September 19, 2017
Economists usually argue that it’s best to tax the things you want discourage, like cigarettes, alcohol, and gasoline, not things you want to encourage, like work. That is why it is striking that that the Washington Post could not find one economist who thought that a plan in London to tax vacant housing units is a good idea.
The only expert cited in the piece argued that the tax would have little effect on the housing market because the rich would not care if their property taxes were doubled or tripled, they would still leave units vacant. (The piece repeatedly refers to “experts” even though only one is cited by name.) This answer is striking for three reasons.
Whenever tax increases on the rich are proposed, the Washington Post and other newspapers are usually filled with assertions from economists about how it will cause to them work less, move, or take other steps to avoid the tax. Apparently for some reason a tax on vacant property is different from other taxes; the rich don’t mind paying it.
The second reason the comment is striking is that it suggests a relatively costless way for the city of London to raise money. If doubling or tripling the property tax for vacant properties won’t affect the behavior of the rich then maybe they could quadruple or quintuple the tax. Hey, if the rich don’t mind paying a tax on vacant property, why not charge them ten or twenty times the regular property tax? They won’t even notice.
The third reason is that the comment comes just before a statement telling us most vacant properties in London are owned by middle-class people, not rich people:
“Most of London’s 20,000 empty units aren’t owned by the super-rich, but by the middle and lower rungs — and studies show that most homes are empty because they are the subjects of inheritance tussles or uninhabitable or in need of repairs.”
Taxing these people on vacant units might be just the incentive they need to resolve inheritance disputes or to sell a vacant property to someone who could afford to make the repairs for it to be habitable. Of course, this works from the assumption that we actually want less vacant property.
In arguing the case against the tax, the Post even found someone was happy to live next to a building with many vacant units:
“Plus, there are upsides to living next to absentee neighbors.
“‘I would shudder to imagine if this was running at 80 percent occupancy,’ said Suruchi Shukla, a 38-year-old consultant, with her head cranked skyward at the building.”
So there you have it: a tax on vacant property wouldn’t reduce the number of vacant units, and it would be a bad thing if it did. And remember folks, this is supposed to be a news story, not an opinion piece.
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