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> You can’t argue that more housing supply is the answer to affordability problems and also argue that vacancy taxes are pointless.

I don't follow at all. The argument that vacancy taxes are pointless is that there just aren't many vacancies compared to the enormous housing shortage. We could tax vacant apartments 1M$/day and not move the needle on pricing.

That would move the needle on pricing... Upwards. By a lot. The only way landlords could afford that would be to get the tenants to pay for insurance against that kind of disaster, and also to include clauses against leaving until a new tenant had signed to replace you.

Alternatively, they could cease to become landlords, by ceding the properties to someone who will actually rent out the units, or buy it and actually live there.

Obviously 1M/day is ridiculous, but even in that obscene case there are conceivably financial institutions that would be willing to take the real estate off your hands - or you can gift it to the federal government, which can sell it to someone who actually wants to live there rather than contribute to the constriction of supply.

>by ceding the properties to someone who will actually rent out the units, or buy it and actually live there.

Unfortunately, the vacancies I am describing are unavoidable, because people do not rent apartments forever and empty apartments cannot instantly be leased.

>there are conceivably financial institutions that would be willing to take the real estate off your hands

And pay the vacancy tax themselves? They'd be in the same position as the previous owners.

If the taxes are not the obvious hyperbole of 1M/day, there are equilibrium options which result in the scenarios I laid out - and even accepting that ridiculous premise, there is the escape hatch for giving it the federal government the day-of, who obviously don't care about paying taxes to themselves.

The point is that there are logical paths where even punitive (or intentionally ridiculous) levels of vacancy taxes result in a decrease in real prices.

>there are equilibrium options which result in the scenarios I laid out

Yes, but they are that the tenants pay the taxes. Capitalists are free to move their money anywhere they want to keep the return on investment up, but people must live somewhere.

An owner-occupier would naturally not have to worry about vacancy taxes. If you are a landlord, can't afford the vacancy tax, and would lose money on tenancy, eventually your most efficient option is to simply give away the home to someone who will happily take it.

Sounds like a great way to make owning and building apartment buildings let's attractive.

Owning buildings, yes. In this hypothetical and ridiculous scenario, the only people buying would be those who intended to live there. This would decrease prices (it is no longer a speculative asset) and increase home ownership rate. Functionally no one would own a whole apartment building just to rent it out. Individual units would end up being sold the way condos are. Building "apartment" buildings would still be attractive, because they could be sold as condo units. With no one willing to rent, there would a more direct demand from actual buyers.

Let me once again reiterate that the 1M/day vacancy tax is an obviously ridiculous proposal, and any real-world policy would have many more caveats and be orders of magnitude less radical. But even something so obscenely and grossly unrealistic has potential for solving the supply issue, so we should be considering the more moderate solutions.

Even then no, I build a 30 unit building, covid 22 hits, nobodies buying, I'm on the hook for 30mm / day. Nobody would even build with that risk. You'd have low density housing, single unit homes and massive traffic/pollution issues often associated with suburban sprawl.

Yes, 1m/day is hyperbolic, but if you put the constraint on the suppliers (builders, owners), and the demand is inelastic (you've got to live somewhere), then the outcome is to constrain supply for maximal benefit.

1) Buyers can be arranged during construction

2) A builder can hypothetically continue "building"/renovating the units indefinitely until they have a buyer. Alternatively, nothing about this hypothetical scenario requires the original constructor to even pay the $1M in the first place - it could be deferred, or be another rate entirely.

Side note) Landlords/owners aren't suppliers, they are speculators.

>A builder can hypothetically continue "building"/renovating the units indefinitely until they have a buyer.

If that's true, then speculators who do not want to bother renting can renovate the units indefinitely until never.

Rents are price-inelastic and are determined by the economic opportunity of the land.

Translation: landlords eat taxes.

(Landlords also eat pay-rises.)

>determined by the economic opportunity of the land.

That makes sense for agricultural land that is being worked as well as it can be, where there are already roads for tractors and no improvement could help it become more productive, but in a city the same square feet of land can support anywhere between one and a thousand residences depending on what is invested in to it.

