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Comment by jakelarkin | Hacker News Reader

California and the Bay Area is so screwed. The Powers-that-be looked at SB827 like it was the work of lunatics, and did not engage in any of the significant concessions that were made. The bill was completely impotent at the end ... local demolition control + 4-5 story buildings. It drew no interest nor alternative proposals to actually help solve the housing crisis.

So yeah we're going to end up with middle class social housing lotteries, 1.5 hour commutes and crazy inflation of basic service costs ($3k/month child care, anyone?).

Every neighborhood can't be a wealthy enclave of SFH. There is literally no where to live in the central Bay Area on teachers salary much less a Social Security Disability paycheck. The homelessness epidemic will grow.

It's a rentier economy of land owners and the rent-controlled incumbents. How "Progressive".

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Prop 13 to me seems to be at the root of all these problems.

I'm almost finished with Picketty's Capital in the 21st Century, and Prop 13 seems to be a godsend for rentiers seeking the inequality of 1900-1910.

Overturning Prop 13 isn't realistic since voters are selfish. Prop 13 has GOT to be the biggest reason behind NIMBY-ism. If the little old lady in the 3 bedroom $2M house had to pay $20K a year in taxes, she'd have sold a long time ago. But because of Prop 13, her taxes are likely less than $1K a year.

But the sick thing about Prop 13 is that it applies to landlords. You know why LA is filled with all these single-story rental properties from the 70s in prime locations? Because the taxes hardly budge, so they're paying about $1 per year per square foot in taxes. Even if they sold for the huge premium, it'd be impossible to re-invest that money into something with a higher rate of return.

It also applies to businesses. It's why you see a lot of car washes making < $1M/year sitting on land worth $20M.

We could potentially modify Prop 13 to eliminate the benefits for rental properties and have the benefits only apply to the first $1M of real estate. That'd only affect the top 5%, and only marginally.

But it could eliminate a lot of NIMBYism, I think.

Proposition 13 as a whole needs to go, it has horribly distorted the market, and moved the property tax burden onto those who own the least land. Meanwhile, schools, towns and counties are desperately revenue starved due to Prop 13.

> Proposition 13 as a whole needs to go

Well, the limitation on increases in tax basis value probably needs to go, but I think the case is less clear for the tax rate limits and other parts of it.

The tax rate limits have also turned out to be problematic. They limit how much taxes can be, relative to property value, but they haven’t limited taxes overall. We now have a whole lot of parcel taxes, and Mello-Roos taxes, where a stick hut pays just as much as a mansion, to pay for a lot of city services. It’s incredibly regressive.

Do you know of studies of what the effect would be if it was removed? I think it's a third-rail sort of thing... but also, I think the larger issue is really the supply problem.

More relevant, it has made it economically unattractive for municipalities to zone for or approve housing construction (housing is a net loser generally because of school district costs, and Prop 13 just torpedoes future school funding) and only allow commercial or office development. That's why cities with market power in the Valley (Palo Alto, Mountain View, Sunnyvale) have 3+ jobs per resident.

This. Prop. 13 created incentives to never move out, and thus killed dynamism in CA. Young people need homes near work. Older people need cheaper homes and can be further from city centers.

Homesteading tax breaks are one thing, but applying them to all property is absolutely insane. This is easily the worst thing about it, and it has to go.

As to homesteading, even for homesteading the property taxes need to be able to go up with housing inflation somewhat at least.

It would be quite different if it was only the actual percentage tax rate that was limited in growth. I'd want that for income taxes too.

A brake on one kind of tax will spill into another kind. Thus, e.g., in TX property taxes function as an income tax via the Robin Hood school funding plan. It would be better to have a proper income tax, but no one will vote for such a thing without a hard constitutional brake on rates.

> Older people need cheaper homes

Why do older people need cheaper homes? Older people have paid off their mortgages and have 100% equity.

Property taxes and home repairs on fixed incomes.

Older people are on average on fixed incomes, sure. They're also on average the wealthiest age demographic in the US.

