I would look also at the seriously distorted property and land taxation system in California as an additional contributor along with zoning.
A few decades of Prop 13 have done an amazing amount of damage to the housing markets all over the state, by disincentivizing the sale of property. This has contributed heavily to reducing the supply of housing and distorting the market, among other problems.
If California made some modifications to it's taxation policy - perhaps lowering income and sales taxes while leveling the playing field on land taxation - home owners could come out paying a similar total tax bill while adding needed fluidity to the market.
I support Prop 13 for primary homes that owners are actually living in, but commercial rent deriving properties should have never been covered by it.
I take this position because I'm really not interested in kicking little old ladies out of their homes of multiple decades just because some property price bubble has driven real estate to crazy levels. Basically without prop 13, every bubble is going to drive the poorest and most vulnerable home owners out of their homes, and that is a pretty ugly side effect. That is the original intended protection of prop 13, but commercial properties were somehow rolled under that same umbrella.
Like the mortage-interest tax deduction, NIMBY zoning benefits so many people, once you do it, it's hard to undo without tanking the economy. It's a regressive tax, but so many voters benefit I doubt anything will ever change.
We could then re-evaluate rent control on the same logic!
I think both of these controls have some helpful effects that last way longer than they should. We are trying to damp market oscillations (speculation), not remove them completely! Perhaps the increases could be the moving average of the last 5-10 years, so increases would slowly phase in if they are real growth and be smoothed over if they are temporary fluctuations.
Yeah, zoning is the real story here. Rent control, increasing the cost of most new housing so there is some affordable housing, and similar measures will just worsen the problem of a small housing supply.
If we remove modern zoning law that restricts the bulk of the city to be low density slum, LA can easily house double its population.
You don't just drop zoning laws and expect the problem to fix itself. The bad zoning lead to road planning for the densities that are there (and even then, the densities are beyond what was expected and thus infrastructure is taxed). Fixing LA at this point requires not only bulldozing the sprawl and building higher density but also requires expanded road, sewer, electric, and public transit networks to accommodate.
And in this political climate that will simply never happen. Nobody wants to invest in infrastructure anywhere there is already established buildings. They just want to build new, not refurbish old, because its cheaper to do the former, even if it is macroscopically unsustainable and fails to solve the problem.
This isn't just zoning, it's so much more. 1) California's Prop13 discourages redevelopment. 2) Federal Reserve policies encourage housing speculation. 3) California is filled with NIMBY's who have an arsenal of tools to stop development, usually some kind of overbroad environmental review process. 4) City councils tend to approve higher-end luxury development because it brings in more taxes. 5) Developers tend to build higher end units because of bigger per/unit profits. Usually, cheaper housing is older housing, but not in CA where there's a shortage.
Regarding (2), the mortgage tax deduction and the primary residence capital gains reduction (and/or the cap gains carryover into next property) all contribute to the speculative behavior.
But the city council for years regularly approved zoning changes for more dense development. They did so right up until this March when measure S passed:
There is a solution. Since this would probably have to be implemented at a city or county level (that is where permitting, zoning and property taxes happen), my current theory is that it would be something like:
(1) Get rid of rent control; it doesn't work because it focuses on the price side. Instead...
(2) Tax all businesses and individuals collecting long-term residential rents at a flat rate of, like, 65 cents for every dollar of rent collected.
(3) Deposit the 0.65 revenue into a totally transparent, 100 percent "open accounting" fund that awards building projects to competing builders. The builders must build "for sale" units, some high-density urban, some "family size"... the key is to truly increase the supply of housing that allows people to build equity (as the article points out, people who rent simply cannot build equity and that has been the problem all along).
(4) Businesses and individuals who can't afford the 0.65 tax on rents they collect are probably already too leveraged with other people's money anyway; let them go under and convert that "for rent" complex into a "for sale" one. Whoever buys it will be subjected to the 0.65 tax, too, if they decide "making money on rentals" is the kind of business they want to do.
I suspect this "being too heavily leveraged with other people's money" is a root-cause issue for why rents keep rising astronomically and people's wages are not keeping up. Why not build a system that lets renters leverage their own earnings?
I don't really understand how this would work out. A 65% tax on renters would really drive them away wouldn't it? If you were to collect enough to create the "construction fund", cheap buildings would be built, but who would buy them? If a bunch of buildings were built and rent prices dropped, wouldn't that further block people from purchasing buildings from rent too?
Do you mean that? A 65% rental income tax seems exceedingly high, and while I can imagine an argument for it, you don't really seem to present much of one in your comment.
(Also you refer to it as a "0.65 tax" everywhere else in your comment.)
https://www.portlandoregon.gov/bps/article/420062 discusses this in more detail, but in short, we make sure there are places for cars to sleep before letting anyone make a place for a human to sleep. As a result, most of LA's core is asphalt.
We have this issue in major cities all over the world. Are they all zoning issues or is the end of the gold standard, allowing banks to create unlimited credit part of the problem?
