Government’s Empty Buildings Are Costing Taxpayers Billions

by on March 13, 2014 at 7:25 am in Economics, Political Science | Permalink

emptybuild

The boarded up building in the photo sits a mere 6 blocks from the White House on prime real estate but it’s been empty for 30 years! What’s the problem? The building is owned/controlled by the Federal government which often doesn’t even know what it owns, lacks the incentive to control costs and whose bureaucratic strictures make selling difficult even when motivation exists.

From an excellent piece on NPR:

Government estimates suggest there may be 77,000 empty or underutilized buildings across the country. Taxpayers own them, and even vacant, they’re expensive. The Office of Management and Budget believes these buildings could be costing taxpayers $1.7 billion a year.

…But doing something with these buildings is a complicated job. It turns out that the federal government does not know what it owns.

…even when an agency knows it has a building it would like to sell, bureaucratic hurdles limit it from doing so. No federal agency can sell anything unless it’s uncontaminated, asbestos-free and environmentally safe. Those are expensive fixes.

Then the agency has to make sure another one doesn’t want it. Then state and local governments get a crack at it, then nonprofits — and finally, a 25-year-old law requires the government to see if it could be used as a homeless shelter.

Many agencies just lock the doors and say forget it.

The NPR article is excellent but it vastly underestimates the size of the problem. In addition to empty buildings, the Federal government owns/controls millions of acres of land that are worth hundreds of billions and perhaps even trillions of dollars. The land is not being used to its full value or potential even though maintenance costs runs in the tens of billions annually.

Alexei Sadeski March 13, 2014 at 7:36 am

Empty buildings?

By my calculations, empty *minds* in the federal government are bilking taxpayers to the tune of $6 trillion per year!

Alexei Sadeski March 13, 2014 at 7:36 am

Er, federal and state local combined.

Harlen Sanders March 13, 2014 at 8:23 am

Har har I get it, because all government employees are dumb.

Das March 13, 2014 at 10:26 am

Not *all* of them, not even *most* of them. But the ones on top who run things and get to decide…

Alexei Sadeski March 13, 2014 at 3:50 pm

I do not normally consider legislators and presidents to be “employees.”

Harold March 13, 2014 at 10:48 pm

Neither do they!

lonely Libertarian March 13, 2014 at 7:48 am

It amazes me we have not had someone run for office on a platform of using these resources to pay down/repay the national debt and then fund some of the social programs. When you look at what is going on in Texas and North Dakota it does not take much imagination to see how a plan to develop public lands for oil and natural gas would be beneficial on many fronts.

I remember seeing a national “Balance Sheet” a number of years ago – before the recent energy boom and the recent debt expansion that showed a pretty nice taxpayer surplus when a fair value was placed on the assets that might be sold or developed.

RPLong March 13, 2014 at 9:52 am

Indeed. Robert Murphy has made this suggestion many times.

greg March 13, 2014 at 10:19 am

Libertarian Harry Browne in 1996 and 2000. No major party candidates, though. It’s simply too bold and would be too easy to counter with accusations of corportatism and environmental destruction (“selling the nation off to the highest bidder.”)

anon March 13, 2014 at 10:36 am

Does no one remember “Drill, baby, drill!”?

mulp March 14, 2014 at 2:30 am

How would developing public land by pillage and plunder at royalties lower than private landowners pay down the debt?

Hardrock mining is still under the law of 1872 which requires no royalty payments. In fact, until 2001, reclaiming mining sites was not required, so mining on public lands generates large liabilities. Try getting pro-business Republicans to charge fair market prices.

And Federal oil and gas royalties are not only extremely low, but they get split with the States in most cases. And until recently, taxpayers ended up paying for cleanup after the fact. Millions of wells on public and private land are known to be abandoned, but not properly shut in.

The cheapest way to maintain Federal land is do nothing and let nature manage it. But people who build on the edges get upset when fires and wildlife don’t stop at their property land.

No oil or mining company wants to own the land – that would result in them being required to pay property taxes. Even the legislated reduced rates for farming and forestry are considered too high for land that isn’t able to viably produce in excess of the tax – millions of acres of private forest lands have become public land in the past few decades in New England as recycling (mostly in China of US paper) has made paper making unprofitable.

