"Typical fees in San Francisco are $72,600 per home; in Sacramento, they’re $62,000. And for the six California markets highlighted in the Zelman & Associates report, the average is $51,650. "
I built a few homes in a new (didn't really exist in 1998) city in Utah. Fees were about $20,000. I thought that was high! Most of those fees went to the infrastructure that was put it so people had a lot to build on. Getting water power and gas out there isn't cheap and the city owned the power, water and gas utilities - so they had to pay the bonds with something.
Since then I built in the middle of nowhere - no city, no inspections (except electrical) and it costs about $20,000 to get water (a well and equipment) and power. Anything much more than that and it seems like it is well beyond recovering the costs.
There's varying levels, though, when it comes to infrastructure—at an extreme end, you might need to expand the road network to deal with increased traffic, and if that's building a new, parallel road, or doubling an existing one, that can get pricy fast.
Of course, this is unlikely to affect anyone building a single property, but at least here if you're a developer building a large number of homes you can be expected to make a contribution towards to the cost of the infrastructure associated with the development.
The more prohibitively expensive California (and the Bay Area in particular) becomes, the better it is for the rest of the country - entrepreneurial talent has already started to relocate elsewhere, and I expect this trend to continue, perhaps even accelerate, in the future. There are advantages to having a single, super-dense concentration of business, marketing, and engineering talent but there are also (in my opinion, greater) advantages to having multiple regions competing fiercely for that talent.
The problem is, when you move somewhere else, and you buy your home, you become the person that wants their home value maintained/protected. Are you going to vote against your own interests? If so, I applaud you. Otherwise, you're just distributing the problem across the country, as tech money flows through workers in secondary cities (inflating property prices in Austin, Denver, Boulder, Nashville, Portland, Seattle, etc).
It isn't their home value they are protecting though. Increasing the zoning limit on a plot only causes its value to increase. It's the "character" of their neighborhood.
Somehow we've gotten into a cultural state where everyone expects the place they live to stay exactly as it is for their lifetime. It's totally implausible and destructive, but people fight for it anyways, even when it isn't in their financial interest.
> Somehow we've gotten into a cultural state where everyone expects the place they live to stay exactly as it is for their lifetime.
I think this is just human nature.
> It's totally implausible and destructive, but people fight for it anyways, even when it isn't in their financial interest.
I disagree. Simply look at Europe or historical districts in the US. Its definitely not implausible, and only destructive to new citizens who want to live there (that don't have an existing vested interest in the area).
All politics is local, as they say. If local citizens want to keep their neighborhood the same, that's up to them, and its their choice.
Probably, but I suspect we can trace the triumph of NIMBYism to the baby-boom reaching the "get off my lawn" age.
>I disagree. Simply look at Europe or historical districts in the US. Its definitely not implausible, and only destructive to new citizens who want to live there (that don't have an existing vested interest in the area).
If the area being "preserved" was limited in some way, then sure. But the reality is that new housing is simply illegal in every positive population growth city in the country. You cannot live in a city as a young person without displacing someone else because we've legislated it that way, and that's insane.
>>I suspect we can trace the triumph of NIMBYism to the baby-boom reaching the "get off my lawn" age.
Doubtful. The majority of people hate change, and that has probably always been true. A large population influx inevitably causes change, both because of the number of people and because they are always culturally different to some extent. A lot of this used to get wrapped up in nationalism/racism. See US history of prejudice against the Irish, Italians, Poles, etc etc etc. Heck, we even had legal immigration caps on Chinese people.
The Boomers might just be the first to resist changes via zoning and regulation rather than more direct action.
> the reality is that new housing is simply illegal in every positive population growth city in the country
is just not true. There's plenty of greenfield building going on in the metropolitan areas of Denver, Boise, Salt Lake City, Vegas, St. George, Phoenix, Kansas City, Minneapolis, Northern Virginia, Raleigh, Atlanta, and South Florida. These are areas that have all shown positive population growth.
Also the Dallas/Ft. Worth metroplex is growing like crazy and there are cranes everywhere from downtown Dallas out 20 miles north where even the suburbs are getting high rises along the highways.
> Somehow we've gotten into a cultural state where everyone expects the place they live to stay exactly as it is for their lifetime.
I am trying to find a polite way to indicate that I find this to be a completely absurd reversal of the historical trend. Only within the last few generations, certainly within the last century, has it become so common to relocate far and/or frequently instead of most men living the whole of their lives within a day or two’s ride of their childhood home.
Or lower-middle-class, or otherwise downwardly mobile, and looking to move up; or ideologically motivated.
Read Albion's Seed -- the Borderers/Scotch-Irish were poor and exiled, following the model you describe, but the Cavaliers were both downwardly-mobile and eager to create ideological utopias, and the Puritans and Quakers were just looking for places to build utopia -- they were doing well enough economically back in England.
It is actually counter to house owners' interests to block further development.
1. Their children won't be able to continue to live in the area once they become adults (unless they get lucky with a high-income job).
2. If they ever want to down-size and move into a smaller house or apartment after retirement, it won't be economically viable since the smaller place will still be expensive. The only way to adjust to a fixed income is to relocate.
Most communities don't do this. It's endemic to California due to the legislation noted in the article. It's rational for Mountain View to restrict housing and promote office space because it's the only way it can afford to keep tax revenue high enough to provide public services.
I'm unsure which Boomers you've interacted with, but anecdotally, the ones I've talked to a) don't care if their kids can live where they grew up and b) they plan on selling their home for as much as they can get for it and then move to a low tax, low cost of living area when they retire/downsize (some to Florida, some to Central America [either Panama or Belize], one person to Thailand).
This is to be expected when you have no defined benefit/pension plans in the US anymore, very few people saved enough for retirement on their own, your social security benefit is anemic, and your home is your most valuable asset. One might argue everyone should save more (they should!), but that's of course going to drag GDP down (can't win).
YMMV. Frankly, I feel like we've brought this on as a country ourselves. Dog eat dog catches up.
Yes, I do. I'm a home owner and I continuously vote to allow construction and development.
Increased supply is likely the cause of a lot of the demand (jobs + cheap housing nationally) so cutting supply only seems maliciously harmful and not directly in anyone's interest.
You move to SF despite land costs. You move other places because of it.
Yes. I've started to wonder whether there is anyplace in the US that has both (a) California-style restrictions on non-compete clauses in employment contracts and (b) a Land Value Tax [0] as its primary local tax (not necessarily excluding a state income tax). Since the LVT is not widely used, it looks like the answer is probably No.
I think anyplace that wants to attract tech companies should enact both of these things. (Of course, they won't suffice if there's no other reason to move there.)
Ironically, Henry George came up with the land tax because of his experiences in the Bay Area as a journalist. And the situation has only gotten worse since.
This is the big complaint here in the Austin area. There's a huge flux of people into this area, and a significant portion is coming from CA. Many of the locals feel that the CA emigrants didn't learn their lesson; they don't realize that the reason they needed to leave was because of those very policies, and so stupidly begin to make the same mistakes here, pushing to create the same situation.
Yet they keep encouraging Californians to relocate to Texas, bragging about low costs and a pro-business environment: https://texaswideopenforbusiness.com
I live near Waterloo, Canada. It feels very good for us as we have always struggled to convince people to come live in the snowy abyss rather than cozy California.
I agree with you, that it can help to have things spread apart. But, the competition for talent isn't nearly as high as people say it is. I still see companies trying to set up shop in SF and palo alto. VCs still prefer having companies in SV, even if it means double the labor cost. There's a slow migration of a few companies setting up satelite shops outside of the bay area, but it's not a mass migration. So even with this crazy housing situation, there still seems to be more than enough talent to hire up in the bay area.
I'm really hoping to see a clear winner emerge among places that aren't SF/SV as somewhere to migrate to without having to worry much about being left out of the loop.
I don't know yet of any places that have the necessary combination of both favorable policies for tech and sufficient differences from SF/SV in order for another focal point to form.
P.S. I really do hope the idea of a YC city ends up being executed on in the near future.
50K isn't that much if we are talking about a development where that cost is spread over dozens of homes. It's possible they just misspoke, but the quote about Chico did not say "per home."
Meanwhile in my home town of Fremont, a developer is putting in hundreds of new homes in North Fremont, and the school district has no way to charge those homes enough to actually build a school for them. The four nearest elementary schools are over-capacity, so the buyers will have the fun of commuting over five miles to school.
Consider the source: the linked article is from a Home Builder Industry magazine.
>> but the quote about Chico did not say "per home."
