Comment by ScottBurson | Hacker News Reader

Comment by ScottBurson | Hacker News Reader

“Cities will tell you that from a property tax perspective, housing is a loser,” says David Cogdill, president of the [California Building Industry Association].

I was trying to make this point a few weeks ago here on HN, in a discussion on Prop. 13, and got pushback. I take this quote as evidence that it's common knowledge among people in the housing industry. Prop. 13 disincentivizes cities from adding housing.

Prop. 13 needs to be fixed. The way it should have been done is this: in a year in which property values increase by more than 2%, instead of limiting the tax to 2% more than the previous year's, we limit the payment due to 2% more than last year's payment due. The locality receives a lien on the difference, but that lien does not become due until the property is sold.

So in an area in which property values have been rapidly rising, a homeowner who sells their property will have to share their windfall to some extent with the locality. But those on fixed incomes are still protected: their annual tax payments don't increase any faster than they would today.

Common objections:

"People will take out home equity loans that will have to be repaid at sale, leaving them with a cash loss."

A property tax lien is a public record. Banks will take the liens into consideration when deciding how large a loan to offer. This is standard practice already.

"The liens will accumulate to the point that they will be greater than the owner's gain on the property, giving them a strong disincentive to sell."

No, this wouldn't happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%). If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value. The only scenario that generates a lien larger than the owner's gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble. Well, bubbles produce lots of dislocation; I don't think they make for a good argument against this proposal.

"Prop. 13 will never be modified."

Well, it certainly won't if no better alternative is put forth!

> Prop. 13 disincentivizes cities from adding housing.

disincentivizes cities from adding low-density housing

Once you start piling them up into high-rises, the revenue stream doesn't look that bad.

But for multi-family high rises different cities have a number of additional requirements. Minimum parking spaces, minimum number of feet from the sidewalk, minimum footage of "green zones" consisting of lawns or trees - all great things hypothetically speaking, but costs add up pretty fast, so any high-rise building is now a "luxury condo tower" when in theory increasing density should lead to decrease of cost per square foot, not increase.

> Once you start piling them up into high-rises, the revenue stream doesn't look that bad.

Combine with earthquake regulations essentially limiting buildings to a small number of stories and ScottBurson's comment is pretty spot-on.

How restrictive are those regulations? The tallest structure in the Western United States is being built in Los Angeles, of all places http://graphics.latimes.com/wilshire-grand-the-big-pour/

Is it a residential structure?

Mixed-use, with retail and office space closer to the bottom, hotel rooms and residences towards the top.

There are height limitations in most of Silicon Valley (except maybe downtown San Jose?) -- I think the limit here in Sunnyvale, for example, is eight stories -- but earthquakes are not the reason for them. People just want to preserve the suburban character of the area. How that can be done when a lot more people want to live here is not clear to me.

It's a bit more insidious than preserving the character. Tall residential towers generally require certain amount of parking spaces, which in turn require more expensive structural support for the (usually) underlying garage.

Developers would justify the cost of the parking structure by adding a few residential floors on top of the tower. But that's where height restrictions kick in and price out low-tier and middle-tier apartments, leaving room only for luxury, using SF as an example http://missionlocal.org/2016/10/neighbors-double-down-agains... "Coliver said her team concluded that developers could squeeze a maximum of 13 parking spots in the 12,000 square foot lot— but that would make the building “structurally not feasible,” since it would require removing the columns that support the structure. The cost for the hypothetical scenario? Coliver said $2.25 million — or $180,000 a stall."

So the long-term recipe for opposing any new development is:

1) Require certain minimum parking spaces per square feet built (already done in most cities).

2) Run the numbers for a minimally economically viable structure, calculate the total number of floors it would need with parking garage included.

3) Lobby for regulations that set the maximum height at N-1 floors.

4) Bingo, every tall structure is now economically unfeasible. Saves you a trip to the city hall to protest new development, as most developers come to the conclusion that the numbers don't make sense well before acquiring the land and permits.

>“Well, how about guests?” asked Lucy, before the conversation turned to shadow impact and wind tunnels.

This has a very simple answer: no overnight parking. Keeps residents from owning cars if they don't have off-street parking, so there is always street frontage for visitors. You get a limited set of overnight parking passes for overnight visitors.

In the long run, it's probably the only way to get people to stop blocking development over street parking. Take it away from everyone, except short-term users like guests and car-sharing.

Bonus points of you make an exception for motorcycles/scooters, since they allow far more people to benefit from motor vehicles per square foot of parking.

The FAA has imposed a height limit of about 15 storeys on downtown San Jose. It's right in the takeoff path from SJC.

Most of SV land is parking spaces. The obvious answer is to stack the cars up multilevel, for an easy 2x population density

NEMA is more than 40 stories. Jasper appears to be even taller. Would earthquake regulations prevent someone from building a few dozen (or hundred) more NEMAs?

>Minimum parking spaces

Minimum parking requirements are a big deal for low-rises, where the parking area is an appreciable portion of the building's overall square feet.

The gleaming 40+ story high-rises in the Civic Center/Van Ness area run from around $3000 to $5500 for a basic studio or 1-bedroom. There are also several parking garages in the area, distinct from the residential buildings, where a monthly reserved parking space is around $375.

Assuming parking is built into rent (it isn't) and a 1:1 ratio of parking spaces to apartments (it's actually less), removing minimum parking could only bring the rent down by $375.

I think the real explanation is that desks are much smaller than apartments. Approximately everyone at Twitter, Square, Uber, etc. is willing to pay a substantial portion of their six-figure salary for a trivial walking commute. To have a corresponding apartment in the neighborhood for every desk at Twitter, Square, Uber, etc. would require dozens of residential towers. So when only 3 or 4 are going to exist, they have to priced to skim off only the very top of the corporate ladder at those companies.

Offices also typically have meeting rooms, hallways, showers, locker rooms, gyms, cafeterias, parking, bathrooms...it'd be interesting to compare the average space in sqft per employee in offices vs space per resident in apartments. I'm guessing it's not as different as the desk vs apartment analogy suggests.

Still much denser. Around 150 ft^2 per employee.

https://www.google.com/search?q=square+ft+per+employee

Why would there be only 3 or 4 towers? NYC and Vancouver have many

Of course a disincentive to sell will be created by your proposal! Any lien that comes close to offsetting or canceling out the owner's gain will do that. The lien doesn't have to exceed the gain to create a disincentive. Why would anyone sell for little to no gain? Any time the potential gain is decreased, a disincentive to sell is created.

Furthermore, not only does this create a disincentive to sell, it also creates a disincentive to buy. Buying property becomes a lot less attractive when the same disincentive that applies to the current seller will apply to buyer in the future, when the buyer decides to sell the home.

Actually the people who would feel the disincentive most strongly are speculators. Those are the people we want to discourage.

The whole point is to slow the growth of prices, by giving cities an incentive to increase supply. Higher prices are the biggest disincentive to purchasers.

I have brought this up in multiple Prop 13 discussions, including I think the one you are referring to where you pitched your proposal. My opinion is that the proper fix for Prop 13 is to modify it to match Florida's much saner[1] practice of only providing the appreciation cap to owner-occupied primary residences. That speculators, investors, and landlords get to benefit from taxable value caps is bullshit, IMNSHO.

[1] Who would have expected Florida to be the same one on anything?

I think you did bring it up there, and I completely agree. I don't know how much it would help, though, in the specific area of giving cities more of an incentive to approve residential construction projects. I guess it would help some.

That's an arbitrary advantage given to homeowners over renters (who pay the landlord's taxes)

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