Landlords should have to pay income tax on their rental properties regardless of whether they're rented out or not.
Landlords should have to pay income tax on their rental properties regardless of whether they're rented out or not.
A city Independent Budget Office report examines vacancy data from the state’s housing agency amid concerns of "warehousing."
Why? Because apparently they need some more incentive to keep units occupied. Also, even though a property might be vacant, there's still imputed rental income there. Its owner is just receiving it in the form of enjoying the unit for himself instead of receiving an actual rent check from a tenant. That imputed rent ought to be taxed like any other income.
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.
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.
That's the thing, it's not a "property tax" that they want, it's for landlords to have to utilize the apartments for low income housing like they are supposed to. What's going to happen is that they are going to leave the apartments vacant for 5+ years and then say, "No one wants to live here, so I'm not making money. I have to renovate to draw in new tenants, so I'll have to increase the cost to cover my cost." This is just modern day blockbusting, and it's fucking terrible.
Just make property taxes higher for empty buildings. Prorate per month. I thought some country was trying this?
For rentals in general, trying to solve a different problem, we should drastically increase property taxes and then give a discount for primary residence that puts it back to where it is now.
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.
Btw Switzerland had this low though they are planning to get rid of it soon
That's what I think too. A law where you pay more tax for additional properties you own on top of your first home. I don't know enough about the housing market to know if such a law would actually help, but at first glance it does seem like it'd break up some of the corporate slum lord businesses around the US
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.
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%.
Yes but that’s not the reason why.
There’s actually a very big shortage of homes here. Finding a place is hell, and not just because of the price.
Also they are planning to get rid of this soon.
Taxing people on an empty house makes sense to me. Taxing them on an income that they don’t get from some house that they live in makes zero sense to me. There’s wealth tax for that, but people are living in the house that they bought. That’s what we should encourage people to do if they buy a house.
Do you have any info about this? Is it a tax on the value of vacant units, or a tax on the possible rental income of a vacant unit? I would like to read more about it. Can't find much on Google.
It is called imputed rental value: https://www.taxolution.ch/swiss-tax-guide/imputed-rental-value/
"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.
So much to unpack there, not the least of which are the sweeping generalization of "landlord" and the truly odd assumption that all landlords "enjoy" every single vacant unit "for themselves"... I mean, I appreciate your outrage, but damn. Stay in school?
No outrage here. I'm using the word enjoy in an economic sense, as in possessing something and getting some benefit out of it. The concept is called "imputed rent" if you'd like to look it up.
Thanks, and though only a handful of margins actually enjoy the concept in an economic sense, I'm personally aware of the term and its tax implications (as an actual landlord myself). For those that aren't, however and would like to avoid condescension, I'll save you a click.
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.
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.
This is for apartments only. For the most part I don’t believe corporations should own single family housing, with the exception of vacation homes and those numbers need to be booked up at least 50% of the year and there should be a cap on how many a corporation can own
I would do a tiered tax rate depending on vacancy for apartments.
Example 1% property tax if property is 95-100%
5% 80-94%
10% 60-79%
Etc etc
Absolutely punish the complexes that charge ridiculous rates while sitting at a 20% vacancy. I know plenty in my town that are doing exactly that. Charging $1500 for a small one bedroom apartment while all the units are sitting empty.
Reward the full ones with a low tax rate and punish the ones sitting on empty housing with a high rate.
Sounds like a nightmare to oversee and upkeep. Much easier to just make it easier for companies to build more housing so that there's enough competition to drive prices down
They're arguing against imputed income... possibly not understanding how it works... not that rent isn't income.
I wouldn't be so sure about that. Landlords should be legally compelled to keep their properties up to snuff and if that's too much to ask then they need to get out of the business. As for renovations, if they have to do any that would make a unit uninhabitable for a period of time then that would probably warrant a temporary reduction of the taxable rent, which could be addressed in the permitting process. If renovations take longer than what was permitted, authorities could investigate to make sure the owner isn't actually warehousing the unit, which would be a violation. In any case, tax on the imputed rent of the land would still be owed, so there's always an incentive to complete renovations quickly.
Edit: as I replied here, I'm not a fan of land value or other property taxes.
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.
It makes sense for landlords to hold out for higher rents sometimes. In NYC and probably other places, landlords can get tax breaks if they agree to rent stabilization rules, which set the limit for rent increases each year. One way for landlords to take advantage of this arrangement in to keep units off the market until they think rents are relatively high so that they can get the most out of the allowed increases, while still getting the tax break.
Also, with property values increasing, it can be very tolerable just on to hold onto a vacant unit. What do you need an annoying tenant for if the property keeps appreciating and you can even maybe get a line of credit out of it?
In the context of imputed rent, it doesn't really matter what the owner personally gets out of keeping a property to himself. If the market rent for the unit is $2,000/month, that means the owner is getting $2,000/month worth of some kind enjoyment out of having it. That's because if he didn't own it he would have to pay whomever did $2,000/month for the privilege. It's not immediately obvious, but the income is the rent you don't have to pay when you are both the owner and possessor of a piece of property.
