Washington Post Urges Funding Office-to-Apartment Conversions as Downtown Worker...
source link: https://it.slashdot.org/story/23/03/04/2356212/washington-post-urges-funding-office-to-apartment-conversions-as-downtown-workers-stay-home
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Washington Post Urges Funding Office-to-Apartment Conversions as Downtown Workers Stay Home
"Cities across the nation face a dilemma," writes the Washington Post's editoral board," warning local leaders to respond to "the urgency and scale of the downtown crisis in many major metro areas..."
"Downtown office buildings are empty as workers prefer to stay home." Nearly all local leaders agree part of the solution is an office-to-apartment conversion boom. Cities have started rolling out tax incentives to encourage developers to begin this transformation. This strategy is straight out of the playbook that revived center city Philadelphia and Lower Manhattan in the past quarter century. But there's a problem: City leaders aren't doing enough...
Consider the nation's capital city. Downtown D.C. is more than 90 percent commercial buildings. The vibrancy and workers are largely gone. Crime and grime are increasing, while property tax revenue is quickly decreasing as building values plummet. Mayor Muriel E. Bowser (D) has put out an ambitious "Comeback Plan" that calls for 15,000 new residents living downtown by 2028. To make that a reality, the city needs developers to convert roughly 7 million square feet of office space to apartments and condos. Her team estimates about 1 million square feet is on track for conversion so far. There's a long way to go. The situation is similar in Chicago, San Francisco, New York and Atlanta, among other cities....
The longer cities wait to get conversions underway, the more tax values drop and crime goes up, and the more people see no value in living in the heart of the city — or even visiting. One way or another, cities are going to pay. D.C. is already staring at $464 million in lower revenue for 2024 to 2026 mainly due to lower commercial property taxes downtown. San Francisco is facing a $728 million shortfall over the next two fiscal years for similar reasons. Buildings constructed in the 1980s, 1990s and early 2000s are quickly becoming distressed. It's far better to invest now than to spend years overseeing stagnation and decline. As D.C.'s Chief Financial Officer Glen Lee warned, this is "a serious long-term risk to the District's economy and its tax base."
The sooner these buildings can convert to residential, the sooner the city can generate some tax revenue again from an area that once brought in hefty commercial property revenue. Cities will have to rely much more on residential income tax revenue from downtowns.
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by quonset ( 4839537 ) on Sunday March 05, 2023 @07:56AM (#63344151)
But there's a problem: City leaders aren't doing enough...
The taxpayers aren't being fleeced nearly enough to allow private corporations to reap the benefits. Every last pfenig must be extracted from the pleebs if infinite growth is to continue. Under no circumstances should private industry have to bear the costs of upgrades or rebuilding.
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They're talking their book. They don't need tax insensitives and could easily re-design them into modular low income apartments. (can't easily do luxury) As a result, these guys want tax payer subsidies so they can still get the luxury apartment margins for the lower priced conversions. IMO let the owners go bankrupt or sell the old buildings for peanuts so they can be torn down for purpose build apartment high rises.
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IMO let the owners go bankrupt or sell the old buildings for peanuts so they can be torn down for purpose build apartment high rises.
Here's my point. These building owners have two choices. They can either continue to get no leasholders for their vacant buildings which means no money in their pockets, or they can do what you said. Tear down or renovate what they have and start getting paid for their property.
It is not the responsibility of the taxpayers to prop up private industry.
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Considering there are so many buildings now that are owned by hedge funds and other financial parasites, they can sit and take the losses for vacancies for a very long time. Longer than the politicians can allow the city to decay around them. The property owners have all of the leverage here. Subsidize it or face the consequences.
Extreme solutions such as eminent domain seizure of property doesn't happen to multi-billion dollar hedge funds with teams of lawyers. That's just the little guys that gets screwed like that.
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A lot of institutions invest in real estate. A *lot* (banks, insurances, asset mangers, pensions, etc). That's for the demand. In the mean time local governments control the supply through NIMBY-ism, regulations, etc. Only a fraction of hedge funds invest in real estate. Why single them out?
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High vacancy taxes, maybe progressively tied to owner valuation, would help this. You can make the hedge funds hurt financially too if they get whacked hard enough. Add in a vacancy flip tax also tied to owner valuation to avoid them just creating tax dodges and âoesellingâ the buildings. Making is a set of progressive taxes means you dont screw over small owners while causing pain to force hedge funds hands at the top.
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This is about the only kind of tool the cities have, and they need to wield it very quickly... they really needed to start last year. Commercial office space, especially vacant or lower tier Class A space needs a major write-down, and mechanically that is hard to do. (The property is generally leveraged, so who ultimately holds the bag...)
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Vacancy taxes that increase every year left vacant (1% per year?) - regardless of ownership - would eventually cause the financial loss to cause a change - and flipping to another owner doesn't reset the vacancy tax rate.
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It's an interesting idea - I've always thought that some tax code structures to incentive lowering rents would be a good thing.
However, I'm not sure that will work for this particular problem because there may not be enough demand for office space to keep these buildings occupied no matter what the rent is.
I also have read stuff about provisos in the original financing of these buildings that establishes minimum rent. Similar to startup valuations, I think there's a strong incentive for both lenders and pro
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It may not be taxpayers responsibility but that is how it always works out. Elected officials answer to big corps that bankrolled their election.
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...or to the unions who would do the conversion work.
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The problem with democracy is that, eventually, the people deciding where tax payer's money goes will have closer ties with big private industries than with tax payers.
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In the US election system, corporations are people who cannot vote, but who decide who you can vote for.