Japan's example would suggest it's zoning. Tokyo is IMO very affordable for a metropolis (i.e. lots of people in middle income jobs can have a small but decent apartment here). And small apartments are less of an issue than you think, if a city has the right amenities. Room for children to play? There's tons of public play centers and playgrounds. A Garage? Don't need it, walk instead 5min to a superb transport network. Big kitchen? There's 50 restaurants within a 15min walk. Big relaxing bath? Go to a nearby public bath house and feel like an Ancient Roman. Need space for guests? Fold away your Futon, put up the heated Kotatsu-Table and have another room to use. More fun? Shibuya is 25min away. All yours for ~950 USD/month for a 35m2 or so apartment.
You need large continuous blocks to build high density developments. When you've got all these small single family lots, it becomes really difficult for a developer to acquire them all without some hold outs saying no or demanding crazy prices. It might be time to use eminent domain more
You can double the density by just building townhouses and small apartment buildings in many of these places. A small developer can buy up a couple of adjacent lots, add double the capacity and still make a tidy profit. No imminent domain is needed here.
In my area (Sydney) people have been getting together with their neighbours and then going to a developer and offering to sell all their houses together. Instead of getting 1.5-2 mil they are getting around 5 mil. The developers are very keen for it too - so I guess its still possible to pay very large amounts in this way and still the developers still make money.
I'm seeing a lot of "I fear that..." in this thread. I just have to laugh. This isn't a new or unique situation. The only thing that has changed are people's preferences. My Great Aunt lived in NYC with 6 other girls. Roommates were required to survive the high rents of post-war NYC.
California has always been gripped by NIMBYisms and choking regulation. You get what you vote for.
What can you do against the tyranny of good ideas? It's a good idea to make use environmentally friendly building materials. It's a good idea to build earthquake resilient homes. It's a good idea to require certain standards of home building. It's a good idea to rent control the apartments of the elderly so they can continue to live in their home of the past 50 years. It's a good idea to X..Y..Z.
Is it a good idea to create a generation of serfs?
"A government big enough to give you everything you want, is a government big enough to take away everything that you have."
For all the talk of "negative externalities" I see on HN and the valley in general, I never see people discussing the rampant "negative externalities" of the laws and regulations we pass. It's unfortunate there's so little introspection going on, and so much reliance on the monopoly of the Government to further what Group A or Group B wants. (But it's OK, because I agree with Group A!)
> "A government big enough to give you everything you want, is a government big enough to take away everything that you have."
A cute saying, but misleading. A government big enough to impose even a modest constraint on violent crime is also more than big enough to take away everything you have; anything weak enough to avoid that threat is not the government and will be replaced in that role but something else that is. So, mitigating that threat necessarily is about managing aspects of government other than its size.
I lived in a suburban single-family home with about 20-25 other people for a year when I was in college (each of us had our own bedroom, except for families where children slept with parents). For the most part everyone there was quiet, either going to the college nearby or else working while studying for a professional license or graduate school. The landlord also lived there with an extended family of about 10 people.
We had a couple of rotten apples, but we self-regulated and kicked out people who caused problems in our house or for our neighbors. Yet, we still had people in the neighborhood calling the zoning inspector to "shut us down." Zoning laws make it hard to even live with "6 other girls" these days. Boarding houses are mostly illegal, and people don't really build SROs anymore.
In the city I grew up in they had some arcane law on the books regarding brothels, so something stupid like no more than 8 women could live in one dwelling. Made it impossible to have sorority houses, though fraternity houses were still allowed.
It used to be feasible to buy a home on the peninsula for 3-4x the area median income, and that number's now 6-8x at least, so I'd argue that yes, things are worse now, even taking inflation into account.
SF rents have also been increasing 6% YoY or so.
> What can you do against the tyranny of good ideas?
There are a number of practical things we can do:
- Contact the Brisbane City Council and ask them to approve housing in the Baylands. The developer wants to build 4000 units, the city Planning Commission wants to build 0.
- Contact the Mountain View City Council and ask them to build the high-density version of their housing plan, which would add 8000 units instead of 2000 (I have asked YC, a prominent Mountain View business, to help take the lead here).
- Show up to your city council and ask them to upzone their downtown area to support higher density. Ask them to make it easier to build accessory dwelling units (ADU's) and streamline the planning process.
- Call your State Assemblymember and ask them to support SB 35, which removes local control over projects that are near transit and include a high percentage of below market rent units.
- Call your State Senator and ask them to oppose AB 915, which would make it more difficult to build housing in San Francisco.
As well as a number of other pieces... I don't know that there's a magic bullet but at the margin there are a number of things that we can do to mitigate the situation.
Having tried the "Contact the City Council of a city I don't live in" thing in the past, I'd suggest a better use of your time, if you don't live in Brisbane or MV, is to try to find companies that do and persuade their leaders to take action.
Larry and Sergey could fix MV's intransigence very fast. We need to call on tech leadership to take a stand here. It's in their best interest.
