Always in agreement to such initiatives. I do think a barrier to adoption is the space of possibilities is quite large and generally not well organized around a specific proposal or mandate, so opposition to these initiatives can pick them apart of details. Especially since opposition is usually much more engaged in local governance.
It's somewhat complicated to understand, but I think this is an opportunity for strong communicators to present to a public that is much more receptive toward these ideas.
How does this survive contact with the triple net lease? You pass the bond and the property tax is immediately due from the tenant. Congratulations, you destroyed all the businesses.
I never considered how a street with lots of cool shops could create value for homeowners and commercial real estate owners without necessarily creating value for the businesses that were responsible for making it cool.
I don't think that any of the suggested solutions would work, as they all involve the government and taxation - which can only destroy value, IMHO.
Creating a cool vibe certainly has value and can contribute to price appreciation in the community, but ultimately capitalism is not based upon creating vibe but upon selling products and services.
>But homeowners would likely be willing to share value too
No, they wouldn't. That is why property tax rates (and hence land value tax rates) have so many laws capping them and otherwise limiting them for all the important voting blocs (old people, military, big business, etc).
See California prop 13, that voters passed. See Oregon measure 5 and 50, also passed by voters. And politicians wouldn't dare touch these.
>In American cities, there is an issue with value capture. One party creates the value (in this case retailers), another party (landowners or homeowners) captures it.
This phenomenon is not restricted to American cities. It will broadly exist in all human societies with flattened or top heavy population age histograms. The old are the most populous and knowledgeable (and motivated) to structure society so that the non working (themselves) can capture the most value. Hence, the popularity of earned income tax instead of marginal land value tax rates. The goals of the wealthy and the old (and the ones with aspirations to be wealthy) align to support rent seeking policy.
This is a vexing problem I was made aware of by friends that are in the retail business, renting their stores from landlords. It's really brutal. Retailers take on all the risk, put in the work to revitalize a neighbourhood, and their reward is that when lease renewal comes up in 10 years, it spikes and they're faced with a choice of being displaced or handing over an enormously increased part of their margins to the landlord which has done literally nothing.
The others that benefit are the nearby condo developers, that take photos of cool retail in the area to put into their brochures in order to help sell their product. They benefit from the land speculation and the work from others.
I don't really have a solution except that I can see that the landlords benefit from scarcity, and their leverage and ability to raise rents would be lessened if there was more viable retail spaces to take advantage of.
So the city could help retailers by dramatically liberalizing retail zoning and allowing more competitive high streets to develop. This could take the edge off being forced to move by a landlord jacking up rent.
The most chaotic solution I can think of would be making Felix Margolis, who joins Fannie Mae and Freddie Mac and gives out 30 year tiny interest loans to help first time small business owners buy the property instead of renting it. A beautiful crop of thriving businesses started in 2027 at the low low price of commercial real estate prices climbing imto the stratosphere so no small business started in 2040 being able to rent more than a square foot.
The whole discussion about "fixing" cities is stupid. Dense cities can't be fixed, and using ad-hoc regulations like this is just like plugging the holes in a dike with fingers.
Next you'll find that you also need to do the same for schools. But schoolteachers won't be able to afford living near the areas that they serve. So you need subsidized housing for them.
Oh, and the same for kindergarten. But what about at-home childcare? And so on.
And no, "land value capture" won't fix it. You'll just move the complexity from giving out subsidies into assessing the value of kindergartens and schools.
> Two thirds of new American homes are in some sort of community association, typically homeowners’ associations, but also co-ops, and condominium associations, and 30 percent of American homes overall. Buyers opt into these associations, pay annual fees in the thousands of dollars, and suffer their annoying restrictions and demands because they create amenities: quiet, cleanliness/tidiness, safety, or things like public pools and parks.
Uh... People "opt-in" to homeowners' associations because two-thirds of new builds impose them. Municipalities don't want to accept new roads, so developers can get things built through privatization.
A classic “just do LVT” situation. It’s amusing because Henry George wrote down exactly what to do 130 years ago and we’re still arguing about it. Just read the book people!
I hear people talk about this all the time and I know I am guilty of it too:
1. Go into a store to check out a product in person or try it on.
2. Leave and buy it cheaper online.
I try not to. Sometimes it's because the store doesn't have the exact color or model I want. Sometimes the point in time when I'm shopping happens to not be when I'm ready to buy and when I am ready, it's a hassle to go back to the store. But sometimes it's just being lazy and cheap.
I'm surprised the article didn't mention an obvious (but extremely difficult) answer:
1. Levy taxes on online retail companies. Scale so that the larger the business is and the greater the fraction of their business is online, the higher the tax.
2. Use that to subsidize or lower the taxes on smaller, in-person focused businesses.
Taxes are the single best lever we have to architect incentivizes to improve the world for the public. It's a shame that government and politics in the US is so broken that we can't really use it effectively.
> The Hong Kong Mass Transit Railway buys up the land around new station sites before they start building them. This rail-plus-property model makes them one of the few profitable transit services in the world.
