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A Brief History of California’s Housing Crisis
- justinzollars 7y agoIt's impossible to build anything here. This overregulation at work. I wrote a blog post about a plot of land in Bolinas which I hoped to build something on: http://jz.io/2018/05/12/development-is-difficult-in-california.html http://jz.io/2018/05/12/development-is-difficult-in-californ... TLDR there is triple overlap of legal authorities (City, State and County) who prevent you from building anything, with a 48 year old "water emergency" in place.
- 3fe9a03ccd14ca5 7y agoShhh, the city and state governments don’t want people to know that they are the reason we have a housing crisis. It’s much better to blame rich people, tech companies, foreign investors etc etc.
- toomuchtodo 7y ago1) "Rich people" want their property values to be stable or increase. They want their communities to be somewhat static. If I paid $1MM+ for a property in a dense CA metro, I can't say that'd I'd disagree with those desires. I'm buying a home and a location, not "housing" as a commodity. 2) Tech companies unnecessarily demand butts in chairs in the Bay Area, foisting the externalities onto the commons (infrastructure and housing). Tax them more if they won't go remote/support remote work. Destroy demand for dense housing and the associated infrastructure. 3) It's documented that there's substantial Chinese money flowing into specific US markets (the US isn't alone of course; Canada, Australia, and the UK also have this problem). This pushes up the price of real estate, whether these properties are lived in or simply used as a store of value outside of the CCP's reach. Due to property owner/voter and governance momentum, it is unlikely you will see the will to increase development inertia in any California market that requires it, ever. Your options are to complain and put up with it, find an economic path to leaping onto the ownership ladder ("startup lottery", inheritance, etc), or eventually abandoning hope and moving somewhere cheaper/more development friendly (such as Colorado, Texas, Utah, Tennessee, North Carolina, Florida, etc). Disclaimer: Not a CA resident, too expensive!
- wbl 7y agoIf you want to restrict what your neighbor can build buy an easement. Otherwise talk to the invisible hand. California makes money off of me being in it. Why is it good policy to drive an industry out?
- toomuchtodo 7y ago> If you want to restrict what your neighbor can build buy an easement. Otherwise talk to the invisible hand. I'm sorry you're unhappy with how zoning and local governance exists today, but that's the hand that has been dealt. > California makes money off of me being in it. Why is it good policy to drive an industry out? If you're happy with the quality of life available with the status quo (renting forever with rents continually increasing faster than inflation), feel free to stay. It's your income; if you want to rent forever, that's your choice. Owning in a high cost of living geographic area is not a right, it is a luxury obtained mostly by luck (either through a purchase before property value increased or a present day windfall of some sort, whether that's an inheritance, the startup lottery, or a high single or dual income that can support servicing a large amount of mortgage debt).
- thereisnospork 7y ago> I'm sorry you're unhappy with how zoning and local governance exists today, but that's the hand that has been dealt. A hand that has resulted in the ""housing crisis"" which is why we are here talking about why and how it should be changed.
- toomuchtodo 7y agoNo one with the authority to change it is talking about changing it. No one invested in the status quo is willing to delegate the necessary authority to YIMBYs or their surrogates. You’d be asking existing and potential property owners to vote against their own interests. Progress isn’t impossible, but it’s going to take decades to make meaningful reforms.
- deleted 7y ago[deleted]
- refurb 7y agoThat's pretty clear. If the gov't (at all levels) really wanted more housing, it could happen pretty dam quickly. There is enough capital floating around out there. Problem is the capital says "not worth the hassle" or "with all the delays and costs, it's not worth it".
- thrower123 7y agoHow the hell there isn't a giant apartment complex mandated, rather than forbidden, as part of these big tech company campuses is something I've scratched my head on. My best theory is that having to sing "Sixteen Tons" day after day in music classes has forever vilified anything approaching the idea of a company town...
