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.
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…
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.)
Either the properties are valuable as rental properties, they’re not especially suited for rental properties, or they’re not fit to live in. If they’re in the first category, great. If they’re in the second, forcing a landlord to sell instead of sitting on an empty property helps, in that it creates more supply of livable homes for people making the leap to homeownership (that’s the answer to who would buy a house that doesn’t make them money: people who want to live in it). If the property is unsafe/unlivable, it should be repaired in a timely manner or torn down.
I think rent-controlled properties tend to be apartment buildings rather than single-family homes. An apartment building can be converted into a co-op or condominium and I admit I don’t know much about that process. I can see a lot of potential difficulties. Maybe there are solutions and I am just ignorant of them.
Presumably most of the tenants in the building can’t afford to buy their apartment outright but just kicking them all out isn’t allowed. If tenants do end up getting their apartments for less than market price, what’s to stop them from immediately reselling them? And won’t monthly costs for the tenants go up because the co-op/condo can’t run at a loss?
It’s pretty common to have a building that’s partially inhabited by renters and partially by owners. It’s not super unusual to have a building owner sell only some units in a building.
It’s entirely possible to put a clause in the contracts associated with the sale that the new owner must give the old owner a share of any profits on a resale within five years.
If there’s a building with five rent controlled units, two of which are occupied, and the owner of the building sells off the other three, the two occupied units will continue to be rent controlled and belong to the landlord. If the landlord doesn’t want them and lowers the price by a bunch or makes a special offer to the tenants, people still don’t have to buy it. If people start to think being a landlord is risky and maybe not a great idea, good.
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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.
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.
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.
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.
It may not be salable to a renter but it’s probably going to still be salable to people who actually need a place to live.
Also, yes, plenty of landlords would be screwed into a situation where they’ll lose money either way and will just lose more money from holding onto the property than from selling.
What you are describing is the same problem though. If you sell it and someone comes in and renovates it for use as a primary residence, then it is no longer affordable housing.
I doubt that. If a properly is salable and isn’t rentable, a landlord will generally just sell it.
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?
Perhaps landowning as an “investment” is a shit idea, and that propety should be owned by HUD, or whatever regional equivalent.
Forget selling - why would anyone even take it for free if it was just a permanent money sink
Because it’s a place to live in without having rent being arbitrarily dictated by some random dude. It’s instead a tax you pay based on who you vote for.
The idea is that properties beyond the first get taxed more heavily. So if you’re going to buy an investment property, you better damn well make it attractive to rent.
…why would anyone even take it for free…?
So they could live in it. Why does it have to be a money sink for the new owners if they get it for a good price (or even for free)?