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SROs went out of style throughout the USA because they provided poor returns for the property used and were a huge hassle for whoever was running them, not to mention being magnates for crime. It’s sad, since an SRO is better than a tent. The socialization of lower tier housing (via HUD) also played a role as SROs didn’t really fit what was expected once the government got involved.

China has a lot of options for cheap housing, none at all legal, but rule of law isn’t really a thing there so just keep things quiet. In Beijing, you can rent a windowless sub-basement room for a few hundred kuai a month, mold is an issue, but it’s better than other options. Waitresses also often crash on the floors of the restaurants they are working in, so the windows are all blinded over in cardboard after closing time. This is all working poor, it is really hard to be a vagabond in China because the social safety net just isn’t there for it (and you can’t just crash under an overpass because the police are already in to that).

> With no constraints on construction will there be a small boom in new development, tearing down virgin forest in order to make empty developments?

Probably? I live in Michigan, which (with the exception of two spots) has no meaningful limits on construction. Even the cities that technically have-and-enforce zoning, waive all the rules constantly anytime a developer asks.

And yes -- it means developers can build almost anything they want, almost anywhere they want. (Truly anything, I live next to a 15-story concrete castle apartment building that a developer built on what was once a trailer park).

Unfortunately, it does not mean you get lower cost of housing (prices here are still astronomical, and while they look cheaper in comparison to California, is only because of the severely reduced income locals make -- prices are still at record-all-time highs)

But it does mean, developers routinely cut down entire forests or farmland for new suburbs anytime they'd like. If you want a house made of sticks and cardboard, we have loads and loads of them for 'just' $450k. Years worth of 'inventory' here.

> Unfortunately, it does not mean you get lower cost of housing

You don't believe in supply and demand? I'm not saying you have cheap housing. I'm saying you would have more expensive housing if there were fewer of them, the same way GPUs are more valuable when there are fewer of them.

What you're not factoring in is the cost of labor and materials. They are both already quite expensive and when you have a building boom the costs of both will skyrocket. What will happen is you'll end up with cheaply constructed housing made from the worst materials. And that's the good outcome.

The bad outcome is the rich who are looking for alternate investments will buy up all the labor and materials and build construction for themselves and will build rentals. That's the bad outcome.

The awful outcome, and likely outcome is that the labor and materials will be bought by newly formed real estate companies that will build rental property that is ugly and expensive - because they control the market more and more as they merge into 2 super landlord companys.

The cost of the house itself is nothing compared to the cost of the land. Houses don't appreciate in value because of the houses (which deteriorate over time) - they appreciate because of the scarcity of land.

Sure, but houses don't depreciate as quickly as you might think. There's a few reasons for this:

- Constructing a new building isn't as cheap as when the existing structure was built. For instance, my home cost about $15,000 to build 100 years ago. Today the structure itself is worth more than that. Inflation matters here.

- People maintain and improve their homes. New kitchens, roofs, flooring, furnaces, siding, etc. In essence you are rebuilding a home 1 piece at a time from the day it is made. If you don't then the house gets to a point it can't be lived in.

People who haven't looked at new build prices for 10 years are shocked at what it costs today.

Nothing you're saying is wrong, but it doesn't change the fact that the land is an order of magnitude more valuable than the building (I'm speaking broadly and for residential real estate).

We still have more lumber than land. In a very hand-wavy way we have more labor than land. The limiting factor is always what drives the price.

This is not accurate outside of a handful of broken housing markets. In Philadelphia[1] land is often 1/5 of the total value. There are definitely some parcels that are undeveloped[2] or underdeveloped[3], but most properties are more balanced.

[1] I chose Philly because of a good clickable property tax browser https://property.phila.gov/?p=881576550, and because it keeps separate land vs. improvement assessments.

[2] This is in no way a statement that Rittenhouse Square should be developed. Parks are good. https://property.phila.gov/?p=885705260

[3] https://property.phila.gov/?p=881520352

Your [1] example is a 100+ unit apartment building. In the context of this thread, we're discussing single-unit buildings like your [3] example.