> They're also on average the wealthiest age demographic in the US.

That's true, but it's a bit misleading IMO. Older folks might have accrued more wealth than younger demographics, but they're not really adding to it each year.

For example, the 65-69 age range has a median net worth of ~$194k[0]. However, somebody in that age range is likely retired and will be living off of that $194k for the remainder of their life. Conversely, somebody under 35 might only have a net worth of $6.6k but will likely be bringing in ~$4,000 each month. Were an individual in the 65-69 age range to withdraw $4,000 per month, they'd be out of money in 4 years. Realistically, most might withdraw around $2,000 per month (before or after Social Security). That's where my parents are at. They really have much less to spend even though they have a lot saved up.

If you take into consideration home equity, it's more apparent why property taxes and such are a big deal to older folks: upwards of 80% of their assets are in their house[1].

[0]: http://www.businessinsider.com/heres-the-average-net-worth-o... [1]: https://amp.businessinsider.com/images/593580d679474c17018b6...

Great explanation.

Retirement starts to get scary when your parents are thinking about it. You start asking them just how much they have saved, and you start thinking about how much more income you'll need if you end up having to supplement theirs.

If you retire at 72 today you might well live twenty more years. That's a lot of time to live of fixed income. You'll get sicker as you get older, so you know your healthcare costs will go up. That expensive house with high property taxes (if you don't have prop 13 to have made them close to zero for you over 40 or 50 years) starts looking like a burden, and also a source of funds.

Easy solution is to make it such that Prop 13 only applies to primary residences of people that are on social security.

I think the premise is that "older people" don't "need" as much space (interior or exterior) as they did when they presumably were raising children in the home.

Then again, few people "need" SUVs.

They need less space. Having too much space is a cost of opportunity, since presumably a big house is more valuable than a small one. Selling one's big house and buying a smaller house, then investing the difference, may well be better than holding on to the house -- for society as a whole that's almost certainly true since now someone who needs more space can use that particular house's extra space.

And at some point many elderly people start needing to tap their equity. Sure, you can use a reverse mortgage to do that, but downsizing works too, so some do that.

In any case, "we're retiring and moving to the middle of nowhere, where land and homes are cheap" is a common thing I see. Property taxes are a big reason for this, because even with senior homesteading property tax breaks, it can be a big savings to live farther out, and that's a big deal when your retirement savings aren't as big as you might have hoped.

California's old people are already paying 10% income tax which they can easily avoid by moving to Oregon. Lower property taxes is a result of higher taxes.

Also property taxes are not there to decide who leaves and who stays. The only reason why we have property taxes is to pay for Police, Public schools and other bare minimum public services.

Prop 13 is such garbage, especially for rentals. My landlady was charging me $2500/mo and paid $650/year in property taxes. I think she used that property tax transfer for 55+ older from an even older place she must have purchased a long time ago, because the assessed value is now $60k, but the property is worth at least 500k. Bullshit. Not to mention the insane appreciation on the property. It was a poorly maintained dump of a place. She had no interest in fixing it or taking care of it, but had every incentive to hang onto it because it cost her NOTHING.

Prop 13 has many, many pernicious effects but it doesn't drive NIMBYism. The pernicious effects are a slowdown in the velocity of the housing market (keeping your low taxes) and pushing local governments to very strongly prefer commercial over residential development. Every new house is a net loss to local government on a long term budget basis.

One of Prop 13s benefits from a planning perspectives is that your property taxes are isolated from the decisions of your neighbors. So if adjacent properties turn into condos or commercial, you won't see your taxes rocket, so you have less of an incentive to oppose development.

CEQA and the California Coastal Commission are weapons that NIMBYs use, but what drives NIMBYs in CA is the same as everywhere else. The hippy/champagne communists of SF just make it stronger (damn those evil developers making a profit! boo hiss!!!!) and elect malevolent local politicians, but it's the same drivers as anywhere else.

Even just removing it for commercial properties, and residential properties that are not owned by an occupant would fix 80% of the problem from an overall tax revenue perspective, while retaining the most support with voters. How does it make sense that a regular McDonalds pays less in property taxes than a single family home, while being larger and in a more desirable location?

