This is circular reasoning. These multi-year vacancies exist precisely because the present regime encourages it. One determines the appropriate vacancy rate and then tunes the regulatory framework to remove barriers to achieving that public purpose.
The most direct policy framework would be wielding the sledgehammer that is eminent domain. However, I think government should use the lightest touch possible to achieve the public purpose, so I’d prefer setting the rules in a way that maximizes freedom while still achieving the public purpose of having non-blighted commercial districts.
It’s not just banking ratios that cause this behavior, though, but rather in part the owners of commercial property, often let out for 5 year terms with 2 5-year renewal options, who don’t want to be too quick to lower their rental base for possibly 15 years for a 1-2 year recession.
Property with no bank note on it would behave the same way. (It’s just exceedingly rare, especially in an easy-borrowing, money-printing presses running environment.
The most direct policy framework would be wielding the sledgehammer that is eminent domain. However, I think government should use the lightest touch possible to achieve the public purpose, so I’d prefer setting the rules in a way that maximizes freedom while still achieving the public purpose of having non-blighted commercial districts.