Single-unit buildings close to downtown can have higher land costs. But single-unit buildings in single-unit neighborhoods are, again, around 1/5 land cost.

https://property.phila.gov/?p=492129100 https://property.phila.gov/?p=581427500 https://property.phila.gov/?p=212348000 https://property.phila.gov/?p=344136100

These are definitely better examples than you previously used. That said, I think the tax assessments don't accurately state the value of the land vs the building. I don't think OnlineGladiator is correct about the universality of >10x land:building, but I don't think you're right about ~0.2x in these neighborhoods either. I do think OG is correct about housing as an appreciating asset being primarily about the land value.

1) The nominal land cost has huge jumps up and down. From 2016->2017, all of these properties had their land value lowered 60-70%: $150k->$44k; $166k->$59k; $75k->$32k; $279k->$96k. I find it hard to believe that property prices swung that much, especially since the total appraised value remained constant.

2) The price of the land depends on the zoning of the land. A lot which can't be subdivided further or which can't have multi-unit housing will be constrained by what a single family is willing to pay for the lot. If you compare the last property ($140k land assessment / 19k ft2) to a smaller lot nearby [0] ($50k land / 2.4k ft2), you can see a huge difference in the land price per ft2: $6.7/ft2 vs $20.4/ft2. This price difference reflects legal constraints on what can be done with the lot. If the larger lot could be subdivided, it should be closer in price per ft2 to the smaller lot and would be worth ~$390k. If the total assessed value remained constant, that would be 1.25:1 for land:building.

[0] https://property.phila.gov/?p=344121100

3) Furthermore, the price of the building itself depends on the scarcity of housing. With plentiful land to build new housing, old housing loses value quicker. An old house in a constricted market has more value because it's existing housing on a scarce plot of land. Even though the value is assigned to the building, that building is more valuable because of the plot of land it's associated with.

I used to believe this and then I got into the area. It depends on the area of course but it turns out that the cost of the house is quite significant. House construction costs are $200-500 per square foot, putting even a medium-sized house at around a quarter of a million dollars. When you look at the costs of empty plots of land versus similar plots of land with houses on them, you'll see that the housed plots of land cost the same as the empty plots plus the construction costs of a similar-sized house. In the areas where I looked, the costs of the house dominated, such that the land value is about 20% of the total value of the plot. Even the variance that occurs at that level can be further explained by the value of potential future plots of land on the space -- a plot of land that has one house but could hold a second (for whatever reason) is more valuable than an otherwise-identical plot that can only support one house.

> You don't believe in supply and demand?

Induced demand is a thing, as (and much more common) are demand curves that are flat enough that shifting the supply curve to the right by some large fraction of the current market clearing quantity has no discernable effect on the market clearing price.

Real life supply and demand involves more than the simplest Econ 101 illustrative examples of the general direction of the ideal relation.

While you are right that the dynamics are complex, research has clearly established that an increase in housing supply decreases its cost.

See e.g. https://www.lewis.ucla.edu/research/market-rate-development-...

There's a certain cost to build a house. It's not like the houses themselves are more in CA (well, maybe a little), it's the land. For example, my house is appraised around $300k but the land is appraised at $1.2 million.

My 4 bedroom house in Oakland had a replacement cost/value of about $400k. That seemed high but not unreasonable. Then the Santa Rosa fire burned down 1000 homes and insurers realized that construction costs in California are insane (especially when you are trying to build a thousand in a year). Replacement cost jumped to $750k in one year. The land used to be worth quite a good fraction of the property, and then it wasn't.

My home’s replacement cost is way higher than what the insurer appraised it as, but asking for a higher appraisal counts as warning bells in their eyes (are they planning on burning down their home?).

That may be what your used house is worth in an appraisal but if you wanted to build it new, it would cost significantly more I imagine. It depends a lot on finishes and framing complexity of course (number of windows, roof, etc).

A lot of people I know in Colorado found this out when their homes burned down. They had the structure insured for like $500,000 and found out that rebuilding their home that was built 20 years ago would cost around $1,000,000.

A friend recently had a multi story addition put on his house, and of course additions always cost more because there's some amount of demolition and working on an existing site, so the new footings have to be underpinned, etc. It's also a large kitchen and the existing kitchen space had to be demo'd and rebuilt into a new, basic room. The upstairs connected to a hallways but there was some work. Anyways, the cost, all in was over $500k. Even if he didn't use Marvin windows, Wold appliances, nice cabinetry, etc it would have been like $400k. And yes you can go lower. But don't be fooled. A lot of the cheaper construction you see is not only made with awful materials and lazy/inexperienced tradesmen, but is also track housing or similar no modifications allowed type things.

