Income tax when you aren't receiving an income is a weird idea.
It sounds like the author wants a land tax, but hasn't ever heard the term.
this post was submitted on 24 Aug 2023
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Another term is a vacant homes tax, something Vancouver and Toronto in Canada are using.
These sorts of narrow, “feel-good” taxes are the wrong way to go. People find loopholes to avoid paying them.
Georgist land value tax (LVT) is straightforward and cannot be avoided. It incentivizes owned land to be utilized, otherwise it becomes a huge liability. It does not disincentivize improvements (building stuff) because taxes are tied to underlying land values, not improved property value.
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The owner of an apartment is always receiving income from it, either in the form of the rent check or whatever utility it provides for him to keep it to himself.
I don't like land taxes and other property taxes because I don't think there's a good way to apply those taxes progressively. Rather, if we just take the imputed rent of a given asset (land, building, car, etc.) and add that to the taxpayer's income, the the progressive income tax can just do its thing.
No, he's receiving value from it. That's not the same thing as income. You can't tax a percentage of value, only actual money.
You're guessing how much rent he could be collecting and taxing a percentage of the imaginary rent payments... You're really bending over backwards here to implement a property tax or vacancy tax but with a bunch of extra steps.
Wrong. Basically everyone who's ever paid property taxes has been taxed on value. Even though I haven't sold it or nor plan to anytime soon, I owe increased taxes because the estimated value of it has gone up.
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That's not true. If I receive artwork, a car, shares of stock, room and board, free tuition, etc., then that is income on I which I will owe taxes. Figuring out the value of these things isn't a guess. It's an estimate based on actual market data. It's actually kind of easy in the case of a rental property since the landlord will have advertised the rent amount. So, if he wants to pay lower tax then he can just lower his ask.
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"Income tax on their properties whether they're rented or not" is just a long way of saying "land value taxation".
I disagree. Land value taxes are flat unlike a progressive income taxes. Therefore, a land value tax can be unfairly burdensome to people with low incomes who happen to own land. If imputed rent is taxed as income, then the tax burden is more fairly shared. It also creates more insentive to keep rents low and units occupied.
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There are so many empty business spaces in my town because landlords can just sit on them -- and potentially rake in tax credits -- even though no one wants to rent at their rates.
Needs to stop.
That's why San Francisco implemented a vacant storefront tax.
But getting commercial landlords to comply has been a struggle.
I was just in SF a month ago for the Dead & Co shows, and it really is astonishing how empty a lot of storefronts are, especially where we were staying up near North Beach/FW. Also too, the lack of late night food; in all the years I've been going to SF, you could always count on a noodle bar in Chinatown at 12-1a to be open, but not anymore. Not really anything except fast food. COVID wrecked that town. I've also never seen so few homeless people walking around, but I didn't head over to Oakland.
It's not just San Francisco.
Vancouver BC and nearby towns have a similar problem, and are working towards their own empty storefront tax.
they could repurpose those buildings (difficult but possible) to dwellings, which would revitalize the downtown businesses - but no, they'll hold out desperately for a return to office that, if it was going to happen, would have happened already.
Meanwhile, there ain't enough housing. Everyone pays more and the core rots.
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p.s. You gotta know where the late night eateries are.
Here's a decent list https://sf.eater.com/maps/best-late-night-food-drinks-restaurants-san-francisco
That’s how it works in Switzerland and there are no empty unrented places anywhere to be seen.
They also have relatively low amount of homelessness.
Based on the mean projection, 0.02% of the adult population is homeless in this country. The proportion in neighbouring Austria is 0.25%. In Germany, the share of homelessness is 0.41%, in France it is 0.22% and in Italy the share is 0.08%.
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There are lots of ways to tax landowners, but ultimately they all punish landowners for existing (which is a great thing for society) so instead they become weird neo-liberal market based schemes like tax credits for entrepreneurs who own land in a disadvantaged area for at least 3 years. so that the people that will be targetted by the tax are able to avoid it by claiming that they also own the bodega in their slum, thereby making them an entrepreneur.
Ultimately it's not that the people proposing these taxes can't come up with better tax schemes, it's that they are paid to come up with ridiculous schemes that are designed not to eliminate landowners.
Its owner is just receiving it in the form of enjoying the unit for himself
What's actually wrong with that?
I don't know about anywhere else but in Australia if you are using the unit you can't claim the expenses as a rental, so there's no advantage to keeping it empty.
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Where do landlords get their money? (the money they exist with).
From renters.
If they have to pay money (as taxes) for rentals that aren't occupied, where will that money come from?
From renters in the form of higher rents.
Are you SURE you want to go through with this?
