Empty

Rich folks invoke the chi chi French “feet on the ground” epithet – pieds-à-terre – to describe that second (third, fourth, etc.) home tucked away in another city. The words conjure up a vision of a cozy little alternative dwelling for occasional short stays away from the main household. A little familiar apartment to rest a weary head. In some areas, they refer to a standalone house, but for most of these mega-rich owners of convenient get-aways, they refer to luxury coops and condominiums in expensive cities. They are often spacious, well beyond any notion of what is average square footage for even larger middle-income housing, and have doormen, perhaps even garaged vehicles/limousines parked in the building or nearby.

I’ve always looked at the residential skyline in cities where millionaires and billionaires are notorious for owning a prestigious apartment or where over-rich business men and women have purchased “investment” apartments to take advantage of the skyrocketing real estate costs in the world’s most desirable urban markets. “Speculators.” If you are in Manhattan or London, take a look at those highly desirable residence buildings and see how many apartments are dark even at normal periods when someone is likely to be home. Odds are that many of those apartments are seldom occupied. Odds are also that these part-time and speculative practices are major factors in rising housing costs.

Guess the owners do not care that in most of those upscale cities, there is often a severe shortage of available or affordable housing anywhere near the most prestigious areas where the best corporate jobs are focused. That workers have long commutes or live stacked like sardines sharing living spaces with strangers – a huge deterrent to attracting young, energetic employees – is simply not their problem. Yet so many of these residences sit empty most of the year. Truly rich folks do not allow strangers to avail themselves of short-term rentals (Air BNB, for example), and many homeowners’ associations have rules against such activities anyway.

Housing is a major problem for almost all of the major cities in the world. I always wondered in New York where retail salespeople, taxi drivers, clerks and secretaries actually live? Long commutes from outlying areas in Queens or the Bronx, the lesser areas of Jersey.

“[A] researcher, University College London PhD student Jonathan Bourne, started thinking about the issue of unused property after moving back to the U.K. from Norway in 2015. ‘Empty property and foreign ownership of property was pretty much on everyone’s lips in London,’ he says. ‘And there was a lot of hysteria about it, but there was almost no actual evidence for it.’ He kept hearing anecdotes–a friend in the center of the city reported that in his own apartment block, only a third of the homes ever had the lights on. ‘I thought, I wonder if there’s a way we can actually investigate this.’

“It’s difficult to get accurate data about how many homes are actually empty in a given city or neighborhood. Bourne used freedom of information requests to learn how many houses weren’t paying local taxes in each U.K. zip code. In the U.K., people who aren’t full-time residents in a particular district pay a reduced amount for local services, so it was a way to make a tally. (Vancouver made its initial count by looking at which homes weren’t using much electricity.) He compared this to census data. In the most expensive areas, there was a very high rate of empty or low-use homes; this contrasts with some previous research commissioned by the city that had suggested it wasn’t much of a problem.

“In the upper-class London neighborhoods of Kensington and Chelsea, the value of those homes was around £21 billion (US$27 billion).” Adele Peters writing for the February 12^th FastCompany.com. But the press of housing shortages, from low inventory to absurd pricing, has passed out of being merely an area of concern and into becoming a serious threat to the cities they serve. Short of massive and exceptionally expensive government construction or over-generous tax benefits, perhaps there is at least one more possible solution.

“When Vancouver passed a tax on homes that sit empty for more than six months out of the year–apartments that serve as pieds-à-terre or investments for the rich, for example–it made a difference: The city recently reported that the number of empty properties dropped 15% between 2017, when the law took effect, and 2018. More than half of those homes went back on the rental market, presumably to avoid the tax. The city also raised more than $38 million, most of which will go to affordable housing programs.

“A new study suggests that something similar could happen in other cities–and that in expensive, dense areas where it’s difficult to build new housing, an empty house tax might be an effective way to make housing more affordable. The research focused on London, where housing has become significantly more expensive in the last couple of decades, and where property has become a popular investment for people who live overseas. In the most expensive neighborhoods, the study found, as many as 30% of the housing can be empty or ‘low use.’…

“The tax may also make a real difference only in certain cities where the density of low-use houses is high. In Vancouver, despite the success of the tax, it only affected a relatively tiny number of homes–1,085 in 2017. ‘To the extent that we can improve that a certain number of homes are being held vacant, some sort of tax mechanism to push owners to keep those units rented makes sense…[but] the evidence I’ve seen in most places is that places are not being held vacant at significant rates,’ says David Garcia, policy director at the Terner Center for Housing Innovation, an institute at the University of California-Berkeley. ‘Generally speaking, this deals with a very small segment of the overall housing stock in any given city. Depending on the situation in a particular city, it could be part of a solution–that ultimately should include an emphasis on creating more housing supply overall, for all segments of the population.’…

“With a [London] tax like Vancouver’s, the local government could raise roughly twice as much money as they currently earn from municipal taxes. Those who aren’t full-time residents also can’t vote in local elections, so it’s possible that this type of law could gain support.

“Taxes like this are becoming more common around the world: Low-use homes in Melbourne, Australia, are now subject to a tax like Vancouver’s. In Paris, where second homes are common, they’re subject to a tax equal to 60% of the market value of rent. Oakland, California also recently passed a similar policy. Other cities could potentially also benefit from similar laws. In New York City, by one count, there are nearly 75,000 low-use apartments as of 2018 (this number doesn’t include the thousands of others that are vacant because they are being renovated or are in the process of being sold or rented). The organization that calculated this noted that the number is more than enough to house the city’s entire homeless population.” FastCompany.com

There are no easy answers to housing shortages. But income inequality is getting worse across the entire developed world, much worse in the United States. Tax benefits for the rich merely accelerate their ability to use their excess cash to speculate even more in these over-crowded cities. It is time to start addressing these issues, one by one, to serve “most of us.”

              I’m Peter Dekom, and when income inequality is an underlying corrosive force in society, the answer is not to push more benefits to the rich at the expensive of everyone else.