Ethics of Real Estate Investment, NIMYism and the Housing Crisis

In reply to pheller :

What limited land? We only live on about 3.6% of the available land in the USA. 

This is what is required to feed us. About 4%. 

There is plenty of land to be had. Just not in the posh neighborhood with the good schools, unless you are willing to pay the premium. 

And that's what this boils down to, isn't it?

pheller said:

I seem to be the only one who has serious concerns with greed negatively impacting humanity's forward progress. 

Capitalism thrives on competition. We seem to have a lot of mechanisms in place that prevent competition. That protects wealth once it reach a certain level of power. If you're afraid of government, you should also be afraid of wealth that is so powerful it owns government. 

No, you are the only one who sees socialistic property ownership tactics as solutions to the greed YOU perceive.

pheller said:

I seem to be the only one who has serious concerns with greed negatively impacting humanity's forward progress. 

Capitalism thrives on competition. We seem to have a lot of mechanisms in place that prevent competition. That protects wealth once it reach a certain level of power. If you're afraid of government, you should also be afraid of wealth that is so powerful it owns government. 

Capitalism thrives on competition and cooperation. No one can stand on his own, be it a person or a company.

The government thrives on the gun. The best way to remove the problem of the wealthy owing the government is to remove the government's power to control the individual. The founding fathers understood this, hence the Constitution, Bill of Rights, and all those pesky documents that are ignored or "interpreted" to suit the powers that be. 

You don't want the corporations to use the government's gun but instead, you want to use it yourself. Same coin. Different side. Both are bad currencies. 

In reply to pheller :

Let's try this example...

I'm willing to bet that the majority of people on this forum have or have had a car they didn't need.  I have 5.

Who is gonna determnine that the excess cars I own should be redistributed in some fashion?  Hell poor people could use them to get to work or school.  Or they could be sold to buy food for less privileged.  Or the environment would be better off if they were not in my back yard returning to earth.

Certainly YOU can see my wasteful ways.  You can look over my fence, or take pictures of them when you drive by.  You can tell all your friends, and get people riled up on FaceBook.  Perhaps get laws passed against me.

But they are MY cars.

And no, it makes no difference whatsoever if they are owned by me personally, or by my company.  It makes no difference if 
I am wealthier than you.  There is no way you can spin this to make it RIGHT to take MY cars and reutilize them in whatever manner you see fit.

Just because you can't afford a high rise commercial office building, doesn't make the core concept any less like theft.

Buildings don't just grow out of the ground from rain and sunshine. There is a cost to build them. The way our society is supposed to work is that we convert our labor to money in order to facilitate trade. When you say that someone should give you something that you didn't pay for, you are saying that you want them to give you their labor without trading yours in return. 
 

It would be nice if we didn't have to pay property taxes on the homes that we live in. But unfortunately as a society, we have decided that we want the government to provide an increasing number of benefits and services. Since the government does not produce anything, they must collect their funding from society in the form of taxes. If we eliminate property taxes, they would just collect those taxes through other means. Now, you probably mean that you want someone else to pay your property taxes for you- with their labor. But the only real choice is for society to accept less benefits and services in exchange for lower taxes, or accept the higher taxes. 

In reply to pheller :

There are already laws against monopolies...

Unless they are government-sanctioned...

Which most of your examples are...

And with that, I'm out. You aren't going to change my mind. I'm not going to change yours. 

I would argue that our laws on monopolies need revised to address modern realities within the real estate sector. 

https://arstechnica.com/tech-policy/2022/10/company-that-makes-rent-setting-software-for-landlords-sued-for-collusion/

In reply to SV reX :

I don't think pheller has proposed taking (stealing) assets that belong to you (or a corporation) and repurposing them. My interpretation is that pheller wants to change taxes to disincentivize owning those assets without use. You'd still be able to hoard cars, and the companies that own the real estate would be able to maintain their ownership, it would just cost them more to do so.

Government taxing activity that they want to discourage seems to have a fair amount of precedent, while providing tax breaks for activity that they want to promote does as well. I wonder if there could be a way to structure legislation to have both a 'rod' and a 'carrot'?

STM317 said:

In reply to SV reX :

I don't think pheller has proposed taking (stealing) assets that belong to you (or a corporation) and repurposing them. My interpretation is that pheller wants to change taxes to disincentivize owning those assets without use. You'd still be able to hoard cars, and the companies that own the real estate would be able to maintain their ownership, it would just cost them more to do so.

This exactly. 

