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Old Posted Nov 7, 2019, 2:20 PM
Sun Belt Sun Belt is offline
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How California Became America’s Housing Market Nightmare

How California Became America’s Housing Market Nightmare
Noah Buhayar and Christopher Cannon
November 6, 2019
Bloomberg

Quote:
California, the land of golden dreams, has become America’s worst housing nightmare. Recent wildfires have only heightened the stakes for a state that can’t seem to build enough new homes.

The median price for a house now tops $600,000, more than twice the national level. The state has four of the country’s five most expensive residential markets—Silicon Valley, San Francisco, Orange County and San Diego. (Los Angeles is seventh.) The poverty rate, when adjusted for the cost of living, is the worst in the nation. California accounts for 12% of the U.S. population, but a quarter of its homeless population.

How did we get here? Simply put, bad government—from outdated zoning laws to a 40-year-old tax provision that benefits long-time homeowners at the expense of everyone else—has created a severe shortage of houses. While decades in the making, California’s slow-moving disaster has reached a critical point for state officials, businesses and the millions who are straining to live there.
Bloomberg

Some take aways:

1] CA has the highest poverty rate when adjusted for cost of living.
2] CA needs 3.5 million new homes, right now.
3] Cost Burden: CA has the highest share of households spending more than 30% of their income on housing.
4] CA has held the second highest home prices for decades [only behind Hawaii, for obvious reasons]
5] The cost burden hits all income brackets.
6] Job growth exceeds the growth of the housing supply. The Bay Area saw 5.4 new jobs for every unit of housing it built between 2011 and 2017.
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  #2  
Old Posted Nov 7, 2019, 2:28 PM
bossabreezes bossabreezes is online now
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How much of this crisis is caused by NIMBYs? Like 95%?

I am still not sure if this is all NIMBY caused or if it has to do with high cost of business and regulation, leaving little return for developers.

I understand places like the Bay (especially the peninsula) and San Diego are quite conservative when it comes to upzoning, which is odd, due to the region's uber liberal population.

Oakland could really take advantage of this housing crisis and up zone it's entire western half and absorb a good 150,000 people, but BART will need significant help to deal.
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  #3  
Old Posted Nov 7, 2019, 2:39 PM
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Saying California is a "housing market nightmare" is like saying Apple is a "valuation nightmare". Homeowners are sitting pretty.

Most people are existing homeowners, obviously, and benefit from strong property values. You wish you bought in Palo Alto or Flint?
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  #4  
Old Posted Nov 7, 2019, 2:45 PM
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Originally Posted by bossabreezes View Post
I understand places like the Bay (especially the peninsula) and San Diego are quite conservative when it comes to upzoning, which is odd, due to the region's uber liberal population.
It's not odd, it's logical. Why would existing homeowners not wish to protect their wealth, and why would they wish to change their neighborhoods? And what does "uber-liberalism" have to do with anything?

San Diego and Silicon Valley are hardly "uber-liberal", BTW.
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Old Posted Nov 7, 2019, 2:51 PM
bossabreezes bossabreezes is online now
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Originally Posted by Crawford View Post
It's not odd, it's logical. Why would existing homeowners not wish to protect their wealth, and why would they wish to change their neighborhoods? And what does "uber-liberalism" have to do with anything?

San Diego and Silicon Valley are hardly "uber-liberal", BTW.
''Housing for All''
''Free Healthcare''
''Everyone is equal'' ect.

The Bay Area is famous for being super far left swinging, and this generally means that people favor more left leaning policies, like universal healthcare and government subsidies ect.

I understand why current homeowners wouldn't want more housing, obviously. But a good chunk of the voting population is renters, who would most certainly want more housing units constructed so their rents go down and have more housing options.

Also, sure- there are conservative areas of California. But they are the minority. To say otherwise is being intellectually dishonest. CA is one of, if not THE most reliably liberal states in the country.
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  #6  
Old Posted Nov 7, 2019, 2:58 PM
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Originally Posted by bossabreezes View Post
''Housing for All''
''Free Healthcare''
''Everyone is equal'' ect.

The Bay Area is famous for being super far left swinging, and this generally means that people favor more left leaning policies, like universal healthcare and government subsidies ect.

I understand why current homeowners wouldn't want more housing, obviously. But a good chunk of the voting population is renters, who would most certainly want more housing units constructed.
You're conflating all sorts of things.

Most of California isn't "liberal" and even most liberals don't support "housing for all" and "free healthcare". Yes, obviously most believe in equality, but that isn't a liberal take.

The Bay Area isn't "super left". SF, Oakland and Berkley are "super left". Silicon Valley, which has the crazy home prices, is politically moderate. Actually the super left areas are some of the most affordable areas. Even lefty-leaning Marin has lagged, because it doesn't have tech.

There are more homeowners than renters. Why would homeowners want cheaper housing? My aunt in Coastal CA, a retired nurse, has a modest oceanfront house that's probably worth $4 million. You think she's crying about her home values? Maybe she should have bought in Cleveland or Detroit back in the 70's, so her children and grandchildren would get nothing when she dies.