> Unfortunately, it does not mean you get lower cost of housing (prices here are still astronomical, and while they look cheaper in comparison to California, is only because of the severely reduced income locals make -- prices are still at record-all-time highs)

Are you taking into account the inflation we've experienced? If the mental anchor against which you compare this "all time high" is 2015, for example, then we've seen over 20% inflation. Over 33% inflation since 2008.

https://fred.stlouisfed.org/series/MISTHPI

By these numbers, up about 78% since 2008 and 2015, which almost matched.

Up 50% since the previous peak in 2005, so yeah all-time high.

> (prices here are still astronomical, and while they look cheaper in comparison to California, is only because of the severely reduced income locals make -- prices are still at record-all-time highs)

You are confusing cause & effect here.

I'm in Austin. I believe there to be inconsistency in zoning here because I'm on the top floor of a 10+ floor residential building looking down on a neighborhood park, single family homes, a motel, and smaller apartment buildings.

The building occurring downtown is insane. I haven't seen anything like it since the booms in Shanghai and Dubai.

> (Truly anything, I live next to a 15-story concrete castle apartment building that a developer built on what was once a trailer park).

Ah, the good ol' Grandville castle.

It boggles my mind every time I drive past that someone decided to spend tens of millions to build... whatever the hell this is. https://cdngeneral.rentcafe.com/dmslivecafe/3/610177/DJI_018...

My very first thought there was 'here's an example of what could have been ambitious, interesting architecture, except all the public space is devoted to cars instead of people'.

> Unfortunately, it does not mean you get lower cost of housing

I think that I'm missing something here unless there happens to be an infinite supply of people looking to move to your city.

>Basically, shows that the State's tax difficulties are themselves the consequence of exclusion.

I'm not sure what you mean by tax difficulties, if you mean the state has trouble raising revenue, that's certainly not the case. CA is running a large budget surplus right now. If they only relied on property tax it could be an issue, but they also have an income tax, so the revenue outlook in CA is pretty good right now.

Fari enough: let me clarify. Because California gets so little tax from property, it must get more from income taxes. That has a couple of negative consequences.

The nice thing about property taxes is that housing prices change slowly, even in boom/bust cycles -- essentially they are coupled to a dashpot. While income, especially in California with a progressive system coupled with most of the high earners paying cap gains, leading to large swings (further influenced by the Fed).

Also property taxes are the main source of municipal and school funding; with property taxes artificially pulled low, the state needs to step in instead. In addition, the structure of Prop 13 discourages people from moving which reduces the availability of housing stock.

Prop 13 wouldn't be so bad if it excluded commercial buildings (including rental properties) and didn't have the huge inheritance loophole. But neither of those is likely to change.

The reason I mentioned the coupling between prop 13 and exclusion: Californians voided all restrictive covenants in the 60s, which lead to more selective zoning restrictions; Prop 13 came from conservative southern californians and (due to the stickiness mentioned above, including a retroactive valuation reduction and the inheritance loophole) locked a lot of "those" buyers out of the existing neghborhoods.

Your point about moving is really important: there are a ton of boomers sitting in houses which are much larger than they need without children living at home but in many cases they're doing exactly what the system incentivizes. Accessory dwelling units (ADUs) can help somewhat if they have enough space and want to get in the landlord business (or have family who need it) but really we need to make it easy for people to downsize without financial precarity.

I think now seniors can keep their Prop 13 tax exemption if they move anywhere in the state. However, that is a law that only passed a few years ago. Before then, I believe you were restricted to moving only within the same county.

On one hand I’m sympathetic to the individualist argument that it’s unfair for these people to have to vacate their 30+ year residences just because a bunch of people moved to their area.

On the other, I agree that it’s ridiculous someone can be paying 10-20% what their neighbor pays in property taxes, and that this causes an inefficient allocation of resources.