And worse, owning means clear liability for cleaning up and maintaining the land.

lonely Libertarian March 14, 2014 at 8:11 am

Mulp.

When did you become so locked into what was. Have some imagination – a vision. Laws can – and should be changed when the need arises.

Not saying it would be easy – not saying it will ever happen. But we have the resources to fix the mess progressives have gotten us into if
we have the vision to see how to get this done in a way that is a net benefit to the taxpayers and the economy.

If there is no way we can do anything with the buildings Alex mentions – or the vast amount of land that is owned by the Federal Government then get rid of it all – rent building space when needed and never build or own another square foot of office space or a military base.

prior_approval March 13, 2014 at 7:56 am

‘the Federal government owns/controls millions of acres of land that are worth hundreds of billions and perhaps even trillions of dollars’

Just imagine how much money could be made if someone were to charge admission to the Washington Monument – and the sponsorship possibilities are endless.

And those old growth redwoods in Muir Woods? Considering their rarity, they would bring a pretty penny if cut and sold.

Though likely, Til Hazel isn’t all that interested in buying any surplus property which used to be a National Battlefield Park. He seems to prefer selling property to the federal government – nothing like making a 400% profit in a few short years selling just part of a partcel of Arlington land. With Hazel Hall being the crowning monument to that sort of deal making, actually. A place where people sit in comfort, many of them tenured professors paid by the taxpayers of the Commonwealth, decrying how wasteful government is.

Though that is clearly an efficient use of resources, unlike the millions, if not billions, of wasted dollars represented by something like this – ‘The Chesapeake and Ohio (C&O) Canal is one of the most intact and impressive survivals of the American canal-building era. The C&O Canal is unique in that it remains virtually unbroken and without substantial modification affecting its original character for its entire length of 185 miles.’ http://www.nps.gov/nr/travel/wash/dc6.htm

Duracomm March 13, 2014 at 8:49 am

prior_approval arrives to poison the well.

Deriving economic benefit from the vast amount of land the federal government owns does not equal charging admission for the Washington monument.

It is a stale argument designed to end discussion and shows that the person making it is not interested in having a reasonable discussion of the issues.

It also illustrates prior_approval’s ignorance of the facts.

Sites like the Washington monument or the C&O Canal represent a microscopic portion of the land the federal government owns.

chuck martel March 13, 2014 at 9:01 am

It’s really a commentary on the mentality of the grappling viewpoints in the country when a bozo like prior_approval is allowed to contribute his (or maybe her) leftist and witless diatribes daily. Lefty counterparts to Marginal Revolution regularly ban commenters who criticize their positions. It says something about the free exchange of ideas and ideology.

croneez March 13, 2014 at 9:17 am

Don’t worry. prior-arrival is just bitter that he failed in the US job market and uses his German spouse as an excuse for his “superior” lifestyle in Europe. He’s upset that the people he worked with at GMU are ignored and that Tyler is rightly admired and listened to by thinkers from both the left and the right. His obsessive need to pollute the MR comments is testimony to the fact that his meds aren’t working. But hey, that’s German healthcare for you!

Sherparick March 13, 2014 at 10:33 am

1. First, this was Alex’s post and not Tyler’s.

2. Although “prior approval’s” response was a little snarky, he is making a good point. Alex’s standard “That the land is not being used to its full value and potential” applied to all Federally owned land means that Alex is applying a pure economic criterion to a the value of land. The Antietam Battlefield Park, a an hour commuted from D.C., would be far more economically “utilized” at its full value if it was sold off and subdivided for houses and office parks (I don’t mention shopping malls because I sense that outside of Dollar stores and the like to service the proles, most brick and mortar stores are basically money sinks on their way to abandonment). There may exist other values then economic ones (for instance one fellow named Adam Smith, whose book “Theory of Moral Sentiments” I am reading right now, seemed to think so). Since Alex does not specify what properties he wants disposed of (National Parks, National Forests, Wildlife refuges, BLM property in the arid west?) Prior Approval is allowed to make is point “reductio ad absurbam.” Because the conversion of the National Mall to commercial use and sponsorship would be quite lucrative and it is clearly underutilized from a profit maximizing point of view of the libertarian/neofeudalism. The NPR story he talks about concerns buildings in urban and suburban areas. So please specify Alex.