+1 to all the suggestions about calling your city council, your assemblymember, your state senator, etc
Rent and debt are far too often taxation without representation. It's that simple. This is especially true in situations where landlords sit back and collect, without taking due responsibility for the shape of the living spaces they supposedly "own". And people put themselves into these feudal arrangements for so many reasons. That part is not simple.
Why do people want to be landlords over others? Why do you want to live in a world where it is normal to take huge debts, only to hand off the monthly payments to people who are barely treading water?
This whole business of playing musical chairs with our homes and communities is beyond ridiculous. The amount of furniture that gets thrown out every month is shameful in the face of global climate change.
I'm a small time landlord. I was able to rent out my old house at a rate that covers the mortgage and a manager. When you factor appreciation, equity and tax breaks my net worth increases at a rate of $3k/month even though on paper I barely break even. I'd be dumb to turn down such a deal.
The richest man in California owns the Irvine Company. I assume he faces similar incentives at scale.
On one level, I get that: it is economically sensible to play the landlord role, even at a small scale. And in a lot of ways, you're doing something really important. You're providing someone with a place to live, one that they don't have to worry about taking long-term care of. You've decided that you're going to be a long term care-taker of this home. Assuming you're a good landlord, you really are doing some good for the world.
But would you really be "dumb" if you did things differently? Or would you be following a different set of economic values? Seriously, think about that. I challenge you to rethink your "smart vs dumb" idea. It's "smart" to drive and rely on a car. But on another very important level, it's also incredibly foolish, a.k.a. "dumb".
And I'd argue that what you and your renter have done is also pretty "dumb". Why? Because you and your renters are paying the bank that much for a house. The cost of building a new house is much less. This is an old house, but the bank said "this house is actually worth more than a new house, because you can simply pass the debt onto someone who doesn't have the option of buying a house at this moment, even though they urgently need a place to live". The house itself probably isn't inherently "worth" that much: it takes a lot of work to keep up an aging house. Yet all of this rent money is harvested from the occupant's time/earnings/savings: money that could be invested in the house gets sucked into some exponential function that translates to the bank taking thousands of dollars a month from your renters. Since the bank is so "helpful", you get to keep a very small amount allowance so that you can do repairs/profit. Of course, in the end you'll "own" the house, you'll have paid off your mortgage. Or maybe you'll sell it to someone else, who will enter into a similar agreement with the bank. Regardless, by the time someone has paid off the mortgage, banks will have gotten off with something in the range of 0.5-5x the entire inflated value of the house just for handling sacred paperwork. To me, that's DUMB.
This kind of thing is technically forbidden in Islam, Judaism and arguably Christianity, but not in the USA.
By the way, I'm right there with you in doing dumb stuff like this: I'm a renter.
Hey I just wanted to clarify that I don't want to make you feel bad about being a landlord. I just wanted to share some alternative economic logic, and get kinda riled up about poorly managed capitalism. I realize that everyone is doing what they gotta do, and didn't mean to imply that you landlords in general are bad people or something like that. I don't actually think you're dumb for renting out your old house, it's smart given the circumstances. The circumstances are dumb.
In SF people being a landlord is so onerous that people often don't want to be landlords to the point that they'd rather leave highly lucrative space unoccupied forever. And/or rent it out semi-illegally on airbnb.
> Why do people want to be landlords over others? Why do you want to live in a world where it is normal to take huge debts, only to hand off the monthly payments to people who are barely treading water?
Seems like you answered your own question. Being a landlord exposes you to risk and in most cases yields profit.
>Why do people want to be landlords over others? Why do you want to live in a world where it is normal to take huge debts, only to hand off the monthly payments to people who are barely treading water?
I'm not saying it's the bank cartel, but it's the bank cartel.
In some sense, we are throwing all the property rights into the windows of banks and real estate investment offices, where they will conveniently land in some virtual filing drawer to sit with the rest of their spoils.
I agree with you - the whole idea of people owning houses they didn't build AND don't live in and somehow getting to make a profit off it is absurd. It's just a way of creating a class system and funnelling money from working people to the lazy. Why should someone get to sit back and collect a profit just because they were born into a rich family and had the privilege to bootstrap free income for life thru property ownership?
It has to stop eventually. I say this as a young Melbournian who will probably never own a house unless the bubble bursts in a very, very big way. Median house price is nearing a million dollars (currently $843,674 [1] i.e. twenty years pay without including any mortgage interest), and those responsible tell us it's our fault because we eat too much avocado.
What work are landlords doing exactly? What value are they creating for the world? What is better about it for them being there? Nothing, nothing, and nothing.
I could say the same about banks and mortgage lenders. Creating absolutely nothing for the world, simply holding housing hostage and collecting a big paycheque for it.
The entire way we think about home ownership has to change.
I'm not a fan of most landlords but they do provide a service. They're legally on the hook for paying property taxes, making sure the home is up to code, maintaining the grounds and the structure, paying utilities in many cases, carrying various forms of insurance, etc. Sometimes they acquire distressed assets and remodel to add homes back to the supply.
