Launch HN: Homestead (YC W20) – Lot-splitting to build new housing supply
We’re taking advantage of a new California law called SB9, which is designed to expand housing supply (https://cayimby.org/sb-9/) in the state. SB9 allows homeowners to split their single-family residential lot into two separate lots and build up to two new housing units on each. It just went into effect on January 1.
The new development opportunity opened by SB9 is only available to homeowners, most of whom are under-resourced to take advantage of it. That’s where we come in. We take care of splitting your lot, financing the new development, managing construction, and selling the new home. You receive 80% of the net profit. You can see whether your property qualifies here: https://search.homestead.is.
We’re a couple of architects who have been working on large scale urban plans, affordable housing financing, and increasing housing supply for a while now. Our first idea was to help homeowners create lifelong revenue streams by building ADUs (Accessory Dwelling Units) on their property. We figured out how to manage builds that finish up to 5x faster than normal builders and are 2x faster than prefab from first touch to a turnkey unit. Homeowners have used the income from our ADUs to start a business, move to a different country during the pandemic, become cash flow positive on their mortgage, house grandparents, and move out renters to reclaim their home for the first time in a decade.
The problem was that over 70% of our leads could not afford the upfront costs of construction. With Homestead, our latest iteration, we solve this by taking on the risk of funding the project. We provide a way for homeowners to finance $400k+ of construction without risking their home or credit as collateral. We split the lot, bring financing, and our expert team of architects and project managers oversee the project until sale.
In high value markets, that means a homeowner could make over $1M without risking, or spending, a dollar. Under normal circumstances, this would be too good to be true, but that’s how crazy the housing market has become. SB9 represents a $6T (!) opportunity in California alone. For example, a 1-mile radius of San Fernando Valley has $3.35B in untapped development equity—4,600 opportunities to add new homes and duplexes through SB9.
Capturing the opportunity of SB9 requires developing new financing products, development expertise, and customer-facing sales. Development is an incredibly regulatory-heavy and location-specific industry. Homestead is based in Los Angeles (by far the best market for SB9) and we have sold 80 ADUs (59 since March) with 10 built and 17 projects underway.
Here’s an example (https://www.zillow.com/homes/4511-Sally-Dr-San-Jose,-CA-9512...) of how this could work for a typical San Jose home — footsteps away from one of our customers. The new house on the split lot has a sale value of $1.5M, based on a same-sized new-build home on the block. The total cost for building the new unit, including permitting, local fees, and financing, is $700k. That’s a net profit of $800k, of which the homeowner’s 80% share is $640k.
Our mission is to increase the housing supply in California. In contrast to the develop-and-flip approach, we add new housing while sharing profit and keeping communities in place. We want to change the lives of teachers, nurses, social workers—doubling or tripling their liquid net worth—so they can do things like early retirement and paying off their kids' student debt or helping the...
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[ 5.8 ms ] story [ 230 ms ] threadThe riskiest part is extending credit (imho) to marginal borrowers (low to middle class), but the value of the land is proven, so the rest is logistics.
The investment risk would presumably be mostly if the owner moves and the subdivision becomes inegligible. Or of course if they aren’t as good at building as they think and can’t clear 20%, or housing market tanks…
There are tons of places offering this service, they just dont post on HN.
I take it by this you're specifically targeting individuals who can't qualify for a HELOC or other (very common) methods of accessing home equity?
I assume you have data to suggest that "most people" with SB-9 eligible lots are incapable of opening a heloc?
If your goal is to pay for college or buy a boat, HELOCs can be great.
This is super appealing to me because its a path I hadn't considered to becoming debt free with your primary residence, which is a large goal for many people, including myself.
A scaled denser version of the house linked in your post doesn't seem like particularly appealing scenario for individuals, in the long run.
OTOH, I can see the appeal from a pure capitalist perspective. You guys won't be the only ones seeking to take advantage of the new rules, it's not personal and I can't fault you for it.
Most of the homeowners who wanted ADUs were lower income & couldn't find financing (likely not HN community). These are multigenerational households where the children live in the house their parents bought with them and their kids. They work two jobs—their yard is rarely used—no one stopped to mourn it.
They wanted to make money to help lighten the economic burden of living where they grew up, and maybe not work the night shift, or have to provide their own childcare while working full time.
I imagine a large subset of HN and the tech community will not want to lose their yards-and its a free world, we aren't going to take them away!