If rent was really inelastic, anywhere that it was profitable to build housing would be a free infinite money opportunity, because no matter how high you stacked the apartments they'd all rent for more than it cost to build them. You'd be able to build a skyscraper with 100 floors of penthouses in the middle of a rich suburban neighborhood, if increased supply really did nothing to reduce rents.

David Ricardo, Law of Rent.

The rent of a land site is equal to the economic advantage obtained by using the site in its most productive use, relative to the advantage obtained by using marginal (i.e., the best rent-free) land for the same purpose, given the same inputs of labor and capital.

https://en.wikipedia.org/wiki/Law_of_rent

https://www.economicsdiscussion.net/rent/ricardian-theory-of...

Income is income ---doesn't matter if that's ag, manufactures, retail, commercial, or wage or salary of a residential tenant.

The restriction of new housing increases rent on the remaining lots. NIMBYism, architectural codes, zoning, etc., serve to restrict what can be built, so that the rent on what can be built increases.

There's a great, highly readable, 1930s take on this in "Resistances to the Adoption of Technological Innovations", Bernhard J. Stern. See the section title "Building".

https://archive.org/details/technologicaltre1937unitrich/pag...

https://rentry.co/szi3g

>The restriction of new housing increases rent on the remaining lots. NIMBYism, architectural codes, zoning, etc., serve to restrict what can be built, so that the rent on what can be built increases.

If reductions in supply raise the price, you are saying that it is elastic. I basically agree with you on this, it seems. Supply restrictions raise prices.

If price were elastic, the demand would change as prices increased.

Demand largely does not. Instead, as supply is constrained, the price increases because demand remains constant.

https://budgeting.thenest.com/price-elasticity-affect-housin...

This is the whole idea behind a land value tax. Where a tax is made on the unimproved value of land, surplus value is taken by the taxing authority (and presumably returned as public expenditures). The landlord cannot increase rent to compensate (supply hasn't changed, price has), and the result, if other conditions permit, should be increased supply in the sense that idle property is now rented, and low-density / low-value uses are replaced by higher-density / higher-value uses.

The tax applies to the unimproved value so that property investments which increase utility and utilisation are not discouraged. Idle land is penalised.

Real-world validation of the theory ... varies, though seems generally to bear it out. A considerable problem is in getting the LVT in place to begin with, and in dealing with other barriers to enhancement, including zoning and building codes.

In the alternative, increasing asset valuation allows property owners to benefit from constrained supply. Part of their gains come through rent, but a large share is simply in the asset inflation of their property. This can be exercised as collateral on loans for other spending or investment.

I think your facts are plausible but your terminology is wrong. The market can be elastic if either the supply or the demand is elastic, or both. You are saying that the price is not elastic but then contradicting yourself by correctly saying that supply changes change the price.

https://onlinelibrary.wiley.com/doi/abs/10.1093/aepp/ppr011

That's a paper talking about agricultural land use...

It details how and why land is price inelastic, and how elasticity is defined.

Economically, ag and urban land behave similarly. To wit: they're not making it any more. The supply is price-inelastic.

Your understanding is incorrect.

Tenants in cities don't rent land, they rent housing. You can vary the amount of housing on a plot by making investments.

Further, a vacancy tax creates a risk that if too much housing gets build I end up holding the bag. So it creates some amount of disincentive to build or own housing. Just think about owning an apartment building in Detroit in 2008. Everyone moves away. Now I have no tenants and get punished by a tax. I'm already paying a mortgage or opportunity cost for not having my wealth in another form.

So.. sell or lower your rent? If you’re saying that what you’d do otherwise is sit on a bunch of empty housing hoping for a market correction, it seems like you’re just violently agreeing that such a tax would have a net effect of reducing vacant housing by disincentivizing overly speculative development and holding.

In other words, maybe if you’re not holding the bag (that is, your bad investment), that just means everyone else is instead.

> So.. sell or lower your rent?