They generally own the property because they've shown they have assets and good credit. The bulk of people that rent have very little assets - so little that the only way they could have decent housing is to rent from the evil landlords. Or move to some non-capitalist country.
Yeah the homeless population is insane - a long heat wave and I wouldn't be surprised if we had riots.
I'm lucky enough to have a rent-controlled place in Silverlake but it does come with other costs because the owner doesn't really maintain the property. Hallway light doesn't work and we strung up Christmas lights in our kitchen because we can't get an electrician to fix the light in there.
A lot of the startup jobs are on the Westside but considering those easily adds an additional 18k/year in housing costs or doing that terrible 2-3 hour commute everyday.
Thinking hard about moving to Oregon or something and just doing remote work - I've lost most of any enthusiasm I've had for LA.
I'm in a rent-controlled place near Silverlake as well and have been here long enough that trying to find equal price for amenities I have at my current building (well-maintained, garage for car) is impossible without moving further away.
As you said though, a lot of jobs on the Westside and it's way more expensive, even with a roommate or two, to live out there. The Expo line may help some but we definitely need wider-scale rail or dedicated bus lanes to connect all the central business nodes to the mainly residential areas.
Portland or Seattle is a wise move. Places can still expensive, but an expensive place will get you somewhere actually central. And at worst the commute will be smaller even if you do live farther away. You should look into it! I'm a northwesterner through and through, but a lot of my favorite people are transplants. Don't listen to Ed, you're very welcome here.
- Austin is fun and has some good companies but too damn humid (and I'm originally from the South). And I think the exodus from CA the past few years have really overwhelmed their infrastructure
- Houston/Dallas seem like just more sprawl. LA is actually pretty dense in parts and can have good public transit. I know people from Dallas that have been happy moving back though.
Out of curiosity, how big is your place? It seems pretty crazy that moving across LA would _add_ $1,500 a month... that's almost what my total rent is in the South Bay.
Santa Monica is nearly all million dollar homes now, not a lot of high density housing. Renting a house there is easily 5-6k / month. I grew up there and would love to move back, but it's just insane.
Commuting in the Portland area can be pretty horrific. Plus when it occasionally snows here traffic gets turned up to 11. I'd rather commute from Jersey to Manhattan than deal with Portlands winter traffic.
I'd also like to add that LA county has the highest number of illegal immigrants in the country, with and estimate of 1.1 million. That is surely exacerbating the housing situation. This also likely exacerbates low salary problems too.
Net illegal immigration is trending down due to enforcement and a less robust US economy. The only way to improve upon the situation is to improve working/living conditions in Mexico, accept it as a given, or kick everyone out. NAFTA is an attempt at #1 but it is a double edged sword, you lose jobs in the USA but get more corporate profits / cheaper products) from cheaper labor in Mexico. What I think was unexpected was that China came a long and really reduced labor costs further while cloning the intellectual property.
Conditions in Mexico (and South America) did not improve enough though; China has amassed major purchasing power (such that expatriates are buying properties to hedge and take capital out) further increasing costs globally in affluent cities.
So cities and communities should ideally increase density (available product) in response to demand. They could in fact raise their tax base, improve living conditions/services and reduce costs. This is all in support of the growing tech economy.
In LA there are probably more renters than owners and perhaps those that are able should vote. I think the problem is people don't and when they want to buy or think about it they realize they are SOL and either have to gentrify some part of LA or move out.
L.A. has a major NIMBY problem: as soon as anyone gets a whiff of new housing development you'll see someone pile on the fud about how it will increase crime and homelessness (ironically) in their neighborhood.
Everywhere has a big NIMBY problem. Where I'm from in St. Louis they're seeing one of the biggest (although still modest in absolute terms) construction booms in over 50 years and people are complaining. This is a city that has lost 2/3 its peak population, that has underfunded basic services, that has tens of thousands of vacant buildings and lots.
But when somebody wants to build a new apartment building in a single-family neighborhood we get questions like, "where will people park?" And even straight-faced complaints about gentrification (in a city where you can still find apartments for $400/month).
Incumbents can derail almost anything, even in a city that should be begging for new development. It's a huge problem.
It's always fashionable to complain about new development. What matters is, do residents have a venue to elevate their complaints to serious legal barriers for the project?
Gentrification and displacement are distinct. Downward pressure on home values mitigates displacement, but the presence of more above-median-income people is gentrification.
It can change the social fabric of a neighborhood (different taste in retail, different participation in neighborhood social life, etc), even if the original lower-income residents are still there.
I think this is something we should accept, but they're not technically wrong to call it gentrification.
I got into it on Facebook one time with a guy complaining about the high housing prices in Venice, as well as the parking garage they were constructing in his neighborhood. You can solve one of these problems. Probably going to NIMBY the parking garage then rant about parking problems.