Most of our team is signed up for our buy product. If you think people you know would be interested, send them our way!
true to the name of your startup. consider collective homesteads. high density housing is definitely a sustainable solution, but high density without also scaling infrastructure is a bad idea.
like everything, it is a numbers game. and the only numbers that make sense here is in $$$$ that makes sense for investors and the taxman.
not everyone can own homes. and its ok. building affordable rentable communities that are sustainable is also a laudable effort. and it definitely is a profit maker. first infrastructure, then housing. otherwise, its set up for failure.
and the state of california has a really bad record when it comes to how counties are run. their mismanagement over decades have made the state highly taxed and yet unaffordable to most of the population.
I grew up in a real estate family and while I don't think we personally engage in nasty behavior, I'm all too familiar with the games and schemes people play to get ahead. The large sums of money frequently attract unsavory and selfish actors. It makes for a rather ugly business sometimes, instead of being able to focus on the goal of helping people find a good living situation.
Wish you all the best, we're all stuck on this rock (and more frequently on HN, around the Bay Area) together, whether we care to think about it or not - we're all more connected than we may realize.
This is a very natural way for cities to develop. So natural, in fact, that it's how every city in the country did develop before planners made that development pattern illegal via zoning. SB 9 isn't some kind of radical new way of doing things; it's a partial unwinding of rules that prevented the kinds of development that occurs when the market is allowed to meet the demands of buyers and sellers.
At some point in Providence's history they changed the rules here, too. My building is "non-conforming." It'd be illegal to build a two-family home on this lot today. Further, my building has a generous side lot, which was at some point combined with my own lot into one, leaving a conspicuous gap between my house and its neighbor. I would love to sell this land to a developer and would welcome an SB-9-style law in Rhode Island.
Would you pay 20% more up front for an SB9 eligible lot if you're guaranteed 20% overall profit from living in the residence for 3 years while doing a lot split and sale of the second property?
99% of homeowners could not actually do what you need to do for this densification - the planning, paperwork, and execution to get everything done is very difficult. 20% of net profit in exchange is pretty good actually. You’d need some truly crazy levels (several million+) of pure gain before it would make sense to try it yourself IMO.
I’ve done a decent amount of permitted work and far smaller projects can easily burn a year of nights and weekends.
People sometimes need cash in the bank.
Sometimes theoretical is fine.
And since it takes awhile for a buyer to turn the theoretical value into cash (and risk, and work), the theoretical value is also going to be lower than you might think.
They could do a reverse mortgage, but a lot of people are adverse to those for their own reasons.
Once the market has a consensus.on what the change is, sure; it's fairly speculative what it will be, though; it's not like homes are a fixed price per housing unit and, because who can afford to live nearby also affects value in a positive feedback way (because people pay a premium to not live near poorer people), the relation is not simple or easily predictable.
This is used to harm actors all of the time. Basically, the company is heavily incentivized to get really creative with their accounting, so even on lucrative projects they don't have to pay you much of the value reaped from you. One of the oldest scams in the book, and the incentives are such that the company (Homestead in this case) would be acting irrationally if they didn't practice it. It's a no-win situation. Either they're acting irrationally, in which case why trust them? Or they're acting rationally, which means that you lose if you trust them.
https://en.wikipedia.org/wiki/Hollywood_accounting
https://en.wikipedia.org/wiki/Creative_accounting
If you sell for 1M that means you keep the extra 100k from the building firm and 100k from the land.
If you go with the cheaper builder you only get 120k
This is true with any product that is new and requires mutual trust.
Or we could just deliver a product people want, and make much more money at scale than trying to optimize for a short term scam!
Also, how do you deal with existing lein holders? I.e. the current mortgage.
In theory banks could approve the transfer—certainly they could split the lot, but the current lien would be spread between the two lots, and we couldn't finance the property today.
A crazy insight: Many of the customers we work with don't have mortgages.
They intrinsically don't trust debt, because of either low income, job insecurity, and/or their long tenure of homeownership (often intergenerational). They do like the ideal of selling their yard for money, and don't have the risk appetite/ability to go it alone!
We're working on a solution that will allow the existing lien-holders to stay on title until sale--making a refinance less burdensome for the current homeowner.
Down the road, we'd like to provide the owner to keep some ownership interest in the property with homestead, if they'd prefer long term income. In this arrangement, we likely wouldn't
Lower value homes depreciate less, higher value more--but are offset by larger returns!
It will likely re-appreciate in a few years, and so the loss is temporary/the other capital could be deployed to quickly outpace any depreciation.
If this were the case, real estate brokers wouldn’t on average have their property on the market longer, and sell for a higher price, then their clients. The classic Freakonomics example.
