We need land value tax bad [1]
In Los Angeles I’ve watched business after business close because their rent was increased by their commercial landlord only for the property to sit vacant in some cases (no exaggeration) for over 5 years!
Thats absurd. Also as a business owner who would like some space to work out of your only options are endless swaths of vacant industrial buildings that are tens of thousands in rent a month. I don’t quite get how anyone runs a brick and mortar or has space to do anything profitable.
I’d support a land value tax myself so don’t take this following comment as criticism, but you don’t even need a land value tax in the case of LA. You do need to repeal Prop 13 for investment properties. I wager most of those years-vacant properties have a generous Prop 13 assessment and so the owner can just sit on it because their carrying cost is closer to zero than what it would be in any other tax regime. Then all of us folks around them continue to make the adjacent area nicer and they just ride off into the sunset while the absurd delta between their taxable value and market value increases.
Prop 13 is like the anti land value tax. Makes places like Texas look downright progressive.
One of the biggest objections to a straight repeal Prop 13 on commercial property is that most commercial leases are triple-net, meaning that the businesses directly pay the taxes. Which means that a bunch of small businesses that are just barely on the edge of profitability will shut down when they finally have to pay their fair share of property tax.
Agreed on the need to do it though (and also Texas typically has higher taxes for a normal person, with worse services than California). We might just want to pass a gradual phase in or a requirement that landowners pay it without increasing rent )and doing reach through to modify all those triple net leases... or something. Or we just let the businesses fail, but the public tends to not like lots of small businesses failing.
Re your NNN comment, would you mind sharing a source for that? My gut says it's not accurate, but happy to be proven wrong. If you meant total square footage of leased space, that would make more sense, but having a hard time believing most leases are NNN (and since your point was about businesses going under what I think matters is the number of leases because (a bit over-simplified) 1 lease = 1 business regardless of the square footage leased by the business.
The ironic thing about this whole topic of businesses going under is that there's no rent control, for the most part, for businesses and yet Prop 13 acts as rent control (i.e., carried cost control) for landlords. If the landlords only charged the market rent that was achievable at the time they bought the property with a nominal capped annual increase that'd be pretty good for operating businesses, just not for the landlord's real estate business.
P.s. I personally benefit from Prop 13 and would be happy to have its market-distorting bullshit eliminated!