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How California Became America’s Housing Market Nightmare

80 points by anarbadalov 7y ago

rcpt 7y ago
> California also has a distinct burden: Proposition 13, a measure approved by voters in 1978 that limits property-tax increases on homes until they’re sold. That’s been a boon for Baby Boomers who’ve lived in their houses for decades and aren’t assessed at anything close to their property’s market value. But it’s especially unfair to their children, who are in effect subsidizing their parents’ generation. yup
- willyg123 7y ago
  I think the greater impact of Prop 13 is the disincentive to downgrade into a smaller house after the kids move out. A better measure of housing supply would be in terms of bedrooms. I imagine there is a massive gap in CA relative to other states in terms of the efficiency of bedroom allocation.
- fortran77 7y ago
  Everyone benefits, not just "boomers". Anyone who buys a house ever gets the same protection. No more than 2% property tax increase/year. So if you bought a house in Silicon Valley for $1.5Million and the house next door sell for $3MM because someone had a lot of cash from their facebook stock, your property tax doesn't double.
  - sjg007 7y ago
    One $3M cash buyer doesn't change the taxable FMV on your house. That price isn't considered in assessments. Now if 10 houses in your neighborhood sold similarily and are roughly equivalent to your house, then your tax would go up. This actually happened in Palo Alto when Zuckerberg bought the houses around his home.
  - d1zzy 7y ago
    If you think that a house bought today will see the same relative increase in value over the next 20 years then yes, you'd be right. I'd argue that seems extremely unlikely for a whole set of reasons but the time will who was right. Note that we're not just talking here about paying lower tax for 1-5 years where the property prices go up, we're talking about taking advantage of this benefit over the course of multiple decades, that's where it adds up and I doubt the same will be true for those that buy a house in Silicon Valley today at market price.
    - rcpt 7y ago
      > the same relative increase in value over the next 20 years Which will just get us what Hong Kong has now
- NTDF9 7y ago
  yup
  - mylons 7y ago
    yup
- malvosenior 7y ago
  I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? A lot of these people probably had normal jobs and incomes, they didn't chose for Google/Apple/Facebook to move into town and send the property prices sky high. Yes, they benefit as owners but this rule only takes effect if they don't sell their house and continue to live in it. The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative.
  - ariwilson 7y ago
    We live in society; everyone is interconnected. One's own self interest cannot outweigh the needs of the group and, in California, all the stats are showing that the group is suffering due to the needs of the few. Prop 13 is part of the problem and should be reduced in effect (commercial property taxes, max rise of 3% annually) alongside changes to zoning until the housing crisis abates.
    - la6470 7y ago
      Sensible take the middle road folks
  - WWLink 7y ago
    Apple has been in the same general area since the 1970s, and all of the many companies that came before them lol.
    - malvosenior 7y ago
      Yes, but they weren't the money printing machine back then that they are now and it's highly doubtful they had a meaningful impact on Bay Area real estate prices in the 1970s.
  - klipt 7y ago
    Of course prop 13 "seems" fair, that's how it got passed. But it has terrible consequences. Adjusted for inflation, it makes taxes drop to 0 in the limit, which means there's no incentive for rich people to ever sell. Which means real estate becomes hoarded across generations by the wealthy class, which recreates the main feature of feudalism.
- claudeganon 7y ago
  Repealing Proposition 13, state-level permissive zoning, and using the resulting money to build social housing is the only way I can see out of the crisis. Everything else is just a put-off so the financialized speculation and money laundering can continue apace.
  - BubRoss 7y ago
    Is social housing really a good focus in extremely valuable real estate areas? Many places in the world are too expensive for most people to live in. Places like Vancouver and Toronto though, have a skyline of cranes building high rises to meet the demand. Social housing in high prices areas is manipulation that doesn't help many people. Letting the demand be met on the high end and shooting for social housing in more reasonable areas makes much more sense. I'm not convinced that market distortion in pricey areas helps anyone when people who are in danger of not having basic needs met need something accessible, not a multi-year process to win a cheaper place in a hot area.
    - claudeganon 7y ago
      Vienna is consistently ranked among the best cities in the world and has a high degree of social housing. And the same is true for places like Singapore and cities across the more social democratic parts of Europe. If anything, the availability of social housing puts a downward pressure on prices and makes sure that people who perform many of the vital functions of running cities (healthcare workers, teachers, infrastructure maintenance workers) can afford to live there. Leaving something as necessary to survival as housing open to a highly financialized, global capital markets has proven time and time again to be a rolling disaster of homelessness and unaffordability.
      - BubRoss 7y ago