Also, she's in a traditionally conservative area that's very NIMBY and still has tons of Republicans (southern Orange County). I bet you the remaining Republicans are every bit as NIMBY as the liberals. Still tons of Republicans in places like Newport Beach and Dana Point, even a decent share of hard-core Trumpies.
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  #7  
Old Posted Nov 7, 2019, 3:01 PM
bossabreezes bossabreezes is online now
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CA homeownership rate is about 55%, which is low. If you go to urban areas, it's most certainly lower than half. So this argument doesn't really hold.
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Old Posted Nov 7, 2019, 3:04 PM
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Originally Posted by bossabreezes View Post
CA homeownership rate is about 55%, which is low. If you go to urban areas, it's most certainly lower than half. So this argument doesn't really hold.
Homeowners vote much more than renters. They're also older and much more politically engaged.

Yes, if CA eventually became renter dominated, like NYC, the dynamics might change. But keep in mind that NYC is super-NIMBY too. The renters apparently hate tall buildings too.
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  #9  
Old Posted Nov 7, 2019, 3:13 PM
bossabreezes bossabreezes is online now
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That sounds like your opinion rather than a fact.

If homeowners voted much more than renters, 99% of my peers shouldn't have had the ''Voted'' sticker on their chest on Tuesday.

Anyway, I asked about the reason for this housing shortage and we're splitting hairs and getting nowhere. There clearly is a problem with a housing shortage, see the homeless camps everywhere in CA. Would like to understand the reason behind this rather than discuss the republican pockets of CA or why calling California liberal is wrong.
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Old Posted Nov 7, 2019, 3:43 PM
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Quote:
Originally Posted by bossabreezes View Post

Anyway, I asked about the reason for this housing shortage and we're splitting hairs and getting nowhere. There clearly is a problem with a housing shortage, see the homeless camps everywhere in CA. Would like to understand the reason behind this rather than discuss the republican pockets of CA or why calling California liberal is wrong.
I doubt homeless camps are the primary indicator of a housing shortage. I think it's more people working in the Bay Area making $130k+ living with 4 roommates. California may be a massive state, but the most desirable areas are still geographically constrained. If tech companies wanted to locate in Fresno or Bakersfield instead of Palo Alto, housing affordability would likely be far less of an issue. As it stands, there is a long-time contingent of wealthy and powerful homeowners that have little to gain from supporting intensification of their neighbourhoods with mixed-use, medium/high-density projects.

I don't know Los Angeles as well, but I know BART has done a pretty good job of incentivising private investment into exurban transit stations that bring a drastic uplift in value to the surrounding land. I've used a couple of examples there as case studies for similarly structured deals here in the GTA. Unless the State is going to implement some sort of mechanism to overrule local zoning disputes, I see developments like this one in West Dublin/Pleasanton being the primary method of adding large numbers of units.



There are over 1,500 units in this photo and it's about a 45-minute train ride to Downtown (according to Google Maps, never done the route myself). There's no existing layer of low-density residential full of NIMBY homeowners. Also, upzoning from medium-density like this to high-density in the future should be far less of a battle than going from SFH to 4-5 storey blocks.
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  #11  
Old Posted Nov 7, 2019, 3:55 PM
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It's mostly NIMBYism, but not just that. Proposition 13 has also played a role. It means that unless a house changes hands, property taxes cannot go up by more than 2% per year - which is of course generally speaking not only lower than property appreciation, but lower than inflation.

The proposition was originally put into place in 1978 in part to ensure seniors would not be priced out of their homes. But it applies to all property equally, and ensures that if you've owned a property for decades, you will be paying very low property tax rates, eliminating most of the incentive to sell. IIRC you can even pass down houses in families without your children getting reassessed.

The result of this is it fucks up the California housing market. People who in other states might choose to downsize to smaller units - or move within the state - just stay put where they are for long periods of time. On average, homeowners in the major coastal cities stay put around three years longer than they would have otherwise, which doesn't sound like a lot, but it means a lot of units which could be taken up by the local workforce are just kept off the market entirely.
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Old Posted Nov 7, 2019, 3:58 PM
muertecaza muertecaza is offline
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Originally Posted by suburbanite View Post
I doubt homeless camps are the primary indicator of a housing shortage. I think it's more people working in the Bay Area making $130k+ living with 4 roommates. California may be a massive state, but the most desirable areas are still geographically constrained. If tech companies wanted to locate in Fresno or Bakersfield instead of Palo Alto, housing affordability would likely be far less of an issue. As it stands, there is a long-time contingent of wealthy and powerful homeowners that have little to gain from supporting intensification of their neighbourhoods with mixed-use, medium/high-density projects.

I don't know Los Angeles as well, but I know BART has done a pretty good job of incentivising private investment into exurban transit stations that bring a drastic uplift in value to the surrounding land. I've used a couple of examples there as case studies for similarly structured deals here in the GTA. Unless the State is going to implement some sort of mechanism to overrule local zoning disputes, I see developments like this one in West Dublin/Pleasanton being the primary method of adding large numbers of units.



