Ethics of Real Estate Investment, NIMYism and the Housing Crisis

In reply to pheller :

I want to propose some food for thought for your consideration...

Your entire frame of reference is from an authoritarian perspective. The articles you read, the job you have, the people you talk with are ALL of the perspective that there are expanded government roles which can improve life for the vast majority of people. That's one viewpoint. 
 

However, government is often in the position they want to disincentivize small business. The reason is small business is harder to regulate and control. 
 

Your above example is a perfect example. A smaller business with a property that has deficiencies forced to sell through tax manipulation so a bigger, stronger, better financed company can take ownership and build it into something that the original owner was not able to. 
 

My opinion is this is the WORST form of governance. I want nothing to do with it. 
 

The tools exist NOW to deal with dilapidated properties. Property maintenance codes, local enforcement, condemnation when necessary, eminent domain when it is in the best interest of the public. 
 

The ONLY thing you are accomplishing with everything you have proposed is to put more power in the hands of government through tax manipulation. They already have the tools they need. Use them.

pheller said:

ProDarwin said:

To add to the above, it seems if you want to encourage development in dilapidated areas, you would want to discourage vacant land development more.

I know what I have seen happen in some areas is a new shopping center is built across the street from an older run down one with vacancies, which only makes the problem worse.

This is certainly a consideration when thinking about LVT, because the dilapidated land holder might just make enough income from their property to pay the land tax, and the new developer across the street is motivated to develop vacant land, but might not be inclined to buy the dilapidated property because it's owner still wants a price that does not make redeveloping it financially profitable. 

In this situation, do we raise the taxes on the dilapidated property to the point where they are motivated to sell it for whatever they can get for it? Do we offer strong tax breaks for redevelopment of property? I'm not sure, honestly. 

I dont see creating another tax to fix the new tax that was created really solving the problem.

Having read through that wikipedia section you quoted and done some more thinking, I don't know that encouraging land development is really needed.  And if it is need, you need to make sure it doesn't come at the expense of redevelopment/upkeep/whatever of dilapidated areas.

Im happy to gain better understanding of this, but heres what I picture in my head:

 CityX encourages land development.  It comes at the expense of dilapidated structures.  Vacant land around the city is developed with newer houses.  Older stuff in the center starts going to E36 M3.  People don't like that and move further away to new development.   You end up with Detroit circa mid 2000s.

Taxes, taxes, and more taxes will not solve the problem I think.  A fundamental rethink of the approach to the problem is needed.  What do you want, and what do people want?  Can it be solved on a city/count/state by state bases through ordinances?  I dont disagree that there are some problems, but I do disagree with the fundamental problem suggested originally in this thread (that people are hoarding/sitting on land).

pheller said:

In reply to SV reX :

My interest is maximizing urban land use. I hate sprawl. 

I'm open to other ways of combating it. Suggestions?

This seems to be mutually exclusive with policies that encourage development of vacant land.

pheller said:

In reply to SV reX :

My interest is maximizing urban land use. I hate sprawl. 

I'm open to other ways of combating it. Suggestions?

That's reasonable. But honestly, it's gonna happen on its own, or fix itself. 
 

Sprawl happens because people WANT to live there. The only way to stop sprawl is to make it a LESS desirable place to live. 

Your solution to sprawl seems to be to try to recapture blighted urban areas to slow sprawl. That's called urban redevelopment, and it happens already naturally. But it doesn't stop sprawl, it is a by-product of sprawl. 
 

Atlanta GA is virtually the definition of sprawl. There are no natural barriers to prevent it (like rivers, mountains, state lines, etc), and sprawl has been happening there for 50+ years. Every time a subdivision grows on the outskirts, it eventually becomes a city. Why?  Because people want to live there. 
 

The further the sprawl reaches, the more valuable the blighted urban areas become. When they hit a price point that makes it worthwhile, developers recapture those properties and turn them into something wonderful. This comes at a price... they are NEVER cheap.

Any form of forced urban development will end in disaster. There has to be a financial advantage to considering it. 
 

ProDarwin said:

pheller said:

In reply to SV reX :

My interest is maximizing urban land use. I hate sprawl. 

I'm open to other ways of combating it. Suggestions?

This seems to be mutually exclusive with policies that encourage development of vacant land.

Only if that land is outside the urban boundary. 

Within an urban area, that land has likely already been developed, razed, and now sits vacant again. It's got all the utilities and services of urban properities. It's got access to highways and rail. 

Right now, it's far cheaper to develop land in suburban areas because you don't need to build up and most suburban municipalities don't give a flying eff about sprawl. 

I'm not proposing such a change in rural or suburban areas outside city limits. In the case of my city, we're an island. We can only "sprawl" so much before all the land is used up. The problem we have is that we've got vacant land in town that has been vacant for a very long time, but it seems like the places with the highest demand sit vacant the longest. Now we have apartments being built on the fringes of city limits, while empty old restaraunts sits downtown with boarded up windows. The people in the apartments would love to live on that vacant property, but for whatever reason, the owner of it will not sell, or not develop. 