80/20% profit split is a nice round number, it’s unlikely that this is where perfect alignment is found. If the split was 100/0 or 0/100, we definitely know incentives are not aligned, and so reductio as absurdem there are split points at which the incentives aren’t aligned. In fact, there is likely at most 1 equilibrium of perfect alignment, and the rest aren’t. Furthermore, if 80/20% is fixed as your company changes and administrative costs, production/resource cost changes, then the incentives for each party is constantly changing.
That’s just the tip of the iceberg. Schools are over crowded and Unions are becoming more and more demanding that state pension liabilities keep increasing without any improvement of quality of life. There are road diets and traffic jams on the highways to hell making multi hour commutes an economic drain. There are power cuts and wild fires.
We are 40 million. It’s time to consider drastically reducing population and housing. We need sustainable housing and better infrastructure for walkable high density cities. Perhaps when we have figured out infrastructure, they we can consider increasing housing stock.
We need public transport, a cut in wasteful spending, better schools and roads. Taxes must be diverted provide free utilities for all. And free internet. That should be a right. Instead of paying for pension liabilities of union employees of public sector , I would rather have our taxes go towards creating a better California and towards free utilities, healthcare and environmental protection/conservation and public transport.
I cannot support your startup and the sector is set up to fail and will be damaging to Californians in the long run.
My advice is for you to pivot. Self sustaining tech supported ‘villages’ within Dunbar numbers or anything that creates little townships away from the tyranny of Sacramento will be a better loftier goal, imo. Create homesteads with large farms that are businesses. Look into 3D printed structures and creating high density tech-eco cities.
Making housing better in California is useful. Increasing housing stock is like scratching a bleeding itch when there is no doctors or pharmacies around for miles. Please reconsider. I cannot wish you success…it sounds mean, but I am being honest..regretfully. But I wish success for you if you can make California better. Regards.
Interestingly, California is one of the lower direct carbon footprint per capita states. With drastically less heating and cooling in the Bay, LA and SD than national averages, and denser areas, it's a net positive to build more housing here than Phoenix, Austin, Houston, Dallas, etc.
https://news.ycombinator.com/newsguidelines.html
a couple buys a home in 6000 sq ft and takes on a 30 year mortgage. they expect to have two or three kids. property taxes go towards 24-36 years of public education, infrastructure and law and order/utilties management. and they expect to retire in a fully paid off home in their old age when they dont have any income.
maybe those who cant afford to move into a place, should work with the state to build infrastructure and well networked public transport instead. how many sardines can you keep stuffing into the same little tin can?
california is 1.7 times bigger than the UK. we have 40 million vs 68 million population of UK. we are not the united kingdom.
Perhaps the city needs more housing. My biggest problem ..amongst many others..is that the local zoning laws and cities have NO control over sb9 and sb10 build outs.
They entirely bypass local laws and voting processes and gives the power directly to developers.
California has slowly eroded local governance and increasingly passing the power to a few politicians in Sacramento leading to regional and state interference and governance..often railroading local government. It is absolutely appalling.
We saw this happen with the public school system and property taxes. When Jerry Brown brought in his super secret inscrutable tax redistribution formula, nobody could figure out what portion of our taxes is allocated where..this means that posh homes paying millions and millions of dollars in property taxes because immigrant parents who like suckers pick the best expensive school districts end up sending their kids to schools with no budget for swimming pools or infrastructure improvements or even new restrooms.
A home should not be treated as a speculative instrument. It is a recipe to destablise society. Everyone should have house secure and that’s not always about home ownership.
Home ownership is not a right. Affordable homes to live is a basic right. Having to keep splitting the pie into thinner and thinner slices will lead to more hungry people. Instead we should bake a bigger pie!
Whatever makes expensive zip codes desirable should be made available to all zip codes in California.
In California, we are slicing the pie into slivers until no one is going to be happy. It’s going to be disastrous! The only beneficiaries are developers and politicians. And now VCs and investors. Do.The.Math.
1. Increasing housing stock in already saturated markets stresses resources and creates a demand for more infrastructure.
2. When we have more land and more people, we can build where there is land with suitable infrastructure.
3. This means: don’t build if you don’t create infrastructure.
4. Example: a child climbs on a grown man’s shoulder. He is very strong. He runs around. Looks like fun. Another child jumps on the man. And another. And another. And another. Until he is flat on the ground with a pile of children on his back.
Solution: Find another shoulder to climb upon.
I hope this clarifies.
