— By Kevin Montgomery (@kevinmonty) |
In response to the post about Modern Times not being allowed to renew their Valencia St. lease so the landlord could (presumably) find a higher-paying tenant, reader Jermey brought up the idea that we tax landlords who leave storefronts empty:
Does anyone know if the landlord has a new tenant lined up, or is it going to join the ranks of the empty storefronts on Valencia while the landlords hold out and wait for someone willing to pay outrageous rent?
I hope the Supervisors follow up on the City economist's suggestion to create a tax on vacant commercial properties to encourage landlords to lower the rents to where businesses that don't sell $100 meals or $500 jeans can afford to pay them.
Not a bad suggestion. As anyone who has actually studied economics and isn't in the Tea Party can tell you, communities often levy a tax on negative externalities (e.g. we tax the sale of gasoline because it pollutes our air). Since empty storefronts have a negative effect on SF (blight, reduced commerce, harder to start a small business), it would seem reasonable to enact a tax that discourages landlords to leave units empty and evict small businesses in favor of finding a higher-paying corporation to fill the space. Then again, this would be blasted as anti-business by the developers of the city, so there will doubtfully be any political capital to make it happen. Nice to dream though?
Comments (37)
Thanks for the post, Kevin! The idea came from Ted Egan, the City’s Chief Economist. In his economic impact reports on the Twitter tax break, he said that would be a better way to stimulate business in Mid-Market. That’s got to be the first time he’s ever advocated for a tax increase as a way to generate jobs. Usually he’s in the business of telling the Supervisors how many jobs will be cost by the tax increases they’re considering.
Here’s the full quote from page 3 of his report:
He says that it would have to be approved by the voters, thanks to our friends at the Howard Jarvis Taxpayers Association and Prop 218.
oh this is rich. in the picture above, isn’t that the same storefront that was supposed to get an American Apparrel?
Yup, the landlord of this particular space is American Apparel, but they were run out of the neighborhood by the same people who are now complaining about the empty storefronts. AA even wrote a letter to the community trying to lease the space after that little incident.
Can you people please all move to Portland and get it over with already?
I totally agree. The hipster nimby brigade blocks american apparel from taking the street up a notch, then complains there is no business in there. Well, in this case, there is a business in there, only you can’t see it because you and your moron buddies have blocked them from moving in their inventory.
regarding an “empty storefront tax” only in San Francisco would or could this get more than ½ seconds of consideration. OK, so I’m a landlord and my storefront is empty. I’ll lease it for $1 a year to my buddy while we wait for a high paying tenant. There’ your silly proposed law has just been nullified. I know, far left complainers, logic has never been your strong suit.
This is a half-truth, the protest wasn’t about a business trying to move into a space (nice try through), but protecting the neighborhood-feel Valencia has. Moreover, there was concerns that AA paying a high rent would be a signal to other landlords to evict small businesses in favor of leaving the storefront empty until a higher-paying corporate tenant moved in.
Anyway, I’m not going to rehash the debate from 2009… you can read the protestor’s reasons directly: http://stopamericanapparel.wordpress.com/ (be sure to check out the early posts)
The signal we’re trying to send to landlords is: 1) rent space cheaply but only to businesses that other hipster-run businesses approve of. 2) Otherwise you’re going to have to pay more taxes.
Actually, AA was trying to move into a historic district, which can not have chain stores…hence KFC getting the boot for Grub. That was before the Kevin’s time here in SF. His history is what 2 years deep?
I love you.
The issue with American Apparel was with having a chain store in the neighborhood. It’s now a non-chain store. So, there’s no vacancy issue and it’s actually good that American Apparel was rejected because then it became a space for a locally-owned business. I would have preferred it to stay Discount Glass, but at least it’s not a chain store.
As with Modern Times, commercial landlords will often raise rent (there are no increase limits for commercial leases), drive out a locally-owned business, and hold out for a commercial tenant that can pay higher rent (often chain stores). You can choose to have more money go to landlords (with chain-store tenants) or circulate back into the local economy when money is spent for services (with locally-owned business tenants).