        What Singapore does is not at all the same as what is talked about here. Singapore isn't building housing in the hottest areas and selling it for cheaper than a market rate, they are building their own housing and selling it at market rates to Singaporean citizens with restrictions. San Francisco forces developers to have certain amounts of units that get rented out for half the normal price as a stipulation for building. This is directly counter to market prices in desirable areas.
- jread 7y ago
  With follow-on Props 58 and 193, property tax assessments can be inherited/assumed by children and grandchildren. So not only do they inherit the property tax-free, but get the added benefit of often well-below market property tax rate in perpetuity. Then expand this to not only primary residences, but also second homes and commercial property.
  - georgeecollins 7y ago
    As a 5th generation Californian this is the thing I see in my life. My parent's have a house that has become really expensive (to be fair it was always nice) and they pay a lot less property tax than I do on my more modest California home. That crazy low tax rate is ultimately transferable to one of us, even if we move. Me or my sister will inherit the ability to own $x amount of real estate and pay $y worth in property taxes. Insanity.
- RubberSoul 7y ago
  The injustice is actually larger than this paragraph makes it seem. First, people can pass their low property taxes on to their children using trusts, creating a sort of landed nobility in California. Second, Prop 13 results in neighbors who receive the same public services paying vastly different taxes to fund them. Taxing similarly situated individuals differently violates the norm of horizontal equity.
- charlesju 7y ago
  I would say it's especially unfair to new California residents and great for their children. I grew up in Silicon Valley and almost everyone I grew up with have parents that live very comfortably if for nothing else than their property value skyrocketing over the last 3 decades. Everyone that bought a house in the 1980s or 90s are now millionaires a couple times over. As children of wealthy parents, the natural benefits are going to be passed down to us, if not in the short term through day-to-day subsidies but in the long term future through generational wealth. The real issue with Silicon Valley was the tech boom after 2004, tech companies went from being worth a couple billion to several being worth multiple hundreds of billions. That amount of wealth in a 15 year time frame is really hard for the public infrastructure to keep up with.
- satya71 7y ago
  The ideal way to tax the increase of property value is at a liquidity event (ie sale) when the owner has the cash, and limit the cash required of the owner just because there's a bubble. That's kind of how capital gains on stocks are cashed.
- Starkus 7y ago
  A Californian law that is inefficient and restrictive? No surprise there. California has been extremely fortunate with major economic forces driving their economy for decades, but paired with ineffective governance to this beautiful state, is incredibly disappointing. No pity for CA though, a lot of their voters over the years enabled this
  - d1zzy 7y ago
    But to make some things clear for those that might be reading and aren't familiar with California politics, Prop 13 is not the result of some politicians voting against the public interest or being populist or our out of touch any of those things, it's the result of direct democracy[1]. "The People" thought this is in their best interest, so they are now going to deal with the consequences. [1] https://en.wikipedia.org/wiki/1978_California_Proposition_13 https://en.wikipedia.org/wiki/1978_California_Proposition_13
    - masonic 7y ago
      The Legislature could have changed it with a Legislative Constitutional Amendment at any time. After that, it only needs a simple majority of the voters to take effect.
- jayd16 7y ago
  Its easy to complain but the reality of what your demanding is that many more elderly citizens should be unable to afford their homes and be forced out of them. That's not a preventable side effect, that's the desired outcome. It seems obvious to me why many don't think that's ideal. If opponents of prop 13 want it repealed they're going to have to buy out existing homeowners to get the votes. I won't pretend to know what that would take but you won't get the moral high ground with a straight repeal so you might as think of some sugar coating.
  - yonran 7y ago
    Proposition 13 was advertised to protect the poor and elderly citizens, but its design does not target them. In particular, it benefits those who don’t need help: commercial landlords, rental landlords, and (after Proposition 58/193) feudal estates. And it harms those poor and elderly who are unable to purchase a house. In short, it is an entitlement that benefits homeowners, at the expense of renters and home-seekers. It takes some tautological reasoning to defend its poor design if the goal is protecting lower income households; see the Stevens dissent to Nordlinger v Hahn https://www.law.cornell.edu/supct/html/90-1912.ZD.html https://www.law.cornell.edu/supct/html/90-1912.ZD.html
- Shivetya 7y ago
  well the proposition system is near as many will get to straight up democracy, which comes down to voting everything yourself and people like yourself with occasional as in infrequent guilt trip votes. 13 was part of the problem but it really all comes down to a system by which politicians and special interest groups can simply tie up development until they get their pound of flesh. it simply is too easy to burden new development with requirements and also too easy to nimby it behind well meaning suits that merely mask the bigotry underneath
mylons 7y ago
Prices are so insane here they make Lake Tahoe (NV side) look rational, and appealing.
m15i 7y ago
So build more houses?
