How did the right get it so wrong? CA booming instead of dooming!

[woolfe9998]

Sorry I don’t have access to view the study and a study that makes such a bold claim is definitely worth looking into how they came to that determination, especially considering home prices have historically gone up as has California’s economy.

Here, I found the entire study.

Proposition 13: An Equilibrium Analysis

There are many federal, state, and local laws that distort housing decisions and prices. However, it is often difficult to tease out the quantitative impact of

papers.ssrn.com

Click on the "download this paper" and you'll download the whole PDF.

I should mention that the lead researcher is a professor of economics at USC, and that the American Economic Association is a respected association of economists.

American Economic Association - Wikipedia

en.wikipedia.org

So it isn't some partisan BS.

 

[ivwshane]

Hard to believe that anyone seriously contests that prop13 makes housing more expensive.

There are areas of the state where there are vacant lots in prime buildable areas for decades because building a house on the lot forces a property tax reassessment which dramatically increases taxes instead of the low locked in rate from prop13.


If the owner considers it an investment property, she or he could build a home on it and say, rent it out. But then you have a big property tax bill to add to all the maintenance costs you'll incur. So in many cases the owner will just sit on the raw land and watch it appreciate over time. They may even decide to keep it in the family and pass it on to their kids, who will pay the same low property tax.

The lesson of Prop13 is, don't sell, and in many cases, even don't build.

That makes zero sense.

 

[woolfe9998]

That makes zero sense.

That’s where an unintended consequence of Proposition 13 may be at play. After Proposition 13, all California properties — even vacant ones — are taxed based on the original purchase price, not their current value. That makes it relatively inexpensive to hold onto land, even when the market is hot.

“In other markets where Prop. 13 policies aren’t in effect, the taxes on that property would continue to go up with land value,” says Ralph McLaughlin, a housing economist with Veritas Urbis Economics and former chief economist for the real estate website Trulia. “And that incentivizes development, it increases holding costs, it makes it more expensive to hold it vacant.”

A report from the nonpartisan Legislative Analyst’s Office found that vacant lots in California were less likely to be developed the longer they were owned, even when compared to similar vacant lots in the same neighborhood. Oakland, where the average house is now worth $750,000, has more than 3,000 vacant residential lots.

Too Few Homes: Is Proposition 13 to Blame for California's Housing Shortage? | KQED

Oakland has more than 3,000 vacant residential lots. Some say it's because Proposition 13 has made it too expensive to build. Defenders say other regulations are far bigger barriers to construction.

www.kqed.org

 

[hal2kilo]

Too Few Homes: Is Proposition 13 to Blame for California's Housing Shortage? | KQED

Oakland has more than 3,000 vacant residential lots. Some say it's because Proposition 13 has made it too expensive to build. Defenders say other regulations are far bigger barriers to construction.

www.kqed.org

Now I understand the land banking concept discussed on Million Dollar Real Estate - LA.

 

[ivwshane]

Here, I found the entire study.

Proposition 13: An Equilibrium Analysis

There are many federal, state, and local laws that distort housing decisions and prices. However, it is often difficult to tease out the quantitative impact of

papers.ssrn.com

Click on the "download this paper" and you'll download the whole PDF.

I should mention that the lead researcher is a professor of economics at USC, and that the American Economic Association is a respected association of economists.

American Economic Association - Wikipedia

en.wikipedia.org

So it isn't some partisan BS.

I didn’t think it was bs. What it is though is based on a highly subjective model.

However…

In order to disentangle the effects of the two features of Proposition 13 on house prices, we examine a counterfactual case (Experiment 1) where the only change relative to the pre-1978 case is the reduction in the property tax rate from 2.5% to 0.7%, the average effective tax rate under Proposition 13. Thus, total revenues collected in the Proposition 13 economy and the economy in Experiment 1 are the same; the only difference between the two cases is that, in Experiment 1, the value of a house for tax purposes is not related to housing tenure (property taxes are based on the current market value of the property and not the purchase price of the house). We find that in this case, house prices increase by 19.5% compared to the Pre-1978 case (from 87 to 103.7).37 This comparison reveals that the increase in house prices would have been slightly higher if it were not for the link between property assessments and housing tenure. Distortions due to Proposition 13 limit the growth of house prices to 15%.

So according to them, without prop 13, housing would have increased by 19%. They do further experiments and find that even those show a higher increase in higher prices than with prop 13. See page 22.

So no, according to this paper prop 13 didn’t cause housing prices to be higher than they would have been otherwise.