I really enjoyed this video https://www.youtube.com/watch?v=k_roPoXi8QI describing more in detail how they did this. It has as much to do with historical circumstance as it does with good decision-making. The MTR is an impressive organization. MTA in NY seems to be taking a few cues, prioritizing in-house expertise.
There is a chicken-and-egg problem. You would need to show cash flow in your business for several years in order to get a loan to purchase a property. In the mean time, if you’re successful, your landlord has no incentive to sell but instead hold and raise rents.
Access to capital. People who want to start their own small store aren't usually sitting on the money they would need to buy urban property on top of stocking the store and potentially earning nothing for a few years before they can form any steady customer base.
The solution is obvious and not going to happen. Extra tax, super cheap rent with conditions: Minimum number of products, product diversity, open x days per year (etc?)
30 years ago there was this lovely shop here full of hand crafted wooden dolls and beautiful wooden statues about the size of a garden gnome. They were reasonably expensive but an absolute joy to look at without buying anything.
I don't think selling tickets like in a museum would work for a place like that. If they tax me 10 bucks the city could buy the building and continue to lure me into town.
19 comments
[ 3.3 ms ] story [ 35.8 ms ] thread- I like to shop IRL, and the opportunities to do this pleasurably are going extinct
- I live right by Hayes valley, which they start out with.
- I'm also a member of "The Commons" which they mention at the end. I love what it's trying to do: creating a new social 3rd space in SF.
It's somewhat complicated to understand, but I think this is an opportunity for strong communicators to present to a public that is much more receptive toward these ideas.
I don't think that any of the suggested solutions would work, as they all involve the government and taxation - which can only destroy value, IMHO.
Creating a cool vibe certainly has value and can contribute to price appreciation in the community, but ultimately capitalism is not based upon creating vibe but upon selling products and services.
No, they wouldn't. That is why property tax rates (and hence land value tax rates) have so many laws capping them and otherwise limiting them for all the important voting blocs (old people, military, big business, etc).
See California prop 13, that voters passed. See Oregon measure 5 and 50, also passed by voters. And politicians wouldn't dare touch these.
>In American cities, there is an issue with value capture. One party creates the value (in this case retailers), another party (landowners or homeowners) captures it.
This phenomenon is not restricted to American cities. It will broadly exist in all human societies with flattened or top heavy population age histograms. The old are the most populous and knowledgeable (and motivated) to structure society so that the non working (themselves) can capture the most value. Hence, the popularity of earned income tax instead of marginal land value tax rates. The goals of the wealthy and the old (and the ones with aspirations to be wealthy) align to support rent seeking policy.
The others that benefit are the nearby condo developers, that take photos of cool retail in the area to put into their brochures in order to help sell their product. They benefit from the land speculation and the work from others.
I don't really have a solution except that I can see that the landlords benefit from scarcity, and their leverage and ability to raise rents would be lessened if there was more viable retail spaces to take advantage of.
So the city could help retailers by dramatically liberalizing retail zoning and allowing more competitive high streets to develop. This could take the edge off being forced to move by a landlord jacking up rent.
Next you'll find that you also need to do the same for schools. But schoolteachers won't be able to afford living near the areas that they serve. So you need subsidized housing for them.
Oh, and the same for kindergarten. But what about at-home childcare? And so on.
And no, "land value capture" won't fix it. You'll just move the complexity from giving out subsidies into assessing the value of kindergartens and schools.
Uh... People "opt-in" to homeowners' associations because two-thirds of new builds impose them. Municipalities don't want to accept new roads, so developers can get things built through privatization.
1. Go into a store to check out a product in person or try it on.
2. Leave and buy it cheaper online.
I try not to. Sometimes it's because the store doesn't have the exact color or model I want. Sometimes the point in time when I'm shopping happens to not be when I'm ready to buy and when I am ready, it's a hassle to go back to the store. But sometimes it's just being lazy and cheap.
I'm surprised the article didn't mention an obvious (but extremely difficult) answer:
1. Levy taxes on online retail companies. Scale so that the larger the business is and the greater the fraction of their business is online, the higher the tax.
2. Use that to subsidize or lower the taxes on smaller, in-person focused businesses.
Taxes are the single best lever we have to architect incentivizes to improve the world for the public. It's a shame that government and politics in the US is so broken that we can't really use it effectively.
I really enjoyed this video https://www.youtube.com/watch?v=k_roPoXi8QI describing more in detail how they did this. It has as much to do with historical circumstance as it does with good decision-making. The MTR is an impressive organization. MTA in NY seems to be taking a few cues, prioritizing in-house expertise.
30 years ago there was this lovely shop here full of hand crafted wooden dolls and beautiful wooden statues about the size of a garden gnome. They were reasonably expensive but an absolute joy to look at without buying anything.
I don't think selling tickets like in a museum would work for a place like that. If they tax me 10 bucks the city could buy the building and continue to lure me into town.