Anyone know what the story is with Discount Glass? I wonder if they left because of a situation similar to Modern Times’. If there had been a vacancy tax as a disincentive for the landlord back then, we wouldn’t have had to deal with the whole American Apparel question. Production, distribution and repair businesses (PDRs) are important to keep in the neighborhood because they provide more stable jobs than upscale restaurants and boutiques, especially during recessions.
Too bad about Modern Times moving and downsizing their retail store.
We tax gasoline because the government needed money far before pollution was well-understood:
http://www.fhwa.dot.gov/infrastructure/gastax.cfm
And this temporary measure was made permanent as part of our buildup to World War II. I can say with certainty that we did not engage the Axis powers as part of an environmentally-oriented defense - except, of course, that we prefer to breathe free air.
While part of the gas tax may now go toward environmental causes, the majority of it goes to pay for roads. We tax those who use the roads in this way, attempting (however unequally) to shift the burden of the road costs onto those who use them the most. Laying down those roads is very hard on the surrounding environment. If anything, the gas tax goes towards a net harm to the environment.
Facts. They’re out there.
And there *are* states that have done this, but thanks for playing.
I see. Because a few states have added a few cents on *top* of their existing tax, that means that your blanket statement that we tax gasoline because of its negative effects is correct, and not at all misleading or in any way an attempt to lead the reader to your point of view by presenting only one shade of one side of a story, then? Really?
How can we take the rest of your opinion seriously when you so clearly are willing to twist and mislead in order to convince people? If this is such a good idea, it shouldn’t require manipulation to convince.
Politics. Just say no.
And before you climb up in that lofty-high saddle once more, let us quickly remind our dear readers that the entire offense this article attempts to correct hinges on a presumption, not any sort of evidence or fact, nor statement from the property owner.
Sensationalism is not moral.
You, oh Facts, played very well.
Depresses me to all hell when I can’t even even trust the fact checking of the curious and vilified delinquents I identified with in the back alley behind the playground. I know its difficult to rise up against a situation when the facts are difficult to find, but the author’s smugness is so backwards. We could be helping each other, and he could have thanked you.
Fuel is taxed to pay for roads and highways. “offroad” fuels do not contain this tax, because the fuel is used not on roads or highways. Both on-road and off-road fuels burn the same, so how does one explain why red gasoline or red diesel (offroad) contain no taxes?
Feel free to just educate yourself: http://en.wikipedia.org/wiki/Pigovian_tax
Yes this is exactly what we need - further restrictions and taxes on private property. Let’s also invite the British back manage this whole process.
Actually, that is what we need. Prop 13 decimated our tax base and we do, in fact, need to build it back up.
If it wasn’t for Prop 13, most of the people who own homes on my street (near Folsom / Chavez) would be forced to move. Families have owned homes here for 50+ years and pay very small annual property taxes. Their property taxes would go from $100 a month to $1,000 a month without Prop 13.
Sure, businesses abuse Prop 13, but repealing it will certainly cause rents to increase.
That doesn’t mean it shouldn’t be amended and changed, but outright repeal of it would be devastating for many people.
I am a big big fan of Pigovian taxes, but they have two potential downsides.
1) Like Kevin said, they tend to be political non-starters, because people currently generating the negative externality strongly favor not having to pay for them. The pushback from generated from the preference intensity is hard to overcome. Even if the tax is established, it will be a constant target for rollback and undermining.
2) Once the tax is in place, it’s a revenue stream. That can lead to rate setters over-charging landlords from what a “fair”/efficient rate would be, to goose revenue. (You wouldn’t want the vacancy fee so high, for instance, that there’s too little rollover in storefronts that lousy venues can thrive.) But the really bad distortion is that there can be now a perverse incentive on the tax collector’s part to actually encourage greater amounts of the negative externality to generate higher revenue.
