New York City Mayor Bill de Blasio says he has a plan to end the scourge of empty commercial storefront space in the Big Apple. He is proposing that New York City create a “vacancy tax” to help get landlords to rent out their spaces quicker. Speaking in Albany in front of a joint session of the state’s Senate and Assembly, the mayor said, "Let's make clear to landlords that this is a problem for our communities, and with this tax, hopefully we would encourage landlords to turn their properties over more quickly and ensure that small businesses have an opportunity to rent them at a reasonable level."
Speaking of “landlords” as if most of the problem is individual people not wanting to rent out their storefronts is a somewhat diplomatic way of framing the problem. According to the Atlantic’s CityLab website, while there is disagreement over how much storefront space is empty (with estimates ranging from 4 percent to 20 percent), there is agreement that small businesses have a very difficult time getting a chance to even open a space in the current commercial-lease market.
A big problem is that there is no meaningful rent control for commercial businesses, and as New York City real estate has become more and more a portfolio item for hedge funds and stockbrokers, the need for landlords to get someone into a space, or keep a solid business owner happy in their space, has disappeared. Landlords used to actually generate their income from the rents they collected; now real estate is just one piece of a larger portfolio that can withstand the loss of income as its owners wait for a big-box-type tenant to pony up the big dollars.
At the same time, it has become clear that high rents and internet shopping have made retail businesses less financially viable. That being said, with the right rents, businesses in the neighborhoods could do well enough to strengthen the local economies that help keep people connected. Mayor de Blasio will get pushback on the tax, especially from the very wealthy and powerful real estate lobby. One of its more effective arguments will be that there haven’t been any comprehensive studies done yet on the issues and possible economic outcomes surrounding these empty storefronts. How can we begin taxing something we don’t understand?
Sound familiar? It’s basically the same argument that gun advocates have around issues of public safety concerning firearms. We should definitely study all of these things, but the fact that these issues haven’t already been studied, with data collected, is not an excuse. It’s time to try a few things we haven’t tried before, like taxing the people with the money.