Why California Real Estate Prices Are Through the Roof
The general topic is how regulations drive up real estate prices, while the politicians try to extract credit for creating affordable housing while reducing supply and transferring the costs onto developers and other home owners. The reduced supply drives up prices in cities where these regulations are implemented. Here is one article by The Independent author, Ben Powell, on Inclusionary Zoning. In a nutshell, here is what is happening:
Director of business and economic studies, research fellow at hoover, Economic Issues.
California real estate!!
Great object lessons here in California as what not to do with regard to real estate. California really messes things up.
Why are prices so high in California?
SF is the perfect example.
1. Over the last 5 years, SF added 180,000 private sector jobs, but only 50,000 housing units. It's a supply and demand issue. Housing is just not being built at a rate sufficient to keep demand down.
Projections on office buildings there's probably going to be a lot more people coming into town. Business cycle theory. The outrageous levels here are something to behold.
Regulations keep city from building units. $750,000k for median.
Rent is $3500. Strictly driven by low supply. Scarcity of housing is off limits to new developments. You're taking 75% of the land off the plans for development. 2 million people will be squeezed into 5% of the land. more and more people into smaller area of land. Higher density drive prices through the roof. A master plan for the bay area is called Plan Bay Area, rules and regs on where and how housing and land use and transportation can be used. Only 5% of land can be used going forward. Skyrocketing prices.
Another reason is inclusionary zoning.
What is the effect of inclusionary zoning in the LA and Bay areas? 30% reduction in new housing. In Orange County there was a 61% drop in new housing. This will have a huge impact on the market. 17,000 homes that would have been built weren't built because of the inclusionary regs. Politicians look at the 770 units and brag about their achievement.
These regulations depress the housing stock long term and the result is that we see sky high prices in the Bay area, LA, and Orange County. No problem for the lower incomes to get property.
The 5% new housing regulation is set to be clustered in predominantly minority neighborhoods.
Who's behind Planned Bay Area? Lefties, Crony Capitalists, what's going on? Anti-automobile folks. Against the cars and the freedoms that that allows, and generally people that are politically connected. The more you artificially restrict something, the fewer developers will build or get permits to build in that area and the opportunities that go along with that. County Board of Sups. Drive by construction sites you see the same developers because of crony connections. Building what people want instead of building what restrictions demand.
Pro-density, anti-car people are useful stooges for cronies who have the access for buildings.
The Tenderloin with druggies and homeless a block from the Hilton Hotel. How do they keep that from being developed? Boarded up buildings sit for decades and never get developed has to do with the permitting, regulatory process. It's the incumbent versus the outsider. If you own a home, commercial building, or hotel, you don't want to see competitors building.
Local neighborhood associations prevent construction and building. Its driven by commercial enterprise who don't want competition. This stuff can get blocked for decades. It's not uncommon. Takes so much time to get anything done to build homes and housing. 5 or 6 years to get a permit to build a unit. Environmental review, permitting, commissions, city council, sign-offs, all of this creates so much delay, while more and more people move into the area. And forces more and more people out. Roads get congested, and you get gridlock.
Tax as requirement for low income people. What it costs builders per unit. For the Bay Area where this inclusionary requirements is $44000 per unit to subsidize the below market unit. In LA and Orange counties it's $66,000. The developers calculate that in their costs. It limits their amount of construction. 30% drop of construction in the Bay area. 61% in LA. This is the result of the tax. Las Vegas is booming with new homes in the north and west side. Other parts of the US we don't see this slow down. Other states don't have this impediment. People want to live here. Only solution is to build more.
Water regulations impact the building of units. If you can control water, you can control housing. Water is being used as a weapon to prohibit construction in California. Developers have to prove that they have water sources for the people in those units. If you want to build more than 2500 you have to prove that you c. Have to prove you have a 20 year supply of water. Not a bad idea. Problem is that water is so regulated it impacts what can be developed. Won't be sufficient water, so they scale back the project from 500 units to 300 units. If water was freed up in California with all of the impediments in trade from historical water rights. Archaic water system. Needed in urban areas and home constructions. Restrictions on development ties into artificial impediments on the federal, state levels that prevent water trading. Australia is the modern way to trade water. They move water around very efficiently on an online trading platform.
Waters prices to reflect it's true scarcity and it moves where it is most needed. Production doesn't happen here.
Commercial office space goes up more than housing because it doesn't use any where near the water of a residential zone. Restrictions on commercial landscape watering. New commercial site requires native species that don't require as much water. Developers have gotten into commercial building in California than they have in residential. Show me the water laws cuts into the number of homes built around the state or they downsize the units. Efficient water trade would improve things.
Mayor Lee of SF is in camp with inclusionary zoning. They can claim credit for anything that's built. They're ruining the market for housing in the city. Jerry Brown was anti-inclusionary zoning in SF. He was really good on this issue as mayor. But as he left, the situation has deteriorated. Politicians love it because they get credit for what does get built.
If you became the czar for california real estate.
1. Get rid of the inclusionary zoning mandates.
2.
3. OPen up a lot of the land, reserve space open it up. Privatize it. Don't let the city get a hold of it. Unleash open space and let that be developed. Autonomous vehicle we are on the cusp of radical transportation.
60% of the highway at any given time is empty because of the distance between cars.
