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Columnist says ban all new stores, build housing instead. Or try free markets.

Posted by John T. Reed on

Jonathan Lansner, a business columnist for the East Bay Times, called for a government ban on building new stores. He wants housing instead.

  1. America has what are called free markets. They are Old Testament harsh. If you build an unneeded store, you will have to pay an unpayable mortgage with rent that you could not find. The market punishes vacant building developers.
  2. He says cities prefer stores because they “control” sales tax revenue. The average Californian pays $997 a year in sales tax and the average home pays $7,266 in property taxes. The average unneeded vacant store pays $0 in sales tax and a falling % of property taxes as its value falls from being vacant.
  3. One of the reasons new stores are built is because existing stores are in the wrong place or configured suboptimally for current retail demand. For example, in recent years a store type called an outlet mall has arisen. They are located at some distance away from cities. Many in California would replace a type of store called a gas station with another type called a charging station.
  4. Buildings other than homes in California tend to pay lower property taxes over time because they turn over less frequently. More frequent turnover among homes means homes pay higher property taxes over time because Prop 13 prohibits reassessment to current market value until the property gets a new owner. So municipal governments already have plenty of incentives to favor residential construction over non-residential.
  5. Yes, there are currently too many vacant stores. Pandemic government seizing of dictatorial shut down powers partly caused that. People switching to more delivery-style shopping is another part. Other causes include stupid developers and stupid construction loan lenders. Some genius recently converted the old Walnut Creek railroad station from a Vic Stewart’s steak restaurant to a shiny, new, refurbished, mostly vacant, would-be retail building across the street from the thriving Broadway Plaza shopping center.
  6. Perhaps the East Bay Times business columnist should be a successful entrepreneur rather than a Soviet-style collectivist.

 

John T. Reed

Author of 21 how-to books on real estate investment

www.johntreed.com

 


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