- tstrimple 7y ago
  More houses? Not in MY back yard! Building more houses will depress housing prices. Home owners tend to value their equity more than ensuring housing is affordable for others.
  - gyc 7y ago
    Also wanting the neighborhood to be preserved in amber from when they bought the place.
  - fortran77 7y ago
    I own a house in Silicon Valley and I would love for them to build more housing. Keep building until housing is affordable again. Many homeowners here feel the same way.
    - tstrimple 7y ago
      Sure. It's never about the individual. Individually, there are plenty of great homeowners who would hurt themselves financially to help out their fellow man. Unfortunately, as is shown by reality, there aren't enough of them in aggregate to overcome the NIMBY class. Otherwise there would be action taken instead of just maintaining the status quo.
chiefalchemist 7y ago
> "How did we get here? Simply put, bad government—from outdated zoning laws to a 40-year-old tax provision that benefits long-time homeowners at the expense of everyone else—has created a severe shortage of houses. While decades in the making, California’s slow-moving disaster has reached a critical point for state officials, businesses and the millions who are straining to live there." To be clear, and fair, the economic implosion circa 2007 / 2008 helpeda lot as well. That "crisis" led to a massive redistribution of (home equity) wealth. The under-waters bottomed out and those with the resources stepped in and filled the void at pennies on the dollar. With so much control and so much demand rents only go up.
Mathnerd314 7y ago
Paris is 55k people per square mile, San Francisco is 17k per square mile. So there is room for growth. I think it's more likely that people will just continue fleeing the state though. It's tech work so there's nothing preventing people from working remotely.
- carapace 7y ago
  FWIW, Paris is a transportation hub in the middle of the county, San Francisco is surrounded by water or three sides.
  - Mathnerd314 7y ago
    NYC has a lot of water too, and its density is comparable to Paris. All these cities have "housing shortages" though, according to newspapers.
g2ah5z 7y ago
This is the great irony of government intervention in the economy. When they try to make housing more affordable, it becomes dramatically less affordable. When they try to make college more accessible, it ends up raising the cost of tuition to astronomical levels. When they try to correct a perceived injustice, it ends up creating real injustice by picking winners and losers. When they raise the minimum wage, they put people out of work. When they try to guarantee defined retirement benefits, they end up going bankrupt and robbing their workers of the pensions they were promised. When they subsidize dying industries to "save jobs", they ending destroying more jobs than they save. Yet despite these failures, people on both sides of the aisle seem to think that the solution to the problems created by government policy should be solved by additional layers of policy. It's a feedback loop of insanity.
- helen___keller 7y ago
  > When they try to make housing more affordable, it becomes dramatically less affordable. Zoning law (the biggest factor in restricting new housing growth) was never about making housing more affordable, it was supposed to be about quality of life (and many times was actually about racism, see redlining era)
  - g2ah5z 7y ago
    I was referring to Prop 13, rent control laws, federal tax breaks given to homeowners, and the numerous subsidized home loan products provided by Fannie, Freddie, the Federal Housing Administration, and the Veterans Administration. All of these were intended to make housing more affordable, but ended up jacking up asset prices to extreme levels. I agree with you that zoning was never intended to make housing more affordable, but it's not the only policy in play.
    - helen___keller 7y ago
      A lot of these products probably made sense in an era where there was a massive amount of undeveloped farmland suddenly available to build houses on and connect via road - if undeveloped land is cheap, the costs of a new house can't rise significantly above the cost to build a new house, so offering incentives to homeowners makes some amount of sense. This doesn't happen anymore as most cities are at "peak suburb" - the undeveloped land that still exists is so far out that nobody wants the insane drive into the city (and rightfully so). But yeah in the 21st century where everyone is competing the afford the same few properties in the same few neighborhoods, subsidizing homeownership is just subsidizing bidding wars. There's no productive economic activity being subsidized like it used to be (construction of new homes on undeveloped land yields more living space for the city, which I would consider productive) - a bidding war just leads to the previous homeowner getting a fatter payout. In theory, if prices were kept to reasonable levels via sufficient construction, I could get behind (toned down versions of) prop 13 and rent control. It's just clearly they exacerbate price issues, and to say California has a price issue is an understatement.
Fainsan 7y ago
Why should California be allowed to have the same percentage based property tax to begin with? Assessed values that skyrocketed due to Silicon Valley and Corrupted Mortgages and Appraisals shouldn't mean California gets to give itself a humongous raise at the expense of it's constituents. More so due to the bail out and them artificially keeping interest rates down re-enabling these high values. The economy as a whole would be better off by managing housing values to not be out of line with median incomes of any given area.
- helen___keller 7y ago
