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75% of all SF housing units are over 50 years old. Source: http://www.sf-planning.org/ftp/general_plan/Housing_Element_Part_I_Data_Needs_Assmt_CPC_Adopted.pdf

75% of all SF housing units are over 50 years old. Source: http://www.sf-planning.org/ftp/general_plan/Housing_Element_Part_I_Data_Needs_Assmt_CPC_Adopted.pdf http://www.sf-planning.org/ftp/general_plan/Housing_Element_... So the technlogical improvements in earthquake safety since the 1960s are simply irrelevant for most residents. They're living an ancient, unsafe homes. What ought to happen is proposition 13 ought to be repealed, along with the restrictive zoning laws. Then people who are sitting on lots of undeveloped property would have to sell it to developers, because the taxes would be unaffordable otherwise. And developers would put up new properties. Prices would then come back to earth and poor people would be able to live in houses again. But the prevailing mentality in the US is that houses are investments, not places to live, so don't expect this to happen any time soon. Instead, you can expect politicians to intervene if housing starts to become affordable again, like they did in 2007. ("Oh no! Housing prices DECLINED!") It's basically a giant transfer of wealth from the young to the old. But people are too ignorant of economics to understand how and why it's happening, so you can expect it to continue.

ericd 12y ago
You're right, and Prop 13 doesn't get nearly enough hate in these discussions. It's not just that people are sitting on investments like domain campers, though - it makes it impossible for many people to move, because if they did move to an equivalently valued home, they'd be paying many times their current property tax. This restricts the liquidity of the housing market and encourages hoarding, which leads to skyrocketing prices among the few houses that do go on the market. If that was slowly phased out, prices would come down as more houses came on the market, and the houses that those people wouldn't represent such a huge jump in ongoing property taxes.
- bagels 12y ago
  How does repealing Prop 13 change anything? Wouldn't everyone just end up paying the same or more taxes? Looking at property tax rates in other states (which presumably don't have such a law), we're about on par with them. The people who can't move because of increased taxes would be forced to flee the state maybe?
  - ericd 12y ago
    We may be on par with them in terms of nominal rates, but those other states' property taxes rise with the value of the houses every year, whereas CA prop tax amounts are based on the cost at the time of purchase and adjusted at a max of 2%/year, even if their house appreciates by 10%, as it does some years. People who bought their houses in 1975 are paying taxes based on what their houses were worth in 1975 times roughly 1.02^40, or 2.2x. In the same period, the median home price went from $41,600 to $478,700, a rise of almost 12x. So, if they moved to an equivalently valuable home, they'd pay about 5.5x the amount of tax going forward, which can be very significant. Housing prices take into account the amount of taxes one expects to have to pay, so if they're no longer locked, and one expects prices to rise, then the price one will be willing to pay will be lower. Also, prices will fall as more supply opens up, since there won't be such a big advantage to sitting on houses anymore, and people are more free to move to less expensive areas. Currently there's a bit of a rent control situation where the low rates can be passed on to your descendants, and there's a big incentive to stay in it rather than selling it and moving farther out, even if the place farther out is half the price. This effect is more pronounced on the high demand areas where prices have risen more. Over time, the prices would adjust and settle. People may end up paying more tax overall, but we can play with the rate, or we could decide that the schools could use more funding (in many places, they could), and that we should keep the rate where it is. As it is now, the people who are just moving to CA are heavily subsidizing people who have lived here for a long time, and the lack of liquid housing supply is causing prices to shoot up.
    - TheMiller 12y ago
      "... but those other states' property taxes rise with the value of the houses every year, ..." In Michigan, it's a bit more complex. The assessor calculates a State Equalized Value (SEV) on which the tax is based, and that cannot rise faster than the rate of inflation, or 5%, whichever is less. I assume lots of states have odd property tax quirks.