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It's the tax payers (or the voting public at least) who decide who represents them. If they keep picking people who turn around and fleece them it's their own fault. However the notion that the major cities that are about the least Republican-party places in the country are widely voting in nothing but pro big-business candidates is ridiculous.
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they get to choose which of the (generally 2) options presented by the ruling elite will be fucking them over for the next few years. that you consider that to be actual decision power is so naive that's no wonder you also believe there is some sort of difference in these aspects between voting republican or democrat or whathaveyou.
you are right though in that it's people's own fault, but now for what they vote for, but for actually tolerating this rotten and corrupt system and calling it democracy. i guess
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I don't know which end of the spectrum you consider yourself aligned to, but the reality is that most people are going to be closer to the middle than either of us. Most human attributes are normally distributed which means both the extreme free-market libertarians and the card-carrying Marxist socialist types will never hold power. Fortunately we live in a free country. Go start your own local government with like-minded people if you want. Unless it looks like Jonestown or Waco, the government will mostly
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Creating "modular low-income apartments" out of downtown office buildings would create ghetto housing among tax-paying office districts. It would basically repeat the experience of Detroit and Baltimore, which tried to replace empty factories with "urban low-cost housing" which very quickly became dangerous gang turf.
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Detroit failed because of too few people. It didn't need more housing, it needed the 4 million residents the city was built for. This seems like the exact opposite of the problems we have today.
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I might lack context, but an average of 460SF/person seems low unless you expect a lot of kids. For adults I would think you need closer to 550-600SF/person.
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What creates ghetto housing is a lack of jobs and opportunity not the housing itself.
What you're talking about is what Americans call "the projects". They look bad until you know the history. And knowing the history should make you angry.
A very brief synopsis, large numbers of poor Americans were brought into cities into public housing with the intention of supporting them with government programs for industrialization and jobs. These were people living in the 21st century equivalent of thatched roof
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let the owners go bankrupt or sell the old buildings for peanuts so they can be torn down for purpose build apartment high rises.
But who's going to pay for that?
Whenever somebody wants to build something permanent, cities ought to require the cost of tearing down the building and restoring the land back to its natural form be deposited into an escrow account. Then if the building is never finished or it becomes obsolete or the city itself becomes deserted, there will be money to fix the problem long after
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Jesus focking christ, man. Then almost no building will ever be built anywhere, including housing. Are you insane?
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Do it based on bonds that payout if the development goes under. Good actors will receive very cheap rates on their bonds. Bad actors will be priced out of development.
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Doing it that way would require the town to trust the bond seller to still have the money if the developer vanishes. The usual solution is to require the developer to provide a completion bond deposited with a bank of the town's choice. As the development is completed the money is returned to the developer. If the developer vanishes there is enough left in the bond to hire another developer to complete the project.
This does not penalize bad actors, but it is my understanding that the town is legally obli
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Then almost no building will ever be built anywhere, including housing.
I don't think you understand. Holding the money in escrow means the money isn't paid out until the condition is met, in this case they money is held until it's time to tear down the building. Then whoever owns the building at the time uses the money held in escrow to tear it down. The value of the property is thus increased by the balance in the escrow account, which is passed to the new owner whenever the property is sold.
Increasing th
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I don't think you understand.
And I don't think you understand basic economics and are shaky on simple arithmetic. Having to provide an escrow account for demolishing the building will, at the very least, double the cost of construction, especially as you're going to have to take inflation into account. Yes, you can make sure your account is invested in something that earns interest, but there's no way of knowing in advance how much your fund is going to have to grow, meaning that you'll be expected to-
Having to provide an escrow account for demolishing the building will, at the very least, double the cost of construction
$18,000 [bobvila.com] ÷ $303,373 [bobvila.com] × 100% = 5.9%, not 100%.
If it makes you feel better, not everybody can do math. [slashdot.org]
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That may be true for a house, but an office building is going to be built to resist earthquakes, among other things, making it harder to demolish. I don't know how much more, but I'd bet that it's more than proportionately expensive, especially when you have to take into account the life expectancy of the building. You may well be right, but I doubt it.
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In theory it might seem smart to let them fail. But in practice, this would tend towards a downward spiral in tax revenue, services, and real estate. Failing to properly invest is what kills cities. (well, that, and the fact that city tax revenue subsidizes the suburbs).
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I live in Pennsylvania, where cities and counties assess both income and property taxes. The state assesses a flat income tax. In the event that you live in the lower tax suburbs and work in the high tax cities (Philadelphia) you have to pay Philadelphia income tax. Despite having a large tax base it doesnt provide full services too, Philadelphia still struggles financially. How can that be?
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I can't speak to PA specifically, but suburbs tend to drain urban areas through programs related to building out infrastructure to the suburbs like roads and sewage. Individual cities might have different dynamics, but the general rule is cities pay more than their fair share.
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The reason we have what we have is heavy govt subsidies. They weren't direct though, they were in the form of structured loans and massive public works projects that prepped the land for builders so all they had to do was throw up a frame and hook it to the grid.
We stopped doing all that in the 90s in favor of tax breaks for billionaires because they started offshoring all the jobs and didn't need us anymore. It took a little while to burn through that inventory but now here we are.-
The reason we have what we have is people wishing to vote themselves bread and circuses. Government housing is shit and I wouldn't wish it upon anyone. Of course your framework for trying to under the world doesn't want to consider the fact that government can do considerably more harm than good, so you ignore this. You try to place the blame on billionaires or anyone else so that the concept might still be salvageable, but there's too much rot underneath it all to work.
All of these big cities and their
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