  > The economy as a whole would be better off by managing housing values to not be out of line with median incomes of any given area. I don't think anyone serious about this topic can disagree the economy would be hugely benefitted if the bay area built a massive amount of housing, particularly around transit corridors. Despite this, it continues to not happen.
neonate 7y ago
http://archive.is/puSKl http://archive.is/puSKl
shakil 7y ago
> In recent years, younger, less-educated and lower-income folks have led the exodus from the state ... Or in other words, Republicans [1] 1. https://www.mercurynews.com/2019/11/06/study-finds-republicans-are-more-likely-to-consider-leaving-california/ https://www.mercurynews.com/2019/11/06/study-finds-republica...
- undersuit 7y ago
  But other reports show leaving Californians turning their destination states more "blue". https://www.kunr.org/post/californians-move-are-turning-nevada-blue#stream/0 https://www.kunr.org/post/californians-move-are-turning-neva... https://thehill.com/homenews/campaign/460155-texas-republicans-sound-alarm-about-rapidly-evolving-state https://thehill.com/homenews/campaign/460155-texas-republica... https://www.npr.org/sections/itsallpolitics/2013/08/29/216150644/how-california-is-turning-the-rest-of-the-west-blue https://www.npr.org/sections/itsallpolitics/2013/08/29/21615...
  - shakil 7y ago
    I think we can bridge the gap. In California these people were Republicans, but when they reach a real red state, they realize its better to be a Democrat and turn blue :D
ranDOMscripts 7y ago
This article is remiss in not mentioning how Jarvis et al. also got commercial property included in Prop 13. With many commercial properties held in trusts and corporations, the ownership never "changes" and generations of beneficiaries pay a pittance in taxes on incredibly valuable real estate. San Francisco, in particular, strikes me as a city awash in properties that haven't changed hands in generations because even a crappy old warehouse practically mints income. Thankfully, Californians have the opportunity to correct this giveaway with a vote for a split-roll in 2020[0]. [0]https://www.sfchronicle.com/politics/article/Change-in-California-s-Prop-13-makes-2020-13314983.php https://www.sfchronicle.com/politics/article/Change-in-Calif...
outerspace 7y ago
I think there is a straightforward solution to the housing crisis, and it’s not building more houses and squeezing more and more people into the same limited space. At least for Big Tech, which seems to be the focus of the problem, the solution would be telecommuting. As a software engineer, there is no reason whatsoever for me to go to an office. I can do whatever I do from anywhere in the world as long as I have a decent internet connection. Yet I’m forced to live in an expensive place just because of some old pre-hitech mentality that expects me to be in an office.
- helen___keller 7y ago
  > At least for Big Tech, which seems to be the focus of the problem, the solution would be telecommuting. I like to call this the "thoughts and prayers" solution - we offer thoughts and prayers that big tech will suddenly de-prioritize having butts in their HQ and that demand will greatly drop as a result.
Fainsan 7y ago
More Housing is no solution. That's compounding the issue at hand. Lower Property taxes plus value adjustments for areas based on median income could help ensure you don't price residents out of their areas and ensure healthy participation in the rest of the economy.
- helen___keller 7y ago
  > More Housing is no solution. That's compounding the issue at hand How so? > value adjustments for areas based on median income What do you mean value adjustments?
  - Fainsan 7y ago
    Adjustment of Home Values. If any given area is selling at levels higher than standard median income allows and that given area is experiencing a higher than average number of Foreclosures (or pick a reasonable threshold), requirements should be in place to ensure that if a home defaults, it doesn't go back to market at those same values, but lower. After all, if you go strictly by banks rules, housing costs shouldn't be over 35% of income to hopefully prevent this from reoccurring.
    - helen___keller 7y ago
      I'm not sure I understand. Firstly, banks can't offer their foreclosed assets as significantly less than market rate because homes are used as collateral in a mortgage, so they'd have to just stop offering mortgages, which means only cash buyers get homes Secondly, even if a bank did offer the foreclosed homes much cheaper, it won't fix gentrification, it just means whenever a house gets foreclosed a bunch of cash buyers swoop in and flip a house back to market rate for a free profit (or realistically, hold a bidding war and end up paying close to market rate anyways) It doesn't make logical sense suggesting a bank has any power to change market rate (whether that's an asset bubble or genuine demand)
k-dude-sj 7y ago
A simple crazy fix idea, eliminate the collection of tax revenue on property... collect county taxes through income like everything else. Counties have been burdening their revenue needs onto only property owners. just add it to our collective April tax bill maybe? too simple?
Fainsan 7y ago
This isn't a simple supply and demand situation, zoning issue, or tax issue. If we built 1 million homes in California, only a small percentage of those homes would be deemed "affordable housing" and what would have to control that affordability? We don't want to have to subsidize, we need broader laws governing home values tied into median income for any given area. All banks scrutinze lending based off 35% Debt to Income ratio's, why not scrutinize appraised values of homes and include consideration for median income in all evaluations?