- jayd16 7y agoA lot of new construction is residential on top of light commercial. In Culver City (in the middle of LA) they're supposedly building offices for Apple and Amazon which has adjacent housing being constructed as well (although not stacked).
- erik_seaberg 7y agoI think the Googleplex is built around wetlands where land use is heavily restricted, and they couldn't get permission to add any housing.
- Retric 7y agoYou say that yet there is still adding more space for jobs than housing. That’s the core issue, if new jobs > new housing the situation gets worse. If new housing > new jobs the situation gets better. Retrofit some office space as apartments and you quickly fix the issue without any new buildings. You could even just remove some office buildings and replace them with parks for a similar net effect.
- thereisnospork 7y agoChoking the economy by limiting jobs is hardly a reasonable solution to limited housing. You are also presuming that it is easier to build offices than apartments, and easier to get permits, do environmental studies, appease NIMBY groups, and navigate the lawsuits necessary to turn offices into apartments. More directly to the point: with current residential rents there should be a lot of money in doing just what you are proposing, and yet the real estate developers aren't.
- Decade 7y agoIt absolutely is easier to build offices than apartments. And I don’t have a lot of physical needs; I would live in the office if it were legal. As it is, at my previous job the company allocated a room to be the nap room, but instead turned it into a meditation/massage room because sleeping is forbidden in commercial zoning.
- mistrial9 7y agoreally? Bolinas? that is the example... thats almost irrational, and really building there would benefit almost no one but you
- intpbro 7y agoI know, right...
- joe_the_user 7y agoJust to elaborate. Bolinas is a town in Western Marin County. It's a significant drive on winding, hard to maintain roads (highway 1 and others) from any location even in wealthy, isolated Marin County. It was once a hippy town but is now, naturally, a preserve of the very wealthy but regardless of cost, with no jobs in the area, only tourists and the wealth would buy development there. It seems like the State and YIMBY or whoever should push housing near transportation as well as denser housing. This is obviously not that. If you read the GP's post, you'll notice they're complaining about not being able to build on an irregular parcel in Marin that's advertised for $12K. Of course, the parcel is that cheap because you can't build on it. The GP should save their complaints for problems that make sense. Complaints about not being able to build in Mountain View make sense, this doesn't. Altogether, the problems of US housing comes from too much low density housing and too little high density. Given this, keeping people from building on marginal locations is not the worse sin, to say the least.
- JMTQp8lwXL 7y agoIf zoning or regulations ever change, the $12k parcel could appreciate significantly, assuming it's actually buildable.
- flomo 7y agoThanks for posting this explanation. Bolinas is also pretty infamous as the only town in California that Caltrans can't post a sign pointing too. It does hit on the fundamental Bay Area issue that almost all water is imported, and there are significant restrictions on development because of that. Almost all of the land surrounding the populated bay is part of a public & ngo "green belt". In the Bay Area, there really is not just some new amazing new places to build. We must build up.
- jayd16 7y agoAren't California cities already the most dense in the US short of New York? We could perhaps do more but it doesn't seem right to say its impossible to build.
- JMTQp8lwXL 7y agoI have anecdotally heard people regularly ignore the standard permitting processes and the state lacks the bandwidth for enforcing code violations. Not for huge scale projects, but more for SFH-type improvements.
- refurb 7y agoOne contractor I spoke to in SF said maybe 50% of people get permits for renovations. If you do pull permits, it costs $1,500 or so and your property taxes will go up. Apparently if you get busted, they just make you pay plus a small penalty.
- ping_pong 7y agoAlmost no one in SF gets permits unless it's for something big enough that your neighbors will narc on you for. Most houses that are for sale will have some form of unpermitted work done on it.
- refurb 7y agoThe drawback of not getting permits is that permitted work is valued higher when it comes to resale.
- ping_pong 7y agoNot in SF from what I've seen. Unpermitted work is so common that people basically don't care anymore. Maybe in other cities where it's more common to get permits, it will definitely make a difference, but not in SF.
- intpbro 7y agoYeah, that’s because you’re trying to build in Bolinas....
