West Coast Cities Turn to Vacancy Taxes to Grapple with Housing Crisis(theurbanist.org)
theurbanist.org
West Coast Cities Turn to Vacancy Taxes to Grapple with Housing Crisis
https://www.theurbanist.org/west-coast-cities-turn-to-vacancy-taxes-to-grapple-with-housing-crisis/
35 comments
As long as they don't let anyone build more housing: that'd ruin the character of the neighborhood.
In my experience, the same people who oppose building more housing also oppose vacancy taxes.
Why not both? Subsidize development and permitting fees with vacancy taxes.
Because development and permitting fees aren’t the problem. People already want to build new homes. We just don’t allow them to do so.
In fact, those subsidies are often part of the problem. The only way to get new development approved in many cases is to include a number of below-market units in the development… even though they are subsidized, that mandate kills the economics of the project. It happens often enough that you start to wonder if maybe that isn’t the point.
In fact, those subsidies are often part of the problem. The only way to get new development approved in many cases is to include a number of below-market units in the development… even though they are subsidized, that mandate kills the economics of the project. It happens often enough that you start to wonder if maybe that isn’t the point.
Well whatever. Hand vacancy taxes to developers as straight cash incentives to build more. Bonus per unit completed or any other metric that isn't subject to gaming. The point is, make it cheaper to build.
I think you're misunderstanding the problem. Everyone wants to build more. Cities won't let them. It's often arbitrary and capricious.
This is not quite true.
It's entirely correct to say that cities are the main obstacle to building housing, but it's not true to say that everyone wants to build more.
Whether or not a project pencils out depends on local demand and interest rates. An unfortunately common sight in SF is that developers start construction before getting all the required permits to finish, then the city drags its feet for half a decade, then when the permits are finally granted the building no longer pencils and the foundation or skeleton are left to rot.
The timeliness is important; the goal for most finished buildings is that they provide so much supply that building new ones isn't financially viable.
It's entirely correct to say that cities are the main obstacle to building housing, but it's not true to say that everyone wants to build more.
Whether or not a project pencils out depends on local demand and interest rates. An unfortunately common sight in SF is that developers start construction before getting all the required permits to finish, then the city drags its feet for half a decade, then when the permits are finally granted the building no longer pencils and the foundation or skeleton are left to rot.
The timeliness is important; the goal for most finished buildings is that they provide so much supply that building new ones isn't financially viable.
"Everyone" as in "nearly every project is proposed to the maximum allowed for its site." Almost every project built would be larger if permitted.
I never said don't reform zoning or permitting. Allow building easily and charge a vacancy tax. Literally my first sentence in this thread was "Why not both?" https://news.ycombinator.com/item?id=48262501
Why not both: because you'll get the vacancy tax and not the reform. Organizers target the easier work.
Development and permitting cost (fees plus time) are most certainly a part of the problem.
I think it was sarcasm.
What's sarcastic about saying "charge a vacancy tax and allow building more"?
I think they were saying the comment the comment they replied to replied to was being sarcastic, not the comment they replied to.
Given that their reply is on decreasing development fees, it seems that they understood the sarcasm.
I can’t see it being a bad thing.
The kind of landlord who is willing to keep a property vacant is not usually a struggling enterprise, unless we are talking about a completely hollowed out declining metropolitan area (which most west coast cities absolutely are not).
In my city, one development in a highly desirable area basically demolished a historic building, built a new one with far more prime retail space including small storefronts and flagship retail (think grocery store or big box store), built it out completely in the interior, totally ready to lease. But in the years since they built the development, the bank branch is the only occupant.
My guess is the bank is squatting on the property. It was probably easy to get a big “revitalizing” property approved, and now they can take a tax write off on multiple retail spaces that they apparently never intend to bother leasing out.
Presumably they don’t want to bother leasing to anyone and actually have to deal with the management overhead of landlording unless someone comes in and pays inflated prices. So they’re happy to sit on it until someone bites. Meanwhile, it’s been an empty eyesore for years now.