The solution is simply for landlords to keep their units occupied and they can increase occupancy rates by lowering rents, which will also have the effect of lowering their tax obligations. I'm not sure what you think the problem is.
That's certainly the preferable solution, I guess it's worth asking if it would work out that way.
So for example, I own 100 houses and I earn £100 per month for each one. (Values for purposes of illustration only!)
Let's assume 10% are empty at one time.
With an income of £9,000 per month I'm paying 20% tax on that, £1800.
Up that tax to £2000 under this scheme, costing me £200 per month.
so do I drop rents by £5 per building which is going to mean my income changes to £9500 minus £1900 tax for a net earnings of £7600
Or do I increase rents by £5 and keep running with 10% empty buildings? Earnings are now £9450 with a tax bill of £2100. Net earnings of £7350 while holding onto hope that I could rent out some of those other empty buildings?
Put simply, if I'm the kind of person who owns a 100 buildings do you imagine my instinctive response is going to be to cut prices or to pass on my costs to tenants?
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Or they'll just raise rent further like they already do. Landlords already want empty units filled because in their eyes they are losing money on it being empty. They already have incentive to fill the units.
Thinking that'd they'd lower rent to fill more units rather than just raise prices further for current and future tenets to compensate additional expenses is frankily naive.
It's not like landlords are gonna run out of people to charge more money for. It's not like people won't just lower their standard of living further to compensate for the increase like what happens already.
The only solution to high rent and the housing crisis is to loosen zoning laws and allow the building of both more affordable government housing and general housing and apartments in cities and high population areas to have supply meet or exceed the demand. We know from studies and real world examples that this approach works and is very effective.
Imposing a tax on vacant units would make it more risky for potential investors and companies to build more housing and thus the rate and speed of new homes being erected would slow even further due to this tax.
On paper this tax makes sense, but it ignores the reality of how landlords and multinational companies that build houses and apartments currently operate
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The effect of this would be a massive disincentive for landlords to engage in major remodels or reconstructions to rental units, impeding growth in housing and remodeling of units beyond the kind of basic paint and sweep that is typical between tenants.
Just increase the land value tax.
Easiest solution would be to have 2 property tax brackets and manage it at a city council level.
Occupied/under maintenance or vacant. If you rent a house you show the city council the lease and they give you a form that says you're entitled to the lower rate for the term of the tenancy,or you go to them and inform them that the property is underrgoing maintenance and is expected to be that way for X months and again you're entitled to the lower rate. If you cant provide evidence or tenancy or maintenance/repairs for say... 75% of the year, you pay a higher rate. Not extortion levels of higher but a definite incentive.
Oh and absolutely ball breaking fines for anyone found to be doing dodgy shit.
They're arguing against imputed income... possibly not understanding how it works... not that rent isn't income.
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Landlords generally aren't going to decline making money. If they're not renting these units out, that implies that doing so would cost them money despite the rent they would receive. You can force them to rent the units out anyway, but ultimately they're not going to agree to keep losing money forever. Either they find some loophole that does let them make money, or eventually you end up with abandoned property inhabited by people who can't or won't pay enough to actually maintain that property.
I've never owned rent-controlled property, but I did own a house which I kept empty for about a year instead of renting out. (Eventually I sold it.) Market rent wasn't enough to motivate me to do the work and take on the risks associated with having tenants. I know another guy who lives alone in a big two-family house for the same reasons. Some people who don't own property seem to think that renting it out is just free money, but things aren't that simple...
If you read the article, they state exactly what you just said. NYC has many unoccupied apartments which are not being filled because the renters concluded that the rent would not pay for cost of upkeep. They're not selling the properties either, though.
This is occurring in the midst of homelessness being on the rise. A law like this would be to either force the renter to put the property on the market, or fill the vacancy.
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Landlords don’t generally leave money on the table.
Here’s two anecdotes about landlords leaving money on the table.
The thing is, there’s too much hassle and insecurity there for you. The income tax on empty properties would almost certainly change the equation, whether it incentivizes you to sell the building or rent it out, that helps tenants.
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I suspect a lot of it is an opportunity-cost fixation. If I rent this unit to you today at $900/month, what happens if someone comes in tomorrow offering $1300 and I have to say "sold out."
I know with commercial space, the financing and valuation associated with the properties are dependent on specific rent levels, where it's better for Wall Street to see an empty $4000 unit than a full $3000 one.
Holding out for a better deal seems like common behavior for anyone. You describe doing it yourself. However, the consequences of withholding housing are pretty bad. We need policies that convince landlords to cut their losses sooner and either accept lower rents or sell to buyers who will.
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