I don't know the specifics of the bill, but if it's a 2.5x investment cheat code for the fastest actors, it's going to cause mayhem and hard backlash.
It isn't a 2.5x investment cheat code. You're spending $1M for the original home. You're spending $500k on the construction of each new home. That's $2.5M invested. They would need to sell each house for more than $1.5M each for a "2.5x investment cheat code". If the original house cost $1M, how are they going to sell 4 houses with less land at a higher asking price? Even if they somehow managed that, do you honestly think sellers in the area aren't going to catch on?
The intent is good but the system needs a moderating factor to prevent runaway.
Um, no. The graphic intends to show money spent by all parties on housing. The original party pays $1M and receives $300k for the plots of land. The subplot parties then spend $500k to build houses. There is nothing magically turning a $1M home into multiple homes without additional capital.
What if you like your lot, and don't want a lot 1/4th the size? I think this likely applies to most homeowners.
> the last house in the neighborhood full of subdivisions will have the lowest sale value (and the first house to subdivide will be the most valuable).
I don't think this is likely. As more homes subdivide, the relative value of non-subdivided homes will go up due to scarcity.
> needs a moderating factor to prevent runaway
Why? I can think of very very few cases in the US where we've had a problem with "too many homes", and many many cases where the opposite trend prevails. I think it's unlikely that we'll see any sort of runaway.
No, it doesn't. Subdividing and building more houses on it turns it into $2.5M.
Most people will not have the cash or financing available to do that. And many people who want to do this will likely spend years doing it. And many people, even seeing their neighbors do it, just won't want to. They perhaps like the size of their lot, or don't have any family or friends that they really want to live that close to.
> last house in the neighborhood full of subdivisions will have the lowest sale value (and the first house to subdivide will be the most valuable).
If true, so what? As long as its sale value is more than it cost to build, that's fine.
> By "rapidly" I mean on the span of a few years.
That just isn't going to happen. GP's estimate of several decades is much more likely.
> the system needs a moderating factor to prevent runaway.
I don't think there's really any risk of that happening. At any rate, the problem is that we don't have enough housing; increasing the number of houses, and making them more affordable, is the entire point here.
If you are an absentee landlord, sure.
If you are a homeowner, then, you probably already chose your living arrangement over living in a smaller apartment while being the landlord of several other smaller units, and the reasons you choose that probably still apply.
And because there are people who prefer larger single family homes, as the supply of those drops, the value of the existing ones goes up (not as much as the value of subdivided lots, but the increase in value is—unlike that on a lot that you subdivide and improve—mostly-untaxed because Prop 13 full-value assessment is triggered by change of ownership or nee construction, not market appreciation driven by supply.)
So, as a homeowner, the smart thing to do—absent a change in living situation that changes why you became a homeowner—the smart thing to do when some neighbors convert is to enjoy the tax-free value boost, take advantage of the increase value-to-loan ratio to refi at more favorable terms if you have a mortgage, or take money out for other projects, etc., or... whatever.
I'm not sure there is any logic in believing that. Since even a 4x increase in housing wouldn't provide enough to meet demand, if everyone else subdivided and you didn't yours would be worth more not less. The only way your fears would happen is if they allowed apartment complexes on the new lots and density increased by 10-50x.