The kind of landlord who is willing to keep a property vacant is not usually a struggling enterprise, unless we are talking about a completely hollowed out declining metropolitan area (which most west coast cities absolutely are not).
In my city, one development in a highly desirable area basically demolished a historic building, built a new one with far more prime retail space including small storefronts and flagship retail (think grocery store or big box store), built it out completely in the interior, totally ready to lease. But in the years since they built the development, the bank branch is the only occupant.
My guess is the bank is squatting on the property. It was probably easy to get a big “revitalizing” property approved, and now they can take a tax write off on multiple retail spaces that they apparently never intend to bother leasing out.
Presumably they don’t want to bother leasing to anyone and actually have to deal with the management overhead of landlording unless someone comes in and pays inflated prices. So they’re happy to sit on it until someone bites. Meanwhile, it’s been an empty eyesore for years now.
> The kind of landlord who is willing to keep a property vacant is not usually a struggling enterprise, unless we are talking about a completely hollowed out declining metropolitan area (which most west coast cities absolutely are not).
In CA, Prop 13 ensures that holding costs for landlords of old buildings are virtually zero. If you throw rent control in the mix it's actually very easy to see the incentives that can keep buildings empty.
This is even more severe for commercial properties, where lowering the rent can cause an owner's mortgage to be adjusted.
In CA, Prop 13 ensures that holding costs for landlords of old buildings are virtually zero. If you throw rent control in the mix it's actually very easy to see the incentives that can keep buildings empty.
This is even more severe for commercial properties, where lowering the rent can cause an owner's mortgage to be adjusted.
you think it's more profitable to not lease the spaces because "the management overhead of landlording"?
What do you think a "tax write off" is?
What do you think a "tax write off" is?
I wish we didn't have to guess about these things.
Vancouver development is in bad shape now thanks to these taxes and a glut of new supply that was built with financing not available to the average developer
Pre sales are dead. Some projects are in receivership. New Projects are not going ahead
Pre sales are dead. Some projects are in receivership. New Projects are not going ahead
Did we read the same article?
> A feature of the EHT is that it focuses on residential properties, not commercial spaces
> [Due to] the shift to remote work during the pandemic, office vacancies remain stubbornly high in many cities.
> With the combination of Vancouver’s EHT combined with the province’s SVT, the taxes are credited with reducing the residential vacancy rate to 0.49%
> A feature of the EHT is that it focuses on residential properties, not commercial spaces
> [Due to] the shift to remote work during the pandemic, office vacancies remain stubbornly high in many cities.
> With the combination of Vancouver’s EHT combined with the province’s SVT, the taxes are credited with reducing the residential vacancy rate to 0.49%
> the taxes are credited with reducing the residential vacancy rate to 0.49%
Isn't that really, really low and a driver of rent rises?
Isn't that really, really low and a driver of rent rises?
They taxes vacancies so vacancies went down - but that doesn’t mean that someone who was happy keeping their property empty put it on the market and found some random tenants with all of the hassles that entails - you can never get rid of them as the laws strongly favour tenants. So you lose control of your “property”
Instead they find someone in their network, like a friend or friends adult child that is studying who can stay there and they pay a trivial rent to “take care of the house”
Instead they find someone in their network, like a friend or friends adult child that is studying who can stay there and they pay a trivial rent to “take care of the house”
A residential vacancy rate that low means people are deeply stuck - that means the market has almost no slack, and people can't move there. That's a very very bad situation - employers want to hire more people, but they can't get talent because that talent can't move. AND the people who can't move then can't get the better paying jobs they're being offered.
> A residential vacancy rate that low means people are deeply stuck
Is that what it means? Paris has a similar vacancy rate and seems to be doing alright. Vancouver has also seen population growth rates above 4%/yr, which outpaces the province, so people are moving there.
Is there a talent shortage in that city? Unemployment seems higher than normal but that could be an oversimplification.
I guess I’m struggling to see the connective tissue between the stated points.
Is that what it means? Paris has a similar vacancy rate and seems to be doing alright. Vancouver has also seen population growth rates above 4%/yr, which outpaces the province, so people are moving there.
