Now that some places are emerging from the pandemic and business wants to get back to normal — whatever that is — we are going to see more stories about how workers have changed the way they think about work. After two years of not being able to — or needing to — go into an office but still managing to get things done, why would they want to change that?
The question business owners — and city leaders — should be asking themselves is why downtown locations are more expensive than suburbs or spare rooms turned into workspaces and why they pay higher wages in large cities than smaller ones? In other words, who is making the real money here and without doing any of the work? Landlords grow rich in their sleep, as someone once said. The high rents and higher wages are the landlords game…business owners may be nettled about having to pay the same wages and rents, as their still-productive workers stay home. And that’s what they should be thinking about: why am I enriching someone who creates no value while I and my workers put in the work?
The reduction in corporate property rents last year as high as 10%, with huge changes in the use of office space and co-working space. And the city has a new competitor: the suburb. The flight to suburbia during the pandemic has accounted for a rise in the property market for residences outside city centers. For downtown districts to attract and retain people as places to live and work, city centers will need to be redesigned completely.
The fact that business owners pay high rents and higher wages for downtown office space that now might be vacant, with all of that value raked off by speculators, should be concerning. The landlord’s game is all about charging what their tenants can afford to pay, not the value they offer. Sure, they might claim to offer a great location but they didn’t build that. Seattle didn’t become a tech goldmine because of real estate investors…it became one through the investment of various business owners and the educated workforce that jumpstarted it. A lot of workers may move to Seattle but the UW and other local schools are well-represented. That investment should be reclaimed from the speculators through a tax or ground rent structure that rewards development over speculation. As noted in the excerpt above, land values — and prices — increase with economic activity.
Land prices mainly reflect location: farmers may till the soil, or drain it, but most increases in land’s value comes from the activity of other people. Nobody builds skyscrapers or shopping malls in the wilderness. Landowners, in other words, enjoy unearned income from the benefits bestowed by good transport links, and proximity to customers, suppliers and other businesses. Once they have bought their land, they keep this money.
And this would be an ideal time to re-assess the best use of land in cities to make them work as something other than a 9-5 destination and a desert the other 16 hours of the day. Monocultures don’t survive. And what else is a city of office blocks but a monoculture?
Not every city has the energy to be a 24 hour city but it’s only failure of imagination that holds them back. Cities like Seattle have lots of opportunities to reclaim and redevelop the urban environment (hint: if people are no longer commuting by car, you probably don’t need all those surface parking lots).
Every one of those markers could be a multistory development, mixed-use or residential, all adding to the local community rather than sitting idle for 2/3 of the day for 5 of the 7 days.
The value of the land downtown, whether it’s under an existing development or a disused car storage area, is all created by the investment made by others…your vacant lot becomes more valuable when I put up a shop on mine. And both become more valuable when the city runs a bus or train to connect them with other parts of the city or connects them to the utility grid. And that value should be recaptured by something more closely related to that value than simple property tax. A high tax on the productive value of land — not held as a vacant lot, but based on the uses nearby — and a reduced tax on improvements would get land back into productive use, driving more commercial activity and lowering rents as landlords are forced to compete, rather than hold land idle.