No, they shouldn't. There are externalities that effect others, and the free market.
For example, you don't want people doing things that poison groundwater for the neighbors, right?
Anyway, letting property sit idle benefits the landowner but causes issues for neighbors, local government and the free market. It means businesses in those locations get less customers, and local governments less sales tax. If the property is not cared for, there can be additional issues that lower the value of other's homes.
It causes rental prices and home prices for buyers to inflate because of the market distortion, leading to boom bust real estate problems.
Boom and bust effects homesellers and homebuyers, but also, given how often property tax plays a role in government budgets, dramatically affects local and state revenue, (and federal revenue in countries with a federal property tax).
Normally people talk about externalities of activity, as opposed to externalities of inactivity. I suppose this is just two sides of the same coin. People living in a place does have positive knock on effects. However it feels a little different to me to say, “because you didn’t use your property a certain way, therefore there wasn’t this good secondary effect, therefore you have created a negative externality.” No, I just have declined to create a positive one. If I use my property in a way that is good but not creating the maximum amount of positive externalities, have I still created a negative externality? I don’t think so.
Terminological issues aside, tax is not about fairness. At least not for any one person’s particular definition of fairness, and certainly not mine. Tax, in this case, is about a behavior we want changed, and a means readily to hand by which to change it. Doesn’t really matter if it’s fair.
"letting property sit idle benefits the landowner"
Can you help me understand this? I've never understood why any property sits idle -- the property would need to increase in value fast enough to counteract property taxes, just for the owner to break even. And that's ignoring the opportunity cost of not filling the property with tenants.
To me, it seems that it would always make more financial sense to try and hit 100% occupancy, even if that means steeply discounting the rent. Wouldn't an empty property be hemorrhaging cash?
Another is this: a building nearly full rented has an easily calculable valuable based on its income. A building with a higher price but not trying to rent can, incredibly, claim to have a higher value. Especially if there are several building nearby claiming the same value.
If there is a debt associated with the building, it is especially in the owner's interest to keeping the supposed value of the building high even if they are loosing revenue at the moment.
If a few organizations own a large number of units they can strongly influence a market both of rental rates and building values by doing this. Undoubtedly to a net profit or they wouldn't be doing it.
For some people cost of owning – property tax, various services is not a big deal. Also, in some places property rises in prices just by itself (like in San Francisco), you just have to wait.
Sometimes people lose money, but at the end of the day they can sign a good deal on it (let's say couple of years), and it will compensate their losses extensively. But they will have this "ready immediately" sign all this time.
Problem is, every “tweak” of the market causes ramifications, often unintended.
A great example is rent control. Sure it helps current tenants, but it distorts the rental market such that it disincentivizes putting new homes on the market, and the exact opposite of what you want - higher rents.
The people hoarding empty houses will do anything they can to block this because it drops the value of their houses which they only own to sell at a higher price later
That's not true in the modern world and never has been. There's plenty of things you can't do with your property, and indeed the total universe of what you can do is much smaller than the universe of what you cannot do.
Cities are (necessarily) very tightly regulated, because when people and property are packed in so tightly together the possibilities for negative externalities are severe. It's important to optimize the very limited space in a way that maximizes its good for as many people as possible.
You have a lot more leeway to do whatever you want way out in the country if that's what you're looking for, but you should never expect that in a dense city, because you won't find it anywhere.
What are the negative externalities associated with me leaving my house empty vs. me living in it? Bear in mind that any perceived shortage of housing in the local area is most likely artificial in nature because of NIMBY policies that I did not vote for.
The claim I was responding to was that people should be able to do "whatever they want" with their properties, which encompasses a lot more than just leaving them vacant.
But to answer your specific question, the most obvious negative externality is increased rents for other people, because an apartment that could be being rented out (increasing supply) isn't being rented out.
