5 ms·

The more supply is restricted, the higher property prices rise. The higher property prices are, the more homeowners will do to protect their economic interests

The more supply is restricted, the higher property prices rise. The higher property prices are, the more homeowners will do to protect their economic interests by voting to restrict supply. It's a vicious cycle. > therefore public policy should be based on viewing homes as places to live, not as investments. This sounds all well and good, but can you really expect people to support diluting their >$1mm property investment?

derefr 10y ago
Naive question: how much would it distort the market if prices were allowed to rise on undeveloped land, but there was a sort of "land-value control" equivalent to rent-control on developed land, preventing its value from rising? (Maybe implemented in terms of a tax at time-of-sale that takes away however much profit was made due to property-price inflation and just hands it to the city instead.)
- pseudonom- 10y ago
  https://en.m.wikipedia.org/wiki/Community_land_trust https://en.m.wikipedia.org/wiki/Community_land_trust is certainly relevant.
- philsnow 10y ago
  It sounds like it would dis-incentivize market liquidity even more than Prop 13 already does.
- JoshTriplett 10y ago
  > Maybe implemented in terms of a tax at time-of-sale that takes away however much profit was made due to property-price inflation and just hands it to the city instead. Apart from being unjust, that approach would completely break the market and put people out on the street. You buy a house for $200k; its value increases to $400k; you sell it, and the city takes $200k, leaving you with $200k. You now cannot afford any of the houses currently for sale for $400k, even though the additional $200k you don't have would just go to the city, and the seller just gets the $200k you actually have. Typical price controls affect both sides of the transaction, so the house value can't increase, or doesn't increase faster than a certain limit. That at least doesn't directly prevent people from selling one house and buying another comparable house. To answer your original question, though: to what extent do the areas in most dire need of housing have any undeveloped land? Those areas don't have much undeveloped land; they have underdeveloped land. If you had price controls on undeveloped land but not on developed land, at some point you'd end up with a price inversion where a given property with a house on it has less value than the same property without the house. At which point someone wanting to extract the increased value could demolish the house and then sell the land at market value.
  - derefr 10y ago
    > You now cannot afford any of the houses currently for sale for $400k Why would the houses continue to be for sale for $400k? I can't see why people would bother to charge any more than the price they bought the house for, once they realized that the government would pocket any profit. If selling for either $400k or $200k gives you either way $200k, it's in your interest as a seller to sell for the lesser amount, because you get more buyers more quickly that way. > At which point someone wanting to extract the increased value could demolish the house and then sell the land at market value. That was actually partly the point! It incentivizes property-management companies to try to lobby to remove the NIMBY barriers in the way of tearing down old buildings.
    - JoshTriplett 10y ago
      > Why would the houses continue to be for sale for $400k? I can't see why people would bother to charge any more than the price they bought the house for, once they realized that the government would pocket any profit. If selling for $400k or $200k just gives you $200k, it's in your interest as a seller to sell for $200k. That sounds like a plausible (but not certain) outcome, assuming a 100% tax with no way around it. I wouldn't underestimate creative (legal) solutions, though. A structure like this creates major incentives for under-the-table sales, fees, or anything that doesn't qualify as "part of the sale price". For instance, it would create an incentive for "buyer pays" transactions, where the buyer directly pays for all associated services involved with a sale without paying the seller directly, including those costs typically paid by the seller or split between the two. > That was actually partly the point! It incentivizes property-management companies to try to lobby to remove the NIMBY barriers in the way of tearing down old buildings. Interesting notion. What stops them from tearing down those old buildings today, though? It seems like the bigger problem is that they can't build new buildings that aren't just as sparse and under-developed as the old.