3. The responses to “prior-arrival” were ad hominem and mostly about how “smart and clever” we rightist libertarians are about all this “wasteful” Government and how “stupid” liberals are without actually making any arguments from logic or facts. The Federal agencies are being the opposite of wasteful for any given current Fiscal year, since following the law would incur greater costs in the current year in excess to the maintenance costs, particularly the environmental clean-up (one of those externalities that libertarians say don’t exist). And they have to follow the law. Maybe the current law does not make sense. So then call up Paul Ryan and Dan Issa and give them a new draft law and perhaps the Tea Party House can originate a biil or is that to much effort?

4. Finally, to keep things in perspective, $1.7 billion dollars is .0492% of the current FY 2014 budget. http://www.cepr.net/index.php/responsible-budget-reporting, or about the costs of 6 to 8 F-35s (depending on the Air Force, Marine, or Navy version). http://www.outsidethebeltway.com/f-35-costs-182-million-to-299-million-per-plane/ Now there is a program we are talking about “real waste” numbers. http://www.outsidethebeltway.com/f-35-costs-182-million-to-299-million-per-plane/ Hence we have another horrible NPR business story using “large,” meaningless numbers.

Alex Tabarrok March 13, 2014 at 11:57 am

Sherpack, it’s a joke when the first objection selling federal land is what about Antietam Battlefield Park or the National Mall. Be serious. Moreover, follow the links. I have been clear that I am not talking about parks. Indeed at one point I suggested creating a park!

http://marginalrevolution.com/marginalrevolution/2008/11/now-is-the-time.html

http://marginalrevolution.com/marginalrevolution/2011/05/selling-government-assets.html

But here is a map. You pick which say 100 million acres to sell. It’s easy to do without running into any parks or national monuments.

http://www.nationalatlas.gov/printable/images/pdf/fedlands/fedlands3.pdf

Eric with a c March 13, 2014 at 4:06 pm

I need to see something more then hand waiving before I agree that this is a good idea. A huge concern is water in an area that is dry and getting drier.

What are people going to (sustainably) do with this land that supports such a valuation? A 100 acre ranch that offers access to thousands of BLM managed acres for grazing is worth one amount per acre, a million acre parcel is worth much less per acre and is probably only good to overgraze on for a couple of years and then abandon.

My suspicion is that the western libertarians who are pushing this idea quote the valuation based on what a few acres would get right now, knowing that if you massively increase the supply of available land, they will be able to pick it up for pennies per acre. At that point you can overexploit the with a LLC and then go bankrupt when the bill to clean up the land comes due.

dead serious March 13, 2014 at 4:49 pm

“Other agencies” = Canada, Mexico, Cuba. :)

Sherparick March 13, 2014 at 10:46 am

1. First, this was Alex’s post and not Tyler’s.

2. Although “prior approval’s” response was a little snarky, he is making a good point. Alex’s standard “That the land is not being used to its full value and potential” applied to all Federally owned land means that Alex is applying a pure economic criterion to a the value of land. The Antietam Battlefield Park, an hour commute from D.C., would be far more economically “utilized” at its full value if it was sold off and subdivided for houses and office parks (I don’t mention shopping malls because I sense that outside of Dollar stores and the like to service the proles, most brick and mortar stores are basically money sinks on their way to abandonment). There may exist other values then economic ones (for instance one fellow named Adam Smith, whose book “Theory of Moral Sentiments” I am reading right now, seemed to think so). However, since Alex does not specify what properties he wants disposed of (National Parks, National Forests, Wildlife refuges, BLM property in the arid west?) then Prior Approval is allowed to make is point utilizing the argument of “reductio ad absurdum.” Because the conversion of the National Mall to commercial use and sponsorship would be quite lucrative and and they are clearly underutilized from a profit maximizing the libertarian/neofeudalism perspective. Since the NPR story he talks about concerns buildings in urban and suburban areas Alex should specify his hand waving about “trillions of dollars of property.”