80 points by anarbadalov 7y ago

rcpt 7y ago

> California also has a distinct burden: Proposition 13, a measure approved by voters in 1978 that limits property-tax increases on homes until they’re sold. That’s been a boon for Baby Boomers who’ve lived in their houses for decades and aren’t assessed at anything close to their property’s market value. But it’s especially unfair to their children, who are in effect subsidizing their parents’ generation. yup

willyg123 7y ago
I think the greater impact of Prop 13 is the disincentive to downgrade into a smaller house after the kids move out. A better measure of housing supply would be in terms of bedrooms. I imagine there is a massive gap in CA relative to other states in terms of the efficiency of bedroom allocation.
fortran77 7y ago
Everyone benefits, not just "boomers". Anyone who buys a house ever gets the same protection. No more than 2% property tax increase/year. So if you bought a house in Silicon Valley for $1.5Million and the house next door sell for $3MM because someone had a lot of cash from their facebook stock, your property tax doesn't double.
- sjg007 7y ago
  One $3M cash buyer doesn't change the taxable FMV on your house. That price isn't considered in assessments. Now if 10 houses in your neighborhood sold similarily and are roughly equivalent to your house, then your tax would go up. This actually happened in Palo Alto when Zuckerberg bought the houses around his home.
- d1zzy 7y ago
  If you think that a house bought today will see the same relative increase in value over the next 20 years then yes, you'd be right. I'd argue that seems extremely unlikely for a whole set of reasons but the time will who was right. Note that we're not just talking here about paying lower tax for 1-5 years where the property prices go up, we're talking about taking advantage of this benefit over the course of multiple decades, that's where it adds up and I doubt the same will be true for those that buy a house in Silicon Valley today at market price.
  - rcpt 7y ago
    > the same relative increase in value over the next 20 years Which will just get us what Hong Kong has now
NTDF9 7y ago
yup
- mylons 7y ago
  yup
malvosenior 7y ago
I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? A lot of these people probably had normal jobs and incomes, they didn't chose for Google/Apple/Facebook to move into town and send the property prices sky high. Yes, they benefit as owners but this rule only takes effect if they don't sell their house and continue to live in it. The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative.
- ariwilson 7y ago
  We live in society; everyone is interconnected. One's own self interest cannot outweigh the needs of the group and, in California, all the stats are showing that the group is suffering due to the needs of the few. Prop 13 is part of the problem and should be reduced in effect (commercial property taxes, max rise of 3% annually) alongside changes to zoning until the housing crisis abates.
  - la6470 7y ago
    Sensible take the middle road folks
- WWLink 7y ago
  Apple has been in the same general area since the 1970s, and all of the many companies that came before them lol.
  - malvosenior 7y ago
    Yes, but they weren't the money printing machine back then that they are now and it's highly doubtful they had a meaningful impact on Bay Area real estate prices in the 1970s.
- klipt 7y ago
  Of course prop 13 "seems" fair, that's how it got passed. But it has terrible consequences. Adjusted for inflation, it makes taxes drop to 0 in the limit, which means there's no incentive for rich people to ever sell. Which means real estate becomes hoarded across generations by the wealthy class, which recreates the main feature of feudalism.
claudeganon 7y ago
Repealing Proposition 13, state-level permissive zoning, and using the resulting money to build social housing is the only way I can see out of the crisis. Everything else is just a put-off so the financialized speculation and money laundering can continue apace.
- BubRoss 7y ago
  Is social housing really a good focus in extremely valuable real estate areas? Many places in the world are too expensive for most people to live in. Places like Vancouver and Toronto though, have a skyline of cranes building high rises to meet the demand. Social housing in high prices areas is manipulation that doesn't help many people. Letting the demand be met on the high end and shooting for social housing in more reasonable areas makes much more sense. I'm not convinced that market distortion in pricey areas helps anyone when people who are in danger of not having basic needs met need something accessible, not a multi-year process to win a cheaper place in a hot area.
  - claudeganon 7y ago
    Vienna is consistently ranked among the best cities in the world and has a high degree of social housing. And the same is true for places like Singapore and cities across the more social democratic parts of Europe. If anything, the availability of social housing puts a downward pressure on prices and makes sure that people who perform many of the vital functions of running cities (healthcare workers, teachers, infrastructure maintenance workers) can afford to live there. Leaving something as necessary to survival as housing open to a highly financialized, global capital markets has proven time and time again to be a rolling disaster of homelessness and unaffordability.
    - BubRoss 7y ago
