5 ms·

This. 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 i

This. 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 ago
Why would someone leave the plot empty and forgo potential rent?
- refurb 7y ago
  Too 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 ago
  Imagine 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.
  - JMTQp8lwXL 7y ago
    Building will also trigger a re-assessment (which is why you'll see lot with existing structures stripped to the studs to avoid reassessment).
    - refurb 7y ago
      I'm sure the rules are complex, but even if you stripped to the studs you'd get reassessed on the improvement to the structure, correct? Not a reassessment of the whole property? Say your property tax should be $10,000 per year, but you're paying $1,000 because of Prop 13. If you were to put an addition on, with a value of $200,000, you'd have to pay property tax on that ($2,000 per year), but they wouldn't reassess the whole property and make you pay $12,000, I assume?
      - svachalek 7y ago
        Property assessment is a single value, not a room-by-room piecemeal kinda thing.
        refurb 7y ago
        Apparently not in SF.
      - ping_pong 7y ago
        No you get reassessed on the entire thing.
        fortran77 7y ago
        You will get re-assessed even if you left the frame (or one wall standing). And new construction is reassessed. And even under prop 13, tax can increase 2% / year. Prop 13 is not why California doesn't have enough housing. This is a lie propagated by teachers unions who flood internet forums with falsehoods. California's problem is there are hundreds and hundreds of little "cities" each with their own restrictive zoning laws. They need the state to overrule zoning laws and allow denser housing. These local cities also cut "sweetheart deals" for companies and give them property tax breaks. So Apple or Facebook or anyone building a new campus pays bargain rates -- not because of Prop 13, but because the local cities have the ability to negotiate tax rates for these companies to encourage them to move in.
  - flomo 7y ago
    Good points, but it's probably not "empty land" we're talking about. Instead, it is an existing development which is not the "highest and best use". Prop 13 means underdeveloped properties can still be quite profitable in CA, and that is what discourages redevelopment. Also, I'll add that these places are often owned by a trust. Someone in Florida is getting a check (they need) every month, and they aren't bothering the trustees to maximize the investment potential.
- epistasis 7y ago
  This is extremely common, people will forgo $4k/month because they don't want the hassle of finding a contractor to fix a house, for example. It's extremely frustrating to see all the vacant houses in my city that are in family trusts and sit on the housing market for 12 months because they are inappropriately priced, or because the family has extra stuff going on and can't find the time to get a property manager. These houses alone aren't enough to solve the housing crisis, but they are a symptom of the disastrous tax policy. It's enough to make me into a full Georgist, and hope for all land rents to be taxed away.
  - rcpt 7y ago
    It still amazes me that Henry George put all those ideas together in San Francisco
- JMTQp8lwXL 7y ago
  The most obvious answer, not suggested yet, is not having to put with the California Coastal Commission. Slap a high price on the land, sell the dream, and make the permitting and construction someone else's problem. An unimproved plot in an area under the jurisdiction of the CCC is in some ways a liability.
- Decade 7y ago
  Another reason to forgo rent is in hope of a higher payoff. Especially in California with Prop 13 of 1978, if the property owner has had a property for a long time, they can be paying taxes as if it were a depression while charging rents (or taking out commercial loans) as if it’s a gold rush. A single property with a long-term lease signed during an economic boom can pay the taxes for many vacant properties. That’s my guess as to why property owners insist on charging high rents even if it contributes to the epidemic of vacant storefronts in my neighborhood.

usaar333 7y ago

Why would someone leave the plot empty and forgo potential rent?

refurb 7y ago
Too 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 ago
Imagine 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.
- JMTQp8lwXL 7y ago
  Building will also trigger a re-assessment (which is why you'll see lot with existing structures stripped to the studs to avoid reassessment).
  - refurb 7y ago
    I'm sure the rules are complex, but even if you stripped to the studs you'd get reassessed on the improvement to the structure, correct? Not a reassessment of the whole property? Say your property tax should be $10,000 per year, but you're paying $1,000 because of Prop 13. If you were to put an addition on, with a value of $200,000, you'd have to pay property tax on that ($2,000 per year), but they wouldn't reassess the whole property and make you pay $12,000, I assume?
    - svachalek 7y ago
      Property assessment is a single value, not a room-by-room piecemeal kinda thing.
      - refurb 7y ago
        Apparently not in SF.
    - ping_pong 7y ago
      No you get reassessed on the entire thing.
      - fortran77 7y ago
        You will get re-assessed even if you left the frame (or one wall standing). And new construction is reassessed. And even under prop 13, tax can increase 2% / year. Prop 13 is not why California doesn't have enough housing. This is a lie propagated by teachers unions who flood internet forums with falsehoods. California's problem is there are hundreds and hundreds of little "cities" each with their own restrictive zoning laws. They need the state to overrule zoning laws and allow denser housing. These local cities also cut "sweetheart deals" for companies and give them property tax breaks. So Apple or Facebook or anyone building a new campus pays bargain rates -- not because of Prop 13, but because the local cities have the ability to negotiate tax rates for these companies to encourage them to move in.
- flomo 7y ago
  Good points, but it's probably not "empty land" we're talking about. Instead, it is an existing development which is not the "highest and best use". Prop 13 means underdeveloped properties can still be quite profitable in CA, and that is what discourages redevelopment. Also, I'll add that these places are often owned by a trust. Someone in Florida is getting a check (they need) every month, and they aren't bothering the trustees to maximize the investment potential.
epistasis 7y ago
This is extremely common, people will forgo $4k/month because they don't want the hassle of finding a contractor to fix a house, for example. It's extremely frustrating to see all the vacant houses in my city that are in family trusts and sit on the housing market for 12 months because they are inappropriately priced, or because the family has extra stuff going on and can't find the time to get a property manager. These houses alone aren't enough to solve the housing crisis, but they are a symptom of the disastrous tax policy. It's enough to make me into a full Georgist, and hope for all land rents to be taxed away.
- rcpt 7y ago
  It still amazes me that Henry George put all those ideas together in San Francisco
JMTQp8lwXL 7y ago
The most obvious answer, not suggested yet, is not having to put with the California Coastal Commission. Slap a high price on the land, sell the dream, and make the permitting and construction someone else's problem. An unimproved plot in an area under the jurisdiction of the CCC is in some ways a liability.
Decade 7y ago
Another reason to forgo rent is in hope of a higher payoff. Especially in California with Prop 13 of 1978, if the property owner has had a property for a long time, they can be paying taxes as if it were a depression while charging rents (or taking out commercial loans) as if it’s a gold rush. A single property with a long-term lease signed during an economic boom can pay the taxes for many vacant properties. That’s my guess as to why property owners insist on charging high rents even if it contributes to the epidemic of vacant storefronts in my neighborhood.