g., Silicon Valley and SF.
In the USA that should look like heavily taxing Silicon Valley and NYC, etc and using that money to fund high speed Internet and education and companies and business centers in under developed regions like rural Alabama or Mississippi or North Dakota.
I wonder if remote work opportunities could become significant enough to slow this trend and make more people prefer smaller/quieter towns to the big city life while still holding jobs for big industries.
Does anyone happen to know if this effect is/can be a thing or do remote workers still flock to big cities anyway? I imagine this could eventually lead to lower rents in cities (but also lower salaries due to increased competition in cheaper places)
There are things you can do in larger cities that you can't do in smaller ones. The small-ish city I live in, for instance, has ~145k people in its metro area. There are exactly 5 restaurants that are worth going to; there was not a single sushi place until last year; the best bakery in town is -- of all places -- Aldi, a discount chain; and there is exactly one movie theater that periodically shows foreign movies.
The other big problem is getting to work. I'm lucky to have a remote career. If that was not the case I'd almost certainly need to commute 2-3h/day to the nearest big city.
From a business standpoint it also makes sense to go to where the action is: startups flock to SF because it's full of VC money, talent, and startup-friendly customers. Given this, the tax rate is just a cost of doing business. You almost certainly want an office in that area if you're intent on raising VC money.
As to the State level problems you describe, the US doesn't work like the EU. Part of the EU budget gets poured into its poorer countries and regions. The US equivalent would be to pour federal money into poorer states and counties. I'm not aware of any such direct cash infusions occurring, nor can I imagine any occurring in today's polarized environment. What seems much more likely, is states doing this work within themselves. Also, ND seems to be doing fine:
I'm not sure if you've been to Barcelona and smaller towns in the area but there's loads going on in Barcelona - art, galleries, industries etc and not much in the small towns. Why not let people get together where it's all happening? It might make more sense for government to fight NIMBY zoning so people could stick up a high rise and live where they feel like.
>In the USA that should look like heavily taxing Silicon Valley and NYC, etc and using that money to fund high speed Internet and education and companies and business centers in under developed regions like rural Alabama or Mississippi or North Dakota.
"The problems the fines are intended to combat began in 2007, when the financial crisis brought an epidemic of foreclosures on homes across Spain. After a nationwide wave of repossessions, banks found themselves the owners of newly vast portfolios of housing whose tenants had been evicted. Put off by the cost of renovations and wary of their potential obligations to rental tenants as landlords, many banks simply left their buildings empty, waiting for the market to bounce back so they could sell them at a higher price, or seeking permission for non-residential uses such as hotels."
So isn’t the more salient point here that tenants’ rights are apparently so strong here that the owners would rather leave the properties vacant (and lose money) than rent them out to a new tenant? Perhaps if they would remove some of the more pernicious and abused “rights” for tenants, more property owners would put their property up for rent?
Banks wouldn't have these properties at all if they hadn't screwed the pooch financially with mortages. I find it offensive that after taking people's homes and properties, an immense transfer of wealth to them, they should allow them to sit empty, in order to turn a better profit on the misery they helped cause.
Banks lost money on most of those foreclosures, to the extent that some banks failed and others had to be recapitalized. It wasn't a transfer of wealth to them.
Losing money doesn't mean losing the underlying property. There were certainly some losers, but the vast majority of them were the people who lost their house, not the banks which foreclosed on them.
People that lost their house overpaid for real estate that they could not afford. It’s strange that you seem to assume that overburdened debtors are saints while overextended creditors are devils. Both parties made mistakes they should not have made, and both parties suffered rightly as a result.
You realize banks were foreclosing on people who didn't even have mortgages, or never missed payments, and often on mortgages they didn't legally own, right?
If the leasor finds the business too difficult to do within the law then they should change businesses. That's how a healthy market works. In a normal, healthy industry, they would simply go bankrupt selling to those who can.
But in this case, it's possible to sit on land with out utilizing it and actually gain wealth solely because of flaws in that market were land price raises due to other forces than their productive worth. Speculation, persons hiding money from their dubious governments, political influence etc. Sitting on under utilized land is as unproductive as paying people to not grow crops. Even more so since at least in agriculture this, very occasionally, makes sense.
In addition in a growth area, much of the wealth created by those who developed it goes to those that impeded the development. This is exactly the wrong incentives, moving reward from the productive to the counter productive.
So since the market is so seriously broken, producing a dangerous drag on the economy by making labor less and less mobile, there is no choice but to fix it with financial incentives and disincentives.
If the law is written in such a way that it disincentivizes people from conducting business (to the point where they would prefer instead to cease conducting business and lose money), then perhaps the law should be reconsidered because it's a bad law?