      What Singapore does is not at all the same as what is talked about here. Singapore isn't building housing in the hottest areas and selling it for cheaper than a market rate, they are building their own housing and selling it at market rates to Singaporean citizens with restrictions. San Francisco forces developers to have certain amounts of units that get rented out for half the normal price as a stipulation for building. This is directly counter to market prices in desirable areas.
jread 7y ago
With follow-on Props 58 and 193, property tax assessments can be inherited/assumed by children and grandchildren. So not only do they inherit the property tax-free, but get the added benefit of often well-below market property tax rate in perpetuity. Then expand this to not only primary residences, but also second homes and commercial property.
- georgeecollins 7y ago
  As a 5th generation Californian this is the thing I see in my life. My parent's have a house that has become really expensive (to be fair it was always nice) and they pay a lot less property tax than I do on my more modest California home. That crazy low tax rate is ultimately transferable to one of us, even if we move. Me or my sister will inherit the ability to own $x amount of real estate and pay $y worth in property taxes. Insanity.
RubberSoul 7y ago
The injustice is actually larger than this paragraph makes it seem. First, people can pass their low property taxes on to their children using trusts, creating a sort of landed nobility in California. Second, Prop 13 results in neighbors who receive the same public services paying vastly different taxes to fund them. Taxing similarly situated individuals differently violates the norm of horizontal equity.
charlesju 7y ago
I would say it's especially unfair to new California residents and great for their children. I grew up in Silicon Valley and almost everyone I grew up with have parents that live very comfortably if for nothing else than their property value skyrocketing over the last 3 decades. Everyone that bought a house in the 1980s or 90s are now millionaires a couple times over. As children of wealthy parents, the natural benefits are going to be passed down to us, if not in the short term through day-to-day subsidies but in the long term future through generational wealth. The real issue with Silicon Valley was the tech boom after 2004, tech companies went from being worth a couple billion to several being worth multiple hundreds of billions. That amount of wealth in a 15 year time frame is really hard for the public infrastructure to keep up with.
satya71 7y ago
The ideal way to tax the increase of property value is at a liquidity event (ie sale) when the owner has the cash, and limit the cash required of the owner just because there's a bubble. That's kind of how capital gains on stocks are cashed.
Starkus 7y ago
A Californian law that is inefficient and restrictive? No surprise there. California has been extremely fortunate with major economic forces driving their economy for decades, but paired with ineffective governance to this beautiful state, is incredibly disappointing. No pity for CA though, a lot of their voters over the years enabled this
- d1zzy 7y ago
  But to make some things clear for those that might be reading and aren't familiar with California politics, Prop 13 is not the result of some politicians voting against the public interest or being populist or our out of touch any of those things, it's the result of direct democracy[1]. "The People" thought this is in their best interest, so they are now going to deal with the consequences. [1] https://en.wikipedia.org/wiki/1978_California_Proposition_13 https://en.wikipedia.org/wiki/1978_California_Proposition_13
  - masonic 7y ago
    The Legislature could have changed it with a Legislative Constitutional Amendment at any time. After that, it only needs a simple majority of the voters to take effect.
jayd16 7y ago
Its easy to complain but the reality of what your demanding is that many more elderly citizens should be unable to afford their homes and be forced out of them. That's not a preventable side effect, that's the desired outcome. It seems obvious to me why many don't think that's ideal. If opponents of prop 13 want it repealed they're going to have to buy out existing homeowners to get the votes. I won't pretend to know what that would take but you won't get the moral high ground with a straight repeal so you might as think of some sugar coating.
- yonran 7y ago
  Proposition 13 was advertised to protect the poor and elderly citizens, but its design does not target them. In particular, it benefits those who don’t need help: commercial landlords, rental landlords, and (after Proposition 58/193) feudal estates. And it harms those poor and elderly who are unable to purchase a house. In short, it is an entitlement that benefits homeowners, at the expense of renters and home-seekers. It takes some tautological reasoning to defend its poor design if the goal is protecting lower income households; see the Stevens dissent to Nordlinger v Hahn https://www.law.cornell.edu/supct/html/90-1912.ZD.html https://www.law.cornell.edu/supct/html/90-1912.ZD.html
Shivetya 7y ago
well the proposition system is near as many will get to straight up democracy, which comes down to voting everything yourself and people like yourself with occasional as in infrequent guilt trip votes. 13 was part of the problem but it really all comes down to a system by which politicians and special interest groups can simply tie up development until they get their pound of flesh. it simply is too easy to burden new development with requirements and also too easy to nimby it behind well meaning suits that merely mask the bigotry underneath