  - reality_czech 12y ago
    I explained it earlier. Repealing prop 13 forces people holding on to undeveloped land to sell it to someone who can make use of it. It's funny that people accept taxes of up to 40% on wages (things the middle class earns), but can't understand how taxing vast landed estates (things the rich owns) would "help." Suggest thinking this through more clearly.
jekdoce 12y ago
I can't agree with this more. Anyone know when houses started to function as an investment? How far back does this go? How tied is this to the business model of banks?
- ericd 12y ago
  Oftentimes governments will place extra taxes on non-primary residences which discourage using houses as an investment vehicle. I'm not sure about the history of this, though.
  - LoSboccacc 12y ago
    We have something like that in Italy, except financial institution were made exempt to protect them from the housing mortgage crash of 2008, and now are holding on empty houses waiting for market price to raise again. They can't sell at a loss because all mortgages given were put in books at the 100% repayment price and now they need to wait not only for the house to recover the price lost since the crisis but also to raise in value to match the expected mortgage gain written in books, to avoid negative impact on their ratings
- mistermann 12y ago
  From most anything I've read, they've for the most part (yes, with some exceptions) tracked the overall inflation rate very closely, up until around the year 2000, when ratios and charts in the US and much of the world started to massively deviate from extremely long standing trends. I think part of it is credit (money) creation out of thin air, and it has to go somewhere. Another part is the massive productivity gains of past decades, that also has to go somewhere, and it isn't going into rising prices of consumer goods for the most part. To me, it seems logical that the ratio between median housing prices and median wages has to be rather constant over time, and if it isn't, there should be a measurable offset somewhere else, especially when the housing is by far the largest purchase 90%+ of people will ever make - yet, I see no proportional offset (of decreased spending) elsewhere.
nowarninglabel 12y ago
"So the technlogical improvements in earthquake safety since the 1960s are simply irrelevant for most residents. They're living an ancient, unsafe homes." That's a nice theory, but it's wrong. The city is requiring buildings to get retrofitted with earthquake safe structural foundations. It's every building with greater than a few units, so the rather small 100+ year old Victorian I'm in will be required to go undergo retrofitting by 2017.
- raldi 12y ago
  Do you have a link for that? I follow this kind of thing pretty closely and haven't heard anything like that, at least for private residences.
  - nowarninglabel 12y ago
    Here ya go: http://sfdbi.org/mandatory-soft-story-program http://sfdbi.org/mandatory-soft-story-program P.S. Thanks for all the good work you did at Reddit.
    - raldi 12y ago
      Oh, I missed where you mentioned this only applies to buildings with a minimum number of units -- I thought you meant there was a program that applied to single-family homes. Re: reddit, pshaw, I was only there two and a half years. :) Most of the hard work was done before I showed up and after I left.
- Animats 12y ago
  The latest SF seismic retrofit program is for wooden buildings. Brick buildings, which are at much higher risk in an earthquake, were fixed long ago. There were 1,987 unreinforced masonry buildings in SF in 1990, and all but 158 were fixed by 2013. That's why, all over SF, you see diagonal steel beams inside brick buildings, sometimes across windows. There are now supposedly only 29 unreinforced brick buildings left, mostly ones that are abandoned or scheduled for demolition. A few are still occupied, including some non-patient buildings at SF General Hospital. In a really big quake, many buildings will be damaged, but structural collapse in SF should be rare. The occupants get to survive.
Terr_ 12y ago
> So the technlogical improvements in earthquake safety since the 1960s are simply irrelevant for most residents. They're living an ancient, unsafe homes. Even if we assume zero retrofitting of old homes, what about the future residents of currently-new homes which persist for another 50 years?