  Overturning Prop 13 isn't realistic since voters are selfish.

Overturning Prop 13 for everything but one's legitimate primary residence would be a lead-pipe cinch. Yet neither the legislature nor any deep-pocket funder for a relevant initiative constitutional amendment (cough Tom Steyer cough) has come forward.

Agreed. Prop 13 is also the reason municipalities zone more commercial. Ever wonder why so many hundred thousand sq ft office space is going up around transbay terminal without a balance of housing? Don’t think that’s the dreaded straw man”NIMBY”. Its the city trying to make sure the services are financially solvent 20 yrs from now.

So I just bought a house (condo actually) in Oakland and I have to agree.

There's a huge class of people who aren't particularly impressive, hard-working, or otherwise "deserving" in my admittedly-morally-loaded-sense of the term, who happened to buy a ton of real estate over the last 30 years, and are now earning eye-popping rates of return (20%+/year on millions of invested capital) owing to the combination of increased desire to live in city centers, and prop 13.

It's really shocking. If you look at most small towns in America, the wealthy people tend to be small business owners, successful professionals, and perhaps a few landowners. Here in the SFBA, the serious peninsula wealth is all tech (early employees and execs) and everywhere else it's landowners by a mile. Here in Oakland, restaurants are closing practically every day because this rentier class is bleeding them dry of any profit. Both directly through rents, and indirectly by the wages employees are demanding to live in an area where prevailing rents are 2-3k/month.

I wouldn't even be mad about this except that they're using bad government policy to line their pockets, and they're just shameless about it. It boils my blood. These people are just leeching off of the huge south bay productivity engines (Google, facebook, Apple, etc) and taking a pound of flesh by restricting supply of a necessary good. Their entire livelihood rests with the stubbornness of execs at the big tech companies to stay here and put up with it. These companies end up paying exorbitant salaries just so that this rentier class can line their pockets with what would otherwise be shareholder profit or personal income of employees.

You can substitute "Bay Area" with many of the major centers in the US at this point - Seattle, LA, Denver, Austin all have the same issues, they're just a few years behind the Bay. We need fixes to zoning and development rules and tax laws, they help cities be more liveable as it will help everyone. Cities overseas have figured this out, to some degree - rent as a % of income is lower in both Europe and Asia, generally, and it's a lot easier to build effective mass transit when housing densities are a bit higher. The single family home is one of the worst things to happen to the US, and it's slowly killing us with traffic and spiraling housing prices.

> You can substitute "Bay Area" with many of the major centers in the US at this point - Seattle, LA, Denver, Austin all have the same issues, they're just a few years behind the Bay.

Not the same issues. Seattle doesn't have anything like Prop 13, or nearly as bad height restrictions. City residents and council are much more supportive of upzoning than SFBA — as in, it actually happens.[0]

Plenty of actual issues, and development still lags demand. But the situation is not nearly as dire as SFBA, and it's not getting worse quite as fast.

[0]: https://seattle.curbed.com/2017/11/9/16629248/seattle-hala-m...

Maybe to not the same degree, but the same issues - NIMBYism, a focus on SFH, a sense that established residents are pursuing housing policy that punishes younger / newer residents. https://www.nytimes.com/2018/01/03/upshot/zoning-housing-pro...

Yep, you are absolutely right that there is still (some) NIMBYism and an overemphasis on SFH in Seattle. The distinction I want to draw with SFBA is the degree.

There's a tipping point where the NIMBYs have enough power to block all or most upzoning and development, and I think — fortunately for us — Seattle has not passed that threshold. SFBA has.

To say the final bill was impotent is unfair. It still removed parking requirements within 1/4 mile of transit stops and reduced it 0.5 automobiles elsewhere. It exempted projects from density maximums and some FAR maximums.

In effect, it would've converted a lot of the Bay Area's SFH into much denser condominiums.

not if the local planning department refuses to issue demolition permits for the existing structures

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