Say you're already charging the lowest rent that makes economic sense (i.e. at cost) and you still can't get tenants? What then? It's not like anyone is going to want to buy the place from you under those conditions. Your best bet would probably be to tear the place down in hopes that without an actual inhabitable residence on the property it will no longer qualify as vacant for tax purposes. Perhaps even get the land rezoned from residential to commercial. This certainly won't do anything to improve the availability of housing when demand eventually picks back up, but then that's an entirely predictable outcome of attacking "speculation".

Scarcity prices are determined mostly by the last units available. Imagine demand is just below supply: then very little of the price is driven by scarcity. Now imagine that demand is just above supply: it's not hard for prices to increase dramatically, because every item is being competitively bid on the price will increase until demand at that point is below supply again.

The only time you don't expect small improvement in supply to have an effect on price is when you're far from being supply limited.

Better than vacancy tax is progressive real estate tax. The more properties you own, the higher tax rate on them you have.

This would force largest estate owners to drop their properties onto the market like hot potatoes. Then people who own just a few or none could buy them and make better use of them.

> You can’t argue that more housing supply is the answer to affordability problems and also argue that vacancy taxes are pointless.

Why not? If supply actually does work to reduce housing affordability problems, it takes the wind out of the sails of housing speculation.

Speculators are attracted to markets where things are going wild and there is the promise of making stacks of cash. If the market is boring and stable and there's enough for everybody, they aren't interested.

Leaving a home empty is naturally expensive because of carrying costs (property taxes, maintenance, utilities, etc.). The only way it's worth it is if appreciation is so crazy high that it more than offsets that. Fix that more basic problem of rapid appreciation, and speculation will solve itself.

Of course, once your real estate market is broken at a basic level, things like speculation will ensue, and maybe vacancy taxes are a useful band-aid then.

> Leaving a home empty is naturally expensive because of carrying costs (property taxes, maintenance, utilities, etc.). The only way it's worth it is if appreciation is so crazy high that it more than offsets that.

Welcome to California!

> If there is truly no housing vacancy, nobody will pay the vacancy tax, and NIMBYs have weakened their position by losing an excuse to block housing construction.

Is 1,893 vacancies in the entire city of Vancouver close enough to "nobody" for you? Is it enough to fix the crisis and render housing affordable again?

Don’t assume the only options are a 100% fix or do nothing dropping prices by even 1% makes a significant difference.

Further these taxes aren’t about the every day situation they are to get the market to respond to temporary dips which helps deflate bubbles and keep the market healthy.

> Don’t assume the only options are a 100% fix or do nothing dropping prices by even 1% makes a significant difference.

This is hyped as the Big Headline Fix For Everything and its impact is trivial. 1% impact on rents? No way. Zero-point-one percent, maybe, but I still doubt. Why is anyone even wasting time talking about it? Where is their vision?

The opposition to vacancies in real estate is one of the most absurd memes I've seen recently. Imagine if you went to a supermarket and all the shelves were empty. That's what zero vacancies in the real estate market looks like! There's nothing wrong with available stock.

I think in context, "vacant" means a property that nobody is living in and is not on the market for rent. It's simply owned by someone as an asset. This was the complaint in some parts of Canada: Chinese owner/investors buying condos and not renting them out but just letting them sit empty.

Slap a "for sale" sign on the window. It's "on the market" now.

Imagine if the supermarket shelves were empty BUT there was a warehouse full of all the items that would normally be on the shelf, waiting for people to get desperate and pay more, while renting some fraction of them (bring that lightbulb back next week or keep paying indefinitely!).

> If there is truly no housing vacancy, nobody will pay the vacancy tax

Hum... Yeah. The name for a tax that nobody pays is exactly "pointless".

If the aim of the tax is to raise revenue, then it’s pointless. If it’s to change behaviour, then perhaps it has worked.

If there was never anybody to pay for it, like the GP said, no, it didn't.

But if people don't pay because there was actually somebody doing the bad behavior and they changed, then it would be useful.