ericd 12y ago

You're right, and Prop 13 doesn't get nearly enough hate in these discussions. It's not just that people are sitting on investments like domain campers, though - it makes it impossible for many people to move, because if they did move to an equivalently valued home, they'd be paying many times their current property tax. This restricts the liquidity of the housing market and encourages hoarding, which leads to skyrocketing prices among the few houses that do go on the market. If that was slowly phased out, prices would come down as more houses came on the market, and the houses that those people wouldn't represent such a huge jump in ongoing property taxes.

bagels 12y ago
How does repealing Prop 13 change anything? Wouldn't everyone just end up paying the same or more taxes? Looking at property tax rates in other states (which presumably don't have such a law), we're about on par with them. The people who can't move because of increased taxes would be forced to flee the state maybe?
- ericd 12y ago
  We may be on par with them in terms of nominal rates, but those other states' property taxes rise with the value of the houses every year, whereas CA prop tax amounts are based on the cost at the time of purchase and adjusted at a max of 2%/year, even if their house appreciates by 10%, as it does some years. People who bought their houses in 1975 are paying taxes based on what their houses were worth in 1975 times roughly 1.02^40, or 2.2x. In the same period, the median home price went from $41,600 to $478,700, a rise of almost 12x. So, if they moved to an equivalently valuable home, they'd pay about 5.5x the amount of tax going forward, which can be very significant. Housing prices take into account the amount of taxes one expects to have to pay, so if they're no longer locked, and one expects prices to rise, then the price one will be willing to pay will be lower. Also, prices will fall as more supply opens up, since there won't be such a big advantage to sitting on houses anymore, and people are more free to move to less expensive areas. Currently there's a bit of a rent control situation where the low rates can be passed on to your descendants, and there's a big incentive to stay in it rather than selling it and moving farther out, even if the place farther out is half the price. This effect is more pronounced on the high demand areas where prices have risen more. Over time, the prices would adjust and settle. People may end up paying more tax overall, but we can play with the rate, or we could decide that the schools could use more funding (in many places, they could), and that we should keep the rate where it is. As it is now, the people who are just moving to CA are heavily subsidizing people who have lived here for a long time, and the lack of liquid housing supply is causing prices to shoot up.
  - TheMiller 12y ago
    "... but those other states' property taxes rise with the value of the houses every year, ..." In Michigan, it's a bit more complex. The assessor calculates a State Equalized Value (SEV) on which the tax is based, and that cannot rise faster than the rate of inflation, or 5%, whichever is less. I assume lots of states have odd property tax quirks.
- reality_czech 12y ago
  I explained it earlier. Repealing prop 13 forces people holding on to undeveloped land to sell it to someone who can make use of it. It's funny that people accept taxes of up to 40% on wages (things the middle class earns), but can't understand how taxing vast landed estates (things the rich owns) would "help." Suggest thinking this through more clearly.

jekdoce 12y ago

I can't agree with this more. Anyone know when houses started to function as an investment? How far back does this go? How tied is this to the business model of banks?

ericd 12y ago
Oftentimes governments will place extra taxes on non-primary residences which discourage using houses as an investment vehicle. I'm not sure about the history of this, though.
- LoSboccacc 12y ago
  We have something like that in Italy, except financial institution were made exempt to protect them from the housing mortgage crash of 2008, and now are holding on empty houses waiting for market price to raise again. They can't sell at a loss because all mortgages given were put in books at the 100% repayment price and now they need to wait not only for the house to recover the price lost since the crisis but also to raise in value to match the expected mortgage gain written in books, to avoid negative impact on their ratings
mistermann 12y ago
From most anything I've read, they've for the most part (yes, with some exceptions) tracked the overall inflation rate very closely, up until around the year 2000, when ratios and charts in the US and much of the world started to massively deviate from extremely long standing trends. I think part of it is credit (money) creation out of thin air, and it has to go somewhere. Another part is the massive productivity gains of past decades, that also has to go somewhere, and it isn't going into rising prices of consumer goods for the most part. To me, it seems logical that the ratio between median housing prices and median wages has to be rather constant over time, and if it isn't, there should be a measurable offset somewhere else, especially when the housing is by far the largest purchase 90%+ of people will ever make - yet, I see no proportional offset (of decreased spending) elsewhere.

nowarninglabel 12y ago

"So the technlogical improvements in earthquake safety since the 1960s are simply irrelevant for most residents. They're living an ancient, unsafe homes." That's a nice theory, but it's wrong. The city is requiring buildings to get retrofitted with earthquake safe structural foundations. It's every building with greater than a few units, so the rather small 100+ year old Victorian I'm in will be required to go undergo retrofitting by 2017.

raldi 12y ago
Do you have a link for that? I follow this kind of thing pretty closely and haven't heard anything like that, at least for private residences.
- nowarninglabel 12y ago
  Here ya go: http://sfdbi.org/mandatory-soft-story-program http://sfdbi.org/mandatory-soft-story-program P.S. Thanks for all the good work you did at Reddit.
  - raldi 12y ago
    Oh, I missed where you mentioned this only applies to buildings with a minimum number of units -- I thought you meant there was a program that applied to single-family homes. Re: reddit, pshaw, I was only there two and a half years. :) Most of the hard work was done before I showed up and after I left.
Animats 12y ago
The latest SF seismic retrofit program is for wooden buildings. Brick buildings, which are at much higher risk in an earthquake, were fixed long ago. There were 1,987 unreinforced masonry buildings in SF in 1990, and all but 158 were fixed by 2013. That's why, all over SF, you see diagonal steel beams inside brick buildings, sometimes across windows. There are now supposedly only 29 unreinforced brick buildings left, mostly ones that are abandoned or scheduled for demolition. A few are still occupied, including some non-patient buildings at SF General Hospital. In a really big quake, many buildings will be damaged, but structural collapse in SF should be rare. The occupants get to survive.

Terr_ 12y ago

> So the technlogical improvements in earthquake safety since the 1960s are simply irrelevant for most residents. They're living an ancient, unsafe homes. Even if we assume zero retrofitting of old homes, what about the future residents of currently-new homes which persist for another 50 years?