San Francisco Landlords may lose everything [video]
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Later in this interview they get into public schools, and the implications of the lottery system. While this is well-intentioned this is really a terrible policy, I personally moved out of SF largely because of this issue (I have 3 kiddos so private school is not an option).
The example he gives is that despite living a stone's throw away from a high school his child was allocated to a school 1 hour bus ride away. This is really how it works for anyone living near one of the better schools. In addition to it effectively destroying the community aspect of schools where your kids go to school with the neighbors which facilitates neighboring families meeting each other and becoming friends, walking to school together, and so on.
The policy is well intentioned, but ultimately does more harm than good and everyone who is closely involved and knowledgable about the system is completely powerless. The voters just don't care what any experts or those affected say, they just vote on ideology. Quite frankly it feels a lot like the way in which Texas voters could not, evidently, care less about the plight of women with complications in pregnancy.
This is the reason I'm hardcore opposed to bussing. It disrupts the ability of your stereotypical battle axe mothers from riding the schools ass. I'm sure school district goldbricks love that.
Personal view point which may not be universal. It's supposedly a lottery. But my friends with mixed race kids all got accepted to the better schools. And my friends whose kids have Norman Rockwell nature all got accepted to the schools where the district dumps the problematic kids.
That would be effectively writing off part of the property value forever. I'd wait for as long as possible to avoid that kind of loss.
There already is a "vacancy tax": the landlord is losing money when the property is vacant. They can't do that forever so that "tax" will naturally force them to adapt to the market (lower rents or sell).
To make it fair for the small mom/pop owned units, maybe if they have to lower the rent, they should be able to lower the property value (and thus property tax), since its based off rent.
I've seen older units being sold as condos, because the owner just wanted out of the situation.
So now the city has to do something about crime, littering, defecation, intoxication, looting, etc. otherwise they get no money.
But that won't happen ever because the voting criteria in SF is "donkey people good, elephant people bad". The donkey people have no incentive to be competent because they take their vote for granted.
It might be sad if you ended up in some overly leveraged position, but you did that knowing the risks and expecting to make a lot of money using that leverage. But no one is entitled to risk-free money.
Your example of $100/month is ridiculous hyperbole. More like $4000 in SF and $2000 in San Jose. If I have to choose between an extra 4h a week driving but saving $500 per week, then I will do it.
Summary and background: the Epoch Times host interviews a landlord who’s concerned about the impact of SF’s Proposition M, which imposes a vacancy tax on residential units in multi-family dwellings with three or more units.
The landlord manages a 25-unit building, which his uncle and father acquired decades ago. He blames the WFH phenomenon and crime for people leaving SF for cheaper cities and suburbs. He says he no longer can find people willing to rent his units on his terms on Craigslist or Zillow. He’s also concerned about the cost of implementing seismic retrofitting and complying with fire safety regulations. He’s worried about how long it will take for his building to regain its value: at its peak the building had appreciated and was appraised at “10.5 or 11-million" but his broker now appraises it at “between 6 and 7 million.” He goes on from there to a broader range of complaints about the city’s policies, over-regulation, how things have changed in his time, and how the balance of power seems to have shifted to favor tenants.
As to the residential vacancy tax that theoretically prompted this:
From 2024, after a residential rental unit has been left vacant for 6 months, a tax of between $2,500 and $5,000 (based on the apartment’s size) will apply in the first year, doubling each subsequent vacant year to a maximum of $10,000-$20,000 in the third and subsequent vacant years. Proponents of the vacancy tax mention that they’re particularly concerned about corporate landlords allowing units in rent-controlled buildings to remain vacant.
Single-family homes and duplexes are exempt. The city estimates that 4,000 of the city’s 40,000 vacant units will qualify for the tax in the first year [1]
[0] (pdf) Ballot measure text: https://sfelections.sfgov.org/sites/default/files/20220207_E...
[1] https://www.sfgate.com/politics/article/san-francisco-voters...
I mean they would rather take zero money than some money. Why is that?
If you want to play that game you have to live with the consequences...
The point is that all of these options are already available, but there are trade offs inherent in them that make them a worse option than renting for many people. If they were actually better, why aren't they doing that now?
Payback time.
Housing should not be an investment ever.
Zoning laws are the reason housing is unaffordable. Landlords lobby for zoning laws, but if you have the political power to prohibit renting then presumably you have the political power to reform zoning. Moreover, you should do that anyway, because if all you do is prohibit renting without allowing new housing to be built, you're going to have a bad time.
