A move to impose vacancy rates on building owners who allow store spaces to remain empty could come with unintended consequences, according to a new study released by the Harvard University Joint Center for Housing Studies.
Various reports have indicated that building owners have often been willing to allow retail and commercial space to remain empty at any given time on the hunch that that same space may fetch a higher rent at some point in the future.
As a result, some cities have either enacted or proposed vacancy taxes designed to penalize building owners and landlords who purposely keep certain spaces empty.
The movement has even taken in residential space that is kept empty by owners, with voters recently in both San Francisco and Berkeley, California approving taxes on vacant dwellings.
In New York, such taxes have been proposed primarily for the owners of empty commercial space. Earlier this year, a bill was introduced in the New York State Senate that would impose taxes on the owners of vacant properties only in cities with populations of 1 million or more.
The argument behind the commercial vacancy tax movement is simple: a lack of retail activity in a building has the potential of adversely impacting business and property values. Thus, owners who allow such spaces to remain unused in still-popular neighborhoods where other stores are easily being rented should be penalized.
But the new JCHS study called Option Value and Storefront Vacancy in New York City, contends that such measures, while decreasing vacancy rates, may also have the tendency to lower tenant quality.
Not only that, but the study also argues that such a tax would most likely lead to a higher turnover of retail tenants.
“These findings have important broader implications,” notes a narrative accompanying the study. “Indeed, growth un urban retail amenities helped drive the resurgence of American cities in the last 30 years.”
The study goes on to suggest that elected leaders and others, rather than imposing such new taxes, would be better off trying to understand “the behavior of these landlords,” which it contends is a key to “developing effective urban policies.”
Meanwhile, the first reporting period of a new commercial vacancy tax in San Francisco expired on the last day of February of this year. That tax, according to documents, is calculated based on the length of store frontage and the number of consecutive years the space has remained vacant.
For the first year the property is vacant, the tax is $250 per linear foot of frontage. The fee increases to $500 in the second year, and $1,000 in the third and following years.
By Garry Boulard