 

[woolfe9998]

So no, according to this paper prop 13 didn’t cause housing prices to be higher than they would have been otherwise.

So what you are claiming is that the study itself directly contradicts the study's abstract, which says "we find that, the introduction of Proposition 13 leads to a 15% increase in house prices....."

That would be quite a remarkable error for a study published in a peer reviewed publication which the American Economic Journal is. Such a gaping error would have been caught in peer review by now, and the abstract would certainly have been corrected.

That, or maybe you just didn't understand what you read, not because you're dumb, but because it's complicated.

 

[ivwshane]

Too Few Homes: Is Proposition 13 to Blame for California's Housing Shortage? | KQED

Oakland has more than 3,000 vacant residential lots. Some say it's because Proposition 13 has made it too expensive to build. Defenders say other regulations are far bigger barriers to construction.

www.kqed.org

Sorry, that’s a bull shit “study”. Did you read it? It relied on interviews from a swath of people, none of which had any more actual data to back up their insight into the problem. The study itself was more about the impact of potential legislation than it was about factual reporting of the impact of prop 13.

I’ve never seen a story with so many “it may have” in it and the linked study didn’t help either.

 

[ivwshane]

So what you are claiming is that the study itself directly contradicts the study's abstract, which says "we find that, the introduction of Proposition 13 leads to a 15% increase in house prices....."

That would be quite a remarkable error for a study published in a peer reviewed publication which the American Economic Journal is. Such a gaping error would have been caught in peer review by now, and the abstract would certainly have been corrected.

That, or maybe you just didn't understand what you read, not because you're dumb, but because it's complicated.

No it’s just a failure on your part to actually read the study. I even quoted it for you and gave you a page number of what it was referring to. Housing prices went up 15% under prop 13, according to them, without prop 13 prices would have increased to 19%. With additional factors added in (which were contradictory to the reality of how governments usually work) they still came up with an increase above what prop 13 brought but less than their first experiment.


Now it’s entirely possible that the failure lies with me as I don’t read a lot of studies. So if that’s the case, then please explain the section I quoted and directed you to.

 

[woolfe9998]

Sorry, that’s a bull shit “study”. Did you read it? It relied on interviews from a swath of people, none of which had any more actual data to back up their insight into the problem. The study itself was more about the impact of potential legislation than it was about factual reporting of the impact of prop 13.

I’ve never seen a story with so many “it may have” in it and the linked study didn’t help either.

It's a fact that there are 3000 undeveloped residential lots in Oakland. It's also a fact that home values average $750,000 there. Also a fact that even a undeveloped property is not reassessed until developed or sold. And a fact that this decreases the carrying costs for undeveloped property. And a fact that developing the property will instantly cause a reassessment, and, depending on how long the property was held before being developed, a sudden massive increase in property taxes. None of that is remotely disputable.

The only thing which is really in question is how much of the vacant lot problem is caused by this versus other factors such as high regulations on housing development. I assume that, as with the entire housing problem in California, it's some of both. However, the notion that prop13's incentivizing not developing property in many cases plays no role at all seems kind of ridiculous, don't you think?

 

[woolfe9998]

No it’s just a failure on your part to actually read the study. I even quoted it for you and gave you a page number of what it was referring to. Housing prices went up 15% under prop 13, according to them, without prop 13 prices would have increased to 19%. With additional factors added in (which were contradictory to the reality of how governments usually work) they still came up with an increase above what prop 13 brought but less than their first experiment.


Now it’s entirely possible that the failure lies with me as I don’t read a lot of studies. So if that’s the case, then please explain the section I quoted and directed you to.

Not an expert here either, but my understanding is that the 19% figure is not a baseline of what would have happened had we not enacted prop13. It's a different counter-factual scenario the researchers were examining. Which is why the abstract is an accurate reflection of the study: passing Prop13 really did increase housing prices by 13-15%, according to the content of the study.

 

[s0me0nesmind1]

nom nom nom - delicious post history of the left eating itself as they realize the difference between paying taxes and not paying taxes lol.

 

[ivwshane]

Not an expert here either, but my understanding is that the 19% figure is not a baseline of what would have happened had we not enacted prop13. It's a different counter-factual scenario the researchers were examining. Which is why the abstract is an accurate reflection of the study: passing Prop13 really did increase housing prices by 13-15%, according to the content of the study.

The study did not look at whether prop 13 raised housing prices, it just accepted the fact that after prop 13 housing prices rose 15%. There could be a whole host of reasons why that was.