And yet the next sentences are:
"Typical fees in San Francisco are $72,600 per home; in Sacramento, they’re $62,000. And for the six California markets highlighted in the Zelman & Associates report, the average is $51,650."
The sale price of the house doesn't matter; it could sell for $100k or $900k, the builder is still out the $50k or more they paid out in fees. Which was most likely passed on to the buyer and I bet the mortgage companies have no complaint.
So what, its probably less than 10%, which is less than the sales taxes on most other things being purchased. We could just as well complain about the profit the builder is making, which is likely a lot more given how much most sub contractors are making.
Its sounds like a big number until you consider the final cost, aka everything is relative, it would be a much bigger deal if the houses were selling for $100k because then it would be 50% of the cost.
Yes, but the whole point is that the fees are part of the reason why the house costs that much. If you wanted the final house to cost $100k, then you'd have to actually build it for $50k. Which may not even be possible, or if it was it would be so tiny that nobody would want it.
They're basically forced to build a (relatively) big expensive house so that the final cost seems reasonable despite the $50k in fees buried in it. Hence why they aren't building entry-level priced houses - they're too cheap to hide the fixed fees.
Fees are like 5-10% of the reason. What's the other 90%?
Edit: there are no entry-level houses because zoned land in places where people want to live in the bay are is more expensive than a lot + house in most other places. There are lots selling for >$500k or some for just as much with tear-down houses on them. That's not due to the fees.
No, they build big houses because rich people can afford it and want it. If people couldn't afford it they'd build smaller houses or townhouses/apartments.
If $50k is 10%, that means it's a half million dollar house. That may not be much by comparison to housing stock in California, but there are very few places where that's considered "entry level."
The national average is $21k, so really it's $29k you're out over what the rest of the country charges.
Which is not ideal, but on a $600k+ ($29k is 5% or less) home, let alone a $1m home, that simply isn't the primary cost driver.
========
The whole article seems like it's poorly written or actively attempting to mislead. It's not until 1/2 way through that you learn:
Prop 13 stymies local tax increases, which means housing is an enormous cost for cities because they can't recoup their costs through property taxes. Instead, taxes go to the state government.
I dunno, could you imagine that severing the link between new development which increases local costs (schools, roads, utilities, police) and local income could affect cities' interest in building housing? Unlike complaints about environmental impact costs, this seems like a much more plausible explanation for the lack of housing.
Then the article finally explains that building impact fees are the only way local cities have to recoup their direct costs, which explains their rise. Why wasn't that in the first 1/2 of the article?
Also, prop 13 means rising prices are all to the good for home owners. In most (all?) other states, rising property prices mean homeowners pay more tax, which creates an incentive for homeowners to oppose too large an increase in home prices.
Finally, the complaining about the Zero Net Energy mandate is misleading as well when it presents it only as a negative. A few minutes research will show that it's intended to curb the growth of energy requirements. Power plants are big, expensive, and tend to pollute a lot. If we want to have 45m people in CA, we have to be judicious about how much pollution our state can withstand. And someone has to pay for those new power plants we will have to bring online if we don't curb power usage growth.
> Why wasn't that in the first 1/2 of the article?
Because the authors hope you never read that far.
I was 15 when Prop 13 passed. My feeling back then was that despite the spouted wisdom of the adults around me that Prop 13
1. Wouldn't 'force the government to cut wasteful spending' Which is to say the government doesn't spend money on anything that doesn't have a powerful interest group behind it. Wave your arms as much as you want but those people aren't going to go away.
2. The government would make up for lost tax revenue by imposing nickel and dime fees on everything.
3. Also raise fines for just about any small infraction.
4. #2 & #3 being less efficient ways to raise revenue would lead in increases in government spending.
5. Wouldn't make housing more affordable, but instead would create a two classes winners and losers.
#5 is because of my belief that housing prices reflect how much people have to spend minus costs like maintenance and taxes, divided by the interest rate. Reduce taxes and the price just goes up. Bonus, local tax revenue tends to stay in the local economy creating local demand. Interest on debt is paid to the bond holders few of which are local.
Yup, and they tend to have the politics whose practical effects ended up driving them from California in the first place. I'd like to see an amendment to the Constitution which provided for internal immigration, such that there's a multi-year waiting period to become a state citizen after moving to a new state. The idea would be to give folks a period of time to acclimate & acculturate to their new state's politics. They would, of course, still be able to vote in their old states during that time period.
This might even be good for states that people move from: as their former residents retain voting rights for a period of time while acclimating to better states, they are likely to vote for better policies, to the betterment of those net-emmigrant states.
The politics of Colorado, Florida, Oregon, Virginia & Washington have all noticeably undergone this effect over the past forty years.
Heck, that effect was the entire reason for Bloody Kansas, with pro- and anti-slavery people moving into the territory in order to influence its politics. It's why the Free State Project exists. It's why some politicians want to decrease immigration, and others want to increase it.
I'm curious why you think it doesn't exist. It's hardly an extraordinary claim, and makes perfect sense: people from a place have the habits of mind common to that place; when they move elsewhere, they retain those habits of mind for some time. Even if they were outliers at home, they are more likely to be like their former neighbours than a random subset of their new ones (ever noticed how much you have in common with a fellow countryman you meet whilst travelling abroad? It's the same effect).
And when there is a tremendous influx of people from one particular place into another particular place, then one will be more likely to find people from the former place in the latter — that's just math.
Maybe you find this good, but I don't: we should try to figure out what makes a state the sort of place people move from rather than the sort of place people move to, and replicate that.
(in California's case, I think it's the sort of place people move to because they must and from because they can)
1. Politics have changed, people have moved. You fail to draw a causal link. I'm not disputing that people don't take their attitudes with them as they move, but your post implies that people flee politics they don't like, but then vote for the same politics in their destination. Politics would have changed with or without migration. Political views and cultural attitudes are not static. etc.
2. You're right that politics change with migration, and that people have and do move with the explicit intent of influencing politics.
3. This comment would imply that people are happiest in places where they previously lived and hence would not move. It certainly doesn't support the assertion that they're fleeing the results of their own preferred policies.
4. Sure.
5. I agree with your first statement, but then the parenthetical statement gives up the game. You've concluded that people are forced/heavily incentivized to move to California and are lucky to be able to flee, which I have not found to be the case at all.
That first item has a causal link in Virginia; the "People's Republic of Northern Virginia" is made possible by DC people fleeing Maryland, then staying liberal, once again voting for the policies that made them flee. The locals are still what they always were -- for what that's worth.
Lets say a migrant population does in fact have some "dangerous idea" that the locals don't want.
How big does that migrant population need to be before they have a sizable enough voting majority? Do the couple thousand people who moved from SF to Oregon or Seattle really really have the voting numbers to sway politics that much?
It's the idea that's contagious, not the people. Disenfranchising transplants does not stop the idea. If you want to stop the idea, you need to offer something better (or prove why the idea is dangerous).
> Do the couple thousand people who moved from SF to Oregon or Seattle really really have the voting numbers to sway politics that much?
It depends on how close the numbers were beforehand, right?
> Disenfranchising transplants does not stop the idea.
If they retain the franchise in their former states, then they're not disenfranchised.
I'm frankly astounded that so many people have reacted so negatively to this idea. TO me, it seems like common sense: the mere fact of moving somewhere doesn't make one a local. We require immigrants to our country to learn about American history & civics: why not immigrants to our states?
The state has plenty of water for people to drink. It doesn't have enough water for all those people, and to irrigate a gigantic desert, at the same time.
I'd prefer a market solution - fix the supply of water at the correct level, and have the price for water go up until the wasteful, non-worthwhile uses stop happening.
Not at all. Market based doesn't mean profit-maximizing from the supply side. "Correct" is just short-hand for getting what we as a society want out of our water distribution system. Like, we don't want to use so much water that a river runs dry and kills all the fish in it, even if it means selling a few million dollars more worth of water.
> Market based doesn't mean profit-maximizing from the supply side.
Some context [1] on what "profit maximization" we're offering to say Nestle... "the permit that Nestle uses to operate its water pipeline in the San Bernardino national forest costs just $524 (£357) a year.". Sounds like a racket to me...
A market-based solution means the quantity of water sold is determined by the market. There's no other way to know what the "correct" quantity is; that is the entire purpose of the market.
What you're describing is a centrally-planned solution, not a market one.
I lost all my respect for carbon tax advocates after realizing that their definition of the appropriate tax was "high enough that people stop doing things I don't like". That's not a market system. It will be a market system if you set a price on the thing you don't like, and people respond to that price. Tweaking your price until you get the outcome you originally wanted is a way to claim the rhetoric of "market policies" without any of the substance.