I want profit to be derived from offering goods and services. Not from wealth itself. I want home builders to be profitable. I want tradespeople to be profitable. I want corporations who make stuff to be profitable. 

I feel like real estate speculation deprives the rest of the economy the ability to be profitable. 

In reply to pheller :

I seem to be the only one who has serious concerns with greed negatively impacting humanity's forward progress. 

Capitalism thrives on competition. We seem to have a lot of mechanisms in place that prevent competition. That protects wealth once it reach a certain level of power. If you're afraid of government, you should also be afraid of wealth that is so powerful it owns government. 
 

As you define it, I'd argue that most of humanity's forward progress is directly a result of greed. It's why we aren't still living in caves or huts. For every civilization changing breakthrough we've achieved through philanthropy, we've achieved hundreds more through "greed." As trade has opened up throughout history, so have opportunity and wealth. 
 

In my opinion, calling for others to share what they have earned with those who have not are more greedy than those looking to build and protect their wealth. 

STM317 said:

In reply to SV reX :

the companies that own the real estate would be able to maintain their ownership, it would just cost them more to do so.

There are only two possibilities...

1) A company continues to hold a property = Redistribution wasn't accomplished and the consumer pays more due to the tax pass-through.

2) A company sells a property = Same outcome as just sequestering it by force only it doesn't "appear" to be as much of an overreach.

Believe me, property taxes already massively disincentivize having empty commercial property. Hell, they almost discourage having full and productive commercial property. Property taxes are our single largest bill by far and it's not even close. I think that coupled with strict enforcement of zoning / maintenance codes is enough to keep properties put to productive use if they can be. The problem you run into in a situation like Detroit of the 80s (I would argue strongly that the Detroit of today is very different) is that even the government didn't want the empty buildings in Detroit in the 80s. Even free an empty high rise in an undesirable area is a liability, not an asset. You could spend $100/sf just to rough shell a run down high rise, with no markup for the general contractor or project management. $100/sf on a SMALL highrise is $5 million. By the time a residential conversion would be done you'd easily be at $200 - $300/sf, or up to $15 million - again on a relatively small building - and nobody in the world is going to spend that to put an abandoned building to use in a rough area. There's a reason why they sit empty. Even taken for free - which eminent domain does not provide for - it would be a money sink that would only bankrupt anyone trying to use it.

But in a desirable area, it's worth 2-3x the sales money or 2-3x the rent as office space. So to have it half empty makes more sense than to have it full as residential. We get $20/sf for office space in Ohio. That's $2,000/mo for the equivalent of a small studio apartment, and we do not usually lease out spaces that small, and it costs way more money to take it from office to residential than it does to renovate it into totally modern high end office space. We're spending $200k to renovate 5,000sf into amazing space for an expanding tenant. Turning that space into residential would cost more like $1 to $1.5m and would, again, reduce the rent income by ~half.

That's not to say there aren't bad land owners sitting on what could be productive property. But it's not as common as you might think. I've seen plenty of cool buildings where I thought "oh man, I should..." then penciling it out is in an eye opening exercise in "wow, that will really never even cover its own costs." Most residential conversion require property tax abatements, grants, and government subsidies before they even begin to make sense.

Toyman! said:

In reply to pheller :

What limited land? We only live on about 3.6% of the available land in the USA. 

This is what is required to feed us. About 4%.

There is plenty of land to be had. Just not in the posh neighborhood with the good schools, unless you are willing to pay the premium. 

And that's what this boils down to, isn't it?

In reply to dculberson :

So what happens to buildings that not only not profitable, but wouldn't be profitable even if free? Who bares the burden of that redevelopment?

I see this with a property we've got here in Flagstaff - it sits at a busy intersection, next to a college, and surrounded by hotels. It was once a Chinese Buffet. It's been vacant, rotting for nearly 8 years. The college owns the property - they use it as parking. The building sits vacant. 

While the property itself is being used, the hotel next door has launched some complaints with the city about the condition of the building next door. The college cleaned it up, removed much of the landscaping and repainted the building. 

The college wants to turn the property into a new access to its campus, but it will require a rezone, and massive DOT permitting to do that. The city doesn't want to give up a high-traffic commercial property. The neighboring hotel doesn't want it's property surrounded on all side by busy streets - it would like to have a resteraunt next door. 

In this way, the college is speculating with the land - not for profit - but for it's own future growth - at the expense of neighboring property owners - and the community that gets to look at a blighted property. 

pheller said:

In reply to dculberson :

So what happens to buildings that not only not profitable, but wouldn't be profitable even if free? Who [bears] the burden of that redevelopment?