> if homeownership is out of reach for a segment of the population there should be public housing to accommodate that need.
So if you make 110% of the median income but don't have a downpayment yet the government pays for your housing? Do you get free housing forever as long as you spend everything you make and never save anything up?
What if you have plenty of money but you know you're not going to be somewhere for more than two years and don't want to buy property there?
Added benefit would be less traffic, congestion, and waiting in lines for anything
Whatever the solution is, it’s damn sure is not public housing.
Also Sanhedrin 38a: https://www.sefaria.org/Sanhedrin.38a.8
Our diversity is a complexity that is not addressed for in the working model, so it’s not that we shouldn’t try…but we shouldn’t assume that a model that works well in one environment will work well in another, significantly different, environment.
Housing is unaffordable because demand outstrips supply.
Economic illiterates who blame “greed” making public policy tend to make it even worse.
The real problem we have is exactly what you labeled “economic illiteracy”. This is a serious problem and issue with education systems worldwide.
In the future I hope one day humanity realizes that it’s equivalent in the past to failing to teach reading and writing or denying evolution.
A large portion of the supply is being held by investors like landlords which restricts the supply. Removing them from the equation would increase supply and decrease prices.
> A large portion of the supply is being held by investors like landlords which restricts the supply.
Because they expect the value tomorrow will be higher than the value today, because they expect demand to increase over time while the government continues to inhibit new construction. Stop inhibiting new construction and they'll want to sell now before the price comes down. (Which will make the price come down sooner.)
The incentive to not rent existing units is also a predictable consequence of things like rent control and laws that make it hard to evict non-paying tenants. Don't increase the risk of providing a thing and expect that to lower the price.
The free market used to work better before it got handcuffed by zoning laws everywhere. If you prohibit the free market from working, don't then mock the free market because it's not working.
> A large portion of the supply is being held by investors like landlords which restricts the supply. Removing them from the equation would increase supply and decrease prices.
True - if you mean landlords who hold but don't allow occupancy.
As a landlord I’d be interested to understand your proposed mechanism to “remove” me.
Could you also elaborate what happens to my capital and what I should be doing instead with the excess capital my productivity generates over my chosen needs and wants?
This attitude is so incredibly economical illiterate that it’s shocking we have HN commentators that don’t understand.
Who I am selling to? at what price? Do you support state confiscation of private capital?
Are factories that produce cereal next?
It’s an embarrassment to western education that educated people have such poor understanding of basic economics.
Otherwise its almost always a second (or third) plot that is outrightly owned by the landlord, which means they dont need it and itd be better for you to just be able to buy it.
Also the even better answer is public housing.
The landlord can make money by investing capital and then getting a return equivalent to the interest you'd pay to the bank to borrow that amount of money.
> Otherwise its almost always a second (or third) plot that is outrightly owned by the landlord, which means they dont need it and itd be better for you to just be able to buy it.
But you can buy it. You just go to the owner and buy it from them.
What are you supposed to do if you can't afford that right now?
Putting the state in charge of housing is the cause of the existing problem. They become captured by landlords, or favor higher property values because they increase property tax revenues.
What you need is some constitutional restraint on local zoning rules.
This is technically correct but the areas mentioned are the size of a block or a subdivision so it's hardly the limiting factor. You can build high rise apartments in any big city and multi-family anywhere. The reason prices on housing go up is that it costs a lot to build housing and it's pretty hard to secure financing for a housing project which you plan to sell/rent below cost. It's combined code compliance, materials, labor, and financing. If it costs $300 to build a square foot just in the labor and materials then it comes up at $150K for a tiny 500 sqf 1br and you'd need to rent that for more than $2000 per month to break even on the commercial loan you took. Throw in maintenance, lapses in occupancy and some profit and you are looking at close to $3K for a 500 sqf 1br. Unless it's on Manhattan or on an ocean beach somewhere, it's going to be very hard to find tenants.
It appears that America had ran up its credit card to the limit. Mass produced goods from China are still cheap but the hoses are just expensive, can't ship those in containers from Shenzhen. Playing with zoning is rearranging chairs on the deck of Titanic, it's not going to lower the cost of construction. And yes, adding more housing would lower the price but the problem is that adding housing is held up by the cost mostly and the developers only want to build in very limited prestigious areas where they hope to get tenants/buyers willing to pay their cost. It's not sustainable.
