15 ms·

West Coast Cities Turn to Vacancy Taxes to Grapple with Housing Crisis

50 points by harambae 4mo ago

thundercleeze 4mo ago
As long as they don't let anyone build more housing: that'd ruin the character of the neighborhood.
- lern_too_spel 4mo ago
  In my experience, the same people who oppose building more housing also oppose vacancy taxes.
- triceratops 4mo ago
  Why not both? Subsidize development and permitting fees with vacancy taxes.
  - labcomputer 4mo ago
    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.
    - triceratops 4mo ago
      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.
      - Schiendelman 4mo ago
        I think you're misunderstanding the problem. Everyone wants to build more. Cities won't let them. It's often arbitrary and capricious.
        triceratops 4mo ago
        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 https://news.ycombinator.com/item?id=48262501
        Schiendelman 4mo ago
        Why not both: because you'll get the vacancy tax and not the reform. Organizers target the easier work.
        SR2Z 4mo ago
        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.
        Schiendelman 4mo ago
        "Everyone" as in "nearly every project is proposed to the maximum allowed for its site." Almost every project built would be larger if permitted.
    - mint5 4mo ago
      Development and permitting cost (fees plus time) are most certainly a part of the problem.
  - malicka 4mo ago
    I think it was sarcasm.
    - vinay427 4mo ago
      Given that their reply is on decreasing development fees, it seems that they understood the sarcasm.
    - triceratops 4mo ago
      What's sarcastic about saying "charge a vacancy tax and allow building more"?
      - F3nd0 4mo ago
        I think they were saying the comment the comment they replied to replied to was being sarcastic, not the comment they replied to.
gruez 4mo ago
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/current/index.html https://www.census.gov/housing/hvs/data/rates.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.
- boston_clone 4mo ago
  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%
dangus 4mo ago
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.
- skybrian 4mo ago
  I wish we didn't have to guess about these things.
- shlant 4mo ago
  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?
- SR2Z 4mo ago
  > 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.
swamp_donkey 4mo ago
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
- skybrian 4mo ago
  Shouldn't more supply result in lower prices?
  - applied_heat 4mo ago
    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+
- boston_clone 4mo ago
  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%
  - eli_gottlieb 4mo ago
    > 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?
    - applied_heat 4mo ago
pvillano 4mo ago
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.

50 points by harambae 4mo ago

thundercleeze 4mo ago

As long as they don't let anyone build more housing: that'd ruin the character of the neighborhood.

lern_too_spel 4mo ago
In my experience, the same people who oppose building more housing also oppose vacancy taxes.
triceratops 4mo ago
Why not both? Subsidize development and permitting fees with vacancy taxes.
- labcomputer 4mo ago
  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.
  - triceratops 4mo ago
    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.
    - Schiendelman 4mo ago
      I think you're misunderstanding the problem. Everyone wants to build more. Cities won't let them. It's often arbitrary and capricious.
      - triceratops 4mo ago
        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 https://news.ycombinator.com/item?id=48262501
        Schiendelman 4mo ago
        Why not both: because you'll get the vacancy tax and not the reform. Organizers target the easier work.
      - SR2Z 4mo ago
        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.
        Schiendelman 4mo ago
        "Everyone" as in "nearly every project is proposed to the maximum allowed for its site." Almost every project built would be larger if permitted.
  - mint5 4mo ago
    Development and permitting cost (fees plus time) are most certainly a part of the problem.
- malicka 4mo ago
  I think it was sarcasm.
  - vinay427 4mo ago
    Given that their reply is on decreasing development fees, it seems that they understood the sarcasm.
  - triceratops 4mo ago
    What's sarcastic about saying "charge a vacancy tax and allow building more"?
    - F3nd0 4mo ago
      I think they were saying the comment the comment they replied to replied to was being sarcastic, not the comment they replied to.

gruez 4mo ago

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/current/index.html https://www.census.gov/housing/hvs/data/rates.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.

boston_clone 4mo ago
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%

dangus 4mo ago

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.

skybrian 4mo ago
I wish we didn't have to guess about these things.
shlant 4mo ago
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?
SR2Z 4mo ago
> 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.

swamp_donkey 4mo ago

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

skybrian 4mo ago
Shouldn't more supply result in lower prices?
- applied_heat 4mo ago
  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+
boston_clone 4mo ago
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%
- eli_gottlieb 4mo ago
  > 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?
  - applied_heat 4mo ago

pvillano 4mo ago

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.