71–80 of 151 posts
Startup Idea: My company will lease your space for whatever price you want. Then we sub-lease your building at the market rate. We charge the different between the market rate for your building and what you want to charge + a small fee. That way your property retains it's "original" value, but actually gets rented out. Everyone (especially us) wins!
The problem is that if you don't update values continuously, you are surprised when you finally are forced to. Some stock on the public market that isn't doing well goes from 100 to 90, 80, 70... etc, and people thinking about the stock have to make decisions accordingly.
A private loan against that business can sit at 100 until the company decides it can't pay, and suddenly the loan is worth 20.
Earlier quoted context omitted.
Yes, the idea of a land value tax is to make it high enough to for banks to foreclose. The entire thing is about making sure land is used on the most socially benefiting way possible.
> The entire thing is about making sure land is used on the most socially benefiting way possible. The idea of land value tax is to make the government effectively the universal landowner and everyone else renters, and renters paying a high enough rent that it is economically infeasible to use land for any but the most financially remunerative purpose. Having it optimizing for social utility rather than maximizing ne…
Earlier quoted context omitted.
I’d support a land value tax myself so don’t take this following comment as criticism, but you don’t even need a land value tax in the case of LA. You do need to repeal Prop 13 for investment properties. I wager most of those years-vacant properties have a generous Prop 13 assessment and so the owner can just sit on it because their carrying cost is closer to zero than what it would be in any other tax regime. Then a…
We need to repeal Prop 13 completely. The fact that my neighbors pay 1/10th the property tax that I do, despite being younger and less at risk of being forced out of their home due to going fixed income or some financial crisis, is absurd.
Piecemeal reform is much easier to swallow. Especially if you start with something like commercial properties, and especially since the increased income that results can be used to create tangible community improvements.
So even if your ultimate goal is full repeal, the correct strategy to make that come about is piecemeal reform, and pushing for a full repeal is counterproductive to that happening.
Startup Idea: My company will lease your space for whatever price you want. Then we sub-lease your building at the market rate. We charge the different between the market rate for your building and what you want to charge + a small fee. That way your property retains it's "original" value, but actually gets rented out. Everyone (especially us) wins!
Sounds great! I'll charge you $100 per sqft, and you can sublease it at the current market rate, which is $5 per sq ft.
Earlier quoted context omitted.
I’d support a land value tax myself so don’t take this following comment as criticism, but you don’t even need a land value tax in the case of LA. You do need to repeal Prop 13 for investment properties. I wager most of those years-vacant properties have a generous Prop 13 assessment and so the owner can just sit on it because their carrying cost is closer to zero than what it would be in any other tax regime. Then a…
We were very close to repealing Prop 13 on commercial property a few years ago (via Prop 15). One of the biggest objections to a straight repeal Prop 13 on commercial property is that most commercial leases are triple-net, meaning that the businesses directly pay the taxes. Which means that a bunch of small businesses that are just barely on the edge of profitability will shut down when they finally have to pay their…
For personal property, raise the taxes, and give the home owner the option to defer the raise as a lien against the property, accruing fair interest. Nobody gets kicked out of their home, and the taxes get paid when the home is sold. If it is inherited, then the inheritors will have to increase their taxes paid at least so that the lien amount no longer increases relative to the home value.
For commercial property, cap the property tax paid by the lease-holder to the historic rate + a several percent growth to gradually meet the current tax bill. The rest of the tax becomes a lien on the property to be paid on sale, with forced payment increases if the lien to value ratio becomes too large. It would be up to the property owner whether they pay the additional tax or take it as a lien. Ultimately, commercial prop 13 was a mistake, and businesses that can't compete on a level playing field need to be gradually pressured to improve profitability or make the space available to someone that can.
Edit: one more thing that people seem to forget is that if we repeal Prop 13, we can reduce the property tax rate and keep the same tax income. So the unpayable increase is much more affordable than a naive analysis would suggest.
Earlier quoted context omitted.
> Interesting, but It doesn't answer why a bank would hold a completely vacant building for 15 years. Lowering the rent to fill their building reduces the value of that building, which means when they sell it, they will recognize a loss that is likely larger than many years of operating loss from the empty building. Additionally, lowering the rent for that building will also reduces the value of other nearby building…
> Lowering the rent to fill their building reduces the value of that building > Additionally, lowering the rent for that building will also reduces the value of other nearby buildings that have that building as a comparable property > it's in the bank's interest to let things be vacant and keep the valuations based on the previous rent, rather than lowering the rent and facing the music. This just seems like everyone…
Earlier quoted context omitted.
I’d support a land value tax myself so don’t take this following comment as criticism, but you don’t even need a land value tax in the case of LA. You do need to repeal Prop 13 for investment properties. I wager most of those years-vacant properties have a generous Prop 13 assessment and so the owner can just sit on it because their carrying cost is closer to zero than what it would be in any other tax regime. Then a…
We were very close to repealing Prop 13 on commercial property a few years ago (via Prop 15). One of the biggest objections to a straight repeal Prop 13 on commercial property is that most commercial leases are triple-net, meaning that the businesses directly pay the taxes. Which means that a bunch of small businesses that are just barely on the edge of profitability will shut down when they finally have to pay their…
You could probably adjust the annual percentage increase and find a balance between pre-prop13 problems of rapidly increasing property tax and the post-prop13 problems of significant gap between capped assessment and actual value.
Probably also need to do something about transfers via holding companies as well, since there's a ton of commercial properties that have never had their assessment cap reset because of the way the beneficial holding rules apply to corporations. OTOH, if the capped assessment grows at something like 5% per year, maybe it can catch up soon enough anyway.
Interesting, but It doesn't answer why a bank would hold a completely vacant building for 15 years. I think we need Vacancy taxes that go up based on the percentage of time vacant over different spans of time. Anything that makes owning an empty building a bad investment in all circumstances. This needs to apply to all units in a multitenant building.
> Interesting, but It doesn't answer why a bank would hold a completely vacant building for 15 years. Lowering the rent to fill their building reduces the value of that building, which means when they sell it, they will recognize a loss that is likely larger than many years of operating loss from the empty building. Additionally, lowering the rent for that building will also reduces the value of other nearby building…
I thought it was a really elegant solution, and has made me wonder if a similar program could be used for vacant Commercial Real Estate in the cast of a national vacancy tax, land value tax, or similar value-lowering event.
1: https://en.wikipedia.org/wiki/Bank_Term_Funding_Program#Prog...
A problem is that the externalities of leaving a space vacant are not priced in. Having a bunch of storefront vacant in an area makes it much less appealing and devalues all the other properties surrounding it. It does seem like a vacant storefront tax, which is briefly mentioned at the end of the article, could address this, if partially. This whole extend and pretend deal seems like it's simply accumulating risk ho…
That would just devalue the surrounding property even more. This is why "we should just do X" is almost always a bad idea.
Why do you think that's the case? I'm sure it would make the entire city seem like a riskier investment at first, but it seems like in the medium term it would help address the situation described in the article.