Affordable housing exists only because market rate housing developers pay affordable housing fees to subsidize them. This in turn makes market rate housing more expensive.
These split lot units are not affordable. New builds are market rates as the old home. They don’t pay affordable housing fees but they share the same resources that is becoming even more scarce per person.
It costs millions to build roads..one class room is about million dollars in CA. And there are more teachers and their pensions in the future.
It’s like what the Red Queen said..you have to keep running faster than stay in the same place. You have to keep taxing more $$ and taxing more people to maintain old infrastructure. Can you see what I mean?
These are not even high rises or multi family. It doesn’t cost less. I wrote a longer reply but didn’t post it. Their numbers and projections make no sense at all. I actually took the time look it to because I find this kind of number hunting relaxing.
3D printing multi family or high rise sustainable communities by expanding developed cities will solve housing affordability. It will also bring more equity to California by making every single county as desirable to live ..
It costs $800-1200 per sq ft in Bay Area and anywhere between $350-500 in cheaper parts of California. There should be small self contained village clusters and planned communities.
Basic utilities are water, sewage, power, electricity, trash, internet.
Services: post office, fire, police station, hospitals, city hall, library, down town, entertainment, public squares, open spaces, schools, law and order, office spaces, shopping, gas stations, places to congregate etc.
How many of these can be modernized? How many be remote or digital? How many can be electrified or made with renewable resources?
One reason 3D printed homes won’t take off in CA is because of construction unions. Imagine how much money can be saved if we adopted newer modern tech without tier 1 city prices.
Let me give a sample of some stuff I jotted down today. Large and dense cities are never affordable. Denser it gets, infrastructure will only get more expensive because the cost of doing business there also increases. Remember everything is trucked in..it’s expensive.
San Jose has a million population and 3 billion budget.
Oakland has 450k population and 1.7 billion budget
Fremont has 220k and has 340 million budget
Fresno has 545k people and 1.2 billion budget
Cupertino has 60k population and 90 million budget.
Palo Alto has 66k population and 210 million budget. (Palo alto and mtn view also serve populations of unincorporated cities like Los Altos hills, atherton, wood side etc and that adjustment is included in the budget. Also PA runs and manages its own infrastructure including schools, trash, power and water)
Los Angeles 4 million population and budget is 11.2 billion
I just want one example of housing becoming affordable after it became high density and population increased. One city in California. Just one.
I didn’t think so. Because I have looked.
That said 3000 square feet is still 20ft x 150ft, 280 square metres, bigger than the plot of the 3 bed detached house I grew up in, bigger than the plot of my 4 bed semi I lived in recently - both of which above average prices for the region.
Ok, are you leaving or are you staying?
It seems like it would be better for me to just sell you the land for $640k, then you take on the risk of developing and selling it, but if that was how much the land is now worth, it might still be better for me to hold on to it and let it appreciate for a while without neighbors spitting distance from my back porch.
This happened during the housing crash of 2009. I know first hand, my own condo dropped by more than 50%, which I did a strategic default on.
Can't I just own and use both lots at the same time? Would I need to technically 'reunite' them? Can't I just use both of them at the same time?
The real reason it doesn't qualify, though, is that my HOA—my entire city of ~650 SFH homes exists behind an HOA—has stated it won't approve SB9-related lot splits. The city itself wrote SB9 language into its bylaws, as required, but the architectural review committee in the HOA won't approve requests.
Moreover, all homes in my city are on septic systems, and LA County has a min lot size requirement for approving new ones. Some lots are large enough to split without dipping under that threshold, but most aren't; that means we have a sanitation reason to reject lot split requests too.
I imagine that similar developments will block lot splits in these ways. Have you run into similar issues? Have you successfully split any lots yet?
HFZ: Yes, sadly—though i think there is good logic to prohibit more density in fire prone area, and HOAs are already dense, so in your case it doesn't make sense.
HOA: yes, for now that is a blocker. This was also initially a problem with the 2017 legislation enabling ADUs, but in 2019 the state expanded the law to overrule HOA's. We'd like to see that as well, and can easily give you the resources to contact your legislators (coming soon on the search tool, we can help at connect@homestead.is for now)
LA County had relatively liberal interpretations of the ADU law, we hope they will reform some rules to make lot splitting easier!
All and all, there are still millions of ideal SB9 lots—I am very sorry your's isn't—and i think HOA restrictions are a load of crap!
Very often not, and a central part of their purpose is to prevent densification that might otherwise be allowed by law.