- gfmentor 7y agoI would like to live for free in Central Park NYC in a luxury penthouse too. Why can’t I do that for free??
- imtringued 7y agoWell, maybe you should have taken a look at housing prices in California. People are willing to pay $2 million or more for a house in SF. That's quite a bit more than "free".
- deleted 7y ago[deleted]
- gfmentor 7y agoYes, but I’m whiny and I insist on paying less than market rates for housing. Because I deserve it.
- 0x00000000 7y agoThe only people whining and wanting things ”for free” are the rent seekers who sought to eliminate property taxes so they could impede economic progress and live for free and try to prevent anyone else from moving in because “muh soul“ (translation: “muh property value”)
- ShorsHammer 7y ago> less than market rates for housing Would you be ok with private owners being able to buy up all your water and only selling when they want to at the "market rate"? If speculators can buy up all the available property, why not allow them to buy up a region's drinking water too? I'd be the first to jump in and get massive loans investing in it. When it all dries up and no one wants to sell, will people be cheering on the free market here?
- foogazi 7y agoPeople would be willing to transport water into this region and capture some of the profits. Or maybe there would be a revolt because there is no water. Or people would love to a region with affordable water
- fbonetti 7y agoIt’s illegal to build denser housing. It shouldn’t be hard to see why this policy would cause housing prices to skyrocket.
- pacala 7y agoCA 1970: 20M CA 2020: 40M
- drdeadringer 7y agoIf housing hasn't similarly increased [or "just doubled"?] during that time frame, here we are.
- mixmastamyk 7y agoLA tent was $200ish for a 2bd apt in the seventies, now $2000ish.
- rcpt 7y ago> The infamous Proposition 13, a 1978 ballot initiative that capped property taxes, meant that new housing could cost cities more in services than it would bring in through taxes. In response, cities privileged much more lucrative commercial development—setting the stage for the state’s severe jobs/housing imbalance—and tacked hefty fees on new housing construction. Good take right here but it's not the main reason that prop 13 is making housing expensive imo. The insane market distortions causing landowners to never sell and instead stay put and NIMBY like mad is a larger reason that Prop 13 makes housing more expensive.
- xivzgrev 7y agoThis. There are some random plots of land in very desirable areas that would never be left like that without prop 13. Why yes I’ll keep paying $5000 per year in property taxes while my multi million dollar plot keeps appreciating at 8% per year...
- usaar333 7y agoWhy would someone leave the plot empty and forgo potential rent?
- refurb 7y agoToo much hassle to build and it limits your options in the future. If you're only paying $5000 per year in property taxes on a plot of land worth $2M and going up, why not?
- xyzzyz 7y agoImagine it is you that own such a plot. Can you think of reasons why you yourself might forgo potential rent? To fetch rent, you typically need to build something, which requires capital. Even if you have capital, opportunity cost might make it more profitable to invest it in something else. Even if building something is best alternative at the moment, expectations of change in future market conditions might make the risk-adjusted return too low to justify the opportunity cost. If you don’t have capital, you need to take a loan, which might not be possible depending on your personal financial situation and credit worthiness, but even if it is, it makes the whole business even more risky. Now, given it’s California, even if you have capital and actually want to build something, it might as well turn out that your development efforts might be stuck in a local planing and zoning committee limbo for a decade, and often be ultimately unsuccessful, which results in lots of money lost and opportunity cost paid. As you can see, there are plenty of reasons why you might forgo potential rent.
- starpilot 7y agoIt's interesting how liberal politics lead to conservative housing policies, and vice versa.
- jacobwilliamroy 7y agoWhat if real property worked like cars? Like the land is worth half as soon as you buy it, something like that?
- jacobwilliamroy 7y agoOr maybe every structure built on a lot decreases its value? I just dont understand why real property should appreciate just by existing and being bought and sold. Isnt that just money for nothing? Doesnt that run counter to the old calvinist ethos of WORKING for money? What? Are people just going to live and sleep outside just because there's no more profit in drawing imaginary lines on the ground?