Tenants rights laws in a lot of Europe are just plain ridiculous, and I can fully sympathize with property owners that would prefer to leave their property vacant instead of leasing it to a tenant-squatter.
There are many thousands who make a considerable profit with the law as is. The vast majority of units in fact. Those who knowingly loose money by closing a profitable business out of resentment for their customers should not be in that business anyway.
At any rate, there are people that could enter say, the medical field or restaurant business if regulations are relaxed.
The difference is there are not thousands of restaurants siting empty because the owner can't profit under the current regulations or refuses to on principle or out of petulance. And just as they would quite properly go bankrupt, so too must the owners of un-rented units, presumably selling to those that know how to run them.
No one is forced to be in a particular industry and if one person can't profit in the same circumstances that thousands other do, then rather than blaming the government or voters or the tenants the don't have, they need to take responsibility for the own inability. Barring that, the best policy is taxation and fines on those who refuse to rent going to subsidize those who do.
Likewise those who consider every tenant to be an imminent tenant-squatter are neither temperamentally nor clear minded enough to run a rental business. And, far from getting sympathy, are likely to be resented. Which is probably not going to help. I imagine Barcelona's policy is going to become pretty wide spread.
No, they shouldn't. There are externalities that effect others, and the free market.
For example, you don't want people doing things that poison groundwater for the neighbors, right?
Anyway, letting property sit idle benefits the landowner but causes issues for neighbors, local government and the free market. It means businesses in those locations get less customers, and local governments less sales tax. If the property is not cared for, there can be additional issues that lower the value of other's homes.
It causes rental prices and home prices for buyers to inflate because of the market distortion, leading to boom bust real estate problems.
Boom and bust effects homesellers and homebuyers, but also, given how often property tax plays a role in government budgets, dramatically affects local and state revenue, (and federal revenue in countries with a federal property tax).
Normally people talk about externalities of activity, as opposed to externalities of inactivity. I suppose this is just two sides of the same coin. People living in a place does have positive knock on effects. However it feels a little different to me to say, “because you didn’t use your property a certain way, therefore there wasn’t this good secondary effect, therefore you have created a negative externality.” No, I just have declined to create a positive one. If I use my property in a way that is good but not creating the maximum amount of positive externalities, have I still created a negative externality? I don’t think so.
Terminological issues aside, tax is not about fairness. At least not for any one person’s particular definition of fairness, and certainly not mine. Tax, in this case, is about a behavior we want changed, and a means readily to hand by which to change it. Doesn’t really matter if it’s fair.
"letting property sit idle benefits the landowner"
Can you help me understand this? I've never understood why any property sits idle -- the property would need to increase in value fast enough to counteract property taxes, just for the owner to break even. And that's ignoring the opportunity cost of not filling the property with tenants.
To me, it seems that it would always make more financial sense to try and hit 100% occupancy, even if that means steeply discounting the rent. Wouldn't an empty property be hemorrhaging cash?
Another is this: a building nearly full rented has an easily calculable valuable based on its income. A building with a higher price but not trying to rent can, incredibly, claim to have a higher value. Especially if there are several building nearby claiming the same value.
If there is a debt associated with the building, it is especially in the owner's interest to keeping the supposed value of the building high even if they are loosing revenue at the moment.
If a few organizations own a large number of units they can strongly influence a market both of rental rates and building values by doing this. Undoubtedly to a net profit or they wouldn't be doing it.
For some people cost of owning – property tax, various services is not a big deal. Also, in some places property rises in prices just by itself (like in San Francisco), you just have to wait.
Sometimes people lose money, but at the end of the day they can sign a good deal on it (let's say couple of years), and it will compensate their losses extensively. But they will have this "ready immediately" sign all this time.
Problem is, every “tweak” of the market causes ramifications, often unintended.
A great example is rent control. Sure it helps current tenants, but it distorts the rental market such that it disincentivizes putting new homes on the market, and the exact opposite of what you want - higher rents.
The people hoarding empty houses will do anything they can to block this because it drops the value of their houses which they only own to sell at a higher price later
That's not true in the modern world and never has been. There's plenty of things you can't do with your property, and indeed the total universe of what you can do is much smaller than the universe of what you cannot do.
Cities are (necessarily) very tightly regulated, because when people and property are packed in so tightly together the possibilities for negative externalities are severe. It's important to optimize the very limited space in a way that maximizes its good for as many people as possible.
You have a lot more leeway to do whatever you want way out in the country if that's what you're looking for, but you should never expect that in a dense city, because you won't find it anywhere.
What are the negative externalities associated with me leaving my house empty vs. me living in it? Bear in mind that any perceived shortage of housing in the local area is most likely artificial in nature because of NIMBY policies that I did not vote for.