So get together with other homeowners around that and any other dissatisfaction with the HOA and disband it. Or take it over, either way.
Yes, that is correct. If you want to hand deliver a note to your nextdoor neighbor, their mailbox is off limits. The federal government views that mailbox as some sort of exclusive domain of the USPS. You can leave the note anywhere, other than their mailbox.
The text of the law is:
>Whoever knowingly and willfully deposits any mailable matter such as statements of accounts, circulars, sale bills, or other like matter, on which no postage has been paid, in any letter box established, approved, or accepted by the Postal Service for the receipt or delivery of mail matter on any mail route with intent to avoid payment of lawful postage thereon, shall for each such offense be fined under this title.[1]
[1] https://www.law.cornell.edu/uscode/text/18/1725
(An interesting possibility would be to affix the correct USPS stamp on the note, void said stamp by crossing it out, then hand delivering the note into someone's mailbox. In that case the correct postage would have been paid, so maybe that might be legal? Not a lawyer, just pondering an interesting possibility out loud.)
That all sounds commercial, not dropping a note to a neighbour.
That’s precisely the point about the state’s finances. You have to go back to Gov.Gray Davis disastrous handling of the state pension funds that has led to staggering unfunded pension liabilities.
[..] The California Pension system is way under water and in dire need of reform. The state's unfunded pension and retirement liabilities approach $1 trillion, or roughly $80,000 for each taxpayer in the state.[..]
From 2016: https://www.latimes.com/projects/la-me-pension-unfunded/ : Understanding California's public pension debt
2018: https://amp.sacbee.com/opinion/editorials/article199693069.h... : The pension nightmare for California’s cities is getting scarier
There was a whole investigative piece done in 2015-16. Search for Gov.Gray Davis + ‘unfunded pension liabilities’ + California
It’s been downhill for a while and mostly because the wealth creators are not even eligible to vote in California. Ask the right questions to get the right answers..that’s my guiding principle. Otherwise, everything is just noise.
And they certainly shouldn’t have made the tax exemption inheritable. And it shouldn’t apply to corporations.
As it’s designed, the whole “don’t let seniors lose their homes” argument is pretty obviously just political cover for a pretty egregious wealth transfer scheme.
No argument about the pension liability problem, CA’s governance issues are a big reason we decided not to put down roots long term. Prop 13 is one of the bigger examples of that, in our minds.
The truth is that most people don’t want to downsize. Why should anyone work 40-60 hours a week and pay a mortgage for most of their working adult life and taxes only to live in a condo when they have paid their dues and want to enjoy their retirement.
Should we be dictating to seniors that they deserve no more than a one bedroom condo just because they got older? Is that what you are suggesting?
That’s akin to discarding people and kicking them out of their homes. I don’t know any culture or country that would even suggest this except here in the United States. It’s actually truly appalling to me.
False dichotomy much? If there was actually a problem with that happening under the preexisting tax policy (there wasn’t, really, on any significant scale, and if there had been there would be less now just from the improvement in the range of financial vehicles to let people access equity in their home, which is the source of the supposed risk) it would have been easy to solve it without either:
(1) Prop 13’s low fixed nominal property rate for all property (not limited to owner-occupied residential, or even residential property), or
(2) Prop 13’s limit on assessment increases without sale or other qualifying event on all property (not limited to owner-occupied residential, or even residential property), or
(3) Prop 13’s requirement for a 2/3 vote of the state legislature on any bill that includes an increase of any non-property taxes (even if it was a revenue neutral or negative shift), or
(4) Prop 13’s requirement that special local taxes be referred to public ballot with a 2/3 vote of the electors required to pass.
How? Simply by adopting an income-based limit on property taxes on an owner-occupied primary residence.
> You have to go back to Gov.Gray Davis disastrous handling of the state pension funds that has led to staggering unfunded pension liabilities.
California public pension funding has been improving and is around the national average funding ration (71.9% in 2019 vs. 71.3% nationally.) [0]
> The California Pension system is way under water and in dire need of reform. The state’s unfunded pension and retirement liabilities approach $1 trillion
They don’t and never have (even the source you directly cite claims only $241 billion at the time, which is very much not approaching $1 trillion); more recently the total liabilities are around 2/3 of that $1 trillion claim ($660 billion), and the unfunded share less than 1/5 of that ($185 billion). [0]
[0] https://www.pewtrusts.org/en/research-and-analysis/issue-bri...
Taxing assets isn’t taxing gains, realized or not.
Flows vs. stocks.