3. The responses to “prior-arrival” were ad hominem and mostly about how “smart and clever” we rightist libertarians are about all this “wasteful” Government and how “stupid” liberals are without actually making any arguments from logic or facts. The Federal agencies are being the opposite of wasteful for any given current Fiscal year, since following the law would incur greater costs in the current year in excess to the maintenance costs, particularly the environmental clean-up (one of those externalities that libertarians say don’t exist). And they have to follow the law. Maybe the current law does not make sense. So then call up Paul Ryan and Dan Issa and give them a new draft law and perhaps the Tea Party House can originate a biil or is that to much effort?

4. Finally, to keep things in perspective, $1.7 billion dollars is .0492% of the current FY 2014 budget. http://www.cepr.net/index.php/responsible-budget-reporting, or about the costs of 6 to 8 F-35s (depending on the Air Force, Marine, or Navy version). http://www.outsidethebeltway.com/f-35-costs-182-million-to-299-million-per-plane/ Now there is a program we are talking about “real waste” numbers. http://www.outsidethebeltway.com/f-35-costs-182-million-to-299-million-per-plane/

5. The fact is that this is another horrible NPR “Budget” story using “large,” meaningless numbers. The fact that a law is “twenty-five” years old is another poor argument, since I still see plenty of homeless proles on the street, and if fully implement neofeudalism, we are going to see a lot more. Let’s make the argument that the more awful we make poverty, then the more it will encourage the rest of the proles to work hard and give proper deference to their betters, not that we worried about Government waste. (Actually, I think it is a stupid law, and I thought it was stupid at the time (1987), since there are better and more efficient ways to solve homelessness.)

Govco March 13, 2014 at 12:20 pm

Echo chamber, indeed.

Erik March 13, 2014 at 10:00 am

This is a very confusing comment. It’s wrong to ban counter-commentary because ideology gets in the way of a free exchange of ideas, but apparently MR should ban “leftist and witless diatribes” with which you clearly disagree. Choose a side!

Not that I am on-board with prior_approval’s comment. There is plenty of money to be raised in this fashion. But vultures and profiteers are out there and there are things like valuable watersheds that need to be protected and federal ownership of land is on of the few ways to ensure that. It’s a complicated issue.

anon March 13, 2014 at 10:23 am

I don’t think he’s calling for PA to be banned. He’s saying PA is an idiot, and a mean one, and he doesn’t get banned around here in contrast to what occurs at other websites.

chuck martel March 13, 2014 at 10:38 am

For many years, and perhaps even now, the most significant source of upper Mississippi River pollution was the Fort Ripley US military installation north of Little Falls, Minnesota. The ground water in the Galena, Alaska area literally reeks of spilled JP-4 jet fuel that has leaked from Air Force storage. Fuel leaks at Kirtland AFB, near Albuquerque, have jeopardized the water supply of the entire area. The federal government hasn’t been a success at managing property.

lxm March 13, 2014 at 12:27 pm

Many right wing sites allow no comments at all. And many routinely bar commentators they disagree with, even if those commentators use no profanity or personal attacks. You know, personal attacks like you calling prior_approval a “bozo.” Go post something on Red State that disagrees with their religion and see what happens.

Perhaps Marginal Revolution should bar your comments for thoughtless, prejudiced, ill thought out, unfounded, ad hominem attacks

lxm March 13, 2014 at 12:46 pm

And just for the record, I believe that prior_approval’s comments are flat out wrong.

chuck martel March 13, 2014 at 2:54 pm

Referring to prior_approval as a “bozo” is a personal attack? prior_approval has made statements about people that would result in awards for libel in many parts of the world, maybe even the US. Probably couldn’t get a jury to disagree with a description of him as a bozo.

Locke March 13, 2014 at 3:46 pm

What about Righty counterparts to MR?

Bob March 18, 2014 at 12:56 pm

Sure, he’s a jerk, and makes little sense, but this blog has its own set of right wing equivalents who show actual knowledge of areas they claim are part of their expertise.

So really, I don’t think you are achieving much there other than adding yet some more well poisoning.

mofo. March 13, 2014 at 2:57 pm

Liberals love big government, but are totally uninterested in good government. In a sane world, the notion that a government should manage its resources skillfully is obvious, but to the liberal, questioning any government spending implies questioning government itself, which the liberal can not tolerate.