You can't build them except in the places they already are. Converting existing high density housing to even higher density housing is prohibitively expensive. What you need to do is go to the edge of the high density area where it meets the low density area and convert the low density housing to high density. But that area is only zoned for low density, so you can't.
> The reason prices on housing go up is that it costs a lot to build housing and it's pretty hard to secure financing for a housing project which you plan to sell/rent below cost.
Who is requiring them to sell below cost? Just build more housing at the market rate as long as the market rate is above your construction costs. If you want a lower market rate, find a way to lower construction costs.
> If it costs $300 to build a square foot
But what causes that?
I.e. in all big cities? So are you really arguing that the rent in SF goes up because you cannot build a residential tower in Redding, CA?
> Converting existing high density housing to even higher density housing is prohibitively expensive.
You don't need to convert. You can change zoning on existing lots, it happens all the time.
>Just build more housing at the market rate as long as the market rate is above your construction costs.
But it is not in most places. This is why developers are trying to get into prestigious areas where it's still possible. Nobody prevents you from building a residential tower in the East LA, you just won't be able to sell it. But yes, nobody will let you to build one in Malibu, where you'd be able to move units. The issue is that as soon as you filled Malibu with commie blocks the area won't be prestigious anymore so somebody will be left holding the bag, developers are desperate enough to enter this game anyways.
> If it costs $300 to build a square foot
Just read the message, I've explained what.
Governments have weak competitive pressure. You have to uproot your whole life and move to another jurisdiction. When you vote, you're making a choice about every issue under the sun at once and it's impossible to change your vote on only one issue by itself. You can also easily end up "represented" by the candidate you voted against. As a result they're extremely inefficient by default and should only be used when the alternative is catastrophic.
This is doubly true in markets that could be competitive, because the incumbents have the incentive to use the government to reduce competition so they make more money. The obviously relevant example is zoning rules that restrict housing supply. It's critical to not allow that to happen, or to undo it when it already has.
Trying to cancel it out with even more regulations is just another opportunity for incumbents to sneak in some new way of screwing you. When you screw up a market this badly, people get desperate and angry and start proposing all kinds of aggressive "solutions" because they fail to understand the cause of the problem but want something done about it. The most ridiculous of these are generally filtered out, but the ones that make it through are the ones that don't work or make it worse because those are the ones the incumbents fight the least.
You have to fight the cause of the problem, which is a government captured by land owners imposing rules that make housing more expensive. The solution is to remove those rules.
> There are widely published opinions that state this just makes landlords richer and housing rarer to further deregulate.
One of the main reasons "deregulation" has a bad name is that its purpose is to increase competition and lower prices, which is exactly the thing the incumbents don't want, so instead they propose a "compromise" that prevents exactly the thing you're trying to get.
For example, suppose you have two rules. One says that new housing construction is utterly prohibited, the other says that all rental properties must have working plumbing.
In a competitive market the second rule is inefficient because all it really does is prohibit anyone from offering a storage unit with no plumbing. There would be enough apartments with running water that nobody would have any reason to consider one that didn't.
But in a market where increasing the housing supply is inhibited, there are more tenants than rental units and that allows abusive slumlords to find tenants willing to live under such conditions.
Much "deregulation" is the corruption in which you only remove the second rule and not the first, which of course makes things worse, because the first one is the one that matters and the second one is just an inefficient attempt to mitigate the damage.
Increase the housing supply until rents go down. Accept no substitutes.
Suppose you want to build a 20 story condo. The most efficient thing to do is to find an empty plot of land or a single family home and build it there, but that's prohibited by zoning. 20 story buildings aren't allowed there.
Now what you have to do is find an existing 10 story condo and knock that down, because it's in a place zoned for tall buildings. But that costs a lot more, and you also have to remove all the people who are already living there instead of just buying one house from someone who is already moving. It's so much more expensive than the first thing that it's not profitable, so it doesn't happen without a subsidy. Not only that, even if it does happen, you've now paid to build a 20 story building and only added 10 stories worth of housing.
What I'm saying is that they passed laws that make increasing supply so outrageously expensive that demand has to remain at outrageously high levels to trigger construction. You can't get to reasonable housing costs that way because construction companies can't sustainably operate at a loss. You have to make it sustainable by not prohibiting construction where it's the most cost effective.
