3 ms·

It's a double whammy when you also consider that property taxes are generally based on real estate value. City and local governments are dependent on that incom

by vtange 10y ago

It's a double whammy when you also consider that property taxes are generally based on real estate value. City and local governments are dependent on that income and have little incentive to see real estate values (and thus tax) go down.

hkmurakami 10y ago
That would depend on the price elasticity of the existing housing stock in response to each additional unit of housing that is supplied to the market. It's conceivable that the marginal decrease in tax revenue from the existing stock would be more than offset by the additional tax revenue from the one additional unit.
maerF0x0 10y ago
Also governments get tax not on the value of a single property but the cumulative value of the properties (emphasis on the plurality) . If my 1M house gets replaced with 10x 250k units the government has 2.5x its tax base. See how affordability and solid tax base can coincide?
- Retric 10y ago
  Local government costs also go up as population increases.
  - mjmahone17 10y ago
    The relationship is not usually linear, though. With density comes efficiency in services. Though some of that efficiency is eaten by the additional cost of doing the work.
    - Retric 10y ago
      Not really teachers are linear with population size. An overpass is vastly more expensive than a stoplight and still cheaper than a subway system. So, yes for small changes to population size a city need not spend more an can simply degrade services slightly, but doubling population size quickly gets really expensive.
      - maerF0x0 10y ago
        I would have thought that the linear system was still more expensive than the dense system (within some reasonable limits). Consider the single family home as the null case, everyone lives in single family homes as far as the eye can see, the distance that family must travel to get to the core of a city is greater than any other existing family (that is new homes are on the outer ring of the city and thus progressively further and further from the core). So that family consumes more road miles daily. Vs if you grow in density you do not create anymore miles of road because those people only have to travel a shorter distance. And when the inevitable overpass comes, instead of needing overpasses from 1/2radius of the city you may only need them for 1/4 etc because the people are already in the core and do not need to come from as far. just some thoughts on efficiency of density vs dispersement
refurb 10y ago
But tax rates generally adjust for increasing housing prices. In my old hometown, when housing prices went up 20% in one year, tax rates decreased by ~15%, so overall the increase was about inflation. Otherwise you'd see city budgets double in only a few years in really hot markets. Of course this doesn't work in California with Prop 13, but I've seen it in other areas.
dredmorbius 10y ago
That's not the case, to a large extent, in California, thanks to Proposition 13. The longer a property is held, the lower its assessed value relative-to-market. In cities with buy-an-hold populations (and Palo Alto tends to resemble this), that means a large part of the assessible property value is severely underassessed. Mind: this means that surplus value of urbanisation goes to the property owner rather than to help provide city services. The double-whammy is actually the opposite of what you suggest, and may well be a triple: 1. Prop 13 keeps property taxes down, meaning ... 2. There's an additional upside (and less downside) to inflating property values and ... 3. There's growing opposition to providing new and higher-density housing, as this would remove pressure from housing prices, and leave existing homeowners with a lower property value, itself useful for loan collateral, HELOC, etc. Knowing long-time California natives who've been chased entirely out of the state, I'm starting to think the situation may become untenable. Or, perhaps, it's one more in line of economic population displacement, which began with Spanish missionaries displacing the aboriginal natives, American Anglos the Mexican successors to the Spanish, and now various new money, some domestic, some foreign, chasing out the 1950s - 1980s immigrant class, at least from the Bay Area.

by vtange 10y ago

hkmurakami 10y ago

That would depend on the price elasticity of the existing housing stock in response to each additional unit of housing that is supplied to the market. It's conceivable that the marginal decrease in tax revenue from the existing stock would be more than offset by the additional tax revenue from the one additional unit.

maerF0x0 10y ago

Also governments get tax not on the value of a single property but the cumulative value of the properties (emphasis on the plurality) . If my 1M house gets replaced with 10x 250k units the government has 2.5x its tax base. See how affordability and solid tax base can coincide?

Retric 10y ago
Local government costs also go up as population increases.
- mjmahone17 10y ago
  The relationship is not usually linear, though. With density comes efficiency in services. Though some of that efficiency is eaten by the additional cost of doing the work.
  - Retric 10y ago
    Not really teachers are linear with population size. An overpass is vastly more expensive than a stoplight and still cheaper than a subway system. So, yes for small changes to population size a city need not spend more an can simply degrade services slightly, but doubling population size quickly gets really expensive.
    - maerF0x0 10y ago
      I would have thought that the linear system was still more expensive than the dense system (within some reasonable limits). Consider the single family home as the null case, everyone lives in single family homes as far as the eye can see, the distance that family must travel to get to the core of a city is greater than any other existing family (that is new homes are on the outer ring of the city and thus progressively further and further from the core). So that family consumes more road miles daily. Vs if you grow in density you do not create anymore miles of road because those people only have to travel a shorter distance. And when the inevitable overpass comes, instead of needing overpasses from 1/2radius of the city you may only need them for 1/4 etc because the people are already in the core and do not need to come from as far. just some thoughts on efficiency of density vs dispersement

refurb 10y ago

But tax rates generally adjust for increasing housing prices. In my old hometown, when housing prices went up 20% in one year, tax rates decreased by ~15%, so overall the increase was about inflation. Otherwise you'd see city budgets double in only a few years in really hot markets. Of course this doesn't work in California with Prop 13, but I've seen it in other areas.

dredmorbius 10y ago

That's not the case, to a large extent, in California, thanks to Proposition 13. The longer a property is held, the lower its assessed value relative-to-market. In cities with buy-an-hold populations (and Palo Alto tends to resemble this), that means a large part of the assessible property value is severely underassessed. Mind: this means that surplus value of urbanisation goes to the property owner rather than to help provide city services. The double-whammy is actually the opposite of what you suggest, and may well be a triple: 1. Prop 13 keeps property taxes down, meaning ... 2. There's an additional upside (and less downside) to inflating property values and ... 3. There's growing opposition to providing new and higher-density housing, as this would remove pressure from housing prices, and leave existing homeowners with a lower property value, itself useful for loan collateral, HELOC, etc. Knowing long-time California natives who've been chased entirely out of the state, I'm starting to think the situation may become untenable. Or, perhaps, it's one more in line of economic population displacement, which began with Spanish missionaries displacing the aboriginal natives, American Anglos the Mexican successors to the Spanish, and now various new money, some domestic, some foreign, chasing out the 1950s - 1980s immigrant class, at least from the Bay Area.