Perspective: Vacancy Tax – Cultivating the Collective Vibe
By Eric Webb, Chapel Hill resident who spends a lot of time in Carrboro's commercial district
Does Carrboro need a Vacancy Tax?
Before we answer that, it’s probably worth defining the term. A Vacancy Tax is an additive property tax levied on retail property owners that opt to leave commercial retail space empty for extended periods. The intent is to create financial incentives for landlords to maintain occupied storefronts and improve properties.
Why does this matter? More economic activity means more tax revenue, which enables local leaders to fund more initiatives that contribute to making Carrboro a great place to live. The tax will incentivize landlords to ensure rental costs are in-line with the local market realities and encourage a more productive relationship between property and business owners.
The beauty of this approach is in its flexibility. It doesn’t mandate outcomes. Property owners can still opt for speculative holding or choose pricing algorithms over community vibrancy – after all, it’s their property. However, by creating tax revenue from vacant retail, the town of Carrboro could either offset the tax revenue lost from fewer businesses or elect to fund more small business initiatives.
When implemented thoughtfully, with clear definitions, simple administration, and grace periods for good faith efforts (like renter replacement or improvement projects), the Vacancy Tax would strengthen the partnership between property owners, local entrepreneurs, and municipal leadership. In an ideal world, no property owner would ever have to pay the tax.
This system is already in place for large cities like San Francisco, Vancouver, and Detroit, but one could argue that it is better suited for small towns like Carrboro (and Chapel Hill, for that matter), which serves as not just a destination for the diverse, well-educated people that live here, but for the larger region as well.
Critics point to the system not addressing the root cause – lack of demand. While this could be true for a neighbor in a large city or more rural towns in North Carolina, it’s not true for Carrboro.
Speculators often reference an “urban doom loop” – increased ownership costs leading to less capital for improvements leading to fewer renters leading to increased costs. However, this is only relevant for shrinking populations or one where a major employer has up and left.
Perhaps the most compelling critique is that it encourages less than ideal tenants – how many vape shops per person does one town need? Yet this is easily addressed through new and existing town ordinances.
The Vacancy Tax would be an asset to Carrboro. In the end, it’s not just about tax revenue or fighting blight, it’s about optimizing the creative, entrepreneurial spirit of its residents and creating a more vibrant community. We need to make it easier for small businesses to thrive.