If we ever want to solve this we IMO need some kind of gradual phase out. We can immediately/over a 5-20 year interval move the taxes to what they should be on commercial and non-primary residences. But for actual primary homes probably the only way we can do it is if we let the property taxes be deferred until the current homeowner dies. No matter how much pain the policy causes we must under no circumstances cause a single grandma to lose her home.

A lot of this also comes back to the “just build more housing” point: an 80 year old probably doesn't want to have to be responsible for a house, but if the choice is considerably more expensive or moving away from everyone & everything they've known for 40+ years they'll do it. If there were reasonably-sized options nearby, they'd probably have a different answer.

Where I live now has a couple of nice options for aging in place – dedicated 55+ apartment building, with government support for low-income; and a co-op where the units are smaller but they have more shared space. A lot of older neighbors have spoken glowingly the latter because it's all ages and it since they see their neighbors more they don't feel lonely the way someone in a detached suburban home might. I wish we'd build a lot more stuff like that where someone has an option which doesn't break the bank and avoids those other downsides.

Great point. Prop 13 creates a lot of illiquidity/friction that probably keeps people in places they wouldn’t stay in otherwise. Not just old folks. It’s probably just as much of a problem for people who inherit property or get a job an hour away.

Prop 19 passed in 2020 IIUC partially solves the problem you mention because people 55+ can maintain lower tax rates after moving, but of course it is just a bandaid. Definitely the better solution would be for the real estate market to not be so expensive that people can’t afford to move/live in the general type of housing they want though.

> It’s probably just as much of a problem for people who inherit property or get a job an hour away.

My knowledge is stale - I moved away from California a decade ago - but I think you’re right about downsizing at least to the extent that they can actually find a cheaper place.

Funny enough, Texas is basically the opposite: there's no income tax, and so it has to get taxes from property. That also has a couple of negative consequences:

There's a "homesteading exemption" for taxes on a primary residence. This means your property taxes can't shoot up massively if your property suddenly gets more expensive.

This pushes even more of the property tax burden onto investment properties, which sounds good to some in theory, but one affect it has is that rental properties are investment properties. So rents go up a lot. This means renters end up paying a lot of property taxes, which is, uh... a surprising outcome.

Yeah, these lopsided systems have drawbacks!

The Lebowski loophole is partially closed on large enough values. But I doubt it prevents corporations/trusts from being a simple workaround. Then they added new loopholes to make it so old people can move and keep their low property taxes.

Prop 13 is IMO the biggest problem that California faces, because it’s the most intractable to solve (it would be political suicide to try to roll it back now that so many people are paying way lower taxes than they would without it) but is also a major contributor to a lot of other problems in the housing market. I can think of ways to roll it back slowly, but let’s be real, people will freak out if they think they’ll have to start paying 5x what they currently pay in property taxes, even if it’s after they die or in 20 years from now.

“On average, state and local governments collected $1,617 per capita in property taxes nationwide in FY 2017”

https://taxfoundation.org/state-property-taxes-per-capita-20...

California property taxes for $1620 per capita, which is average. How does this translate to “so little tax from property”?

As a proportion of net state product it’s property taxes are low. Compared to most other states, California provides a lot of services and looks after a lot of land (has a lot of thinly-settled land — people there need services too). It’s a major net contributor to the federal budget.

It should have a better mix of tax sources.

Remember the size of the state’s economy and population would make it one of the large EU countries.

The income+sales taxes are so high in CA partially because prop 13 reduces the amount of funding able to be gathered from property taxes. The reliance on income taxes, as the other reply mentions, means that CA gets streaks of extra tax from capital gains sometimes (leading to occasional budget surpluses).

IMO Prop 13 is at the root of a lot of dysfunction in CA, but personally I hate it because these extra income+sales taxes put a lot of tax burden on new residents and young professionals.

PA has random pockets of new development, like on Alma St & Page Mill across from where AOL was.

Mountain View has much more around the San Antonio Shopping Center where it's starting to look like SF.

I'm wondering if there will be random developments that will sink property values because big city blight comes with : homeless camping, property crime, and so forth.

Palo Alto is unique in California in that it is/was legal to dwell in a vehicle because it wasn't criminalized since the law had to be rolled back due to a Ninth Circuit ruling about another law in LA.

The south side of El Camino Real belongs to Stanford, not Palo Alto, so RV camping has always been allowed on that side of the street.