I live in a suburb of Denver and my neighbors will argue in one breath how the city is 'greedy' for trying to regulate utilities, and in the next breath complain that the city is also 'greedy' for not blocking the construction of new multi-family housing.
Statistically, increasing the number of people in an area will increase the amount of crime, the same way increasing the number of people will increase the traffic or the water usage or the electricity usage. Most people also overestimate the costs of crime by a factor of about 15; see http://press.princeton.edu/titles/9018.html for more information. It's too simplistic to just consider that.
It may be a valid concern but it's also valid to consider the rights of the person or entity that owns the land to build what they want on it, and the consequence of underbuilding and the subsequent effect on real wages.
If you want to do it properly you'd want to consider the increase in crime from a marginal resident added to area X, vs. the increase in crime from wherever they would live if you didn't build more housing in area X. Not to mention the effect on crime from perpetual underbuilding and the subsequent decline in most folks' real wages...
It's largely a myth that high rise projects were an experiment that went poorly. At the time that they were built, most of the high rise public housing projects were argued against by public housing advocates. Public high rise projects were a cynical racist tool of large political machines to segregate voter basis and solidify biased voting blocs.
The earlier public housing experiments were more about integrated mixed income housing, which were very successful. There are lots of examples of this model that are successful but modern versions get voted down due to the specter of the Robert Taylor homes.
One of my favorite books about this subject is "Blueprint for Disaster" by Hunt.
It's pretty simplistic to suggest that the projects caused crime and social problems. A good first step toward understanding the broader cultural context is The Pruitt-Igoe Myth.
>"At some point, telecommuting technology will encourage an exodus of tech workers."
But we already have Slack/Hangouts/Github/HipChat/Skype/Trello etc and most(the majority?) of the tech jobs in SF require you to come into the office no? I don't believe its the tech worker themselves who are short on encouragement.
I'm at a small company right now and I live 30 minutes door-to-door from work, and I WFH when I can. When it comes to solo-work my lead agrees I'm just as-productive, if not more-so, when I'm at home - but things like meetings and "hey, can you take a look at this thing on my computer?" just don't work remotely - it's the little things: like how even a 1080p conference room camera can't pick-up small details on the whiteboard and how people can't just pass me a printed document.
It was the same on my teams when I was at Microsoft too - we did have a couple of remote-workers, but they were effectively treated as contractors who worked in silos - because that's all they can do well when you can't get all that face-to-face contact.
Plus there's a lot of juicy talk and rumors over lunch that just don't get to participate in as well.
While this is HN, with its associated demographics, the reality is that many office jobs just aren't as feasible for remote work. Face time and hallway conversations can be incredibly important for a healthy company.
200 acres 3 hrs away from a major metro? If all it took to be happy was land, we'd already be in our telecommuting utopia. Unfortunately, the subtle joys of life still tend to require physical presence.
I don't think "city life" is popular with today's generation because it's close to work... I think it's because we value human contact and cultural diversity above acreage or square footage.
So work for a company in expensive places, and live in a cheaper college town. You get the human contact, good food&bars, and it's not going to take your 50% income to live there. The median home price is $267,000 in Eugene, OR and $1,189,100 in SF.
For the moment the best and the most numerous job opportunities are in the cities, especially for young people. Restrictive housing requirements choke the earnings of young people
In terms of total cost, cities are much, much cheaper than either rural or urban sprawl development. The costs look high up front when you consider a 50 story condo building will cost hundreds of millions of dollars, but then you recognize it will house several thousand people and contain a majority of the infrastructure for their lives internally and suddenly the per-person costs are paltry compared to maintaining an entire town for the same number of people with roads, utilities, sanitation, maintenance, etc.
Maybe telecommuting can bring down this endless nimby fantasy of investment properties to finally kill draconian zoning that prevents building to meet demand and changing times. Then we might see growing cities that are also affordable be the norm and not the exception.
The problem with SF et al is the pressure to resist change in these cities due to nimbyism and zoning, which means they cannot adapt to demand and thus prices inflate.
living like that is probably the worst possible thing one can do for the environment unless they are living off the grid, farming for themselves etc. This is not a scalable solution to make our planet a better place.
>There are places within 3 hours drive of SF, where you can pay $1000 to buy an acre of land (200 acre parcels minimum).
I don't know what I'd do in a place like that. I'm not a farmer; I don't need acres and acres of land. Am I just going to sit on my porch and look at the trees?
I think I'd end up blowing my own brains after a month or so of living like that.
I'm not a farmer either, but I would take space, quiet, and privacy over having to live in a small apartment in the middle of a loud, expensive, and overcrowded city. To each their own.
There's a proposal that was floated some years back in Atlanta around grocery stores. South of interstate 20 is a food desert. So the proposal said that a corporation and it's subsidiaries could not build a new grocery store anywhere in the city, without also building one in a disadvantaged area. It never went anywhere but I wonder if this might work in an area where more housing is needed. In order to get the building permit you are required to offset one project with a low income project in pre-determined areas.