There are over 1,500 units in this photo and it's about a 45-minute train ride to Downtown (according to Google Maps, never done the route myself). There's no existing layer of low-density residential full of NIMBY homeowners. Also, upzoning from medium-density like this to high-density in the future should be far less of a battle than going from SFH to 4-5 storey blocks.
Excellent and insightful comment. Pretty wild though that the best solution we've come up with is building dense greenfield developments ~40 miles away and shipping people into cities by the train-full.
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Old Posted Nov 7, 2019, 4:09 PM
iheartthed iheartthed is offline
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Quote:
Originally Posted by bossabreezes View Post
''Housing for All''
''Free Healthcare''
''Everyone is equal'' ect.

The Bay Area is famous for being super far left swinging, and this generally means that people favor more left leaning policies, like universal healthcare and government subsidies ect.

I understand why current homeowners wouldn't want more housing, obviously. But a good chunk of the voting population is renters, who would most certainly want more housing units constructed so their rents go down and have more housing options.

Also, sure- there are conservative areas of California. But they are the minority. To say otherwise is being intellectually dishonest. CA is one of, if not THE most reliably liberal states in the country.
Silicon Valley is extremely libertarian. It's probably the most libertarian region in the entire country, and that ethos is integral to much of the tech industry. I would also generalize that California overall is more libertarian leaning than many places east of the Mississippi.
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Old Posted Nov 7, 2019, 4:21 PM
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Originally Posted by muertecaza View Post
Pretty wild though that the best solution we've come up with is building dense greenfield developments ~40 miles away and shipping people into cities by the train-full.
I mean it's not really a new practice in many other places, but it requires good transit coverage and decent speeds. The faster the trains are, the further away from the core developments like this should be viable. With true high-speed rail there shouldn't be any reason that someone couldn't work in the Bay Area and buy a $250,000 condo in Stockton, protecting valuable farmland and ecological areas between the two.
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Old Posted Nov 7, 2019, 4:26 PM
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It may be libertarian, but it's the opposite in limiting density. It's truly bizarre that there aren't several thousand new units per year right in the valley.
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Old Posted Nov 7, 2019, 4:41 PM
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Originally Posted by iheartthed View Post
Silicon Valley is extremely libertarian. It's probably the most libertarian region in the entire country, and that ethos is integral to much of the tech industry. I would also generalize that California overall is more libertarian leaning than many places east of the Mississippi.
Really? What % does the Libertarian party even get in local CA elections? Do they even have ballot access in CA at all? At this point, I think the most libertarian state is probably New Hampshire, while Kentucky libertarians have the most sway in local elections.
Maybe in private, a lot of silicon valley types are libertarian, but they sure do not vote that way outside of maybe gay rights and drug legalization, which are closely aligned libertarian issues with the Democrats. Progressives have completely opposite view, especially on economic issues, compared to libertarians.

Last edited by Gantz; Nov 7, 2019 at 4:56 PM.
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Old Posted Nov 7, 2019, 4:51 PM
iheartthed iheartthed is offline
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Really? What % does the Libertarian party even get in local CA elections? Do they even have ballot access in CA at all? At this point, I think the most libertarian state is probably New Hampshire, while Kentucky libertarians have the most sway in local elections.
Maybe in private, a lot of silicon valley types are libertarian, but they sure do not vote that way outside of maybe gay rights and drug legalization.
No idea, but in Silicon Valley libertarianism is hardly a scarlet letter. This is the land of Peter Thiel and Marc Andreesen we're talking about.
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Old Posted Nov 7, 2019, 4:59 PM
Gantz Gantz is offline
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No idea, but in Silicon Valley libertarianism is hardly a scarlet letter. This is the land of Peter Thiel and Marc Andreesen we're talking about.
Peter Thiel is a black swan and a contrarian, and he moved to LA away from Silicon Valley, because he was in a tiny minority.
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Old Posted Nov 7, 2019, 5:00 PM
iheartthed iheartthed is offline
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Peter Thiel is a black swan and a contrarian, and he moved to LA away from Silicon Valley, because he was in a tiny minority.
The rest of the Paypal mafia is still there.
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Old Posted Nov 7, 2019, 5:06 PM
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Excellent and insightful comment. Pretty wild though that the best solution we've come up with is building dense greenfield developments ~40 miles away and shipping people into cities by the train-full.
Keep in mind that the most insane housing prices aren't in SF; they're in Silicon Valley. SF (proper) really isn't that crazy expensive compared to other first-tier cities. And Silicon Valley is sprawly and centerless.

The East Bay also isn't that insanely expensive. It's pricey, of course, but considering the local salaries, normal households should be able to afford a house and reasonable commute. The real issue is how do you fix SV sprawl where crap homes go for $2 million+ because they're close to giant corporate HQ, and where non-vested employees endure horrific commutes.
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