> It sets an interesting context for Prop 13 (basing the tax base on the purchase price, not generally on assessed value)

Prop 13 uses assessed value, but only allows unlimited assessment increases at sales, some other non-exempt transfers, and a few other qualifying events, otherwise, the year-over-year increase in tax basis value is limited to 2% or the rate of inflation, whichever is lower.

But, also missed in most discussions of Prop 13, is that it capped property tax rates at 1%, which (even before considering the value missed by the assessment cap) is not only way below the common rates prior to Prop 13, its way below the national average effective property tax rate.

Prop 13 isn't a result of exclusive zoning, it is—like exclusive zoning—a measure that protects status quo elites at the expense of everyone else.

> For example, Calaveras county has a shrinking population, but the main sources of jobs and taxes is construction. With no constraints on construction will there be a small boom in new development, tearing down virgin forest in order to make empty developments?

Neither Calaveras County nor any city therein has a noncompliant housing element, so “no constraints” due to builder's remedy is not an issue. OTOH, other places in the state getting more housing is more likely to accelerate Calaveras County population loss.

>With no constraints on construction will there be a small boom in new development, tearing down virgin forest in order to make empty developments?

Prior to these changes, so much new housing was forced into the urban-wildland interface that entire neighborhoods regularly burned in our seasonal wildfires. The hope is these rule changes will force cities that use land inefficiently to densify rather than encourage more sprawl.

Maybe "little know outside of California" is more accurate. I certainly haven't heard anything about this, and it seems like the article is aiming for the broader audience

It won't make economic sense to try a builder's remedy project in lower land value jurisdictions, especially when you consider the legal headache. This is why we saw so many in Santa Monica and few in, say, the Inland Empire.

Right, and I mean the Inland Empire doesn't have anywhere near the housing shortage of the coast anyway, right?

That, and what housing shortage it does have is largely a downstream effect of the housing shortage of the coast.

The article doesn’t mention it, but it’s my understanding that this auto-approval only happens within a certain distance of public transit as well. I know that’s been a part of prior laws by Wiener, but I could totes be wrong that it’s a part of this one as well.

The developers still have to abide by construction laws - safety, and I think environmental impact. All that’s released (AFAIK?) is the zoning-based “no” from cities (and when within a certain distance from public transit hubs, maybe).

> The article doesn’t mention it, but it’s my understanding that this auto-approval only happens within a certain distance of public transit as well.

That article doesn't mention it because that's not correct. It's not tied to transit.

Right - that's the prior bill that didn't pas SB50?

I think you are referring to AB 2097, which allows more housing near transit hubs. It was passed in the latest legislative session, but is distinct from the Builder's Remedy and has height restrictions unlike the topic of this article. The same author wrote about it here:

https://darrellowens.substack.com/p/yimby-triumph-in-califor...

Thank you! This was a super cool article. There's some neat and very spicy things happening in the CA legislature :D

Santa Monica building 4000 homes seems like such a dream. However, I wonder how many of these will get CEQA blocked [1] :(

[1]: https://www.theatlantic.com/ideas/archive/2021/03/signature-...

but just two comments above, there is a no-zoning State person decrying rampant destruction of pristine areas.. so CEQA serves that purpose..

My guess is that a lot will in the short term, which will result in streamlining changes to CEQA rules specifically applying to them. It probably won't be a straight exemption like SB288 and SB922 provided for certain projects.

And if the pressure for a statewide emergenct declaration on the housing crisis bears out, well, a lot could happen without legislative change.

If you were to stop 100 people on the street and ask if they'd heard of the law, how many do you think it would be?

If I were to stop 100 people on the street and ask them if they'd heard of hedgehogs, the positive answer percentage would be depressingly low, I feel...

Sonic was a hedgehog in a video game. Older people might get that reference.

Indeed.

From TFA: "The “builder’s remedy” is a very old law from the 1990s"

Ah, the ancient times!

You could refer to Java as a "little known programming language" and use this as a defence.

I would wager money that members of the general public are at least five times as likely to have heard of the Java programming language as the Housing Accountability Act.

I hear it brought up by someone almost every time I go to a bar in Palo Alto/Mountain View.

Which street?