
How California Became America’s Housing Market Nightmare - anarbadalov
https://www.bloomberg.com/graphics/2019-california-housing-crisis/
======
rcpt
> 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

~~~
malvosenior
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.

~~~
FreakyT
> The alternative is that we basically force people out of houses they've
> bought by gouging them with taxes.

I would argue that being able to afford a place in the 1970s does not endow
one with an inalienable right to remain there forever. Locking the property
taxes creates an artificial incentive to hold onto property forever, thus
creating market stagnation.

~~~
almost_usual
I honestly think it has less to do with money than the younger HN community
realizes. Older people don't like change, especially significant changes like
moving. Most of the people who have been here for decades stay because it's
their home and they have no where else to go. Getting rid of Prop 13 and
raising taxes to tech market rate is the equivalent of deporting someone from
their home.

~~~
pound
non-primary residences as well as commercial properties are also covered by
it. It's about wealth, not about keeping someone in their home.

~~~
almost_usual
I can get on board with amending non-primary residences and commercial
properties.

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g2ah5z
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
> 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
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
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.

------
ranDOMscripts
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-
Calif...](https://www.sfchronicle.com/politics/article/Change-in-California-s-
Prop-13-makes-2020-13314983.php)

------
Mathnerd314
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
FWIW, Paris is a transportation hub in the middle of the county, San Francisco
is surrounded by water or three sides.

~~~
Mathnerd314
NYC has a lot of water too, and its density is comparable to Paris.

All these cities have "housing shortages" though, according to newspapers.

------
shakil
> 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-
republica...](https://www.mercurynews.com/2019/11/06/study-finds-republicans-
are-more-likely-to-consider-leaving-california/)

~~~
undersuit
But other reports show leaving Californians turning their destination states
more "blue".

[https://www.kunr.org/post/californians-move-are-turning-
neva...](https://www.kunr.org/post/californians-move-are-turning-nevada-
blue#stream/0)

[https://thehill.com/homenews/campaign/460155-texas-
republica...](https://thehill.com/homenews/campaign/460155-texas-republicans-
sound-alarm-about-rapidly-evolving-state)

[https://www.npr.org/sections/itsallpolitics/2013/08/29/21615...](https://www.npr.org/sections/itsallpolitics/2013/08/29/216150644/how-
california-is-turning-the-rest-of-the-west-blue)

~~~
shakil
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

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

------
chiefalchemist
> "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.

------
outerspace
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
> 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.

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Fainsan
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
> 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.

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k-dude-sj
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
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
> 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
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
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)

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Fainsan
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?

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m15i
So build more houses?

~~~
tstrimple
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.

~~~
fortran77
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
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.

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neonate
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