Fortunately, there’s one easy addendum that mutes both these at once: Collect all the taxes from the vacant lot landlords, then cut every citizen a check equal to their share of the proceeds (with a note that says, “you got this because of our vacant lot tax”). Now you’ve created a block of folks who want to see the tax survive, hopefully potent enough to keep the tax in place. In addition, because all the revenue goes out the door every year and can’t be used for general spending, there’s less pressure on tax collectors to bring about unintended consequences.
Holy crap! Your blog is fantastic.
(Or website or whatever you want to call it.)
internet cock.
Yes, thank you, couldn’t quite name it. His internet cock is fantastic.
So you think the government can tax vacancies while also retaining veto power over what business can open in a neighborhood? Good luck. It’s been demonstrated time after time that the nimbys far prefer vacant, blighted property over the horrors of a Starbucks or god forbid McDonald.
When you say veto power, do you mean zoning laws? because it has been well established that zoning helps cities grow in ways that encourage commerce and tax revenue.
Pretty sure the “special provisions” of the Mission commercial district go far beyond the realm of zoning laws and actually do get into the realm of veto power. But don’t let the facts get in your way, mr./ms. “it has been well established” without sources.
i would LOVE for the facts to get in my way, it’s a pity you didn’t provide any- your allusion to the ‘special provisions’ withstanding. I don’t think we should tax empty storefronts but I just don’t know what special veto power was being referred to.
But you are right, I didn’t cite any sources because I wasn’t sure how to cite every single urban planning masters degree awarded at universities all over the country.
Dude, this is actually a pretty interesting comment thread, spiced up with just enough attitude, wild accusations and other blogsurdity. Kudos, gang.
@Earl Stevens: American Apparel was the tenant that was willing to pay the inflated rent the landlord was holding out for. And as for the “special provisions,” I don’t believe there are any in the Mission. There is 2006’s Prop G, which that applies citywide and requires chain stores to get a Conditional Use permit. That gives the neighborhood a chance to at least have a hearing at the Planning Commission to say whether they want the chain store or not.
http://www.smartvoter.org/2006/11/07/ca/sf/meas/G/
The Chicken John NIMBY set want to keep Valencia blighted and vacant to keep rents cheap for folks like his girlfriend’s business Rithal Coffee Roasters and who ever else he deems worthy to occupy those spaces. Bring in real businesses and the rents will go up accordingly, no, you can’t have that, he thinks, so launches all these fake “grass roots” campaigns to protest everything and anything that’s not a part of his little clique.
All these self appointed neighborhood bullies are the same, they are anti-progress because they only have so much will to compete in a free market and their trust funds only give them so much per month to live their lives on, apparently that’s right around the level which they can also afford to rent a current Valencia St storefront for their latest hobby business and if prices went up, they’d be priced out of a commercial real estate market that would require them to seek gainful employment to participate in. If they had jobs, they wouldn’t have all this free time to protest everything and anything while the rest of us get up and go to work every day. In this way, their interests are overrepresented in these community meetings because you and I are at work while he and the rest of his trust fund fixie bike cronies are going from meeting to meeting, protesting everything while waiting around for mommy and daddy to send next month’s trust fund distribution check.
This actually has almost *nothing* to do with Chicken John, but rather was a movement spurred by Stephan Elliot and dozens of local businesses.
You’re saying Chicken and Stephan Elliot aren’t buds?
I worked in property management for 7 years and I would definitely support this tax. It makes no sense to me to hold out for higher rent when you can easily gain tenants at a slightly lower rate. Often times it’s not even THAT much lower. I’m sure these landlords do cost analysis, but I doubt that leaving things vacant for even a few months is doing them a lot of good.
I think there should be a tax on dipshits.
Intrigued by this idea. Counter-intuitive.
Anti-business? Can you aggressively argue that with a straight face?
In high foot-traffic, boutique corridors it makes all these sense in the world.
If the problem is landlord’s transferring the blight costs onto the community by keeping their stores vacant, let’s try reducing the blight. Ask the landlord of empty storefronts to wash the sidewalk, clean the graffiti Oops, no we can’t do that, too many peeps want a place for street art..
The only problem is nothing new has happened in street art in 10+ years. Tagging is dead,