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I Have Read this Medium Post. The author makes a great case against Prop F, prop F seems like a totally shitty law and isn't going to fix the housing problem.
by on_ 11y ago
I Have Read this Medium Post.
The author makes a great case against Prop F, prop F seems like a totally shitty law and isn't going to fix the housing problem. It sounds like that isn't what the law is about anyway, but there is a great way to fix the housing problem. The argument he seems to allude to in his notes, is that people seem to choose sides based on their sentiment surrounding the current resedential/housing market.
In economics there are 2 forces at the heart of most problems. These are called "supply" and "demand" and they govern price. SF has not been keeping up with it's infrastructure, is a decade behind in new construction, and building new resedential properties will take ~5-10 years to complete. They are not actively building properties that will sufficiently meet demand even now. So this won't go away.
Unfortunately, people who paid a lot for houses have a vested interest in not raising supply, and the amount of regulation surrounding new construction creates massive amounts of friction. It will be interesting to see how this problem get's solved. I agree with the author though:
It is not going to be Prop F.
- ubernostrum 11y agoOf course, California also interferes with the market to discourage selling real estate. Proposition 13 disconnected property tax rates from the value of the property (by capping the increase in assessed value at 2% per year, far below the increase in actual market value). Which created a massive incentive to hold real estate as long as possible without selling, since the only time the tax rate can reset to being based on market value is at the time of sale.
- gnopgnip 11y agoThis is true but in most cases it doesn't matter because your next best alternative is not changed. If you have owned a home for 10 years and want to buy a new home in another area, you will still want to sell your home. If you just moved to CA and want to own a home, you will still want to buy despite prop 13.
- bmelton 11y ago> If you have owned a home for 10 years and want to buy a new home in another area, you will still want to sell your home. Actually, as an outsider looking in, the incentives seem set up such that you'd be far more inclined to rent your existing home than sell it.
- toast0 11y agoWhy would you want to be a landlord in SF? Even if its not rent controlled, a bad tenant is going to be a nightmare to get rid of.
- mrgordon 11y agoRents are headed straight up and people are desperate for anywhere to live. Its a good gig to be a landlord in SF even if the laws are tenant friendly
- skuhn 11y agoI'm sure that it isn't all smelling roses and cashing checks, but rental property in San Francisco is literally a license to print money for many landlords. Simply by virtue of having owned the property for several decades, you stand to make a significant amount of money from tenants. Consider someone who has owned a property since the 80's. This person might have paid $600,000 for something valued at double that amount today. Their mortgage (if they even still have one) is $2400/mo, property tax works out to $500/mo, and they can charge $4000/mo for rent. Lots of people in lots of places around the world rent their properties out for far lower returns.
- steven2012 11y agoSomeone who owns a house from the 1980s, of which is likely very rare, is getting pretty close to retirement age, and would probably rather sell the house and move away than rent it out. And there will be a very willing buyer waiting to buy it, regardless of the property tax.
- mahyarm 11y agoIt's basically rent control for property owners. California: The land of rent control.
- bcoates 11y agoProposition 13 didn't do that; the various governments who petulantly refused to adapt their tax regimes to the Prop 13 limits did. The bizarre incentives created by almost 40 years of attempting to strong-arm voters into giving power back to legislatures could be fixed by legislatures without doing anything to Prop 13.
- Redoubts 11y agoWhat exactly should they do?
- skuhn 11y agoDon't make all of your money from a property tax that does not increase as your costs to provide services increase. There are options besides property tax for raising tax revenue. City-level local income tax is the first thing that comes to mind.
- Camillo 11y agoSo you want to increase the tax burden on productive economic activity to benefit people who are just capturing rent. That's a horrible idea.
- skuhn 11y agoI don't believe that's what I said. Cities in California have services they are obligated to provide -- police services, for instance. The cost of those services over time has increased proportional to salaries. However, the revenue gathered to pay for those services has only increased proportional to property values -- which are artificially trapped in the 1970's to a large extent. That is an untenable situation, and it is a large part of California's problem at a local level.
- aidenn0 11y agoAre you proposing abolishing property tax? Because nowhere in ubernostrom's post did he talk about city revenues, just about the perverse incentives to land-owners by Prop 13, and those will exist unless property tax is eliminated.
- steven2012 11y agoThis is of course patently false, since the real estate market in CA has gone through the roof, and cities are flush with new property tax money at sky high valuations. The house we bought was last bought at $150k, and we bought it for 10x this amount. The amount of turnover in real estate in our city in the Bay Area has reached a fevered pitch, so the cities are actually benefiting from more tax revenues.