(You might also object to asset taxes, but that is a fundamentally different thing than taxes on unrealized gains.)
ex: i bought a tractor and i will be making payments for 60 months. i paid the required taxes on it at the time of purchase and that is included in the loan repayment. i can depreciate the tractor as a fixed asset. i can claim deductions for repair/maint/service. the tractor is useful and still working even after i pay off the loan. after 60 months, i am not expected to pay a tax for it. even though i have no more payments and i still use the tractor to farm to generate income.
the realisation requirement is the fundamental rule of the IRS. asset appreciation is deferred up until realisation. the quality of life doesnt improve in an old house. if there are improvements made to the building, the assessment changes and the tax amount will change too. california increases property taxes by a capped percentage every year. it is govt spending that has gotten out of control and this spending is not always for the benefit of the tax payers in california. so perhaps thats where the fault lies.
if you change the IRS rules in this regard, the entire economy would become unstable and collapse. the problem is that CA govt spending is bloated and there is no accountability. there is a lot of money. the state is highly taxed. we are not asking enough questions and instead targeting the weakest participant because its the easiest and laziest thing to do.
Real property in most US jurisdictions; cars in several US jurisdictions (though this is sometimes obscured.by opaque terminology; e.g., California has “registration fees” that are, in effect, an ad valorem asset tax on automobiles); net personal wealth in several international jurisdictions.
> the realisation requirement is the fundamental rule of the IRS
That's income taxes (on gains), not property/asset taxes (on value).
One is a flow tax, the other a stock tax.
Registration fees is akin to use tax.
Seizure of agency over assets and dissolution of property rights is what happens in communist regimes and dictatorships.
No, there isn't.
Realization is what the IRS uses as the taxable income event for taxes on capital income (gains).
It is not, in any of the US jurisdictions that tax assets (real property or otherwise) a requirement for taxes on asset value, and doesn't begin to make sense for such taxes (one purpose for which, in some theories of tax on “hard” assets like real property, is motivating sale of idle assets to those who will productively employ them.)
if it already exists, can you quote a case law?
That was not the purpose.
The purpose was to starve state and local government in California of revenue; while it long predates Grover Norquist’s famous statement about getting government “down to the size where we can drown it in the bathtub”, it was pushed by people with similar ideology.
(It’s true that the specter of pushing people out of their homes with property taxes was used to sell it, but it was very much not focussed on that in its design or intent.)
It’s like everyone asking Elon musk to pay ‘his fair share’ because Tesla is doing well and his money is just a number.
Those who are trying to buy homes are not finding homes. I agree. It’s very easy to solve in a free market. Pay more. Seniors are not a burden to the infrastructure and utilities.
Instead of wanting to sip champagne on a beer budget, perhaps those who want to buy need to evaluate their wallets and purchasing power. And if their quality of life is wanting, the people who need to be questioned are our public servants. Demand that they SERVE the public. Not developers and the only ones being supported here are the public servants with developers colluding with them.
My grandmother bought a Diamond ring for 1000 bucks. If it’s worth a million now, it’s not her fault and she shouldn’t be penalized. It doesn’t cost anyone anything if she refuses to sell the Diamond.
It costs people nothing to NOT covet what’s not theirs..
and if an ADU is renting 40% above market..isnt this exactly why housing is becoming unaffordable in california.
plus: where is the water for the dense housing? right now, bay area gets water from hetch hetchy aka little yosemite..which was completely razed down for our water needs. how many new schools are being built? how many new teachers will be needed? how much road infrastructure? how will law enforcement increase to provide safe neighbourhoods? fire stations? power loads? traffic woes? and how much more will the state's tax liabilities increase? are we going to keep exporting our trash to poor countries?
we dont need to increase housing stock. we dont need to increase california population over the current 40 million. we need to take care of californians who have paid taxes for decades and decades..and are losing quality of life that is fast becoming unaffordable.
perhaps if housing stock is increased for those who dont use public utilities and said homes are fully sustainable for utilities and trash, power(solar), water...and they submit to using roads only 2-3 days/week..well..then it would make sense. but thats not possible.
people who live in homes need utilities/services. infrastructure has to be scaled along with population increase. children need to go to school. schools need teachers. housing stock increase without a proper plan for utilities and infrastructure just seems like a plan that is set up to fail. and the only ones who lose are the tax payers.
[1] https://www.gutenberg.org/files/1080/1080-h/1080-h.htm
Are all Apple employees living in Cupertino?
The solution is efficient public transport. Not increasing housing stock.