Brenton March 13, 2014 at 5:22 pm

Now there’s a way to open up a debate.

mofo. March 14, 2014 at 9:16 am

Considering the comment to which im responding….

Eric Hammer March 14, 2014 at 6:33 pm

“Just imagine how much money could be made if someone were to charge admission to the Washington Monument”

Just for future reference, the government does charge admission to the Washington Monument. You must buy tickets in advance if you want to go inside.

Brandon March 14, 2014 at 11:30 pm

They charge a $1.50 service fee for tickets purchased in advance. They sell out frequently, but they don’t need to be purchased in advance.

Chip March 13, 2014 at 8:06 am

The world gets more complex at an exponential rate.

Government and politicians are consistently/increasingly ignorant and ideological.

Something has to give.

Z March 13, 2014 at 8:16 am

The empty buildings do cost a lot, but nowhere near as much as the government buildings being used.

lonely Realist March 13, 2014 at 8:27 am

I assume you’re being snarky, but if taken literally, you would also be correct. Operational buildings (government or not) have costs of utilities, security, staffing, etc.

Z March 13, 2014 at 9:07 am

Agreed. The only answer is to raise all of them and salt the earth on which they stand. Maybe leave a small plaque as a reminder of past mistakes.

lonely Realist March 13, 2014 at 9:46 am

But what about maintenance costs on the plaques?

Ricardo March 13, 2014 at 10:58 am

And then after you’ve raised them, maybe you’d like to raze them.

Contemplationist March 13, 2014 at 11:56 am

+1

Z March 13, 2014 at 1:04 pm

Hahahaha! I really need to read my posts before hitting the submit button.

msgkings March 13, 2014 at 2:04 pm

Or just, you know, don’t submit them at all.

Roy March 13, 2014 at 8:20 am

The vacant building issue is different from the federal land issue. While BLM land is my bete noire, it has all that environmental baggage, god forbid we let development occur in central Nevada, who will think of the children…

So it is probably best to seperate the issues.

Andrew M March 13, 2014 at 8:44 am

Don’t they have to pay property tax on those buildings? A regular bill from the city for $millions would quickly determine who in the Federal government owns the building. If nobody claims it, they can dispose of it.

Land tax is the best tax, for so many reasons.

James B. March 13, 2014 at 9:06 am

No they don’t pay property tax. See McCulloch v. Maryland

Mark Thorson March 13, 2014 at 11:26 am

Changing that would solve the problem. It would provide the pressure to move all that property out of federal government hands.

Brandon March 13, 2014 at 2:39 pm

It would be another cost, but as noted there’s already some pretty decent costs associated with holding these buildings.

John Mansfield March 13, 2014 at 1:16 pm

There are Payments in Lieu of Taxes, $400 million for FY13.

link

Rahul March 13, 2014 at 10:37 pm

Is unused real estate a federal problem only? Or a city / state problem too?

Govco March 13, 2014 at 12:25 pm

It’s shocking to me that a brokerage company/law firm hasn’t made it their specialty to identify & market these properties by learning how to navigate the Federal ownership/approval morass. A coupla well placed campaign contributions or Federal employee hiring decisions, should secure the requisite knowledge.

Note that Warren Buffet figured out how to acquire Federal properties and make handsome profits.

Bill March 13, 2014 at 8:48 am

We should be moving government offices outside of the DC area, and away from GMU. Rent is cheaper and todays telecommunications capacity does not necessitate everything being located in DC. So, its not just sales of existing property, but its reduced costs from moving out of a high cost market.

Brenton March 13, 2014 at 5:26 pm

Would costs be reduced? Businesses have offices in expensive high wage city cores for a reason.

chuck martel March 13, 2014 at 6:23 pm

The US government operates geographically as if it’s still the 18th century. The congress meets in one location just as they did in 1789, when all communications were delivered personally. Now we have airmail, FAX, email, telephone, etc., which our altruist reps use even though they’re in the same marble buildings. There’s no reason Nancy Pelosi or John McCain need to endure those wearysome miles back and forth from home to DC, where they are easy prey for lobbyists and special interest groups. San Fran Nan should have an office with an open door right there in her Castro Street neighborhood where her adoring constituents can drop in and make their wishes known to her personally. When it’s vote time all she should need to do is push a Y or N button on her computer. We have the technology. Allowing these frauds to make their permanent domicile in the DC environs is bad for their physical and mental well-being, even if it seems to be beneficial for their financial health.