- foogazi 7y ago> Or maybe every structure built on a lot decreases its value? That is actually how it works right now Structures depreciate - a new house is worth more than an old one (unless there is some unique historic/sentimental value)
- Gibbon1 7y agoIt's a bit tricky because part of the valuation is 'replacement value'. A problem with San Francisco is building now costs something like $600-1000 a sqft.
- deleted 7y ago[deleted]
- omgwtfbyobbq 7y agoProp 13 does play a part in housing costs in CA, but I suspect it contributes less than limited supply in California metros and low interest rates. Some of the limited supply is due to building restrictions, but addressing those requires more than just issuing building permits. We can't build high density housing and ignore transportation and infrastructure, and upgrading those tends to be more difficult than building more units.
- curuinor 7y agowe have the building restrictions because prop 13 incentivizes homeowners to fight hard for them, though
- omgwtfbyobbq 7y agoThere is a significant amount of just plain NIMBYism, but I think some of the resistance is deserved because people know the developers just want to get in, sell the units, and get out leaving everyone else to deal with all the effects of way more people using the same infrastructure. Now, if the developers are willing to pay for the infrastructure improvements to handle all the people, that's great, but I haven't seen that happen often, although it admittedly does happen.
- sxates 7y agoWe don’t need developers to pay for infrastructure - we have owners of the new building paying property taxes. That’s what funds city infrastructure. Prop 13 is what limits those revenues, it shouldn’t be on the developers back.
- omgwtfbyobbq 7y agoMy feeling is it's better to have something paid for up front than hope it'll be paid for later. We could repeal prop 13 and increase property taxes, but there's nothing requiring that increase in revenue be spent on improving the infrastructure related to the new development. Local government could spend it on something else. There's also Mello-Roos for the specific improvements that need to be made, but that hurts demand for new housing because it's another cost tacked on, which developers don't like. The fact of the matter is, as we build more housing, we also need to build more infrastructure to support more people. Developers don't want to do this, but requiring them to do it insures it gets done.
- einarvollset 7y agoI think it strange that everyone who thinks that repealing prop 13 will magically “fix” housing affordability appears completely ignorant of the fact that most of the western world have effectively zero property taxes.
- mixmastamyk 7y agoIt’s one factor not the entire disease.
- intpbro 7y agoEffectively, but still more than zero... 1.1%+ of 1000000 is still something
- repsilat 7y agoThe problem with Prop 13 isn't that it keeps taxes too low, it's that it disincetivises downsizing by making your taxes jump when you move into a smaller place. I don't think it's all (or even most) of the problem, but it's bad legislation and definitely contributes to the housing shortage.
- toddh 7y agoDepending on where you move to in CA you can keep your previous tax basis. That's prop 60/90 I think.
- jxramos 7y agoSearching for the word "supply" in the article yields 0 hits. I thought I read somewhere recently that two cities in Texas built more housing in 2017 and 2018 than the entire state of California over that same period. It would be great to see a dynamic map of housing being built through the years to see how many rooms or square feet a given region has in aggregate across the various years. Does Trulia let folks in on their data with an API or anything that would permit public data analysis? Is there a public datasource for this information?
- jelliclesfarm 7y agoI don’t understand why ownership of property should be taxed. And increasingly more and more. Consumption should be taxed. I get that. Why should be income be taxed? Are we being taxed for being productive and making money? It makes no sense to me. It’s like taxing rent. That makes no sense, does it? Why should property be taxes? Why should income be taxed? Inheritance tax is like taxing death. We have accepted taxes as a way of life that we have ceased to question its usefulness and purpose.
- foogazi 7y agojust read the article and not the book Are there states that are not in a housing crisis? What are they doing differently? What would California land prices and rent look like in non-housing crisis? Anyone seen analysis like this: Show a house on Zillow and instead of it being worth $x figure out it should be $y