patrick.net

Justme asks about sprawl and incentives. It seems to me that Proposition 13 creates amazing lock-in effects, keeping single-family homes on property for many decades beyond when under a more responsive system, those SFH's would give way to multi-family homes.

The concept makes some of us itchy. We tend to like things the way they are, the way we remember them. But if you look at a healthy neighborhood other than one to which you're emotionally attached, you're likely to notice that it has changed over the past 20, 40, 60 years, and that the changes generally represent progress. Yes, it may be that some lovely older structures may have been sacrificed in the process. But today, a 1-acre lot that 40 years ago housed a single-family home may now have a mid-rise building that houses a dozen families. That's a very good thing if that site is close to public transportation, existing schools, and all the other kinds of infrastructure that is funded by public investment. Far better than having the other 11 families' workers commuting from the current fringe, alone in their own cars or even via the best of public transportation system.

Prop 13 has resulted in it being rather inexpensive for the current long-time owners of, say, Marin County or Silicon Valley housing (and for that matter, commercial property) to stay put. Where a new owner of a, say, $1 million property is paying about 1.25% of that market value in property taxes, or $12,500 per year (or about $34 per day), the guy who owned the identical neighboring property but bought it in, say, 1975, for $250,000 (I'm guessing -- could be lower, I suspect), would be paying property taxes on an assessed value of about $470,000. So if I've got the 1976 value right, he's paying less than half what his new neighbor pays. Rising property taxes are not going to cause him to consider moving, and in fact that lock-in effect will discourage him from considering moving even if his health declines, even if his ability to care for a house sized for 4 or more people declines, even if he no longer needs to be close to the amenities -- jobs, cultural, etc -- that drew him there in the first place.

And don't forget that that "million dollar property" is likely a fairly modest house -- a home that would sell for $200,000 or $250,000 or less in many other parts of the country. The difference is land value, which has been driven sky-high by the finiteness of land, particularly along the coast. (I have a hypothesis, for which I've not yet seen any definitive proof, that part of why land costs are high on the coasts and in the Chicago metro, aside from the facts of ports and infrastructure that has grown up around those ports, is that instead of population being able to spread out in a 360 degree radius, as is the case where only a river divides a city from the adjoining area, the coasts have only 180 degrees of expansion area.)

A Federal Reserve Board study published in May 2006 suggested that on average for the top 46 metro areas, land represented something like 51% of the value of single family housing stock in 2004. This ranged from a low of about 20% in Oklahoma City to a high of 88% in San Francisco metro. The lowest metro in California was Bakersfield at 62%. Boston and NY were in the high 70s, as I recall. Outside the 46 metros, I think the land share averaged something like 28%.

It seems to me that at some point, single family homes in the close-in neighborhoods will yield to multi-family homes, if we have the incentives right. California's Prop 13 disrupts those incentives, and that has made worse the problem of long commutes (which was already an issue before Prop 13).