 

[ivwshane]

It's a fact that there are 3000 undeveloped residential lots in Oakland. It's also a fact that home values average $750,000 there. Also a fact that even a undeveloped property is not reassessed until developed or sold. And a fact that this decreases the carrying costs for undeveloped property. And a fact that developing the property will instantly cause a reassessment, and, depending on how long the property was held before being developed, a sudden massive increase in property taxes. None of that is remotely disputable.

The only thing which is really in question is how much of the vacant lot problem is caused by this versus other factors such as high regulations on housing development. I assume that, as with the entire housing problem in California, it's some of both. However, the notion that prop13's incentivizing not developing property in many cases plays no role at all seems kind of ridiculous, don't you think?

Yeah! That’s a pretty important question to have an answer to when you are attributing things to a policy! It’s also a question they didn’t bother answering.

As to your last point, that would be a straw man as I never said it didn’t have an impact. I said I doubt it had a significant impact. We both agree that there are many factors that caused this issue, where we disagree is how much of that was caused by prop 13. No data has shown, conclusively, that prop 13 had a significant role, at the same time no data has shown that it hasn’t had an impact either.

 

[Moonbeam]

Better to just have the same rules for everyone. And are you sure you’re voting for people who want to radically upzone California? Lots of democrats are just as bad as republicans.

I’m not hearing an explanation for why I am a monster. I voted against prop 13. I understand the effects prop 13 have had on property costs today. I simply find your solution emotionally unpalatable and would regardless of the fact I personally benefit. If prop 13 were to be eliminated and all those holding on were swept away, there would just be even more misery. No middle class person, no upper middle class person, and certainly no homeless poor person would ever be able to afford my home. And the problem, after a modest reset would continue.

We live in a world that survives by stripping more and more people of their wealth so it can wind up in the hands of a very few.

Tinkering around the edges to screw a shrinking lucky few strikes me as vision bankruptcy. We are not going to fix income inequality, joblessness or homelessness without a revolution. Cutting the throats of a few old people does not strike me as one.

The good news is that it looking like soon nobody will want my house because its not going to have any running water. What’s the rent in Death Valley?

 

[woolfe9998]

The study did not look at whether prop 13 raised housing prices, it just accepted the fact that after prop 13 housing prices rose 15%. There could be a whole host of reasons why that was.

The study's abstract states it's finding as "we find that, the introduction of Proposition 13 leads to a 15% increase in house prices....."

The word "leads" is synonymous with "causes" in that sentence, right?

 

[ivwshane]

The study's abstract states it's finding as "we find that, the introduction of Proposition 13 leads to a 15% increase in house prices....."

The word "leads" is synonymous with "causes" in that sentence, right?

Feel free to cite why they said it leads to a 15% increase in housing prices. They simply made assumptions using averages and then set that as the base level. They in no way proved that prop 13 increased housing prices because that wasn’t the purpose of this paper. The purpose was to see what the impact of eliminating prop 13 would be and what other factors could offset its impact.

 

[woolfe9998]

Yeah! That’s a pretty important question to have an answer to when you are attributing things to a policy! It’s also a question they didn’t bother answering.

It's also a question which is nigh impossible to answer with any sort of mathematical precision. Where multiple policies can cause a certain effect, it's exceedingly complicated if your aim is to say something like, "prop13 caused 42% if the vacant lots while high regulations caused the other 58%." Why? Because you'd have to interview each and every owner of these properties to find out why they're not developing them, and none are required to tell you.

So we focus on what we know. We know that the mechanics of Prop13 incentivize non-development. We also know that high regulations can do the same. So from a policy perspective we focus on changing both.

As to your last point, that would be a straw man as I never said it didn’t have an impact. I said I doubt it had a significant impact. We both agree that there are many factors that caused this issue, where we disagree is how much of that was caused by prop 13. No data has shown, conclusively, that prop 13 had a significant role, at the same time no data has shown that it hasn’t had an impact either.

I have no idea why you "doubt it had a significant impact." The fact that the study can't say with specificity what contribution is made by prop13 versus other factors doesn't support any opinion whatsoever about the relative degree of contribution. The only thing which seems clear to me is that prop13 most certainly de-incentivizes development because that is how it is structured. And also, when you layer high regulations on top of it, which increase development costs, it's a lethal brew. I bet if you interviewed many of those owner they'd tell you that both were factors because there is no reason that both wouldn't be given that each affects the bottom line.