Uhm, not really? Like, I'd describe the system that auctions off frequency spectrum as "market-based", even though the quantity of spectrum sold is fixed. The frequency spectrum auction is a market designed and created by a central planner, sure, but it's still a market.
If you wanted to be really clever, you could separate out the environmental concerns as a separate entity and give them a budget to buy and leave unused the water rights that best support their mission. That seems a bit weird to me, though - I'd rather just figure out how much water we can distribute safely, and then auction off the right to receive that distribution at fair market prices.
Most people who advocate "market solutions" always assume perfectly rational actors, and forget that they're basically making it so only the rich can do whatever it is they're advocating for.
The counter-party then has the money, though, which they can then exchange for doing what they want. Like, I'm fine if a rich person decides to use their money to decide how water gets allocated, as long as they spend enough money on it that it ends up paying for better alternatives for those affected by the changes. Even to the point where I'm unable to get drinking water in my home - they'd have to pay for me to take time off work indefinitely and stay somewhere really nice, sure, but I'd be okay with that.
Right - people don't realize that if people had to actually pay non-subsidized rates for water, and had to pay the same rate no matter whether they were using it for irrigation or household use, then most of these wasteful agricultural applications would end pretty sharpish.
Well, that's a pretty common reason why people oppose market prices, isn't it: "I have done this thing in the past, therefore I have a right to do it indefinitely."
(This is not directly in reply to you. It's just something that bugs me about water use discussion, and your comment is a good place to attach it)
What I almost never see considered whenever I read an article on California's agricultural water use is what happens to the water.
For instance, I see it commonly cited that it takes one gallon (3.79 l) of water to grow one almond. OK, but note that an almond weighs about 1.2 g. A gallon of water weighs 3.79 kg, so clearly that gallon of water used to produce an almond does not actually all end up in the almond. At most, 0.03% of that water actually ends up in the almond, and so will leave the area when that almond is sent off to some distant market.
Where does the remaining 99.97% of that gallon go? Some presumably gets absorbed in the ground, and eventually ends up in the local aquifer, where it can come back via local wells to be used again for more crops. Some will be taken up by the plant and released into the atmosphere via the plant's respiration. Some will go onto the ground and evaporate into the atmosphere.
Some that ends up in the atmosphere will condense out locally. Some might end up in local rain. Some might end up in distant rain.
I'm sure there are plenty of other paths and cycles I'm overlooking.
My point is that we can't just say water was taken from X and dumped on crops at Y, and treat it as if that water is now lost forever. It's the system as a whole that has to be considered.
I keep waiting for California to go the way of Israel and have more fresh water than they need. It would really help out the West if the coast could make use of the water that is right next to them. https://www.scientificamerican.com/article/israel-proves-the...
There's not a great answer that isn't "Convince the government to spend tons of money on it" I feel like. Desalination is FAR more expensive than doing what we're currently doing (that is, getting it fresh to start). Until that balance tips it's unlikely we'd invest into desalination heavily.
Convince the people living along the coast to allow the construction of a desalination plant nearby. Which won't happen because it'd devalue their million-dollar property (multi-million in places like Laguna Beach).
I think a good case can be made for prioritizing agriculture over population growth for California. California has some of the best soil in the world and some of the best climate for agriculture. It's just a bit short on water.
It's a lot easier to bring water to that soil and climate then to bring that soil and climate to someplace that has enough water.
People, on the other hand, are more flexible. We can thrive pretty much anywhere. So it makes some sense from a resource efficiency perspective to put the big population centers somewhere that doesn't have terrific agricultural potential, and utilize the great agricultural areas for agriculture.
Started out with an every-man appealing headline and quickly showed its stripes of being a developer funded prop 13 hit article - totally separate from the horror show environmental impact has turned into.
The examples given are completely out of whack and strawmen. prop 13 allows for effective tax increase through reassessment of value, but that reassessment is capped so when the market goes crazy people aren't driven out of their homes - the increases effectively keep pace with inflation which should handle increased outlays on part of the localities.
Prop 13 creates an incentive for homeowners to oppose development, since their housing values will rise with no drawback on property taxes. It also means that the government is forced to raise sales and income taxes in order to raise revenue. It is harmful for society to have high housing prices which falls especially on younger workers and workers moving into an area, in order to benefit a small number of incumbents.
No other good is treated like housing this way. We don't say it's good if your computer or cell phone goes up in price, or if cars are more expensive every year.
The bigger issue, IMO, is the mis-allocation of resources that happens when people aren't able to transmit information through prices and market mechanisms.
Like, the empty-nester who works in downtown SF and happens to own a 4BR townhouse in Mountain View should really trade places with the family of four commuting from a 1BR condo in SF and commuting down to Mountain View. If they both bought their place at a tenth of the current price, the savings on property taxes can justify staying locked in with long commutes and incorrectly sized living spaces.
Note that this sort of example is also one of the strongest arguments against rent control. If you're paying $400/mo for an apartment in downtown SF or NYC, it's worth keeping it as a place to occasionally go to on weekends or vacations or in case you decide to move back into the city. It's classic mis-allocation - even in the midst of a severe shortage, there's under-used resources that don't get used because people aren't allowed to compete on price to get them.
IIRC most counties let you transfer your prop 13 status to a smaller dwelling. But I think it has to be within the same county.
I'm not sure how accurate that is, it was just something my mom mentioned in passing a while back. She lives in a 4 bedroom in San Jose she bought in the early 70's and has been considering downsizing. However, her property taxes are so low it wouldn't make sense to make the switch to a condo or apartment, as she pays so little in property taxes.
HN likes to blame prop 13 for California's housing problem. But keep in mind that prop 13 was passed because of rapidly increasing property values. Given that, it seems likely that a large portion of California's housing prices have no relation to prop 13.
In the article it notes a drastic increase in housing prices and a massive drop in development after the passing of prop 13. I didn't see a graph so it could be wildly exaggerating the impact of prop 13.
>prop 13 was passed because of rapidly increasing property values
The owners who passed it are content to sit on their houses in perpetuity. If property values had continued to rise past owners' appetite for property tax bills, CA homes would be occupied by people under financial pressure to sell them. It seems reasonable to think that would leave prices lower than where they are today.
It wouldn't stop the pressure, probably wouldn't keep those people from getting displaced, but it'd be a relief valve for the tech workers trying to move in.
Why is a relief valve for tech workers more important than the people you would be displacing?
I agree that, on average, prop 13 should go. But you cannot do it overnight. It would likely cause an over correction and a ton of other problems - including having owners who could afford their house under the final price, but still having to sell since counties tend to be slow at lowering property taxes. We saw it during the housing crash, where some cities would outright refuse to reduce property tax bills.
If anything, there should be a gradual phase out. Or, let people keep their prop 13 status as long as they downgrade, and no prop 13 for those that "upgrade".
This would slowly phase out those who are in an advantageous position. It will be slower, but it seems like a fair compromise to correct the problem.
> Prop 13 creates an incentive for homeowners to oppose development, since their housing values will rise with no drawback on property taxes.
That is not necessarily true - increased development is sold at modern-day prices, pushing every homeowner's holy metric - $/sq.ft. - up. It's also taxed at modern-day prices, leading to municipal revenue increases.
I was using this screenshot of downtown LA to illustrate a similar point on a Facebook group - https://www.evernote.com/shard/s103/sh/11bfc9c3-6500-401b-87... - the amount of residential square footage in LA built over the past years is immense, and some other mega-complexes are sold out while still being built.
Increased vertical development brings more residents, which require more services (bars, restaurants, stores, coffee shops). The average $/sq.ft. only went up while DTLA added crazy amount of housing.
Exactly... if left unchecked entire communities would be engulfed by developers hungry to cash in on whatever market they decide to get into. Communities are barely able to fight them off as it is. I live in Venice and the locals are being all pushed out by illegal airbnb "hotels" taking over rent controlled buildings and every little lot suddenly having a three-story steel and glass monstrosity built on it right up the property lines.
Proposition 13 is a massive subsidy provided to real estate investors. If the goal is to prevent retirees from being ''driven out of their homes'' then there is no reason not to limit the exclusion to a single property per person.
> that reassessment is capped so when the market goes crazy people aren't driven out of their homes
By definition, the people who would be "driven out" have seen their home values wildly appreciate and they have by that token become substantially wealthy. This is like saying that if someone is on food stamps but then becomes a millionaire, it's unfair to take away their foodstamps or raise their tax rate.