The person who owns (or acquires) the property and wants to redevelop it.

You still seem to want to dictate terms of use to the legal owners of a property so they have to do what you think is right.

It's not right for the owners.  The college has no desire to operate a Chinese buffet.  However, they have made a prudent investment toward future growth.

Should they end up landlocked 20 years from now, unable to expand, just because you seem to be offended by an unused building right now?

They can be required to keep the building in good repair.  Failing that, they can be required to tear it down.  Those are both powers already built in to the existing ordinance.  But you want to force them to either:

1)  Pay exorbitant taxes (for not agreeing with your vision of the highest best use of the property), or:

2)  Sell the property to someone who will develop it in accordance with your vision (which is the point of the exorbitant taxes).  The college then ends up landlocked in the future, or over a barrel because they will need to reacquire a piece of property that has since been developed (in ways that suit you but do not suit them).

You may find it surprising, but not everyone thinks you know best about what they should do with their property.

In reply to pheller :

You say the college is being greedy and speculating. 
 

I say they are being wise and investing in their own future growth, with the ONLY land that will give them that opportunity. Smart. 
 

If the building is blighted then local government and Code Enforcement is not doing their job. (NOT business). Contact your local Code Enforcement Official or County Commissioner. The laws are already in place. 
 

I think what you are missing is that keeping the property in poor condition IS IN THE COLLEGE'S BEST INTEREST. 

You said the city doesn't want to give up a high-traffic commercial property. But they also don't want to RUN a restaurant, and neither does the hotel. The college knows what they want to do with the property. It's very likely that they would prefer to demolish the building now, instead of maintaining it. But if they do, the city will "lose" a high traffic commercial property. 
 

I suspect the city is refusing to give them a demolition permit. So, the college keeps it in the minimum condition they are required to, hoping to influence the zoning decisions in the future.

And if I am right, then what you are describing is a perfect example of failure of GOVERNMENT (not business), and why it should be kept out of decisions like this. 

 

It's really easy to blame business for all the ills of the world. 

If the college is speculating, they are really bad at it. They bought a piece of expensive commercial income generating property, and they are gonna turn it into a driveway. 
 

That's not the way you're supposed to do it! 

Probably not the best example. For no other reason than the college doesn't pay property taxes and therefore has no motivation to develop the property at a rate faster than a privately owned business. They could sit on the vacant lot for years until the do something with it. 

Anyway - completely different topic altogether: it'll be interesting to see where this lawsuit goes: https://arstechnica.com/tech-policy/2022/10/company-that-makes-rent-setting-software-for-landlords-sued-for-collusion/

In reply to pheller :

I think it's a fine example. 
 

There is a reason the Chinese restaurant closed, and you don't know what it is. Just like none of us ever know all the reasons businesses make decisions (not just greed). 
 

The college bought it because it met their needs (and they may have been the best buyer for the property).  Obviously the city and the hotel didn't want it enough to pay for it. 
 

That is exactly the kind of dynamic that happens with virtually ALL vacant commercial property. There are always things going on that we don't understand, not just greed and speculation. 

In reply to pheller :

It was a perfectly fine example. You just didn't like our analysis of it.

Question for ya'll: 

Can a business claim depreciation on an empty building or vacant property it owns as a way of writing off the expenses to maintain the building or property? 

Perhaps the write-offs still result in substantial loses to the company, but what about properties with low maintenance and lower property taxes? Can they write off debt payments? 

You can write off interest on a loan on the property, generally, and you can write off depreciation on the building but not the land. Commercial property is depreciated over 39.5 years which is silly because the usable life of an unrestored commercial building is much lower than that. They're like human cells: they're constantly renovated and remodeled, so while it looks similar from the outside, the inside has typically been redone many times in those 39.5 years. The expenses to maintain the building or property are all able to be written off, though anything that is considered as "extending the usable life of the property" has to be depreciated over those 39.5 years, within reason. IE, if you spend $500 to replace a leaking faucet you don't need to depreciate that, but if you spend $80,000 on a new roof, you need to write that off over 39.5 years.

yupididit said:

Most of these companies lease space in these building. And the converting to apartments would fall on who ever actually own these buildings, investment companies? Would it be worth the investment? 

Could you imagine trying to route all the dryer exhaust

Most commercial buildings have dropped ceilings for ease of rerouting wiring etc. plus when you are talking large numbers instead of using large diameter hosing it starts to become efficient using higher velocity ( smaller tubes)  to extract waste air.