The claim I was responding to was that people should be able to do "whatever they want" with their properties, which encompasses a lot more than just leaving them vacant.
But to answer your specific question, the most obvious negative externality is increased rents for other people, because an apartment that could be being rented out (increasing supply) isn't being rented out.
Having lots of vacant residences also potentially increases crime, is bad for neighborhood maintenance (we have a huge problem here in NYC of sidewalks not being shoveled in front of vacant properties when it snows), it gives pests a potential home, and increases the potential to damage surrounding residences. Vacant residences are more likely to fall under disrepair and then catch on fire or start leaks, which can damage nearby or underneath residences. If you're touching one then it's bad for your heating/AC bills, because your heat/cold is sapping through the walls into the un-conditioned apartment. Even just simple things like having fewer eyes to watch out for crime and call the police if a burglar or robber is spotted.
There's a huge host of problems associated with having long-term vacant residences in your neighborhood.
Are you currently selling your unused possessions on Craigslist? That camping gear or extra set of kitchenware? By not selling your things, you are making those things more expensive for everyone else. Therefore, you are creating a negative externality by not selling your things, and storing unused property in your garage and basement should be illegal.
What you are describing is not an “externality” in the way that economists use that term.
Land in a developed area is in very limited supply, it's necessary to make the economy function, and most of the owners are speculating on the price going up. Kitchenware doesn't work that way. Almost nothing else works that way.
Owning central land and not using it means that millions of people have to go further to get to their destinations. It also means that construction effort and money is going into a black hole and not turning into supply. Enough of this together makes a powerful negative externality.
The ability to apply the same argument to another situation has no probative value. Any policy has its pros and cons. One can support vacancy taxes/fines without supporting other taxes on unused possessions.
Is that a trick question? The negative externality is leaving a usable property vacant when public policy encourages use. You're maintaining this situation:
and it seems obvious to me why that's bad and public policy should not promote it.
As a public policy, along the lines of taxing vacant properties, we could also simply permit any vacant or unused property to be lived in and used by anyone who came along.
in a very wealth neighborhood of Honolulu, think where the average home is 4-5+ Million USD, a japanese owner of many houses 20+ wanted to build a gallery for his art. the wealthy neighbors didnt want it so what he did instead was rent all of his houses to low income hawaiians and put the art out on one of his vacant lots. they were mainly weird statues. naked greek gods etc. Just goes to show what people can do when sufficiently motivated.
for anyone that wants to read further his name is Kawamoto and he was recently arrested for Tax evasion in japan and was forced to sell his Kahala Homes Portfolio
I agree with you on this principle, and when your property does not affect anyone else this right is an absolute. However groups of people who choose to live and work near each other generally decide that they have some say in what can be done, and this usually works out for the greater good.
Then you get issues with the rich from other places using your city as a wealth storage zone and suddenly you have millions of homes empty but no one has anywhere to live so the city dies.
Unconstrained property ownership has consequences. As a society you have to understand and decide how much you want to regulate how markets and limited resources can benefit some and harm others.
There is clear social harm to have cities filled with empty homes while there are people who want homes and can't afford to buy any on the market or are forced to commute long distances.
Using real estate to store money and other speculation does harm to people who want to participate in the market to actually use the limited fundamentally necessary resource.
It makes good sense for property owners who actively use their property themselves to have more rights than those who seek to profit from market conditions or others' use.
Having paid taxes is a weak justification for any freedom.
Especially in constrained areas like Barcelona (or urban areas in the U.S.), property ownership is a monopoly, so it has market repercussions. Buying up units and then refusing to rent them out (or have anyone occupy them) can be viewed as interfering with the local market. These are micro markets that are price sensitive to interference.
If you are a landlord, you need to rent the place out at the current market price. If you do not want to do that, you can sell the property and get out of the landlord business. Just squatting on it and leaving it empty/boarded up distorts the local property market and should be heavily taxed to discourage absentee landlords from interfering with local markets.
I don't know how its done in US or other countries. But in my country (some small island in west side of Pacific Ocean), some properties just left empty for very long time since no one can afford that piece of thing.
At night, you walk through that place, its quiet like abandon for very long time, and there won't be any retail stores / business nearby since only ghosts and wondering dogs/cats will be there.
But I also wondering, if the city mayor decided to make this bill work, he need the local city council pass the bill, will this make him lose in next year's election?
Maybe we should tax people for voting for politicians who enact laws that artificially restrict housing? Some places sitting vacant are far less then problem then restrictions on building.
Amsterdam has (or used to have, perhaps) a pretty healthy squatting culture. Many squatters are ideologically driven and improve the neighbourhoods they're squatting in.