No, it's like saying that when someone has an illiquid asset theoretically worth $1 million but not actually capable of being traded for cash, it is unfair to take away their food stamps and leave them with no way to buy food. The general idea is that it is impossible to trade in the value of your house for any replacement for 'spend my retirement in the area I spent my working life in', because the other houses that fulfil that requirement will also have appreciated in value.
Edit: I mean, even actual food stamps don't make you sell your house to qualify.
...and it's based on the assumption that it is one's right to continue living in a place just because they've lived there for a few decades, current market conditions be damned.
Pretending that home equity is like a bank account is just silly.
They're wealthy, but can only access that wealth by moving somewhere else (probably out of state), becoming homeless, or taking on potentially risky bets like a reverse mortgage.
>why should they no longer be able to live in their home just because the market went crazy
The market didn't go crazy, it saw an uptick in demand. They should be booted because their homes should be replaced with high-rises with enough room for them AND the new demand.
Yeah. I'd bet developers would happily pay 2-3x in fees if they didn't have to do environmental impact reviews (EIRs).
It's not that EIRs themselves are especially troublesome. But the reviews are the hook for litigation by NIMBYs, especially in California where the state-based environmental review law makes it incredibly easy for challengers to tie up a project in court for an eternity; even tiny developments. Exceedingly rare is the case where a legitimate environmental issue is at stake; and on the whole EIRs have had the effect of encouraging urban sprawl--there are fewer challenges to EIRs in less populated areas.
It's really difficult to keep investments lined-up for an indeterminate amount of time. Time and indeterminism is perhaps the most costly aspect.
And it's compounded by the fact that California doesn't provide development-as-of-right, which means zoning reviews and permitting can drag out for years as committees hem and haw, or allow NIMBYs to control the process. Many if not most cases in the state are likely unconstitutional as a violation of Due Process. But the Supreme Court hates taking those cases because it's a tricky area of the law. Part of the problem is that developers are repeat players in the game, which means they tend to not want to, literally, make a federal case out of any particular project because they know they'll be black-balled on their next project. So the really good cases that would make for good law never materialize.
It was maddening--nay, sickening--to see Governor Jerry Brown's development-as-of-right legislation fail in the legislature. Localities could still have had all the ridiculous zoning restrictions they wanted; it just would have required them to strictly apply their own rules, rather than making them up on-the-fly according to their and challengers' whims. Which is what Due Process technically requires, anyhow! And that legislation would have required 25% affordable units in a project, which means it wouldn't have applied to single-family units, nor effectively to most other projects except large inner city residential projects. Basically it would have had very limited effect. But localities across the state--rural and urban--went apoplectic at the mere hint of being subject to their very own rules.
Central Valley was sort of ground zero for housing meltdown, since we are talking here about the entire state, places like Modesto which are about 2-3 hours from SFO are also out of reach for population? That is surprising, Central Valley is predominantly Agri, but when people of thinking of flying all the way to Colorado, why not move 3 hours East or South ?
Anecdotal evidence from small scale builders suggest building to higher performance standards, even to Passivhaus, add only up to (sometimes no more than) 10℅ build cost.
It's all down to design, and this is where volume builders baulk. They can't pay minimum wage to cheapest labour to throw up 'standard' builds - in the UK that's cavity wall, but in the US no doubt you have your own standard approaches with performance problems.
Given that no house has ever been sold at a price based on build cost, the type of whining in the OP really boils down to "our profits are lower, can government do something about it?".
So, is it possible for a local government to ever reach a limit on fees necessary for building in their area before it creates a problem?
>> "our profits are lower, can government do something about it?"
Seems the complaint is that government is directly responsible for the problem as they see it. Isn't it reasonable for the companies to complain to the government concerning that topic? What if the local government started tacking on fees to your paycheck that reduced your take home pay to what you felt was unreasonable amount? Do you have the right to complain?
I'm addressing performance standards specifically so I can't speak for other fees.
But regards performance targets these exist such that suitable quality housing is built - there are numerous market problems here, so leaving it to the market will not end with a high quality building stock. Performance regulations are too lax by a long way, not too strict.
I do not know much about real estate cost but it is interesting to see someone blaming a $50,000 regulatory fee for the $400,000 or so difference in median house cost between CA and other states.
It's not just about the 50K. There's an additional 20% for building impact fees. And all these regulations prevent builders from using more cost effective means for building.
And, by far, the worst part of it is, it makes innovation in housing a complete non-starter. It's tantamount to: if in the 1980s (before the shape of the internet was known) the government had decided to tax every page download 20 cents. Imagine how much that would have stifled innovation - everything internet would've come to a screeching halt before even seeing what's possible.
Personally, I think these laws are a major crime against humanity. Housing makes up such large percentage of people's spending (50%-65% when you take into account property taxes for 50 years). It keeps you a wage slave for at least 30 years. It doesn't have to be this way - housing can cost a fraction of what it does now without all these regulations, with the right land use policy, the right building materials, using manufactured homes, etc.
Land would still cost a lot because a lot of people who make a lot of money want to live there, and most of them want single-family homes with yards and driveways and school, churches, shopping centers, parks, and residential streets nearby.
How did the article turn $47,000 (average for CA) and $72,600 (SF) and $62,000 (Sacramento) or $51,650 (six California cities highlighted in the report) into "$75,000 in added costs from fees and building code requirements"? They say the average fees nationwide are $21,000.
If the average new home price in CA is $621,135, 73% higher than the national average of $358,200, then it seems like the $26,000 difference in average fees represents only ~10% of the $262,935 difference.
It's not insignificant, and it makes a difference at the margin, but it feels like numbers are being thrown around a bit dishonestly.
A recent conversation with a co-worker really drove this home: what's crazy to me is how comically short-sighted folks are. We've priced our children out of the towns we raised them in but it doesn't seem to bother anyone.
And we've slapped a huge amount of college debt on their backs, just to be sure.
Someone in the past few months was describing this situation as a return to feudal concepts, where the only most practical way to buy a house is to live with your parents until they die and then inherit it.
>We've priced our children out of the towns we raised them in
Alternatively, "our children left behind the sprawling 2nd and 3rd-string metros we raised them in, realized what rent costs in walkable neighborhoods in destination cities, and are finally beginning to appreciate why we raised them in sleepy suburbs in flyover country and why they spent so much time in cars."
Obviously some children got priced out of the Bay Area, but I think most of the rent crisis is attributable to people who grew up in low density now seeking high density.
So, the case that expensive housing hurts California businesses is well stated and intuitive, (and I don't disagree)
But I was considering a counter point the other day. Homeownership here means mid level engineers who have lived here a decade or two often have access to seven figure credit lines. What effect does this have on the entrepreneurial side of things here?
To be clear, I am not putting this fourth as a fully formed belief, but it is an interesting argument, I think, and worth talking about.
>What effect does this have on the entrepreneurial side of things here?
The effect is that an already privileged group is more privileged than they previously were (financial flexibility to try a startup), and those less privileged are driven away and forced to relocate.
Here's my unformed thought from this: are startups hurting progressive/socialist movements in the US? Their benefit is that they're lean and efficient. They do more with fewer people and fewer resources. This means fewer jobs.
California does a lot to privilege long term homeowners over new buyers, which is the reason that the problem can't be solved simply by building density.
In a very real way, existing, long term homeowners are extracting value from newcomers, as the article points out, in part by pushing more of the tax burden on to new construction, and in part by restriction new construction entirely, which pushes up prices, without significantly increasing the tax burden for existing owners.
Many of these existing homeowners would otherwise been displaced by the boom. I have met many people working in service jobs who live in half million dollar plus houses. The tax scheme makes doing so possible; they are still paying taxes on one tenth of that... That was the intent of prop 13.
People who don't own and live outside of rent control cities have cause to complain, but the situation is set up to benefit existing owners.
The second paragraph of your post is more complex, and I don't have time to address it.
“Cities will tell you that from a property tax perspective, housing is a loser,” says David Cogdill, president of the [California Building Industry Association].
I was trying to make this point a few weeks ago here on HN, in a discussion on Prop. 13, and got pushback. I take this quote as evidence that it's common knowledge among people in the housing industry. Prop. 13 disincentivizes cities from adding housing.
Prop. 13 needs to be fixed. The way it should have been done is this: in a year in which property values increase by more than 2%, instead of limiting the tax to 2% more than the previous year's, we limit the payment due to 2% more than last year's payment due. The locality receives a lien on the difference, but that lien does not become due until the property is sold.