Maybe I'm just not understanding this right, but does this mean that that example house which currently is estimated at a $1.3M value would be split into two, each with a market price of $1.5M, despite both having half the lot size? How does that work?
And shouldn't the house next door then logically sell for 3M based on lot size?
Sorry if I'm missing something.
Seems an awkward example of a plot to split without demolishing the original house too, but I guess that's more common than a plot that's easy to split.
The market seems to be saying that people really value new construction relative to older homes, even if that's surprising to some people.
It’s actually not hard to understand. People have a certain amount of budget per month they can afford, which converts into a certain mortgage value. Then they look for the neighborhood they want to be in, and whatever they can get inside that mortgage budget is on the table.
So they see two options:
Old house from 1960, 1800SQFT, 2 bathrooms, low ceilings, needs tons of renovation but has a nice big yard. $700k.
Same neighborhood. Brand new house. 2400 SQFT. 3.5 bathrooms. High end finishes. Almost no yard (it’s a half-lot). $700k.
Most of the people buying this are coming from rentals where they probably didn’t have a yard in the first place, and they are already stretching to the limit to afford anything so they won’t be able to remodel after purchase. So, no yard? No problem.
If it starts to happen in mass, either the supply will depress prices or the existing houses with splitable lots will close to double in value to internalize that unrealized gain.
https://www.housebeautiful.com/uk/lifestyle/property/a354052...
Leave California. Stop privileging it. The world is large.
But a lot of people are willing to make tradeoffs, e.g., the younger people passing through town, the elderly, and the poor, all have different housing preferences.
We are bending/slowing the insane growth in SFR prices and slowing/ending homeowner displacement.
As we scale we'll make a meaningful impact, but the solution to affordable housing is not just loosening artificial supply constraints, and is bigger than any one private (or public) organization.
We just put the whole process on rails--a few material options and designs still have exponential customization, but represent drastic reduction in overall project complexity and project-to-project variance.
With a kit of parts we can automate design and management, and with 3d scanners in everyone's pocket, we can mostly offsite QC with similar or better quality outcomes.
Because we're a repeat provider, we offer builders, cities and suppliers consistency that's only been available to date in tract housing, which is incredibly environmentally destructive.
One specific example:
When an affordable architect specs a house, they almost never spec a shower valve (let alone cabinets, specific flooring providers, etc). When you buy a shower fixture, the valve doesn't come with it. This means you or the contractor has to either drive to home depot to buy a 6 dollar valve, or install the wrong valve to pass inspection and then wait and reinstall the correct valve.
If they spec the materials themselves, it isn't much better: their preferred suppliers never get shop drawings, often are out of stock, and are not able to scale with them.
We make sure there is always an interchangeable backup part, that any specific finish material or fixture is on site before the time it's needed. Designs specs are updated in real time to deal with supply chain disruptions.
That is just for a shower valve—it compounds as custom plans are changed, materials are out of stock, items don't fit as planned.
Prefab solves for a lot of these issues, but because of transportation costs and capacity constraints, it usually is costlier and longer to delivery from start to finish, even though the install is quicker.
We can scale with demand: because their cashflow velocity is so much quicker than working with homeowners, contractors always want to bid on our projects.
For Sb9 we'll use prefab where it makes economic sense—we are solution agnostic!
For existing homeowners, our liquidity is provided by in-house debt backed by the future lot asset.
For purchasers, we own part of the purchased home & that interest is transferred to the new lot when it is split!
This is kind of an eyebrow raising statement.
You definitely can buy a shower fixture with a valve.
They're not $6. Cheapest is like $40 retail and they can be hundreds for fancier models.
Nobody is installing a valve and then reworking it after passing inspection. It's pointless and will cost hundreds in wasted material and labor.
If your desired trim kit is out of stock you're only going to find out after the wall is waterproofed & tiled. Nobody is ripping out thousands of dollars of work to change a valve. You'd just buy a different trim kit that matches the installed valve.
I dunno, maybe they do things differently in California. But what you said there doesn't match any sort of construction experience I've had.
So this is an Icelandic site?
https://en.wikipedia.org/wiki/.ai
You can reach out to connect@homestead.is, let them know I sent you, and I'll try to carve out 10 minutes to point you in a good direction!
Probably well exemplified by Frank Lloyd Wright in the mis-century who created what he called 'usonian' homes. These were small block specific homes intended for workers that were completely in keeping with the surrounds.
Meanwhile the most famous picturesque neighborhoods (in SF, Paris, NYC, etc) were built in a disorganized way to make a quick buck for property developers and landlords in an era before zoning codes even existed.