mylons 7y ago

Prices are so insane here they make Lake Tahoe (NV side) look rational, and appealing.

m15i 7y ago

So build more houses?

tstrimple 7y ago
More houses? Not in MY back yard! Building more houses will depress housing prices. Home owners tend to value their equity more than ensuring housing is affordable for others.
- gyc 7y ago
  Also wanting the neighborhood to be preserved in amber from when they bought the place.
- fortran77 7y ago
  I own a house in Silicon Valley and I would love for them to build more housing. Keep building until housing is affordable again. Many homeowners here feel the same way.
  - tstrimple 7y ago
    Sure. It's never about the individual. Individually, there are plenty of great homeowners who would hurt themselves financially to help out their fellow man. Unfortunately, as is shown by reality, there aren't enough of them in aggregate to overcome the NIMBY class. Otherwise there would be action taken instead of just maintaining the status quo.

chiefalchemist 7y ago

> "How did we get here? Simply put, bad government—from outdated zoning laws to a 40-year-old tax provision that benefits long-time homeowners at the expense of everyone else—has created a severe shortage of houses. While decades in the making, California’s slow-moving disaster has reached a critical point for state officials, businesses and the millions who are straining to live there." To be clear, and fair, the economic implosion circa 2007 / 2008 helpeda lot as well. That "crisis" led to a massive redistribution of (home equity) wealth. The under-waters bottomed out and those with the resources stepped in and filled the void at pennies on the dollar. With so much control and so much demand rents only go up.

Mathnerd314 7y ago

Paris is 55k people per square mile, San Francisco is 17k per square mile. So there is room for growth. I think it's more likely that people will just continue fleeing the state though. It's tech work so there's nothing preventing people from working remotely.

carapace 7y ago
FWIW, Paris is a transportation hub in the middle of the county, San Francisco is surrounded by water or three sides.
- Mathnerd314 7y ago
  NYC has a lot of water too, and its density is comparable to Paris. All these cities have "housing shortages" though, according to newspapers.

g2ah5z 7y ago

This is the great irony of government intervention in the economy. When they try to make housing more affordable, it becomes dramatically less affordable. When they try to make college more accessible, it ends up raising the cost of tuition to astronomical levels. When they try to correct a perceived injustice, it ends up creating real injustice by picking winners and losers. When they raise the minimum wage, they put people out of work. When they try to guarantee defined retirement benefits, they end up going bankrupt and robbing their workers of the pensions they were promised. When they subsidize dying industries to "save jobs", they ending destroying more jobs than they save. Yet despite these failures, people on both sides of the aisle seem to think that the solution to the problems created by government policy should be solved by additional layers of policy. It's a feedback loop of insanity.

helen___keller 7y ago
> When they try to make housing more affordable, it becomes dramatically less affordable. Zoning law (the biggest factor in restricting new housing growth) was never about making housing more affordable, it was supposed to be about quality of life (and many times was actually about racism, see redlining era)
- g2ah5z 7y ago
  I was referring to Prop 13, rent control laws, federal tax breaks given to homeowners, and the numerous subsidized home loan products provided by Fannie, Freddie, the Federal Housing Administration, and the Veterans Administration. All of these were intended to make housing more affordable, but ended up jacking up asset prices to extreme levels. I agree with you that zoning was never intended to make housing more affordable, but it's not the only policy in play.
  - helen___keller 7y ago
    A lot of these products probably made sense in an era where there was a massive amount of undeveloped farmland suddenly available to build houses on and connect via road - if undeveloped land is cheap, the costs of a new house can't rise significantly above the cost to build a new house, so offering incentives to homeowners makes some amount of sense. This doesn't happen anymore as most cities are at "peak suburb" - the undeveloped land that still exists is so far out that nobody wants the insane drive into the city (and rightfully so). But yeah in the 21st century where everyone is competing the afford the same few properties in the same few neighborhoods, subsidizing homeownership is just subsidizing bidding wars. There's no productive economic activity being subsidized like it used to be (construction of new homes on undeveloped land yields more living space for the city, which I would consider productive) - a bidding war just leads to the previous homeowner getting a fatter payout. In theory, if prices were kept to reasonable levels via sufficient construction, I could get behind (toned down versions of) prop 13 and rent control. It's just clearly they exacerbate price issues, and to say California has a price issue is an understatement.