So in an area in which property values have been rapidly rising, a homeowner who sells their property will have to share their windfall to some extent with the locality. But those on fixed incomes are still protected: their annual tax payments don't increase any faster than they would today.
Common objections:
"People will take out home equity loans that will have to be repaid at sale, leaving them with a cash loss."
A property tax lien is a public record. Banks will take the liens into consideration when deciding how large a loan to offer. This is standard practice already.
"The liens will accumulate to the point that they will be greater than the owner's gain on the property, giving them a strong disincentive to sell."
No, this wouldn't happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%). If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value. The only scenario that generates a lien larger than the owner's gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble. Well, bubbles produce lots of dislocation; I don't think they make for a good argument against this proposal.
"Prop. 13 will never be modified."
Well, it certainly won't if no better alternative is put forth!
Of course a disincentive to sell will be created by your proposal! Any lien that comes close to offsetting or canceling out the owner's gain will do that. The lien doesn't have to exceed the gain to create a disincentive. Why would anyone sell for little to no gain? Any time the potential gain is decreased, a disincentive to sell is created.
Furthermore, not only does this create a disincentive to sell, it also creates a disincentive to buy. Buying property becomes a lot less attractive when the same disincentive that applies to the current seller will apply to buyer in the future, when the buyer decides to sell the home.
Actually the people who would feel the disincentive most strongly are speculators. Those are the people we want to discourage.
The whole point is to slow the growth of prices, by giving cities an incentive to increase supply. Higher prices are the biggest disincentive to purchasers.
I have brought this up in multiple Prop 13 discussions, including I think the one you are referring to where you pitched your proposal. My opinion is that the proper fix for Prop 13 is to modify it to match Florida's much saner[1] practice of only providing the appreciation cap to owner-occupied primary residences. That speculators, investors, and landlords get to benefit from taxable value caps is bullshit, IMNSHO.
[1] Who would have expected Florida to be the same one on anything?
I think you did bring it up there, and I completely agree. I don't know how much it would help, though, in the specific area of giving cities more of an incentive to approve residential construction projects. I guess it would help some.
> Prop. 13 disincentivizes cities from adding housing.
disincentivizes cities from adding low-density housing
Once you start piling them up into high-rises, the revenue stream doesn't look that bad.
But for multi-family high rises different cities have a number of additional requirements. Minimum parking spaces, minimum number of feet from the sidewalk, minimum footage of "green zones" consisting of lawns or trees - all great things hypothetically speaking, but costs add up pretty fast, so any high-rise building is now a "luxury condo tower" when in theory increasing density should lead to decrease of cost per square foot, not increase.
There are height limitations in most of Silicon Valley (except maybe downtown San Jose?) -- I think the limit here in Sunnyvale, for example, is eight stories -- but earthquakes are not the reason for them. People just want to preserve the suburban character of the area. How that can be done when a lot more people want to live here is not clear to me.
It's a bit more insidious than preserving the character. Tall residential towers generally require certain amount of parking spaces, which in turn require more expensive structural support for the (usually) underlying garage.
Developers would justify the cost of the parking structure by adding a few residential floors on top of the tower. But that's where height restrictions kick in and price out low-tier and middle-tier apartments, leaving room only for luxury, using SF as an example http://missionlocal.org/2016/10/neighbors-double-down-agains... "Coliver said her team concluded that developers could squeeze a maximum of 13 parking spots in the 12,000 square foot lot— but that would make the building “structurally not feasible,” since it would require removing the columns that support the structure. The cost for the hypothetical scenario? Coliver said $2.25 million — or $180,000 a stall."
So the long-term recipe for opposing any new development is:
1) Require certain minimum parking spaces per square feet built (already done in most cities).
2) Run the numbers for a minimally economically viable structure, calculate the total number of floors it would need with parking garage included.
3) Lobby for regulations that set the maximum height at N-1 floors.
4) Bingo, every tall structure is now economically unfeasible. Saves you a trip to the city hall to protest new development, as most developers come to the conclusion that the numbers don't make sense well before acquiring the land and permits.
>“Well, how about guests?” asked Lucy, before the conversation turned to shadow impact and wind tunnels.
This has a very simple answer: no overnight parking. Keeps residents from owning cars if they don't have off-street parking, so there is always street frontage for visitors. You get a limited set of overnight parking passes for overnight visitors.
In the long run, it's probably the only way to get people to stop blocking development over street parking. Take it away from everyone, except short-term users like guests and car-sharing.
Bonus points of you make an exception for motorcycles/scooters, since they allow far more people to benefit from motor vehicles per square foot of parking.
NEMA is more than 40 stories. Jasper appears to be even taller. Would earthquake regulations prevent someone from building a few dozen (or hundred) more NEMAs?
Minimum parking requirements are a big deal for low-rises, where the parking area is an appreciable portion of the building's overall square feet.
The gleaming 40+ story high-rises in the Civic Center/Van Ness area run from around $3000 to $5500 for a basic studio or 1-bedroom. There are also several parking garages in the area, distinct from the residential buildings, where a monthly reserved parking space is around $375.
Assuming parking is built into rent (it isn't) and a 1:1 ratio of parking spaces to apartments (it's actually less), removing minimum parking could only bring the rent down by $375.
I think the real explanation is that desks are much smaller than apartments. Approximately everyone at Twitter, Square, Uber, etc. is willing to pay a substantial portion of their six-figure salary for a trivial walking commute. To have a corresponding apartment in the neighborhood for every desk at Twitter, Square, Uber, etc. would require dozens of residential towers. So when only 3 or 4 are going to exist, they have to priced to skim off only the very top of the corporate ladder at those companies.
Offices also typically have meeting rooms, hallways, showers, locker rooms, gyms, cafeterias, parking, bathrooms...it'd be interesting to compare the average space in sqft per employee in offices vs space per resident in apartments. I'm guessing it's not as different as the desk vs apartment analogy suggests.
I'm forever torn on this. What can a non homeowner do to help the problem? I feel compelled to not buy into overpriced homes. But I'd also like one and fear they are only going to become more overpriced in the future.
I'd venture to guess that the fundamental drivers of prices remain founded on desirability of the state relative to other states. These policies are certainly making it worse, but they are priced in, one way or the other.
You might think of it like a luxury tax. The item still sells at the total price, even though there is significant cost to acquire it. Either you can afford a $500,000 home or you can't. If you can, then consider living in California. If not, you've likely got 48* other states to choose from.
* Per Zillow, Hawaii's median home price is $571,000, is higher than California's $472,000.
There is something that is not right with that list. Mexico City is on that list but not San Francisco? I have been to Mexico City and rent is about a third for a similar sized apartment in San Francisco.
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[ 4.7 ms ] story [ 336 ms ] thread"Typical fees in San Francisco are $72,600 per home; in Sacramento, they’re $62,000. And for the six California markets highlighted in the Zelman & Associates report, the average is $51,650. "
Since then I built in the middle of nowhere - no city, no inspections (except electrical) and it costs about $20,000 to get water (a well and equipment) and power. Anything much more than that and it seems like it is well beyond recovering the costs.
Of course, this is unlikely to affect anyone building a single property, but at least here if you're a developer building a large number of homes you can be expected to make a contribution towards to the cost of the infrastructure associated with the development.
It's only better if they move elsewhere and refuse to vote for the same policies that caused the problems in the first place.
https://www.google.com/#q=%22no+californians%22
Somehow we've gotten into a cultural state where everyone expects the place they live to stay exactly as it is for their lifetime. It's totally implausible and destructive, but people fight for it anyways, even when it isn't in their financial interest.
> Somehow we've gotten into a cultural state where everyone expects the place they live to stay exactly as it is for their lifetime.
I think this is just human nature.
> It's totally implausible and destructive, but people fight for it anyways, even when it isn't in their financial interest.
I disagree. Simply look at Europe or historical districts in the US. Its definitely not implausible, and only destructive to new citizens who want to live there (that don't have an existing vested interest in the area).
All politics is local, as they say. If local citizens want to keep their neighborhood the same, that's up to them, and its their choice.
Probably, but I suspect we can trace the triumph of NIMBYism to the baby-boom reaching the "get off my lawn" age.
>I disagree. Simply look at Europe or historical districts in the US. Its definitely not implausible, and only destructive to new citizens who want to live there (that don't have an existing vested interest in the area).
If the area being "preserved" was limited in some way, then sure. But the reality is that new housing is simply illegal in every positive population growth city in the country. You cannot live in a city as a young person without displacing someone else because we've legislated it that way, and that's insane.
Las Vegas? To name one. High population growth. A lot of building.