San Francisco has something like this. Conservatives are constantly trying to kill it because they perceive it as a barrier to new construction and therefore an artificial constraint on supply. Of course, these same politicians also vote for stricter zoning regulations, so they might not actually be interested in increasing supply.
Liberals are also constantly trying to kill it because we'd prefer to have socioeconomically diverse neighborhoods, rather than "stick the poors in a crappier building somewhere else where the luxury tenants don't have to see them."
The preferred alternative is to allocate some percentage of units in the new building to low-income tenants.
Of course, some "progressives" want this percentage to be high enough to make development totally nonviable.
I believe you are referring to inclusionary zoning, which requires developers to offer 20% or so of onsite units at below-market rent, but also allows developers to offset this by paying for the equivalent of 30% of the number of units in an offsite development.
Can you name a major political group or politician in SF that takes that stance? I'm not super integrated into SF politics, but everyone I know who's against restrictive measures like the OP suggests aren't voting for stricter supply (and if they are I don't want to support them).
Readit News
Today we have improved technology along almost every dimension yet the city is zoned for less than half as many people.
We are paying zoning's steep price: https://object.cato.org/sites/cato.org/files/serials/files/r... (that's a link to a PDF).
A few decades of Prop 13 have done an amazing amount of damage to the housing markets all over the state, by disincentivizing the sale of property. This has contributed heavily to reducing the supply of housing and distorting the market, among other problems.
If California made some modifications to it's taxation policy - perhaps lowering income and sales taxes while leveling the playing field on land taxation - home owners could come out paying a similar total tax bill while adding needed fluidity to the market.
I take this position because I'm really not interested in kicking little old ladies out of their homes of multiple decades just because some property price bubble has driven real estate to crazy levels. Basically without prop 13, every bubble is going to drive the poorest and most vulnerable home owners out of their homes, and that is a pretty ugly side effect. That is the original intended protection of prop 13, but commercial properties were somehow rolled under that same umbrella.
I think both of these controls have some helpful effects that last way longer than they should. We are trying to damp market oscillations (speculation), not remove them completely! Perhaps the increases could be the moving average of the last 5-10 years, so increases would slowly phase in if they are real growth and be smoothed over if they are temporary fluctuations.
Dead Comment
If we remove modern zoning law that restricts the bulk of the city to be low density slum, LA can easily house double its population.
A relevant article on affordable housing: https://www.strongtowns.org/journal/2017/5/8/immutable-laws-...
And in this political climate that will simply never happen. Nobody wants to invest in infrastructure anywhere there is already established buildings. They just want to build new, not refurbish old, because its cheaper to do the former, even if it is macroscopically unsustainable and fails to solve the problem.
http://www.latimes.com/local/lanow/la-me-ln-planning-commiss...
(1) Get rid of rent control; it doesn't work because it focuses on the price side. Instead...
(2) Tax all businesses and individuals collecting long-term residential rents at a flat rate of, like, 65 cents for every dollar of rent collected.
(3) Deposit the 0.65 revenue into a totally transparent, 100 percent "open accounting" fund that awards building projects to competing builders. The builders must build "for sale" units, some high-density urban, some "family size"... the key is to truly increase the supply of housing that allows people to build equity (as the article points out, people who rent simply cannot build equity and that has been the problem all along).
(4) Businesses and individuals who can't afford the 0.65 tax on rents they collect are probably already too leveraged with other people's money anyway; let them go under and convert that "for rent" complex into a "for sale" one. Whoever buys it will be subjected to the 0.65 tax, too, if they decide "making money on rentals" is the kind of business they want to do.
I suspect this "being too heavily leveraged with other people's money" is a root-cause issue for why rents keep rising astronomically and people's wages are not keeping up. Why not build a system that lets renters leverage their own earnings?
Do you mean that? A 65% rental income tax seems exceedingly high, and while I can imagine an argument for it, you don't really seem to present much of one in your comment.
(Also you refer to it as a "0.65 tax" everywhere else in your comment.)
I wouldn't want to lock in my price until I thought prices were going to stop falling.
Dead Comment
https://www.portlandoregon.gov/bps/article/420062 discusses this in more detail, but in short, we make sure there are places for cars to sleep before letting anyone make a place for a human to sleep. As a result, most of LA's core is asphalt.
A lot of it, though, is just down to geography.
Deleted Comment
California has always been gripped by NIMBYisms and choking regulation. You get what you vote for.
What can you do against the tyranny of good ideas? It's a good idea to make use environmentally friendly building materials. It's a good idea to build earthquake resilient homes. It's a good idea to require certain standards of home building. It's a good idea to rent control the apartments of the elderly so they can continue to live in their home of the past 50 years. It's a good idea to X..Y..Z.
Is it a good idea to create a generation of serfs?
For all the talk of "negative externalities" I see on HN and the valley in general, I never see people discussing the rampant "negative externalities" of the laws and regulations we pass. It's unfortunate there's so little introspection going on, and so much reliance on the monopoly of the Government to further what Group A or Group B wants. (But it's OK, because I agree with Group A!)