I just think that this is a type of income that should be progressively taxed like other income and that there will be benefits to doing so.
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.
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
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.
Honestly if a potential rental unit won't cover the costs associated with renting it, I can't think about how salable it's going to be. Seems like a market failure and my guess is that it probably has to do with the extensive regulations on rentals in NYC and how hard it is to get rid of a bad tenant.
The point I'm trying to make is that if renting the property out is a net loss and whoever owns it is required to rent it out, there's almost no reason for a person who intends to comply with the law to want to own the property. Forget selling - why would anyone even take it for free if it was just a permanent money sink?
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.
I wouldn't say that I was leaving money on the table. There's a difference between gross income and net income - my gross income would have increased if I rented my house out, but my costs would have increased as well. Once I accounted for the cost of my time, of the additional maintenance, and of the risk that I would get someone who refused to pay rent, trashed the place, and took a year to evict, I decided that the net income from renting would be negative.
I was just a guy with a house, not a professional landlord. I think a professional would have found a profitable way to rent out a house like mine (because it wasn't rent-controlled). But these vacant properties are already owned by professional landlords - I'm not sure who you think would find a way to make money off of renting them out if the professionals can't. And why would someone buy a property that doesn't make money?
(I suppose some people would buy them for a low price as a bet that the restrictive regulation will be repealed someday. Where I live, you can already get cheap rent-controlled property in very expensive parts of town with the hope that you might eventually be able to get the tenant out of there. But I don't see this as a viable large-scale solution.)
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.
Why not simply take the property from the "landowners" and possibly even jail them for being a leech on society? If you own property that you don't live in, you are taxed at 100% of the property value if it's not occupied. If you declare bankruptcy you immediately forfeit the property. Easy.
What's really fucked up is that selling a rental property doesn't incur the same tax penalties as selling a lived-in home. Should be the opposite. How ass-backwards can you get?
Great idea if you want to make poor people more poor.
Why do y’all hate poor people so much? Is it like a racism thing or something?
How do policies that would put downward pressure on rent make poor people poorer?
There is a long history of passing costs onto the consumer. If costs go up for empty units, rents go up on occupied units to cover and / or recoup those costs.
This would also disincentives property owners from doing renovations by adding additional costs, since the units need to be vacant during construction.
Without functional regulations and protections around rents and renters, all of the pressure will just gets pushed down stream to impact the most vulnerable.
@CrimeDad @Coreidan I don't believe this, but I will give it a go in trying to steelman this argument.
If landlords and real estate developers see a sector specific decrease in returns then they would decrease the capital in the sector and thus decrease the housing units made available for rent.
This theory ignores the real world where developers opted-out of low-income housing in favor of luxury real estate that either remains vacant or unoccupied while the owner uses it as value storage
Pay income tax on income you aren't collecting?
I live in my house. The neighbor rents theirs. I have twice the square footage, and I maintain my house like it's mine, whereas they maintain theirs like it's a rental, which is to say my house is way fucking nicer... I don't have the paper thin wall paneling with the lines millef in it to look like shiplap, and the babyshit green pile carpet out of the fucking 70's, you know? That pileif shit rents for $1800/mo, and my mortgage is almost exactly $1k with homeowners, taxes, and warranty included. I don't know what the fuck I could get if I rented it, but what you're suggesting is that I should be obligated to pay income tax on what I might get??? Not the 1% property taxes, but like what? 30% or so?
How about fuck no? Do you own a house? Do you want to own a house? What you're suggesting could price anyone who makes less than a million dollars a year right the fuck out of the property ownership world... forever... That is a batshit crazy fucked up idea.
It is possible to distinguish between home occupiers and renters, and were a law made like this some method of distinction would be needed.
The entire purpose of a law like this would be to force renters to keep their lots occupied or sell them if they cannot afford to do so. Either way, you either see a drop in rent costs from a market increase, or you see a drop in real estate costs as the market increases. And either way you do not have tens of thousands of vacant homes while homelessness is on the rise.
You live in your house, it’s not a rental property. It would be very simple to have this law apply to properties 2+
You mean to say people that are renting don't spend their own hard earned money (a huge chunk of which goes to some greedy asshole) improving some other richer persons property? The horror! Won't somebody think of the poor landlords? How dare they not consider the neighbors property values!
🙄
Not sure what my personal situation has to do with it, but I am indeed a home owner. To be clear I don't think you should have to pay property tax in addition to income tax on the imputed rent. It's one or the other and I think income tax on imputed rent is fairer and makes more sense. In my case, if I were to pay income tax on the imputed rent of my house instead of the property tax, I would paying less than half of what I am now at current rates. I don't think such a change would price people out of home ownership, but it might make people reconsider owning too much home.