Doubtful. The majority of people hate change, and that has probably always been true. A large population influx inevitably causes change, both because of the number of people and because they are always culturally different to some extent. A lot of this used to get wrapped up in nationalism/racism. See US history of prejudice against the Irish, Italians, Poles, etc etc etc. Heck, we even had legal immigration caps on Chinese people.
The Boomers might just be the first to resist changes via zoning and regulation rather than more direct action.
> the reality is that new housing is simply illegal in every positive population growth city in the country
is just not true. There's plenty of greenfield building going on in the metropolitan areas of Denver, Boise, Salt Lake City, Vegas, St. George, Phoenix, Kansas City, Minneapolis, Northern Virginia, Raleigh, Atlanta, and South Florida. These are areas that have all shown positive population growth.
I am trying to find a polite way to indicate that I find this to be a completely absurd reversal of the historical trend. Only within the last few generations, certainly within the last century, has it become so common to relocate far and/or frequently instead of most men living the whole of their lives within a day or two’s ride of their childhood home.
Read Albion's Seed -- the Borderers/Scotch-Irish were poor and exiled, following the model you describe, but the Cavaliers were both downwardly-mobile and eager to create ideological utopias, and the Puritans and Quakers were just looking for places to build utopia -- they were doing well enough economically back in England.
1. Their children won't be able to continue to live in the area once they become adults (unless they get lucky with a high-income job).
2. If they ever want to down-size and move into a smaller house or apartment after retirement, it won't be economically viable since the smaller place will still be expensive. The only way to adjust to a fixed income is to relocate.
Most communities don't do this. It's endemic to California due to the legislation noted in the article. It's rational for Mountain View to restrict housing and promote office space because it's the only way it can afford to keep tax revenue high enough to provide public services.
This is to be expected when you have no defined benefit/pension plans in the US anymore, very few people saved enough for retirement on their own, your social security benefit is anemic, and your home is your most valuable asset. One might argue everyone should save more (they should!), but that's of course going to drag GDP down (can't win).
YMMV. Frankly, I feel like we've brought this on as a country ourselves. Dog eat dog catches up.
Increased supply is likely the cause of a lot of the demand (jobs + cheap housing nationally) so cutting supply only seems maliciously harmful and not directly in anyone's interest.
You move to SF despite land costs. You move other places because of it.
(Which I agree is probably not a primary driver of housing problems in the Bay area, but geographic constraints make bad policy a lot worse)
I think anyplace that wants to attract tech companies should enact both of these things. (Of course, they won't suffice if there's no other reason to move there.)
[0] https://en.wikipedia.org/wiki/Non-compete_clause#California
[1] https://en.wikipedia.org/wiki/Land_value_tax
Alas… it has fairly strong non-complete compliance.
Perhaps a screening process is needed?
I don't know yet of any places that have the necessary combination of both favorable policies for tech and sufficient differences from SF/SV in order for another focal point to form.
P.S. I really do hope the idea of a YC city ends up being executed on in the near future.
So, the equivalent of people's downpayment in the rest of the country is lost to regulation. That's insane.
Meanwhile in my home town of Fremont, a developer is putting in hundreds of new homes in North Fremont, and the school district has no way to charge those homes enough to actually build a school for them. The four nearest elementary schools are over-capacity, so the buyers will have the fun of commuting over five miles to school.
Consider the source: the linked article is from a Home Builder Industry magazine.
And yet the next sentences are:
"Typical fees in San Francisco are $72,600 per home; in Sacramento, they’re $62,000. And for the six California markets highlighted in the Zelman & Associates report, the average is $51,650."
Which doesn't make it sound all that bad after all. Particularly when they point out the land itself is about 1/2 the cost.
Not that any of it is good for anyone under 40...
Its sounds like a big number until you consider the final cost, aka everything is relative, it would be a much bigger deal if the houses were selling for $100k because then it would be 50% of the cost.
They're basically forced to build a (relatively) big expensive house so that the final cost seems reasonable despite the $50k in fees buried in it. Hence why they aren't building entry-level priced houses - they're too cheap to hide the fixed fees.
Edit: there are no entry-level houses because zoned land in places where people want to live in the bay are is more expensive than a lot + house in most other places. There are lots selling for >$500k or some for just as much with tear-down houses on them. That's not due to the fees.
If $50k is 10%, that means it's a half million dollar house. That may not be much by comparison to housing stock in California, but there are very few places where that's considered "entry level."
Which is not ideal, but on a $600k+ ($29k is 5% or less) home, let alone a $1m home, that simply isn't the primary cost driver.
========
The whole article seems like it's poorly written or actively attempting to mislead. It's not until 1/2 way through that you learn:
Prop 13 stymies local tax increases, which means housing is an enormous cost for cities because they can't recoup their costs through property taxes. Instead, taxes go to the state government.
I dunno, could you imagine that severing the link between new development which increases local costs (schools, roads, utilities, police) and local income could affect cities' interest in building housing? Unlike complaints about environmental impact costs, this seems like a much more plausible explanation for the lack of housing.
Then the article finally explains that building impact fees are the only way local cities have to recoup their direct costs, which explains their rise. Why wasn't that in the first 1/2 of the article?
Also, prop 13 means rising prices are all to the good for home owners. In most (all?) other states, rising property prices mean homeowners pay more tax, which creates an incentive for homeowners to oppose too large an increase in home prices.
Finally, the complaining about the Zero Net Energy mandate is misleading as well when it presents it only as a negative. A few minutes research will show that it's intended to curb the growth of energy requirements. Power plants are big, expensive, and tend to pollute a lot. If we want to have 45m people in CA, we have to be judicious about how much pollution our state can withstand. And someone has to pay for those new power plants we will have to bring online if we don't curb power usage growth.
Because the authors hope you never read that far.
I was 15 when Prop 13 passed. My feeling back then was that despite the spouted wisdom of the adults around me that Prop 13
1. Wouldn't 'force the government to cut wasteful spending' Which is to say the government doesn't spend money on anything that doesn't have a powerful interest group behind it. Wave your arms as much as you want but those people aren't going to go away.
2. The government would make up for lost tax revenue by imposing nickel and dime fees on everything.
3. Also raise fines for just about any small infraction.
4. #2 & #3 being less efficient ways to raise revenue would lead in increases in government spending.
5. Wouldn't make housing more affordable, but instead would create a two classes winners and losers.
#5 is because of my belief that housing prices reflect how much people have to spend minus costs like maintenance and taxes, divided by the interest rate. Reduce taxes and the price just goes up. Bonus, local tax revenue tends to stay in the local economy creating local demand. Interest on debt is paid to the bond holders few of which are local.
This might even be good for states that people move from: as their former residents retain voting rights for a period of time while acclimating to better states, they are likely to vote for better policies, to the betterment of those net-emmigrant states.
Heck, that effect was the entire reason for Bloody Kansas, with pro- and anti-slavery people moving into the territory in order to influence its politics. It's why the Free State Project exists. It's why some politicians want to decrease immigration, and others want to increase it.
I'm curious why you think it doesn't exist. It's hardly an extraordinary claim, and makes perfect sense: people from a place have the habits of mind common to that place; when they move elsewhere, they retain those habits of mind for some time. Even if they were outliers at home, they are more likely to be like their former neighbours than a random subset of their new ones (ever noticed how much you have in common with a fellow countryman you meet whilst travelling abroad? It's the same effect).
And when there is a tremendous influx of people from one particular place into another particular place, then one will be more likely to find people from the former place in the latter — that's just math.
Maybe you find this good, but I don't: we should try to figure out what makes a state the sort of place people move from rather than the sort of place people move to, and replicate that.
(in California's case, I think it's the sort of place people move to because they must and from because they can)
2. You're right that politics change with migration, and that people have and do move with the explicit intent of influencing politics.
3. This comment would imply that people are happiest in places where they previously lived and hence would not move. It certainly doesn't support the assertion that they're fleeing the results of their own preferred policies.
4. Sure.
5. I agree with your first statement, but then the parenthetical statement gives up the game. You've concluded that people are forced/heavily incentivized to move to California and are lucky to be able to flee, which I have not found to be the case at all.
How big does that migrant population need to be before they have a sizable enough voting majority? Do the couple thousand people who moved from SF to Oregon or Seattle really really have the voting numbers to sway politics that much?
It's the idea that's contagious, not the people. Disenfranchising transplants does not stop the idea. If you want to stop the idea, you need to offer something better (or prove why the idea is dangerous).
It depends on how close the numbers were beforehand, right?