Is there a talent shortage in that city? Unemployment seems higher than normal but that could be an oversimplification.
I guess I’m struggling to see the connective tissue between the stated points.
How are you defining "doing alright"...?
Have you been to Paris recently?
Great food, tons of bike and rail infra, 35 hour work week, strong social safety nets, lower than average rate of violent crime, wide consideration as the preeminent destination for fashion and art, etc. etc.
Great food, tons of bike and rail infra, 35 hour work week, strong social safety nets, lower than average rate of violent crime, wide consideration as the preeminent destination for fashion and art, etc. etc.
Right - for the people who can afford to live there. That's dramatically artificially limited, the people who aren't rich don't get many of those things.
Rent control helps, from what I remember. but I imagine you may be looking from the perspective of purchasing a home (in which yes - pricey!)
Rent control doesn't change how many people get to live there, just swaps some people for others. And usually hinders housing production, reducing that number more over time.
Shouldn't more supply result in lower prices?
Prices in the condo market have fallen.
Some buyers that bought pre sale say at 700k maybe put down 120k and now the units are worth 600k and can only get a mortgage for 600k, have to come up with the extra 100k.
Lots of the supply is tiny condos that are not as desirable as a house for having a family.
the clamp down on Airbnb has also hurt the market for these tiny condos.
Also canada reduced the rate of immigration so demand isn’t increasing as quickly. The population of British Columbia decreased.
A hotel in Vancouver for a night in the summer is $400+
Some buyers that bought pre sale say at 700k maybe put down 120k and now the units are worth 600k and can only get a mortgage for 600k, have to come up with the extra 100k.
Lots of the supply is tiny condos that are not as desirable as a house for having a family.
the clamp down on Airbnb has also hurt the market for these tiny condos.
Also canada reduced the rate of immigration so demand isn’t increasing as quickly. The population of British Columbia decreased.
A hotel in Vancouver for a night in the summer is $400+
This article is terrible. It starts off talking about high vacancy rates for commercial properties, then segues to talking about housing shortages. Vacancy rates for housing is definitely not in the 27% range implied by the article. They're in the single digits, with the hottest housing markets also having the lowest rates.
https://www.census.gov/housing/hvs/current/index.html
https://www.census.gov/housing/hvs/data/rates.html
Sorting by the census areas with the highest rates gets you areas like Jacksonville, FL, Baton Rouge, LA, and San Antonio-New Braunfels, TX. Superstar cities like SF and NY have rental vacancy rates of 5.5 and 5.4 respectively.
https://www.census.gov/housing/hvs/current/index.html
https://www.census.gov/housing/hvs/data/rates.html
Sorting by the census areas with the highest rates gets you areas like Jacksonville, FL, Baton Rouge, LA, and San Antonio-New Braunfels, TX. Superstar cities like SF and NY have rental vacancy rates of 5.5 and 5.4 respectively.
Agreed that the writing is poor and difficult to follow, but the vacancy rate mentioned was regarding commercial properties:
> Portland, Oregon reached another post-pandemic high of downtown office vacancies – 27%
> Portland, Oregon reached another post-pandemic high of downtown office vacancies – 27%
A sudden switch to depreciation makes housing more expensive, even though prices are going down.
Say you buy a house with a loan, and sell it after x years. The total cost of ownership is interest paid to the bank + buy price - sell price. If you bought a house at $600k expecting to sell it in a few years at $700k, but it'll actually sell for $500k, your TCO went up by $200k. The sudden switch to depreciation made the same house much more expensive to own. Prices have to slowly go from rising to steady and then to falling, otherwisw everyone is suddenly living way beyond their means.
Say you buy a house with a loan, and sell it after x years. The total cost of ownership is interest paid to the bank + buy price - sell price. If you bought a house at $600k expecting to sell it in a few years at $700k, but it'll actually sell for $500k, your TCO went up by $200k. The sudden switch to depreciation made the same house much more expensive to own. Prices have to slowly go from rising to steady and then to falling, otherwisw everyone is suddenly living way beyond their means.