      - smallnamespace 10y ago
        As an side note, this is almost the same as proposing price controls for the entire real estate market, since the price of land and housing are closely linked (at least in SF). https://en.wikipedia.org/wiki/Price_controls https://en.wikipedia.org/wiki/Price_controls Let's say we implement full controls tomorrow in SF, where all real estate appreciation is capped at, say, inflation. As demand for housing continues to grow, you'll find that the government-mandated capped price will rapidly diverge from what the free market price is, e.g. someone is willing to pay $1mm for a house but it can only be sold for $600,000. Since the seller is essentially being forced to take a bath, property owners will simply not sell. The market becomes extremely illiquid and everyone loses. The key to understanding the seller's behavior, by the way, is because under price controls the market becomes extremely asymmetric. An excess of demand means that every potential seller has MANY potential buyers who are all willing to pay the asking price, so buying becomes a huge lottery. So if you own a property and you sell, there's very little chance you can change your mind later on and buy a different property, whereas in a normal market you just pay the normal transaction fees.
DINKDINK 10y ago
Political resistance to new housing also comes, paradoxically, from low-income people too in San Francisco. Obstructionists use the term 'Affordable Housing' to rebrand subsidized housing [Market rate housing is also rebranded 'Luxury Housing']. So when measures are proposed in SF, groups can't weather the political backlash of being against subsidized housing because they will be branded as "Anti Affordable Housing"!! ["Who in their right mind would be against that!?"] Normally the subsidy comes from amortizing the cost of building the development/homes over fewer and fewer market rate owners until the breaking point where it's not profitable [Don't forget, in SF any profit a developer makes in housing is 'evil'] for a housing developer to build. In the Mission District, it's common to have housing development stalled because it doesn't have enough subsidized housing to pass through the atypically excessive 'planning' process. Even when The City buys a lot to build housing it sits, stalled for years because of bureaucratic waste and inefficiency[1]. Effectively what's happened is that rent control has sheltered many residents from the market rate of housing to a point where they are effectively locked into staying in their current rental and will never be able to afford to move to a new rental or ever buy a house. Given that they have no hope of ever being able to afford market rate housing and the government of San Francisco is has the power obstruct planning process for a myriad of reasons [that are surreptitiously used to exercise backhanded influence rather than judicial assessment] they have every incentive to resist everything that's not subsidized. Comically to the point where obstructionists tried to literally block all housing, lest it be 100% subsidized.[2] [1]http://missionlocal.org/2016/08/city-cites-its-own-land-for-blight-gives-self-15-days-to-fix/ http://missionlocal.org/2016/08/city-cites-its-own-land-for-... [2]https://ballotpedia.org/City_of_San_Francisco_Mission_District_Housing_Moratorium_Initiative,_Proposition_I_(November_2015) https://ballotpedia.org/City_of_San_Francisco_Mission_Distri...
- twblalock 10y ago
  SF is one of the few cities where the poorest and the richest agree on housing policy. It's a very unusual situation.
  - Tiktaalik 10y ago
    SF is not special or unique at all and the rich and poor do not agree on housing policy. Both groups are looking out for their immediate near term interests. The rich want to maintain their low density single family neighbourhoods exactly as they were when they bought into them. The poor simply want to keep their current home and have it not torn down, as every other apartment is almost certain to be dramatically more expensive to rent than their current one. If the city suggested building mid rise buildings with a percentage of below market units in leafy rich neighbourhoods far from low income areas you'd see that low income persons would be quite happy about this development. The rich wouldn't be. Of course this is almost never the case. Rich homeowners vote in greater numbers and have the time and capacity to fight back, and so what we see is that the areas first in line for redevelopment are almost always low income areas (ie. The Mission) while rich ultra low density areas are left untouched.

