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By Suzanne Blake
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A new proposal in Denver is urging officials to impose a "ghost tax" on landlords and property owners.
Those behind the proposed ghost tax say it would act as a fee on rental units left vacant for an extended period and also operate as a new revenue stream to help create affordable housing by encouraging owners to rent or sell empty properties.
Why It Matters
Advocates frame the measure as a response to a housing shortage and a means to push corporate landlords to make units available and affordable amid a high number of empty rental units in the Denver metro area.
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The proposal follows the defeat of Measure 2R, a sales-tax initiative championed by Democratic Mayor Mike Johnston that voters rejected earlier this year, and the advocates have presented the vacancy fee as an alternative path to finance affordable housing efforts.
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What To Know
The ghost tax would target rental properties that remained unoccupied and unrented for roughly six months, with the backers of the proposal saying it would hopefully generate funds and incentivize owners to rent or sell those units.
The letter proposing the fee was sent to Johnston and the Denver City Council by a coalition that included the Colorado Coalition for the Homeless, Enterprise Community Partners and Archway Communities, which said the move could free up housing units for working-class renters and people experiencing homelessness.
"Assessing a fee on rental units in the Denver market that are left vacant, with their rents unchanged for a minimum period of time, could bring in significant revenue for Denver," the letter to Johnston read. "Current reports indicate that there are more than 27k vacant units of rental housing in the city. This approach is preferable than potentially taxing unoccupied second homes in Denver as there is less likely to be an abundance of such homes. But both may merit exploration and have precedents across Colorado and the country."
The community organizations pointed to precedents set in other U.S. cities, noting that similar vacancy- or empty-home levies existed in places such as Oakland and Washington, D.C., and suggested Denver could adopt comparable measures.
Opposition to the proposal is coming primarily from landlord representatives who argue the fee would interfere with property owners' rights and market dynamics, warning that costs could end up passed on to tenants.
"Ghost taxes attack a symptom, not the disease. They marginally increase local housing availability but are no substitute for new construction," Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
"Will Denver's version pass? Probably. It's politically popular and generates revenue. Cities love these because they're 'a good way to disincentivize' behavior while raising millions."
Joel Berner, senior economist at Realtor.com called the proposal a "market-distorting measure that will ultimately backfire."
"The dynamics of the free market should be enough to incentivize landlords to set rents at the proper level," Berner told Newsweek. "What is likely to happen is that landlords will just absorb the ghost tax and pass the cost along to the tenants in their filled units. The ultimate solution to affordable housing is not raising government revenue, but enabling builders to produce more inventory by removing barriers to building such as minimum lot size or parking requirements."
Newsweek reached out to Johnston for comment via email.
What People Are Saying
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "Taxing rentals that sit unoccupied for long periods has some potential benefits, but also comes with challenges. Landlords will eventually find ways to make up that lost revenue, maybe not through direct rent hikes, but through higher start-up or administrative costs passed on to tenants. What is supposed to occur is lower prices for rentals as supply/demand balances out. But over time, instead of rents falling naturally, landlords may just redirect those costs elsewhere."
Ryan told Newsweek: "Vacant properties lose value rapidly, and with lost value comes lost property tax revenue. Most landlords already have strong financial incentives to fill units quickly, right? The ones keeping properties empty either can't find qualified tenants or are dealing with major repair issues..."
"It's a revenue grab disguised as housing policy. If Denver really wants affordable housing, they need to tackle zoning restrictions and permitting delays that make new construction prohibitively expensive. Ghost taxes just give politicians something to point to while the real problem festers."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The key issue some advocates see is landlords are unwilling to lower rental prices and are willing to let properties sit empty for months or even years on end waiting for someone who will pay what they feel the value is. At the same point, others argue employing a tax would create the opposite effect, as some landlords may opt to raise rents to pay a new tax instead of lowering rents. Ultimately, it's a complex issue that requires data-driven research in every city, like Denver is proposing now, to see if such a tax would produce any of the effects mentioned."
What Happens Next
The proposal's next steps depend on whether city officials chose to pursue study or legislation. Any formal movement would require review by the Denver City Council as well as legal and fiscal analysis to assess enforcement, exemptions and projected revenue.
"A stronger approach might be limiting the role of institutional buyers in single-family housing and opening the door for individuals to purchase homes instead of corporations buying up stock and turning them into rentals," Thompson said. "I don't see this working in most conservative cities, where it would likely be viewed as government overreach."
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