I trust that eventually that vacant property will be developed, but the problem as I see it as the natural progression of the town is all jacked up. Shouldn't the urban center be the most dense? Not the fringes? 

In reply to pheller :

ALL owners WILL sell when the price is high enough. 

Feel free to buy it. 

In reply to ProDarwin :

Most cities offer tax abatements in order to get dilapidated areas in poor neighborhoods rebuilt. NOT tax increases. This is already happening in many areas.

pheller said:

SV reX said:

In reply to pheller :

4th time I've asked...

What large quantity of revenue producing property is randomly sitting idle?

That's  a stupid idea for anyone who wants to make money. 

I think I asked it earlier in the thread, but I'm not sure if it was answered or not: 

Some investors can write off depreciation of assets in areas with high appreciation and still make money. 

Basically, the taxes are low enough and the appreciation is high enough that they will make money on the sale of the property, while also being able to claim depreciation. 

I was talking with a local guy who is a property investor, and here was his answer when I asked this question:

"I’ve ran into tons of reasons, “passing down to kids” when they die, not willing to pay taxes on the sale, corporate tax haven for other businesses, back taxes too high to bother, used as collateral on another deal and left vacant cuz they can, city screwed them, wife has this idea and husband has that, didn’t know they owned it after parents died, and I’ve had countless here in town just simply tell me “I’m not selling anything” even though the building is clearly vacant and falling apart"

If you depreciate an investment property, you have to pay the piper when you sell. It's called the depreciation recapture tax, and it's worse than capital gains tax.

These things aren't as simple an easy as you say.

There is a tax for literally everything you do

In reply to pheller :

No one can deduct or depreciate more money than they actually spend. There are many reasons to hold land, but it's never a money maker on the tax advantages alone.

They sell when it's worth it to sell.

pheller said:

In reply to SV reX :

My interest is maximizing urban land use. I hate sprawl. 

I'm open to other ways of combating it. Suggestions?

You have already been outvoted on that.  People want a big backyard and a garage and the biggest, most powerful vehicle they can afford, not a tiny apartment in the city with access to mass transit. It's the American Dream. Most people who aren't poor move to the suburbs. They vote with their feet. COVID has only increased that movement. People are leaving New York City. They are bailing on San Francisco. They are bailing on the entire State of California in search of an affordable mortgage and a piece of property of their own.

Opti said: 

If you depreciate an investment property, you have to pay the piper when you sell. It's called the depreciation recapture tax, and it's worse than capital gains tax. 

These things aren't as simple an easy as you say.

Do investments companies fear this? Or it just the cost of doing business? Does it motivate them to sell at a loss? 

I would guess not. In areas of high demand, I would guess that all the tax "sticks" do not outweigh the potential "carrot."

In reply to Snowdoggie (Forum Supporter) :

much to my chagrin, you speak truth. 

People love "downtowns" with lots of retail shops, cafes, restaurants etc...but they don't want to live near those things. Especially when those areas are filled with street people and high rent prices.

I used to live in a very successful planned community.  It has never (to my knowledge) dealt with blight, and while sprawl happened all around it, it has had a consistent level of density over the past 50 years.  It sounds like what you want.

If you want to accomplish it, I suggest you do what that guy did:  buy a berkeleyton of a land so you control it.  

In reply to ProDarwin :

I'll study Reston to see how they manage vacant property or land. My guess is that property taxes are sky high? 

Tax rates are Fairfax County.  $1.10 per $100 of assessed value.  That doesnt seem that high, but I dont know.

In reply to pheller :

If you want better utilized properties, remove the barriers to start business and to make properties economically feasible.

As the article you posted mentioned "Most taxes distort economic decisions and discourage beneficial economic activity."

So instead of finding more convoluted ways to tax and refulate these properties why don't we try and reduce barriers, for example excess taxes and regulation 

I'm all for it. Whatever it takes. 

Lets start first with giving the power back to local governments. In my state, that power has been removed. 

In reply to pheller :

Forcing a property owner to make required improvements improves the neighborhood. Reduces crime, raises property values (which raise taxes), removes places for rats to nest, offers overall life improvements to an entire neighborhood. 
 

Taxing them just takes their money, gives it to a politician for their pet projects or neighborhoods, and leaves the blight intact. 

Snowdoggie (Forum Supporter) said:

pheller said:

In reply to SV reX :

My interest is maximizing urban land use. I hate sprawl. 

I'm open to other ways of combating it. Suggestions?

You have already been outvoted on that.  People want a big backyard and a garage and the biggest, most powerful vehicle they can afford, not a tiny apartment in the city with access to mass transit. It's the American Dream. Most people who aren't poor move to the suburbs. They vote with their feet. COVID has only increased that movement. People are leaving New York City. They are bailing on San Francisco. They are bailing on the entire State of California in search of an affordable mortgage and a piece of property of their own.