Having lots of vacant residences also potentially increases crime, is bad for neighborhood maintenance (we have a huge problem here in NYC of sidewalks not being shoveled in front of vacant properties when it snows), it gives pests a potential home, and increases the potential to damage surrounding residences. Vacant residences are more likely to fall under disrepair and then catch on fire or start leaks, which can damage nearby or underneath residences. If you're touching one then it's bad for your heating/AC bills, because your heat/cold is sapping through the walls into the un-conditioned apartment. Even just simple things like having fewer eyes to watch out for crime and call the police if a burglar or robber is spotted.
There's a huge host of problems associated with having long-term vacant residences in your neighborhood.
Are you currently selling your unused possessions on Craigslist? That camping gear or extra set of kitchenware? By not selling your things, you are making those things more expensive for everyone else. Therefore, you are creating a negative externality by not selling your things, and storing unused property in your garage and basement should be illegal.
What you are describing is not an “externality” in the way that economists use that term.
Land in a developed area is in very limited supply, it's necessary to make the economy function, and most of the owners are speculating on the price going up. Kitchenware doesn't work that way. Almost nothing else works that way.
Owning central land and not using it means that millions of people have to go further to get to their destinations. It also means that construction effort and money is going into a black hole and not turning into supply. Enough of this together makes a powerful negative externality.
The ability to apply the same argument to another situation has no probative value. Any policy has its pros and cons. One can support vacancy taxes/fines without supporting other taxes on unused possessions.
Is that a trick question? The negative externality is leaving a usable property vacant when public policy encourages use. You're maintaining this situation:
and it seems obvious to me why that's bad and public policy should not promote it.
As a public policy, along the lines of taxing vacant properties, we could also simply permit any vacant or unused property to be lived in and used by anyone who came along.
in a very wealth neighborhood of Honolulu, think where the average home is 4-5+ Million USD, a japanese owner of many houses 20+ wanted to build a gallery for his art. the wealthy neighbors didnt want it so what he did instead was rent all of his houses to low income hawaiians and put the art out on one of his vacant lots. they were mainly weird statues. naked greek gods etc. Just goes to show what people can do when sufficiently motivated.
for anyone that wants to read further his name is Kawamoto and he was recently arrested for Tax evasion in japan and was forced to sell his Kahala Homes Portfolio
I agree with you on this principle, and when your property does not affect anyone else this right is an absolute. However groups of people who choose to live and work near each other generally decide that they have some say in what can be done, and this usually works out for the greater good.
Then you get issues with the rich from other places using your city as a wealth storage zone and suddenly you have millions of homes empty but no one has anywhere to live so the city dies.
Unconstrained property ownership has consequences. As a society you have to understand and decide how much you want to regulate how markets and limited resources can benefit some and harm others.
There is clear social harm to have cities filled with empty homes while there are people who want homes and can't afford to buy any on the market or are forced to commute long distances.
Using real estate to store money and other speculation does harm to people who want to participate in the market to actually use the limited fundamentally necessary resource.
It makes good sense for property owners who actively use their property themselves to have more rights than those who seek to profit from market conditions or others' use.
Having paid taxes is a weak justification for any freedom.
Especially in constrained areas like Barcelona (or urban areas in the U.S.), property ownership is a monopoly, so it has market repercussions. Buying up units and then refusing to rent them out (or have anyone occupy them) can be viewed as interfering with the local market. These are micro markets that are price sensitive to interference.
If you are a landlord, you need to rent the place out at the current market price. If you do not want to do that, you can sell the property and get out of the landlord business. Just squatting on it and leaving it empty/boarded up distorts the local property market and should be heavily taxed to discourage absentee landlords from interfering with local markets.
I don't know how its done in US or other countries. But in my country (some small island in west side of Pacific Ocean), some properties just left empty for very long time since no one can afford that piece of thing.
At night, you walk through that place, its quiet like abandon for very long time, and there won't be any retail stores / business nearby since only ghosts and wondering dogs/cats will be there.
But I also wondering, if the city mayor decided to make this bill work, he need the local city council pass the bill, will this make him lose in next year's election?
https://news.ycombinator.com/newsguidelines.html