> by your own logic they just want more money.
Of course they want money. They have to pay for land and construction crews. But if you increase their costs by prohibiting them from building on the most cost effective sites, the amount they want before they'll be willing to do it goes up.
Construction companies don't make anything by not building. But they also don't make anything if government regulations increase their costs above real estate prices. So every time you increase their costs with a new regulation, real estate prices go up -- and stay there until you remove the rule that keeps their costs high. (Or something causes demand to go down, which is typically only something bad.)
Because I've seen Soviet era housing and War on Poverty projects.
Challenge my assumptions? I think the burden is on you to show that somehow next time will be different
Because this isn't how things work in civil society.
They can't just decree that all single family homes in San Jose are now illegal and you have to vacate by the end of the month.
I'm a colossal fan of co-ops and credit unions for this reason.
Honestly I'd be fine with the government profiting if it could be tied back to a mechanism that directly reduces a taxpayer's burden, basically "your tax share is reduced by x because total profit from government-run institutions was y"
It might even work to incentivize lawmakers to legislate in favor of the profit of such institutions in that they could then tell their constituents that they were responsible for their lower tax burden in a given year.
In my large US city, a lot of apartments are held by various corporations that collude via third party software to raise and keep prices high. The local building managers have no say in lease pricing. Maybe a small percentage of people are lucky enough to find mom/pop landlords but many are stuck paying whatever the large complexes charge.
Suppose the amount rents have to hit before it's profitable to build a new building is $1000/month and right now rents are at $990/month. A cartel representing 70% of the landlords in the city collude to raise rents to $2500/month.
If they're allowed to, builders will keep building new housing until rents are back below $1000, because until that point they can keep making money by doing it. Even if they have to increase the housing stock in the city by the entire 70% and leave the cartel with a bunch of empty buildings.
But if they're not allowed to build, prices go up. And some entity with a profit cap can't do anything about it because they have no path to supplying enough housing to lower the market price.
Build more housing, that's the only way.
These services, think healthcare, food, and housing, should be public services that are guaranteed not delivered by the market. You cannot look at the market-based solutions to literally any of these objectively and think it is performing well. At least, not if you value human life.
I agree with your intent here, but the devil is in the details.
The current model has led to a persistent underinvestment in housing, especially entry-level housing since at least the late 1990's.
This style of posting - assuming but not stating a controversial position, but stating as given what follows from it - is real bad news. First, it's essentially a dishonest way of communicating. They state as truth something that is very far from accepted, in the attempt to get people to accept something that they don't, without having to go through the hard work of actually persuading them on the real point of disagreement.
But even if no dishonesty is intended - they think the controversial point is not controversial at all, but rather something that everyone accepts - it's still bad news, because it hides the actual point of disagreement that needs discussed. It results in a "conversation" that is both sides hurling sound bytes at each other, but never actually talking about where the disagreement is. That's not a good conversation, even in general, but it's a terrible conversation for HN.
It’s a repeated pattern in history that always ends in darkness for humanity if it gains enough momentum to make changes.
https://iea.org.uk/publications/socialism-the-failed-idea-th...
How are we even debating private ownership of property and housing. What an incredible failure of basic education systems. It’s like denying evolution or holding some other profoundly unscientific and un-objective emotional belief.
Hopefully my comment complies with HN guidelines. It’s can be hard to comply we dealing with such absurd proposals and theories.
Unless tinker-bell is real and has fairy dust to build houses and provide basic needs.
If you want to screw the people doing that, build enough new housing that prices go down and they lose money on their investment.
I’m not sure a few bad actors taking advantage of people warrants statements like, “Housing should not be an investment ever.”
But beyond that, I still don’t think banning owning a rental (however that would be enforced anyway) is the solution there. It’s not a realistic suggestion.
You see how the intent is different? I personally know dozens, maybe hundreds of landlords from various geographical regions in my state, and most of their stories are the same.
But even barring that, I don’t understand where the thinking comes from that those with wealth can’t use it to secure more wealth. I’m not advocating for infinite gains here, but I’ve noticed a non-trivial portion of Hacker News seems to believe that gain is inherently immoral. Like wanting a better life or more for your family is inherently an evil thing. Some folks have more, some folks have less. Those with more should strive to help those with less; but I reject the notion that simply having more than someone else is bad.
I’m glad I own now but it’s really hard to sympathize when so many have been crooks.