While that is absolutely the true ( regarding suburban sprawl and its desirability). 
 The truth  regarding people leaving places isn't as black and white as you portray it.  The attraction of California is its wealth. 5 th richest country in the world and #1 state in America.  So yes some are leaving but nearly as many are returning. Add foreign born growth and California is maybe losing 1%    
     Same with New York. Both have high taxes, high costs, but it's also where opportunity is. 

pheller said:

In reply to Snowdoggie (Forum Supporter) :

much to my chagrin, you speak truth. 

People love "downtowns" with lots of retail shops, cafes, restaurants etc...but they don't want to live near those things. Especially when those areas are filled with street people and high rent prices.

Exactly. Downtown Rockwall has managed to do away with the street people while bringing in retail shops, cafes, etc. When I worked in Downtown Dallas I once almost tripped on homeless guy taking a dump on the sidewalk 3 blocks from my office. Nobody should have to deal with that. Guess where we are going this weekend?

frenchyd said:

Snowdoggie (Forum Supporter) said:

pheller said:

In reply to SV reX :

My interest is maximizing urban land use. I hate sprawl. 

I'm open to other ways of combating it. Suggestions?

You have already been outvoted on that.  People want a big backyard and a garage and the biggest, most powerful vehicle they can afford, not a tiny apartment in the city with access to mass transit. It's the American Dream. Most people who aren't poor move to the suburbs. They vote with their feet. COVID has only increased that movement. People are leaving New York City. They are bailing on San Francisco. They are bailing on the entire State of California in search of an affordable mortgage and a piece of property of their own.

While that is absolutely the true ( regarding suburban sprawl and its desirability). 
 The truth  regarding people leaving places isn't as black and white as you portray it.  The attraction of California is its wealth. 5 th richest country in the world and #1 state in America.  So yes some are leaving but nearly as many are returning. Add foreign born growth and California is maybe losing 1%    
     Same with New York. Both have high taxes, high costs, but it's also where opportunity is. 

Working in Hollywood or the Silicon Valley is why people come to California. People with middle class jobs and less are leaving. You can make as much in Dallas or Atlanta working as an accountant as you can in Los Angeles or San Francisco, so why not move? If you wash dishes for a living you will work two jobs and still be homeless. Of course you will move.

But wait. If you want to work in the movie industry, lots of movies are being shot in Toronto now. Netflix shoots a lot of movies there. Want to be in high tech? Another high tech company moves from San Francisco to Austin almost every day. HP moved. Apple moved a lot offices. Telsa moved.

This rush out the door is only starting. Wait till the homeowners insurance rates spike again because of all the floods on top of all the fires.

In reply to pheller :

So again, you're using the highly idiosyncratic circumstances of your little area to propose a Draconian and risky solution that doesn't really apply to the majority of the country.  And which wouldn't really work anyway, for all the reasons we've been describing at length here.

Since you ignored my previous analogy, let's propose a different one:

Say you passed a derelict <<insert pheller's favorite rare car here>> every day.  It's parked in the owner's carport so it's not really a hazard or an eyesore.  You watched it rusting away.  Every once in a while you'd knock on the door and ask to buy it, but the owner always said "No, I'm going to restore it some day."

That car is obviously going to ruin and its potential is being wasted, when an enthusiast like you should be driving it.

Does that give anyone the right to impose a Nonrunning Car Tax in order to force the owner to either fix it up or sell it?

pheller said:

Opti said: 

If you depreciate an investment property, you have to pay the piper when you sell. It's called the depreciation recapture tax, and it's worse than capital gains tax. 

These things aren't as simple an easy as you say.

Do investments companies fear this? Or it just the cost of doing business? Does it motivate them to sell at a loss? 

I would guess not. In areas of high demand, I would guess that all the tax "sticks" do not outweigh the potential "carrot."

Its the cost of doing business, just like anything else, but that doesnt mean it doesnt affect economic decisions, especially in ways you have specifically stated you dont want, as in unutilized property.

I mentioned it because I was formally educated on the tax code and was real familiar with it about 10 years ago (and its so convoluted and agravating I pay someone else to do my taxes) and I keep seeing opinions based on how people think the tax code works, but they have an incredibly elementary understanding.

As in - just lose money and you owe no taxes and you get to depreciate a property and make money on appreciation.

These opinions generally revolve around additional taxes or further convoluting the tax code.

In reply to Snowdoggie (Forum Supporter) :

OK then where are they going?  If 1/2 of the population is getting out of Dodge, the nearby farms / towns must be filling up.  Yet Wyoming and Idaho's population  hasn't suddenly tripled. 
     Yes, some people move freely around the country, but that has a massive cost. Both moving and adjusting ( " Hey where do  get my stuff fixed?" )   Then what about family friends and neighbors? Is it possible they don't want to move to Wyoming or Idaho?  
  Plus what an accountant earns  in Hollywood is massively higher than he can earn in Mississippi  or Missouri  where yes it is cheaper to live. 
   Cheaper also means lower income.