Brenton March 13, 2014 at 6:32 pm

There is something odd about a metropolitan area of 6 million people existing solely because a government decided to place its headquarters there.

Bill Harshaw March 13, 2014 at 9:06 am

“maintenance costs runs in the tens of billions annually.”

Really? My impression is that the Forest Service and BLM control most of the federal acreage you’re probably talking about, and their combined budgets seem to be in the range of 7-9 billion, a good ways south of “tens of billions.” I assume you’re okay with the National Park Service, DOD, and the Indian reservations, which account for a good deal of the total federal acreage? Or do you have a higher use in mind for the Navaho Nation land, Area 51, and Yosemite?

From the perspective of an owner, leaving buildings to decay may be rational–example: Detroit, The school I went to 60 years ago today is abandoned, because of the asbestos problem, and the economy in upstate New York isn’t vibrant enough to warrant the expense of tearing it down and reusing the acreage, unlike the reuse of the Presidio and the Brooklyn Navy Yard.

Brandon March 13, 2014 at 2:41 pm

That’s one thing the NPR story pointed out. For the government to sell these buildings, they have to be environmentally sound. Asbestos remediation is not cheap, nor are other forms of environmental clean-up or structural rehabilitation that these buildings might need to be fit for sale.

TallDave March 13, 2014 at 9:29 am

It’s an interesting developed-country parallel to DeSoto’s point about capital locked out of the formal economy in poor countries.

anon March 13, 2014 at 9:29 am

The boarded up building in the photo sits a mere 6 blocks from the White House

With all the homeless in DC and the protestors in Lafayette Park, a homeless shelter makes sense. Maybe an SRO hotel. Or a jail for corrupt politicians (keep the windows boarded up).

King Cynic March 13, 2014 at 9:44 am

Why should we be trying to get “economic value” out of every scrap of land in the US? One of the best things the federal government can do with land is to own it and not develop it, either returning it to or letting it remain wilderness. I don’t want to live in a country where every parcel of land is valued only for the money that can be had from it.

lonely Realist March 13, 2014 at 9:47 am

“I don’t want to live in a country where every parcel of land is valued only for the money that can be had from it.”

I don’t think you’ll like this blog very much then. Or at least one of the two regular contributors.

RPLong March 13, 2014 at 9:54 am

Okay, fine. But can we at least agree on vacant buildings located in already heavily urbanized cities?

TallDave March 13, 2014 at 11:49 am

I think you’re confusing “park” with “undeveloped.”

Jay March 13, 2014 at 11:55 am

Nor is Alex saying every “scrap” of land needs to be sold, there’s a difference saying a non-zero number of buildings and lands are being underutilized and could probably be sold to make use of them and the straw man you and PA are arguing against.

Rz0 March 13, 2014 at 10:08 am

Costs money to take inventory. Last time I looked we were sequestering.

Brian Donohue March 13, 2014 at 11:08 am

Look again. Sequester relaxed- it’s an election year!

TallDave March 15, 2014 at 12:51 am

Audit functions, White House tours, and starving orphans — the sequester tolls for thee.

As only the good die young, only the most useful and popular lines in the budget feel the first bite of of the budget-cutters fearsome axe — er, I mean, reductions in future spending growth.

The Other Jim March 13, 2014 at 10:38 am

I’m glad these sales restrictions exist, actually. Otherwise Obama would be flipping these buildings to campaign contributors. “Sorry, I’ve already given away the French Ambassador position…. can I interest you a nice property six blocks from the White House?”

Furthermore, until there is some kind of fiscal sanity in DC — a Balanced Budget Amendment at the very least — I’m totally happy with forcing the Feds to sit on assets. A trillion bucks would run DC for what, 90 days? And that’s at current spending levels. You know they would squander new income on new spending.

observant March 13, 2014 at 11:59 am

+1
Any money raised would be spent on new perks instantly. It would be an overnight destruction of citizen value.