 

[ivwshane]

It's also a question which is nigh impossible to answer with any sort of mathematical precision. Where multiple policies can cause a certain effect, it's exceedingly complicated if your aim is to say something like, "prop13 caused 42% if the vacant lots while high regulations caused the other 58%." Why? Because you'd have to interview each and every owner of these properties to find out why they're not developing them, and none are required to tell you.

So we focus on what we know. We know that the mechanics of Prop13 incentivize non-development. We also know that high regulations can do the same. So from a policy perspective we focus on changing both.



I have no idea why you "doubt it had a significant impact." The fact that the study can't say with specificity what contribution is made by prop13 versus other factors doesn't support any opinion whatsoever about the relative degree of contribution. The only thing which seems clear to me is that prop13 most certainly de-incentivizes development because that is how it is structured.

But you don’t know that! You are equating hearsay with fact.

 

[woolfe9998]

But you don’t know that! You are equating hearsay with fact.

What hearsay?

Are you challenging my description of how the law works here? Are you claiming that undeveloped property gets periodically reassessed? It does not. Are claiming there is no reassessment causing higher property taxes when the property is developed? There is.

This isn't hearsay. It is proposition 13.

 

[ivwshane]

It's also a question which is nigh impossible to answer with any sort of mathematical precision. Where multiple policies can cause a certain effect, it's exceedingly complicated if your aim is to say something like, "prop13 caused 42% if the vacant lots while high regulations caused the other 58%." Why? Because you'd have to interview each and every owner of these properties to find out why they're not developing them, and none are required to tell you.

So we focus on what we know. We know that the mechanics of Prop13 incentivize non-development. We also know that high regulations can do the same. So from a policy perspective we focus on changing both.



I have no idea why you "doubt it had a significant impact." The fact that the study can't say with specificity what contribution is made by prop13 versus other factors doesn't support any opinion whatsoever about the relative degree of contribution. The only thing which seems clear to me is that prop13 most certainly de-incentivizes development because that is how it is structured. And also, when you layer high regulations on top of it, which increase development costs, it's a lethal brew. I bet if you interviewed many of those owner they'd tell you that both were factors because there is no reason that both wouldn't be given that each affects the bottom line.

At best you could say that prop 13 doesn’t penalize developers. I don’t think you can claim it de-incentivizes developers. Saying that it de-incentivizes means that there is a benefit to not developing the land and there is no such mechanism in place. However it does make speculating less costly (less, as in there is still a cost involved).

 

[woolfe9998]

At best you could say that prop 13 doesn’t penalize developers. I don’t think you can claim it de-incentivizes developers. Saying that it de-incentivizes means that there is a benefit to not developing the land and there is no such mechanism in place. However it does make speculating less costly (less, as in there is still a cost involved).

Maybe there is confusion over the meaning of "de-incentivize." It doesn't mean to turn development into a non-feasible proposition all on its own, because there can be other factors which incentivize development. Developing property is an economic proposition with lots of things on both sides of the balance sheet. Suddenly getting a much higher property tax bill is a disincentive just like anything else on the "cost" side of the balance sheet. Whether it is the difference maker or not is going to be case by case.

 

[NWRMidnight]

It's not that they aren't entitled to it, it's that the tax rates should be going down because their budget is being met. Instead they just increase their budget.

My property values continue to climb as well, but our actual tax rate goes down every year.

What state do you live in?

 

[s0me0nesmind1]

What state do you live in?

Texas. We entirely rely on property taxes for localities (City/County/School District) since we don't have state income taxes.

 

[ivwshane]

What hearsay?

Are you challenging my description of how the law works here? Are you claiming that undeveloped property gets periodically reassessed? It does not. Are claiming there is no reassessment causing higher property taxes when the property is developed? There is.

This isn't hearsay. It is proposition 13.

I think you should take a break. You aren’t reading what I’m writing and you are coming across as angry.

What I highlighted was your claim of what we know. You are claiming that paying lower taxes is an incentive not to develope land despite having zero data to back that up. Developers weigh the costs (as in lost money) in not developing the land with potential profit if they developed/sold it at X (time) instead of developing/selling it at y(time). How much prop 13 impacts decisions is the unknown. If it turns out that it’s non factor then what did we get by eliminating prop 13? That seems like an important piece of data to have before making any policy decisions.

 

[vi edit]

Texas. We entirely rely on property taxes for localities (City/County/School District) since we don't have state income taxes.

Usually what I see is white flight. White people leave urban core and flee to suburbs. Then complain that their kids have to get bused to wherever because the are no schools near McMansionVille. Then go through bond referendum to build new school and then bitch about property taxes. These schools don't build themselves.