Friday, June 08, 2012

Stuggles with Art Rent, and The Trump Tax

The NY Times asks: will gentrification happen in SF?  That train has sailed, as I like to say.  But the Bay Area is still a magnet destination for artists, and it is still possible, however thready, to work and show in San Francisco. It's not NYC; I'm asking around, and the only artist I've heard about moving to New York City, in some years mind you, is one moving back. The once great world city for culture is all but dead for the artists, writers, musicians who drive the innovations in culture. But the Bay Area, and Seattle, I dare say, are vibrant places at some long-term risk of losing their creative hearts.


As any professional artist who doesn't own land or have a high professional income knows, maintaining viable work space and access to show space dominates your professional life.  70% of my income generally goes to rent.  I once had to move studios three times - in one year- in my last year in Anchorage, as a hard-won studio find was surrendered to bigger property interests.  My last place in Anchorage, Studio Daddy-O, later turned into a fancy-man bakery, just to rub in that I had served my magical purpose of enhancing property values for no investment. 

To my persistent dismay the NY Times has written up almost all the neighborhoods I've worked in on the West Coast as a desirably artsy area, in articles with titles like 72 Hours in Portland: Driving Up The Rent, which was a sure sign I was going to have to leave.  This included SOMA in San Francisco, downtown Anchorage, Hawthorne in Portland, Northeast Portland, Fremont, Ballard, Downtown  and Georgetown in Seattle. In Anchorage, Portland and Seattle I've helped start artist studios simply because I could not find a room with a mildly abusable floor I could paint in for less than the price of a full apartment.


It's happened almost everywhere I've lived - this endless, frustrating process of artists trying to find a place to live and work, finding an area with a stock of cheap housing and marginal commercial space sort of nearish to a downtown, and becoming wildly successful, a dynamic community springing up. Then, real estate values balloon, with virtually all the benefits naturally going to the same landlords, until the success turns against the people who made it happen.  From SOHO to SOMA to SODO, it's happened again and again.  Its a bit feudal. Land is everything.

Artists moving in have turned many "problem" neighborhoods into giant piles of cash for real estate owners through making the area extremely desirable in a very short period of time. In five years your dilapidated warehouse can become the IT property.  Once this happens, a clock runs, you have maybe 15 years before they are priced out to us woe-be-gone artists, the magical gnomes of property value-  along with the people who already lived there, of course; many poorer neighborhoods have learned to fear rather than welcome artists and community art development, because the suits with measuring tape follow close behind.


In many urban areas, relatively small numbers of people and companies hold enormous amounts of real estate.You see this especially in San Francisco: all non-land owning entrepreneurs are trying to cover rent, all professionals are trying to cover rent, all prices are higher, trying to cover rent. It's a much bigger factor than any income or sales taxes; plenty of other wise profitable businesses fail when rents rise unpredictably, or as the result of aggression meant to drive them out based on speculative interests. Both the market and the government methods of distribution have broken down, and almost every business and personal decisions is over-dominated by rent paid to the same real estate holders, year after year, decade after decade.

MARK MY WORDS: Always fear Suits with measuring tape.
But in almost all of these cities, even in the most dense urban areas, many large, empty buildings sit, year after year, decade after decade, unusable because the most profitable activity for the real estate holders is to wait and wait and hope that someone will buy at top dollar.  And so, Market St. in SF is full of empty buildings.   Huge new luxury condo developments rise, often largely unrented.  Meanwhile, with all of this space off the rental market, everyone else's rent stays artificially high, while the city has to pick up the costs of policing deteriorating buildings, and other holders lose property value.


So here's an idea to try to ease all of these problems: Speculator's Tax, of if you prefer, the Trump Tax. It's key feature: make it increasingly costly to hold onto available, un-rented housing units and commercial spaces, or under-used land as time goes on. The longer it's unused, the more it costs the owner in property taxes, but tax benefits flow for putting idle properties on the market.

Over the years, I've kicked this idea around with friends who know economics and real estate - the idea to adjust property taxes to encourage rentals and discourage empty speculative holdings seems to have potential.  I don't pretend this is a rigorously developed idea-not yet. Proper studies would need to be done, by people like economists and tax specialists. And I can guarantee you a flame-thrower of angry, sad words from the Real Estate Holders' fancy men.  But it's much less draconian than rent control, for example, and uses market forces for both economic and social benefits.  Roughly, this is it:
  1. A Yearly city-wide reviewof  major properties in the area (let's set it at $3 million, just to say something. That's basically a very small multi-tenant building in San Francisco.) Yes, this will require a bureaucracy. Identify unused, un-rented, un-leased property which is clearly held for real estate speculation. Give owners a property tax break for renting out within a certain period, but their property tax increases substantially for every quarter off the market.  The city's intent will  be to make it too expensive to speculate with idled properties for multiple years.
  2. Favor redeveloping and renting out certain properties for business or residential uses with property tax benefits, particularly for rehabilitating property and putting it on the market.
  3. Raise property taxes on idle properties held in speculation.  If it is not in active use by the owner, and does not have another socially beneficial use (such as open natural lands, casual parks, architectural heritage, etc.), and is not rented after a certain period, property taxes go up, ,at a certain percentage every year, until it reaches a maximum, and until it is rented, leased, brought into active use (this would require "active use" standards, such as living or business) sold, or redeveloped with the clear intent of active use.
The intent is to push speculatively held housing and business property onto the market.  You can wait for the price to go up before you sell, but this will cost you; for neglected, empty buildings in dense areas exert public and social costs, sometimes serious ones.

This should have many direct benefits. Housing and commercial stock increases, lowering price pressure for both residents and businesses. Empty, problem buildings (expensive for the city to police and regulate) become too expensive to let sit without redevelopment.  City revenue increases.  Who loses? Giant private holders of urban property, but only if they stick with sitting on their properties for the obvious purposes of idle speculation. If they redevelop and rent, they still make money.  But they no longer get what amounts to a subsidy, the public costs per block of utilities, street maintenance, policing, crime, etc, so they can keep speculating while immediate needs for space in a dense urban area are unmet.

Real estate speculation in an urban center pushes costs onto the public and to government that should be born by the big real estate holders.  If this carrot and stick system worked extremely well, and brought a lot of new spaces onto the market, rent control might even be relaxed.   In a place where   property ownership is in fewer and fewer hands, this should benefit almost everyone by decreasing housing and business rents and directly lowering or moderating the costs of doing business.

And maybe, eventually I can finally afford a big enough place to turn my largest paintings around without knocking off the books on the shelf.