DocMerlin March 13, 2014 at 1:30 pm

Actually, because of coase theorum, him selling off the buildings for personal gain would be a net benefit to the country.

fwiw March 13, 2014 at 2:28 pm

Actually, because we live in the real world and not within a theorem that assumes rational behavior and perfect knowledge, no.

dan1111 March 14, 2014 at 2:33 am

The crony who received the building would either use it or sell it. And the government would be freed of maintenance costs. It seems that it would clearly be better for the country than the status quo.

TallDave March 15, 2014 at 12:52 am

I think we need to check whether Tony Rezko is living in any of these buildings.

Just to be safe, I mean.

Urso March 13, 2014 at 10:57 am

Great point but it’s really only the tip of the iceberg. Imagine the amount of economically underutilized land and buildings in *private* hands. Tens of trillions of dollars’ worth, no doubt! Why, just looking out my window I see a boarded up building in the downtown of a major city. And I know for a fact that in this building there are entire office suites that are wholly empty. These underutilized assets should all be seized and handed over to the control of some truly wise philosopher king (perhaps a tenured econ professor??!!??) who can ensure that they are all placed to their highest and best – which is to say, most immediately economically productive – use.

Jay March 13, 2014 at 11:58 am

At least the landlords sitting on those private buildings are paying taxes to sit on those properties so there’s a reason they’re boarded up.

Thomas March 13, 2014 at 12:05 pm

Nice try but not good enough. There is a fundamental difference between private and public ownership which is that private owners bear truer economic incentives that public owners. It is tautological that private owners better utilize (in terms of wealth) property than public owners except in rare cases of market failure.

Urso March 13, 2014 at 12:40 pm

Maybe so but what you’re missing is that it’s equally tautological that tenured econ professors would even *better* utilize the property since they know what’s best for everybody at all times.

dan1111 March 14, 2014 at 2:40 am

As Alex pointed out, there is a maze of government regulations that prevents rational use of its property. Furthermore, the government doesn’t have the right incentives to make sure it uses things efficiently. It’s not about an economist knowing how to better allocate resources; it’s about a system that places barriers on efficient allocation of resources. Does anyone really think that an abandoned building a few blocks from the White House is being used optimally?

Brandon March 13, 2014 at 2:43 pm

It’s almost as if a system that allows for massive amounts of idle capital at the same time as massive amounts of idle labor needs some fixing…

louis March 13, 2014 at 11:16 am

The BLM does lease out Federal land for mineral extraction and other private purposes. There are regulatory restrictions involved but it’s wrong to assume the land is all economically fallow.
The telling point of the article to me was the thicket of laws that tie the hands of gov’t agencies who might look to rationally reduce their footprint. Fear of cronyism, corruption, etc has led to far too much micromanaging of the federal bureaucracy. James Q Wilson explained this really well. See procurement rules for example. Our low-trust approach to government (from both left and right) makes it more inept and baroque.

greg March 13, 2014 at 11:26 am

The building pictured appears to be in reasonably good shape, but I have seen a lot of run-down eyesores, especially those that were used for public housing at some point. Those might be harder to sell off, especially since they are in bad neighborhoods. But I agree that transaction costs and incentives seem to be preventing some clearly beneficial sales. I would start with the modest step of waiving all the right of nth refusals after a certain period of vacancy, say, three years.

charlie March 13, 2014 at 11:55 am

According to the link,the “tens of billions” is $20 billion.

ANd that is for all federal non-defense real estate. A lot of that is already being used. And I’d be highly suspect of how you define maintenance, since OMB doesn’t have a code for that.

What we be mroe useful is states and localities charging university real estate taxes. DC is starting this for nonprofits that don’t service a District function.

Yancey Ward March 13, 2014 at 12:31 pm

I would bet the big impediment is asbestos. You can’t even do demolition without removing the stuff first. The federal government would either have to do the removal prior to sale/rent, or it would have to sell at a discount to entice a buyer.

Jay March 13, 2014 at 12:59 pm

If the government is unwilling to do it, then I agree it should sell the property at a discount with the agreement that the private buyer must do the removal first thing.

I disagree with your primary reason. I don’t think there’s hundreds of bueaucrats itching to sell these properties if only they could get over the red-tape hurdle of asbestos. I think the various agencies just forget (or think some other agency does) they own the properties and lose track of them over the years.