A cute saying, but misleading. A government big enough to impose even a modest constraint on violent crime is also more than big enough to take away everything you have; anything weak enough to avoid that threat is not the government and will be replaced in that role but something else that is. So, mitigating that threat necessarily is about managing aspects of government other than its size.
We had a couple of rotten apples, but we self-regulated and kicked out people who caused problems in our house or for our neighbors. Yet, we still had people in the neighborhood calling the zoning inspector to "shut us down." Zoning laws make it hard to even live with "6 other girls" these days. Boarding houses are mostly illegal, and people don't really build SROs anymore.
It used to be feasible to buy a home on the peninsula for 3-4x the area median income, and that number's now 6-8x at least, so I'd argue that yes, things are worse now, even taking inflation into account.
SF rents have also been increasing 6% YoY or so.
> What can you do against the tyranny of good ideas?
There are a number of practical things we can do:
- Contact the Brisbane City Council and ask them to approve housing in the Baylands. The developer wants to build 4000 units, the city Planning Commission wants to build 0.
- Contact the Mountain View City Council and ask them to build the high-density version of their housing plan, which would add 8000 units instead of 2000 (I have asked YC, a prominent Mountain View business, to help take the lead here).
- Show up to your city council and ask them to upzone their downtown area to support higher density. Ask them to make it easier to build accessory dwelling units (ADU's) and streamline the planning process.
- Call your State Assemblymember and ask them to support SB 35, which removes local control over projects that are near transit and include a high percentage of below market rent units.
- Call your State Senator and ask them to oppose AB 915, which would make it more difficult to build housing in San Francisco.
As well as a number of other pieces... I don't know that there's a magic bullet but at the margin there are a number of things that we can do to mitigate the situation.
Larry and Sergey could fix MV's intransigence very fast. We need to call on tech leadership to take a stand here. It's in their best interest.
+1 to all the suggestions about calling your city council, your assemblymember, your state senator, etc
Why do people want to be landlords over others? Why do you want to live in a world where it is normal to take huge debts, only to hand off the monthly payments to people who are barely treading water?
This whole business of playing musical chairs with our homes and communities is beyond ridiculous. The amount of furniture that gets thrown out every month is shameful in the face of global climate change.
Incentives.
I'm a small time landlord. I was able to rent out my old house at a rate that covers the mortgage and a manager. When you factor appreciation, equity and tax breaks my net worth increases at a rate of $3k/month even though on paper I barely break even. I'd be dumb to turn down such a deal.
The richest man in California owns the Irvine Company. I assume he faces similar incentives at scale.
But would you really be "dumb" if you did things differently? Or would you be following a different set of economic values? Seriously, think about that. I challenge you to rethink your "smart vs dumb" idea. It's "smart" to drive and rely on a car. But on another very important level, it's also incredibly foolish, a.k.a. "dumb".
And I'd argue that what you and your renter have done is also pretty "dumb". Why? Because you and your renters are paying the bank that much for a house. The cost of building a new house is much less. This is an old house, but the bank said "this house is actually worth more than a new house, because you can simply pass the debt onto someone who doesn't have the option of buying a house at this moment, even though they urgently need a place to live". The house itself probably isn't inherently "worth" that much: it takes a lot of work to keep up an aging house. Yet all of this rent money is harvested from the occupant's time/earnings/savings: money that could be invested in the house gets sucked into some exponential function that translates to the bank taking thousands of dollars a month from your renters. Since the bank is so "helpful", you get to keep a very small amount allowance so that you can do repairs/profit. Of course, in the end you'll "own" the house, you'll have paid off your mortgage. Or maybe you'll sell it to someone else, who will enter into a similar agreement with the bank. Regardless, by the time someone has paid off the mortgage, banks will have gotten off with something in the range of 0.5-5x the entire inflated value of the house just for handling sacred paperwork. To me, that's DUMB.
This kind of thing is technically forbidden in Islam, Judaism and arguably Christianity, but not in the USA.
By the way, I'm right there with you in doing dumb stuff like this: I'm a renter.
Seems like you answered your own question. Being a landlord exposes you to risk and in most cases yields profit.
I'm not saying it's the bank cartel, but it's the bank cartel.
It has to stop eventually. I say this as a young Melbournian who will probably never own a house unless the bubble bursts in a very, very big way. Median house price is nearing a million dollars (currently $843,674 [1] i.e. twenty years pay without including any mortgage interest), and those responsible tell us it's our fault because we eat too much avocado.
What work are landlords doing exactly? What value are they creating for the world? What is better about it for them being there? Nothing, nothing, and nothing.
I could say the same about banks and mortgage lenders. Creating absolutely nothing for the world, simply holding housing hostage and collecting a big paycheque for it.
The entire way we think about home ownership has to change.
[1] https://www.domain.com.au/news/melbournes-median-house-price...