Fainsan 7y ago

Why should California be allowed to have the same percentage based property tax to begin with? Assessed values that skyrocketed due to Silicon Valley and Corrupted Mortgages and Appraisals shouldn't mean California gets to give itself a humongous raise at the expense of it's constituents. More so due to the bail out and them artificially keeping interest rates down re-enabling these high values. The economy as a whole would be better off by managing housing values to not be out of line with median incomes of any given area.

helen___keller 7y ago
> The economy as a whole would be better off by managing housing values to not be out of line with median incomes of any given area. I don't think anyone serious about this topic can disagree the economy would be hugely benefitted if the bay area built a massive amount of housing, particularly around transit corridors. Despite this, it continues to not happen.

neonate 7y ago

http://archive.is/puSKl http://archive.is/puSKl

shakil 7y ago

> In recent years, younger, less-educated and lower-income folks have led the exodus from the state ... Or in other words, Republicans [1] 1. https://www.mercurynews.com/2019/11/06/study-finds-republicans-are-more-likely-to-consider-leaving-california/ https://www.mercurynews.com/2019/11/06/study-finds-republica...

undersuit 7y ago
But other reports show leaving Californians turning their destination states more "blue". https://www.kunr.org/post/californians-move-are-turning-nevada-blue#stream/0 https://www.kunr.org/post/californians-move-are-turning-neva... https://thehill.com/homenews/campaign/460155-texas-republicans-sound-alarm-about-rapidly-evolving-state https://thehill.com/homenews/campaign/460155-texas-republica... https://www.npr.org/sections/itsallpolitics/2013/08/29/216150644/how-california-is-turning-the-rest-of-the-west-blue https://www.npr.org/sections/itsallpolitics/2013/08/29/21615...
- shakil 7y ago
  I think we can bridge the gap. In California these people were Republicans, but when they reach a real red state, they realize its better to be a Democrat and turn blue :D

ranDOMscripts 7y ago

This article is remiss in not mentioning how Jarvis et al. also got commercial property included in Prop 13. With many commercial properties held in trusts and corporations, the ownership never "changes" and generations of beneficiaries pay a pittance in taxes on incredibly valuable real estate. San Francisco, in particular, strikes me as a city awash in properties that haven't changed hands in generations because even a crappy old warehouse practically mints income. Thankfully, Californians have the opportunity to correct this giveaway with a vote for a split-roll in 2020[0]. [0]https://www.sfchronicle.com/politics/article/Change-in-California-s-Prop-13-makes-2020-13314983.php https://www.sfchronicle.com/politics/article/Change-in-Calif...

outerspace 7y ago

I think there is a straightforward solution to the housing crisis, and it’s not building more houses and squeezing more and more people into the same limited space. At least for Big Tech, which seems to be the focus of the problem, the solution would be telecommuting. As a software engineer, there is no reason whatsoever for me to go to an office. I can do whatever I do from anywhere in the world as long as I have a decent internet connection. Yet I’m forced to live in an expensive place just because of some old pre-hitech mentality that expects me to be in an office.

helen___keller 7y ago
> At least for Big Tech, which seems to be the focus of the problem, the solution would be telecommuting. I like to call this the "thoughts and prayers" solution - we offer thoughts and prayers that big tech will suddenly de-prioritize having butts in their HQ and that demand will greatly drop as a result.

Fainsan 7y ago

More Housing is no solution. That's compounding the issue at hand. Lower Property taxes plus value adjustments for areas based on median income could help ensure you don't price residents out of their areas and ensure healthy participation in the rest of the economy.

helen___keller 7y ago
> More Housing is no solution. That's compounding the issue at hand How so? > value adjustments for areas based on median income What do you mean value adjustments?
- Fainsan 7y ago
  Adjustment of Home Values. If any given area is selling at levels higher than standard median income allows and that given area is experiencing a higher than average number of Foreclosures (or pick a reasonable threshold), requirements should be in place to ensure that if a home defaults, it doesn't go back to market at those same values, but lower. After all, if you go strictly by banks rules, housing costs shouldn't be over 35% of income to hopefully prevent this from reoccurring.
  - helen___keller 7y ago
    I'm not sure I understand. Firstly, banks can't offer their foreclosed assets as significantly less than market rate because homes are used as collateral in a mortgage, so they'd have to just stop offering mortgages, which means only cash buyers get homes Secondly, even if a bank did offer the foreclosed homes much cheaper, it won't fix gentrification, it just means whenever a house gets foreclosed a bunch of cash buyers swoop in and flip a house back to market rate for a free profit (or realistically, hold a bidding war and end up paying close to market rate anyways) It doesn't make logical sense suggesting a bank has any power to change market rate (whether that's an asset bubble or genuine demand)

k-dude-sj 7y ago

A simple crazy fix idea, eliminate the collection of tax revenue on property... collect county taxes through income like everything else. Counties have been burdening their revenue needs onto only property owners. just add it to our collective April tax bill maybe? too simple?

Fainsan 7y ago

This isn't a simple supply and demand situation, zoning issue, or tax issue. If we built 1 million homes in California, only a small percentage of those homes would be deemed "affordable housing" and what would have to control that affordability? We don't want to have to subsidize, we need broader laws governing home values tied into median income for any given area. All banks scrutinze lending based off 35% Debt to Income ratio's, why not scrutinize appraised values of homes and include consideration for median income in all evaluations?