Brandon March 13, 2014 at 2:44 pm

Per the NPR story, the government is not allowed to sell buildings with asbestos. So remediation is the only option.

Yancey Ward March 13, 2014 at 8:03 pm

Then this clinches it- remediation is going to be way, way, way down the list of things any bureaucracy is going to want to spend money on.

GW March 13, 2014 at 1:07 pm

This is a story where the aggregate impression, “look at all that government waste” vanishes when one actually looks at details. Governments have to work with responsibilities and under regulations that we voters, through our lawmakers, have insisted upon, and for fundamentally good reasons, most having to do precisely with efficiency and cost-cutting, even when the outcomes are not always optimal, or even close to optimal, in every case. For example, the regulation that Federal properties must first be offered to other Federal and then to state and local agencies is very clearly designed to save taxpayers money by bypassing an intermediate private owner taking a profit on transactions. (Good example of why this should be so: with the military draw-down in Europe in the 90s, many US military facilities were sold or returned to the host nations, but in several cases, in consolidation moves of facilities for both the Defense and State Departments, congressionally mandated to save money, led to the US having to lease or buy back some of precisely the same properties at greater costs. Every step of this process was done in response to popular demand for cost reductions, but there were real local increases in costs in many cases in which having a right of first refusal by other agencies in place for these foreign properties would have saved money.) Also, it should not be surprising that the Federal government has extra unused office space in or around Washington, DC. Above and beyond the costs of demolition for some older buildings (starting with the asbestos mentioned above), having a stock of buildings suitable to provisional (e.g. during renovation of other facilities) or emergency use is extremely prudent for the government, rather than to have to go to an overheated market.
for such facilities.

Finally, may I add that the statement that “the land is not being used to its full value or potential” is not only arrogant with regard to future generations, it is simply unverifiable. We simply do not know what the full potential of any piece of land may be, and our best guesses about their optimal usage are just that, guesses. Humbly setting aside a significant portion of the nation’s land and not doing a damn thing with it is a rational and conservative response to this uncertainty, allowing for maximum flexibility for its use (if any) in the future.

RM March 13, 2014 at 2:39 pm

+ 1 to the first paragraph.

Brandon March 13, 2014 at 2:45 pm

The best use of some land, like the River of No Return Wilderness, is to just leave it the hell alone.

louis March 13, 2014 at 4:21 pm

I agree that the issue is mostly one of the limits we place on the bureaucracy. I disagree that things like ROFRs make sense. Put the underused properties up to public auction, and let the highest bidder — private or public — decide what the best use for the asset is. Make sure you notify the public agencies, like everyone else, that the auction is going to happen.
Additionally, bureaucrats need to be rewards for unlocking the value in their departments. You don’t need a central directory of US govt assets, you need each department administrator to be incentivized to find the value in his department’s portfolio. Maybe let them keep 10% of any proceeds for their department budgets, amortized over 3 years.

Steve-O March 14, 2014 at 12:32 pm

Maybe the private intermediaries earn a profit because they provide value. Just because I sold my house (through a realtor) to someone I went to high school with, doesn’t mean it’s more efficient in total, for everyone I went to HS with, to give first right of refusal to members of my graduating class.

Brandon March 14, 2014 at 11:32 pm

Or maybe they’re simply rentiers extracting wealth from the system without adding any value.

RM March 13, 2014 at 2:43 pm

Professor Tabarrok’s comments about federal lands come at an inopportune time given that Joe Sax just died. http://www.nytimes.com/2014/03/11/us/joseph-l-sax-who-pioneered-legal-protections-for-natural-resources-dies-at-78.html?ref=obituaries&_r=0.

Or maybe Tabarrok’s comments are intentionally well-timed. Whatever the case, I think that Sax’s legacy means that federal lands are not going anywhere for a long time.

EmmaZahn March 13, 2014 at 8:23 pm

You see costs. I see opportunity.

Set up an independent government-sponsored REIT and transfer the property into it. Manage this public REIT the same way as private REITs Hire property managers to determine each property’s best use and what it would take to get it there. Only then can a determination be made of whether or not to sell.

As a general rule, you do not sell assets capable of producing income just because they are not currently doing so.

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