They generally own the property because they've shown they have assets and good credit. The bulk of people that rent have very little assets - so little that the only way they could have decent housing is to rent from the evil landlords. Or move to some non-capitalist country.
I'm lucky enough to have a rent-controlled place in Silverlake but it does come with other costs because the owner doesn't really maintain the property. Hallway light doesn't work and we strung up Christmas lights in our kitchen because we can't get an electrician to fix the light in there.
A lot of the startup jobs are on the Westside but considering those easily adds an additional 18k/year in housing costs or doing that terrible 2-3 hour commute everyday.
Thinking hard about moving to Oregon or something and just doing remote work - I've lost most of any enthusiasm I've had for LA.
As you said though, a lot of jobs on the Westside and it's way more expensive, even with a roommate or two, to live out there. The Expo line may help some but we definitely need wider-scale rail or dedicated bus lanes to connect all the central business nodes to the mainly residential areas.
- Houston/Dallas seem like just more sprawl. LA is actually pretty dense in parts and can have good public transit. I know people from Dallas that have been happy moving back though.
- Don't know much about San Antonio
Conditions in Mexico (and South America) did not improve enough though; China has amassed major purchasing power (such that expatriates are buying properties to hedge and take capital out) further increasing costs globally in affluent cities.
So cities and communities should ideally increase density (available product) in response to demand. They could in fact raise their tax base, improve living conditions/services and reduce costs. This is all in support of the growing tech economy.
In LA there are probably more renters than owners and perhaps those that are able should vote. I think the problem is people don't and when they want to buy or think about it they realize they are SOL and either have to gentrify some part of LA or move out.
I know it's kind of tangential to your point, but any sources on this? I was under the impression we were humming along.
But when somebody wants to build a new apartment building in a single-family neighborhood we get questions like, "where will people park?" And even straight-faced complaints about gentrification (in a city where you can still find apartments for $400/month).
Incumbents can derail almost anything, even in a city that should be begging for new development. It's a huge problem.
It can change the social fabric of a neighborhood (different taste in retail, different participation in neighborhood social life, etc), even if the original lower-income residents are still there.
I think this is something we should accept, but they're not technically wrong to call it gentrification.
I live in a suburb of Denver and my neighbors will argue in one breath how the city is 'greedy' for trying to regulate utilities, and in the next breath complain that the city is also 'greedy' for not blocking the construction of new multi-family housing.
It may be a valid concern but it's also valid to consider the rights of the person or entity that owns the land to build what they want on it, and the consequence of underbuilding and the subsequent effect on real wages.
If you want to do it properly you'd want to consider the increase in crime from a marginal resident added to area X, vs. the increase in crime from wherever they would live if you didn't build more housing in area X. Not to mention the effect on crime from perpetual underbuilding and the subsequent decline in most folks' real wages...
The earlier public housing experiments were more about integrated mixed income housing, which were very successful. There are lots of examples of this model that are successful but modern versions get voted down due to the specter of the Robert Taylor homes.
One of my favorite books about this subject is "Blueprint for Disaster" by Hunt.
https://en.wikipedia.org/wiki/The_Pruitt-Igoe_Myth
At some point, telecommuting technology will encourage an exodus of tech workers.
Some people, yes, want a city life.
Others don't want to lose 50% of their earnings on buying or renting housing.
But we already have Slack/Hangouts/Github/HipChat/Skype/Trello etc and most(the majority?) of the tech jobs in SF require you to come into the office no? I don't believe its the tech worker themselves who are short on encouragement.
It was the same on my teams when I was at Microsoft too - we did have a couple of remote-workers, but they were effectively treated as contractors who worked in silos - because that's all they can do well when you can't get all that face-to-face contact.
Plus there's a lot of juicy talk and rumors over lunch that just don't get to participate in as well.
I don't think "city life" is popular with today's generation because it's close to work... I think it's because we value human contact and cultural diversity above acreage or square footage.
37% home value per year @ $100k vs 8% for SF.
For the moment the best and the most numerous job opportunities are in the cities, especially for young people. Restrictive housing requirements choke the earnings of young people
This paper goes into this phenomenon in more detail: http://www.nber.org/papers/w21154
Maybe telecommuting can bring down this endless nimby fantasy of investment properties to finally kill draconian zoning that prevents building to meet demand and changing times. Then we might see growing cities that are also affordable be the norm and not the exception.
The problem with SF et al is the pressure to resist change in these cities due to nimbyism and zoning, which means they cannot adapt to demand and thus prices inflate.
I don't know what I'd do in a place like that. I'm not a farmer; I don't need acres and acres of land. Am I just going to sit on my porch and look at the trees?
I think I'd end up blowing my own brains after a month or so of living like that.
For a couple it's good. And if you want to do stuff driving once and a while isn't so bad. Camping, etc...
Among many factors, I was pretty sure the land had no water :P
The preferred alternative is to allocate some percentage of units in the new building to low-income tenants.
Of course, some "progressives" want this percentage to be high enough to make development totally nonviable.
Deleted Comment