> Disenfranchising transplants does not stop the idea.
If they retain the franchise in their former states, then they're not disenfranchised.
I'm frankly astounded that so many people have reacted so negatively to this idea. TO me, it seems like common sense: the mere fact of moving somewhere doesn't make one a local. We require immigrants to our country to learn about American history & civics: why not immigrants to our states?
You don't see any problems with this statement?
Some context [1] on what "profit maximization" we're offering to say Nestle... "the permit that Nestle uses to operate its water pipeline in the San Bernardino national forest costs just $524 (£357) a year.". Sounds like a racket to me...
[1] http://www.bbc.com/news/business-36161580
What you're describing is a centrally-planned solution, not a market one.
I lost all my respect for carbon tax advocates after realizing that their definition of the appropriate tax was "high enough that people stop doing things I don't like". That's not a market system. It will be a market system if you set a price on the thing you don't like, and people respond to that price. Tweaking your price until you get the outcome you originally wanted is a way to claim the rhetoric of "market policies" without any of the substance.
If you wanted to be really clever, you could separate out the environmental concerns as a separate entity and give them a budget to buy and leave unused the water rights that best support their mission. That seems a bit weird to me, though - I'd rather just figure out how much water we can distribute safely, and then auction off the right to receive that distribution at fair market prices.
hey decided they'd rather fund Ronald Reagan's candidacy.
"Court rules tiered water rates violate state constitution"
http://www.mercurynews.com/2015/04/20/california-drought-cou...
What I almost never see considered whenever I read an article on California's agricultural water use is what happens to the water.
For instance, I see it commonly cited that it takes one gallon (3.79 l) of water to grow one almond. OK, but note that an almond weighs about 1.2 g. A gallon of water weighs 3.79 kg, so clearly that gallon of water used to produce an almond does not actually all end up in the almond. At most, 0.03% of that water actually ends up in the almond, and so will leave the area when that almond is sent off to some distant market.
Where does the remaining 99.97% of that gallon go? Some presumably gets absorbed in the ground, and eventually ends up in the local aquifer, where it can come back via local wells to be used again for more crops. Some will be taken up by the plant and released into the atmosphere via the plant's respiration. Some will go onto the ground and evaporate into the atmosphere.
Some that ends up in the atmosphere will condense out locally. Some might end up in local rain. Some might end up in distant rain.
I'm sure there are plenty of other paths and cycles I'm overlooking.
My point is that we can't just say water was taken from X and dumped on crops at Y, and treat it as if that water is now lost forever. It's the system as a whole that has to be considered.
A desalination plant is a direct trade of energy for fresh water, and isn't our bottomless appetite for energy already making a mess of things?
You mean, steal water from Mexico?
It's a lot easier to bring water to that soil and climate then to bring that soil and climate to someplace that has enough water.
People, on the other hand, are more flexible. We can thrive pretty much anywhere. So it makes some sense from a resource efficiency perspective to put the big population centers somewhere that doesn't have terrific agricultural potential, and utilize the great agricultural areas for agriculture.
The examples given are completely out of whack and strawmen. prop 13 allows for effective tax increase through reassessment of value, but that reassessment is capped so when the market goes crazy people aren't driven out of their homes - the increases effectively keep pace with inflation which should handle increased outlays on part of the localities.
No other good is treated like housing this way. We don't say it's good if your computer or cell phone goes up in price, or if cars are more expensive every year.
Like, the empty-nester who works in downtown SF and happens to own a 4BR townhouse in Mountain View should really trade places with the family of four commuting from a 1BR condo in SF and commuting down to Mountain View. If they both bought their place at a tenth of the current price, the savings on property taxes can justify staying locked in with long commutes and incorrectly sized living spaces.
Note that this sort of example is also one of the strongest arguments against rent control. If you're paying $400/mo for an apartment in downtown SF or NYC, it's worth keeping it as a place to occasionally go to on weekends or vacations or in case you decide to move back into the city. It's classic mis-allocation - even in the midst of a severe shortage, there's under-used resources that don't get used because people aren't allowed to compete on price to get them.
I'm not sure how accurate that is, it was just something my mom mentioned in passing a while back. She lives in a 4 bedroom in San Jose she bought in the early 70's and has been considering downsizing. However, her property taxes are so low it wouldn't make sense to make the switch to a condo or apartment, as she pays so little in property taxes.
HN likes to blame prop 13 for California's housing problem. But keep in mind that prop 13 was passed because of rapidly increasing property values. Given that, it seems likely that a large portion of California's housing prices have no relation to prop 13.
The owners who passed it are content to sit on their houses in perpetuity. If property values had continued to rise past owners' appetite for property tax bills, CA homes would be occupied by people under financial pressure to sell them. It seems reasonable to think that would leave prices lower than where they are today.
It wouldn't stop the pressure, probably wouldn't keep those people from getting displaced, but it'd be a relief valve for the tech workers trying to move in.
I agree that, on average, prop 13 should go. But you cannot do it overnight. It would likely cause an over correction and a ton of other problems - including having owners who could afford their house under the final price, but still having to sell since counties tend to be slow at lowering property taxes. We saw it during the housing crash, where some cities would outright refuse to reduce property tax bills.
If anything, there should be a gradual phase out. Or, let people keep their prop 13 status as long as they downgrade, and no prop 13 for those that "upgrade".
This would slowly phase out those who are in an advantageous position. It will be slower, but it seems like a fair compromise to correct the problem.
That is not necessarily true - increased development is sold at modern-day prices, pushing every homeowner's holy metric - $/sq.ft. - up. It's also taxed at modern-day prices, leading to municipal revenue increases.
I was using this screenshot of downtown LA to illustrate a similar point on a Facebook group - https://www.evernote.com/shard/s103/sh/11bfc9c3-6500-401b-87... - the amount of residential square footage in LA built over the past years is immense, and some other mega-complexes are sold out while still being built.
Increased vertical development brings more residents, which require more services (bars, restaurants, stores, coffee shops). The average $/sq.ft. only went up while DTLA added crazy amount of housing.
By definition, the people who would be "driven out" have seen their home values wildly appreciate and they have by that token become substantially wealthy. This is like saying that if someone is on food stamps but then becomes a millionaire, it's unfair to take away their foodstamps or raise their tax rate.
Edit: I mean, even actual food stamps don't make you sell your house to qualify.
They're wealthy, but can only access that wealth by moving somewhere else (probably out of state), becoming homeless, or taking on potentially risky bets like a reverse mortgage.
Or, to put it another way, why should they no longer be able to live in their home just because the market went crazy?
The market didn't go crazy, it saw an uptick in demand. They should be booted because their homes should be replaced with high-rises with enough room for them AND the new demand.
It's not that EIRs themselves are especially troublesome. But the reviews are the hook for litigation by NIMBYs, especially in California where the state-based environmental review law makes it incredibly easy for challengers to tie up a project in court for an eternity; even tiny developments. Exceedingly rare is the case where a legitimate environmental issue is at stake; and on the whole EIRs have had the effect of encouraging urban sprawl--there are fewer challenges to EIRs in less populated areas.
It's really difficult to keep investments lined-up for an indeterminate amount of time. Time and indeterminism is perhaps the most costly aspect.
And it's compounded by the fact that California doesn't provide development-as-of-right, which means zoning reviews and permitting can drag out for years as committees hem and haw, or allow NIMBYs to control the process. Many if not most cases in the state are likely unconstitutional as a violation of Due Process. But the Supreme Court hates taking those cases because it's a tricky area of the law. Part of the problem is that developers are repeat players in the game, which means they tend to not want to, literally, make a federal case out of any particular project because they know they'll be black-balled on their next project. So the really good cases that would make for good law never materialize.
It was maddening--nay, sickening--to see Governor Jerry Brown's development-as-of-right legislation fail in the legislature. Localities could still have had all the ridiculous zoning restrictions they wanted; it just would have required them to strictly apply their own rules, rather than making them up on-the-fly according to their and challengers' whims. Which is what Due Process technically requires, anyhow! And that legislation would have required 25% affordable units in a project, which means it wouldn't have applied to single-family units, nor effectively to most other projects except large inner city residential projects. Basically it would have had very limited effect. But localities across the state--rural and urban--went apoplectic at the mere hint of being subject to their very own rules.
It's all down to design, and this is where volume builders baulk. They can't pay minimum wage to cheapest labour to throw up 'standard' builds - in the UK that's cavity wall, but in the US no doubt you have your own standard approaches with performance problems.
Given that no house has ever been sold at a price based on build cost, the type of whining in the OP really boils down to "our profits are lower, can government do something about it?".