derefr 10y ago

Naive question: how much would it distort the market if prices were allowed to rise on undeveloped land, but there was a sort of "land-value control" equivalent to rent-control on developed land, preventing its value from rising? (Maybe implemented in terms of a tax at time-of-sale that takes away however much profit was made due to property-price inflation and just hands it to the city instead.)

pseudonom- 10y ago
https://en.m.wikipedia.org/wiki/Community_land_trust https://en.m.wikipedia.org/wiki/Community_land_trust is certainly relevant.
philsnow 10y ago
It sounds like it would dis-incentivize market liquidity even more than Prop 13 already does.
JoshTriplett 10y ago
> Maybe implemented in terms of a tax at time-of-sale that takes away however much profit was made due to property-price inflation and just hands it to the city instead. Apart from being unjust, that approach would completely break the market and put people out on the street. You buy a house for $200k; its value increases to $400k; you sell it, and the city takes $200k, leaving you with $200k. You now cannot afford any of the houses currently for sale for $400k, even though the additional $200k you don't have would just go to the city, and the seller just gets the $200k you actually have. Typical price controls affect both sides of the transaction, so the house value can't increase, or doesn't increase faster than a certain limit. That at least doesn't directly prevent people from selling one house and buying another comparable house. To answer your original question, though: to what extent do the areas in most dire need of housing have any undeveloped land? Those areas don't have much undeveloped land; they have underdeveloped land. If you had price controls on undeveloped land but not on developed land, at some point you'd end up with a price inversion where a given property with a house on it has less value than the same property without the house. At which point someone wanting to extract the increased value could demolish the house and then sell the land at market value.
- derefr 10y ago
  > You now cannot afford any of the houses currently for sale for $400k Why would the houses continue to be for sale for $400k? I can't see why people would bother to charge any more than the price they bought the house for, once they realized that the government would pocket any profit. If selling for either $400k or $200k gives you either way $200k, it's in your interest as a seller to sell for the lesser amount, because you get more buyers more quickly that way. > At which point someone wanting to extract the increased value could demolish the house and then sell the land at market value. That was actually partly the point! It incentivizes property-management companies to try to lobby to remove the NIMBY barriers in the way of tearing down old buildings.
  - JoshTriplett 10y ago
    > Why would the houses continue to be for sale for $400k? I can't see why people would bother to charge any more than the price they bought the house for, once they realized that the government would pocket any profit. If selling for $400k or $200k just gives you $200k, it's in your interest as a seller to sell for $200k. That sounds like a plausible (but not certain) outcome, assuming a 100% tax with no way around it. I wouldn't underestimate creative (legal) solutions, though. A structure like this creates major incentives for under-the-table sales, fees, or anything that doesn't qualify as "part of the sale price". For instance, it would create an incentive for "buyer pays" transactions, where the buyer directly pays for all associated services involved with a sale without paying the seller directly, including those costs typically paid by the seller or split between the two. > That was actually partly the point! It incentivizes property-management companies to try to lobby to remove the NIMBY barriers in the way of tearing down old buildings. Interesting notion. What stops them from tearing down those old buildings today, though? It seems like the bigger problem is that they can't build new buildings that aren't just as sparse and under-developed as the old.
    - smallnamespace 10y ago
      As an side note, this is almost the same as proposing price controls for the entire real estate market, since the price of land and housing are closely linked (at least in SF). https://en.wikipedia.org/wiki/Price_controls https://en.wikipedia.org/wiki/Price_controls Let's say we implement full controls tomorrow in SF, where all real estate appreciation is capped at, say, inflation. As demand for housing continues to grow, you'll find that the government-mandated capped price will rapidly diverge from what the free market price is, e.g. someone is willing to pay $1mm for a house but it can only be sold for $600,000. Since the seller is essentially being forced to take a bath, property owners will simply not sell. The market becomes extremely illiquid and everyone loses. The key to understanding the seller's behavior, by the way, is because under price controls the market becomes extremely asymmetric. An excess of demand means that every potential seller has MANY potential buyers who are all willing to pay the asking price, so buying becomes a huge lottery. So if you own a property and you sell, there's very little chance you can change your mind later on and buy a different property, whereas in a normal market you just pay the normal transaction fees.

DINKDINK 10y ago

Political resistance to new housing also comes, paradoxically, from low-income people too in San Francisco. Obstructionists use the term 'Affordable Housing' to rebrand subsidized housing [Market rate housing is also rebranded 'Luxury Housing']. So when measures are proposed in SF, groups can't weather the political backlash of being against subsidized housing because they will be branded as "Anti Affordable Housing"!! ["Who in their right mind would be against that!?"] Normally the subsidy comes from amortizing the cost of building the development/homes over fewer and fewer market rate owners until the breaking point where it's not profitable [Don't forget, in SF any profit a developer makes in housing is 'evil'] for a housing developer to build. In the Mission District, it's common to have housing development stalled because it doesn't have enough subsidized housing to pass through the atypically excessive 'planning' process. Even when The City buys a lot to build housing it sits, stalled for years because of bureaucratic waste and inefficiency[1]. Effectively what's happened is that rent control has sheltered many residents from the market rate of housing to a point where they are effectively locked into staying in their current rental and will never be able to afford to move to a new rental or ever buy a house. Given that they have no hope of ever being able to afford market rate housing and the government of San Francisco is has the power obstruct planning process for a myriad of reasons [that are surreptitiously used to exercise backhanded influence rather than judicial assessment] they have every incentive to resist everything that's not subsidized. Comically to the point where obstructionists tried to literally block all housing, lest it be 100% subsidized.[2] [1]http://missionlocal.org/2016/08/city-cites-its-own-land-for-blight-gives-self-15-days-to-fix/ http://missionlocal.org/2016/08/city-cites-its-own-land-for-... [2]https://ballotpedia.org/City_of_San_Francisco_Mission_District_Housing_Moratorium_Initiative,_Proposition_I_(November_2015) https://ballotpedia.org/City_of_San_Francisco_Mission_Distri...

twblalock 10y ago
SF is one of the few cities where the poorest and the richest agree on housing policy. It's a very unusual situation.
- Tiktaalik 10y ago
  SF is not special or unique at all and the rich and poor do not agree on housing policy. Both groups are looking out for their immediate near term interests. The rich want to maintain their low density single family neighbourhoods exactly as they were when they bought into them. The poor simply want to keep their current home and have it not torn down, as every other apartment is almost certain to be dramatically more expensive to rent than their current one. If the city suggested building mid rise buildings with a percentage of below market units in leafy rich neighbourhoods far from low income areas you'd see that low income persons would be quite happy about this development. The rich wouldn't be. Of course this is almost never the case. Rich homeowners vote in greater numbers and have the time and capacity to fight back, and so what we see is that the areas first in line for redevelopment are almost always low income areas (ie. The Mission) while rich ultra low density areas are left untouched.