"Neighborhood character" is a historically unprecedented concept which exists only as an excuse to block new housing.
Nonsense. For example the UK has been protecting our built environment since Ancient Monuments Protection Act 1882. The movement to strengthen protections it is a reaction to cultural artefacts being irretrievably lost in the 20th century.
That comparison doesn’t hold water. California is a joke when it comes to public transport. Newsom shut down the HSR after collecting millions. Just like that. Shut it down. As voters and tax payers, we don’t demand enough accountability from our elected ‘leaders’. It’s unconscionable how they keep repeating the same clown trick again and again…and we just keep clapping our hands and ask for more.
you are probably right for the situations you have thought of, but really over all of the world and all of history, this is really not the case.. start to narrow that down, of course, and you still find contradictions and edge-cases.. too much a generality for the real world
https://twitter.com/aspenmayer/status/1479760958859927554
For space—you'd be surprised what we can fit, but there are certain lots where it will be impossible without demolishing and re-building a smaller home. We don't currently do that, so in that case, you are out of luck for now, but you can go it alone. We do love fighting with HOAs!
so...this home when split will have two units..each valued at 1.5 million. the state will get taxes at about $40k/year instead of the current 4-5k they seem to be paying for the past several decades.
if i were the owner and i have lived there for 30 years..it doesnt make sense from the pov of taxes. if i am the child who inherited the home, everything is essentially free. so there's that. and you make 20% profit.
but as the neighbour..as someone who pays tax for the services the city provides, as a renter in the neighbourhood who has to deal with higher water charges, crowded schools for my children, bad roads, inadequately staffed police stations/fire stations/post offices etc.(all public sector jobs that have unions and whose employees receive pensions till they die), it is a lose lose proposition.
any digression into the 'unfairness of prop 13' is something i am not going to engage in..i dont see why a 75 year old resident who has lived in the neighbourhood for 30-40 years have to pay for schools his children went to decades ago. we owe our senior citizens more than envy and jealousy over their hard earned money.
there are plenty of land in california that can be developed sustainably. and can house people comfortably. the problem is with sacramento that makes housing permits and fees and costs so high..and the historical unfunded pension liablities of public sectors that need more and more and more californians to be taxed to death every decade that is the problem.
and not taking into account that we are a desert and we are in a drought and we havent developed infrastructure or affordable utilities or sustainable public education or public transport. all while being taxed to death.
those numbers make NO sense to home owners. especially if they are in san jose. i dont know how familiar you are with bay area. everyone has something to say about property taxes until they become home owners themselves. just like college kids talk about 'fair taxes' until they have jobs themselves and see what a huge chunk goes away without any discernible benefits or accountablity by the state.
Will it be before or after your 20%? It’s not the primary residence so would they still be able to claim the 250k/500k deduction?
To wit:
> honestly, i am not interested in a debate. thats my opinion. take it or leave it.[0]
[0] https://news.ycombinator.com/item?id=29844719
This hits on something really important. There's a lot of talk in housing circles about how "greedy homeowners" block new supply to increase the value of their homes, but this is a bit confused. Blocking supply can be good for landlords, in some cases, who command higher rents in constrained markets, but it's not clear why that's good for homeowners; the value of the land underneath their houses increases in value because it's in high demand and, crucially, the land remains desirable even as density increases [0]. Upzoning increases the value of a lot, because it means the lot is more attractive to developers. And lot-splitting gives homeowners a tool for unlocking that added value that doesn't require them to sell their land and move to a cheaper market. For existing homeowners, upzoning is an opportunity, not a cost.
[0] This is why upzoning can reduce the cost of individual units even as it increases the value of the land underneath those units. That's a win-win.
I am pessimistic though. I don't think people really understand how much current homeowners do not want additional housing to be built. It makes sense if you consider that the net worth of a typical homeowner is very substantially made up of a highly leveraged long position in real estate. If that position goes south - because of an increase in housing supply, or because of undesirable new people moving into the neighborhood - the homeowner's net worth could be decimated.
Now, most people will not come out and say directly that they are opposed to new housing for the obvious economic reason, because they don't want to seem selfish and greedy and maybe racist. So they have to find a socially acceptable cover story to oppose new housing - environmentalism, concerns about safety, etc etc.
Our federal governance structure doesn't provide enough $$$ for housing that isn't single family homes—until we change that, infill single family development is inherently subsidized by fannie and freddie -> I anticipate that other desirable areas will have to do this to stop out-migration and stay affordable.