>> "our profits are lower, can government do something about it?"
Seems the complaint is that government is directly responsible for the problem as they see it. Isn't it reasonable for the companies to complain to the government concerning that topic? What if the local government started tacking on fees to your paycheck that reduced your take home pay to what you felt was unreasonable amount? Do you have the right to complain?
But regards performance targets these exist such that suitable quality housing is built - there are numerous market problems here, so leaving it to the market will not end with a high quality building stock. Performance regulations are too lax by a long way, not too strict.
Does that fit under performance standards of the quality of the build?
And, by far, the worst part of it is, it makes innovation in housing a complete non-starter. It's tantamount to: if in the 1980s (before the shape of the internet was known) the government had decided to tax every page download 20 cents. Imagine how much that would have stifled innovation - everything internet would've come to a screeching halt before even seeing what's possible.
Personally, I think these laws are a major crime against humanity. Housing makes up such large percentage of people's spending (50%-65% when you take into account property taxes for 50 years). It keeps you a wage slave for at least 30 years. It doesn't have to be this way - housing can cost a fraction of what it does now without all these regulations, with the right land use policy, the right building materials, using manufactured homes, etc.
If the average new home price in CA is $621,135, 73% higher than the national average of $358,200, then it seems like the $26,000 difference in average fees represents only ~10% of the $262,935 difference.
It's not insignificant, and it makes a difference at the margin, but it feels like numbers are being thrown around a bit dishonestly.
And we've slapped a huge amount of college debt on their backs, just to be sure.
Alternatively, "our children left behind the sprawling 2nd and 3rd-string metros we raised them in, realized what rent costs in walkable neighborhoods in destination cities, and are finally beginning to appreciate why we raised them in sleepy suburbs in flyover country and why they spent so much time in cars."
Obviously some children got priced out of the Bay Area, but I think most of the rent crisis is attributable to people who grew up in low density now seeking high density.
But I was considering a counter point the other day. Homeownership here means mid level engineers who have lived here a decade or two often have access to seven figure credit lines. What effect does this have on the entrepreneurial side of things here?
To be clear, I am not putting this fourth as a fully formed belief, but it is an interesting argument, I think, and worth talking about.
The effect is that an already privileged group is more privileged than they previously were (financial flexibility to try a startup), and those less privileged are driven away and forced to relocate.
Here's my unformed thought from this: are startups hurting progressive/socialist movements in the US? Their benefit is that they're lean and efficient. They do more with fewer people and fewer resources. This means fewer jobs.
In a very real way, existing, long term homeowners are extracting value from newcomers, as the article points out, in part by pushing more of the tax burden on to new construction, and in part by restriction new construction entirely, which pushes up prices, without significantly increasing the tax burden for existing owners.
Many of these existing homeowners would otherwise been displaced by the boom. I have met many people working in service jobs who live in half million dollar plus houses. The tax scheme makes doing so possible; they are still paying taxes on one tenth of that... That was the intent of prop 13.
People who don't own and live outside of rent control cities have cause to complain, but the situation is set up to benefit existing owners.
The second paragraph of your post is more complex, and I don't have time to address it.
I was trying to make this point a few weeks ago here on HN, in a discussion on Prop. 13, and got pushback. I take this quote as evidence that it's common knowledge among people in the housing industry. Prop. 13 disincentivizes cities from adding housing.
Prop. 13 needs to be fixed. The way it should have been done is this: in a year in which property values increase by more than 2%, instead of limiting the tax to 2% more than the previous year's, we limit the payment due to 2% more than last year's payment due. The locality receives a lien on the difference, but that lien does not become due until the property is sold.
So in an area in which property values have been rapidly rising, a homeowner who sells their property will have to share their windfall to some extent with the locality. But those on fixed incomes are still protected: their annual tax payments don't increase any faster than they would today.
Common objections:
"People will take out home equity loans that will have to be repaid at sale, leaving them with a cash loss."
A property tax lien is a public record. Banks will take the liens into consideration when deciding how large a loan to offer. This is standard practice already.
"The liens will accumulate to the point that they will be greater than the owner's gain on the property, giving them a strong disincentive to sell."
No, this wouldn't happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%). If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value. The only scenario that generates a lien larger than the owner's gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble. Well, bubbles produce lots of dislocation; I don't think they make for a good argument against this proposal.
"Prop. 13 will never be modified."
Well, it certainly won't if no better alternative is put forth!
Furthermore, not only does this create a disincentive to sell, it also creates a disincentive to buy. Buying property becomes a lot less attractive when the same disincentive that applies to the current seller will apply to buyer in the future, when the buyer decides to sell the home.
The whole point is to slow the growth of prices, by giving cities an incentive to increase supply. Higher prices are the biggest disincentive to purchasers.
[1] Who would have expected Florida to be the same one on anything?
disincentivizes cities from adding low-density housing
Once you start piling them up into high-rises, the revenue stream doesn't look that bad.
But for multi-family high rises different cities have a number of additional requirements. Minimum parking spaces, minimum number of feet from the sidewalk, minimum footage of "green zones" consisting of lawns or trees - all great things hypothetically speaking, but costs add up pretty fast, so any high-rise building is now a "luxury condo tower" when in theory increasing density should lead to decrease of cost per square foot, not increase.
Combine with earthquake regulations essentially limiting buildings to a small number of stories and ScottBurson's comment is pretty spot-on.
Developers would justify the cost of the parking structure by adding a few residential floors on top of the tower. But that's where height restrictions kick in and price out low-tier and middle-tier apartments, leaving room only for luxury, using SF as an example http://missionlocal.org/2016/10/neighbors-double-down-agains... "Coliver said her team concluded that developers could squeeze a maximum of 13 parking spots in the 12,000 square foot lot— but that would make the building “structurally not feasible,” since it would require removing the columns that support the structure. The cost for the hypothetical scenario? Coliver said $2.25 million — or $180,000 a stall."
So the long-term recipe for opposing any new development is:
1) Require certain minimum parking spaces per square feet built (already done in most cities).
2) Run the numbers for a minimally economically viable structure, calculate the total number of floors it would need with parking garage included.
3) Lobby for regulations that set the maximum height at N-1 floors.
4) Bingo, every tall structure is now economically unfeasible. Saves you a trip to the city hall to protest new development, as most developers come to the conclusion that the numbers don't make sense well before acquiring the land and permits.
This has a very simple answer: no overnight parking. Keeps residents from owning cars if they don't have off-street parking, so there is always street frontage for visitors. You get a limited set of overnight parking passes for overnight visitors.
In the long run, it's probably the only way to get people to stop blocking development over street parking. Take it away from everyone, except short-term users like guests and car-sharing.
Bonus points of you make an exception for motorcycles/scooters, since they allow far more people to benefit from motor vehicles per square foot of parking.
Minimum parking requirements are a big deal for low-rises, where the parking area is an appreciable portion of the building's overall square feet.
The gleaming 40+ story high-rises in the Civic Center/Van Ness area run from around $3000 to $5500 for a basic studio or 1-bedroom. There are also several parking garages in the area, distinct from the residential buildings, where a monthly reserved parking space is around $375.
Assuming parking is built into rent (it isn't) and a 1:1 ratio of parking spaces to apartments (it's actually less), removing minimum parking could only bring the rent down by $375.
I think the real explanation is that desks are much smaller than apartments. Approximately everyone at Twitter, Square, Uber, etc. is willing to pay a substantial portion of their six-figure salary for a trivial walking commute. To have a corresponding apartment in the neighborhood for every desk at Twitter, Square, Uber, etc. would require dozens of residential towers. So when only 3 or 4 are going to exist, they have to priced to skim off only the very top of the corporate ladder at those companies.
https://www.google.com/search?q=square+ft+per+employee
How is it possible that this largely Democrat-leaning state can be so pro-wealth/anti-middle class and poor?
You might think of it like a luxury tax. The item still sells at the total price, even though there is significant cost to acquire it. Either you can afford a $500,000 home or you can't. If you can, then consider living in California. If not, you've likely got 48* other states to choose from.
* Per Zillow, Hawaii's median home price is $571,000, is higher than California's $472,000.
http://www.globalpropertyguide.com/most-expensive-cities
There is only one city from the US on that list (New York) of a hundred cities. Sydney Australia is 18th.
And you want to talk about bubbles?
http://www.economist.com/blogs/dailychart/2011/11/global-hou...
Australia tops the list (and Sweden, apparently). That list indicates the price of real-estate has tripled in 15 years.
So yeah...