Can put a lot more traffic through the pipeline. He thinks it's exciting. Safer, effectively, efficiently. Andrew Galambos, Government
The general topic is how regulations drive up real estate prices, while the politicians try to extract credit for creating affordable housing while reducing supply and transferring the costs onto developers and other home owners. The reduced supply drives up prices in cities where these regulations are implemented. Here is one article by The Independent author, Ben Powell, on Inclusionary Zoning. In a nutshell, here is what is happening:
Placing price controls on a percentage of new homes has one clear effect: it lowers builders' profits from new developments. Thus, inclusionary zoning ordinances essentially are a tax on building new homes. And like any punitive tax, it has a predictable result: it reduces the supply of the commodity in question--in this case, new homes--while raising the price of the non-inclusionary units and the existing stock of housing.Powell adds that
In the Bay Area, for example, we found that cities with inclusionary zoning ordinances imposed an effective tax of $44,000 on each new home. With the median cost of a new home at the time slightly over $500,000, this amounted [approximately] to an 8% increase. In Los Angeles and Orange counties, we found the effective inclusionary tax was $66,000 per new home--about 12% of the average median new-home price at the time, approximately $550,000.So not only did the ordinance raise prices, it also reduced supply.
Inclusionary zoning also decreased the supply of new housing . . . . After adopting inclusionary ordinances, we found that housing production on average decreased [by] more than 30% in the first year in Bay Area cities. In Los Angeles and Orange counties, housing production decreased 61% over a 7-year period following adoption of the zoning mandates.Politicians love this zoning ordinance because it allows them to take credit for the little production that was built.
Politicians like inclusionary zoning because it allows them to champion affordable housing without having to directly raise taxes. But the new houses aren't free. Someone must pay for them. That burden is borne by the [the] builders, land-owners, adn other home buyers.from the Robert Wenzel Show and EconomicPolicyJournal
Director of business and economic studies, research fellow at hoover, Economic Issues.
California real estate!!
Great object lessons here in California as what not to do with regard to real estate. California really messes things up.
Why are prices so high in California?
SF is the perfect example.
1. Over the last 5 years, SF added 180,000 private sector jobs, but only 50,000 housing units. It's a supply and demand issue. Housing is just not being built at a rate sufficient to keep demand down.
Projections on office buildings there's probably going to be a lot more people coming into town. Business cycle theory. The outrageous levels here are something to behold.
Regulations keep city from building units. $750,000k for median.
Rent is $3500. Strictly driven by low supply. Scarcity of housing is off limits to new developments. You're taking 75% of the land off the plans for development. 2 million people will be squeezed into 5% of the land. more and more people into smaller area of land. Higher density drive prices through the roof. A master plan for the bay area is called Plan Bay Area, rules and regs on where and how housing and land use and transportation can be used. Only 5% of land can be used going forward. Skyrocketing prices.
Another reason is inclusionary zoning.
Inclusionary zoning or inclusionary housing is an American term that refers to municipal and county planning ordinances that require a given share of new construction to be affordable by people with low to moderate incomes.A certain percentage of new housing has to be offered at below market rate, low-income, varies between 10 and 25%. Forces developers to offer these units at less than market rates so it acts like a tax. As a tax it cuts into the profits on a development project, so developers choose to build elsewhere, like Nevada and Arizona, and choose not to build in the Bay area. The effect of this regulation produces fewer residential units constructed. Fewer units means higher prices on existing units.
What is the effect of inclusionary zoning in the LA and Bay areas? 30% reduction in new housing. In Orange County there was a 61% drop in new housing. This will have a huge impact on the market. 17,000 homes that would have been built weren't built because of the inclusionary regs. Politicians look at the 770 units and brag about their achievement.
These regulations depress the housing stock long term and the result is that we see sky high prices in the Bay area, LA, and Orange County. No problem for the lower incomes to get property.
The 5% new housing regulation is set to be clustered in predominantly minority neighborhoods.
Who's behind Planned Bay Area? Lefties, Crony Capitalists, what's going on? Anti-automobile folks. Against the cars and the freedoms that that allows, and generally people that are politically connected. The more you artificially restrict something, the fewer developers will build or get permits to build in that area and the opportunities that go along with that. County Board of Sups. Drive by construction sites you see the same developers because of crony connections. Building what people want instead of building what restrictions demand.
Pro-density, anti-car people are useful stooges for cronies who have the access for buildings.
The Tenderloin with druggies and homeless a block from the Hilton Hotel. How do they keep that from being developed? Boarded up buildings sit for decades and never get developed has to do with the permitting, regulatory process. It's the incumbent versus the outsider. If you own a home, commercial building, or hotel, you don't want to see competitors building.
Local neighborhood associations prevent construction and building. Its driven by commercial enterprise who don't want competition. This stuff can get blocked for decades. It's not uncommon. Takes so much time to get anything done to build homes and housing. 5 or 6 years to get a permit to build a unit. Environmental review, permitting, commissions, city council, sign-offs, all of this creates so much delay, while more and more people move into the area. And forces more and more people out. Roads get congested, and you get gridlock.
Tax as requirement for low income people. What it costs builders per unit. For the Bay Area where this inclusionary requirements is $44000 per unit to subsidize the below market unit. In LA and Orange counties it's $66,000. The developers calculate that in their costs. It limits their amount of construction. 30% drop of construction in the Bay area. 61% in LA. This is the result of the tax. Las Vegas is booming with new homes in the north and west side. Other parts of the US we don't see this slow down. Other states don't have this impediment. People want to live here. Only solution is to build more.
Water regulations impact the building of units. If you can control water, you can control housing. Water is being used as a weapon to prohibit construction in California. Developers have to prove that they have water sources for the people in those units. If you want to build more than 2500 you have to prove that you c. Have to prove you have a 20 year supply of water. Not a bad idea. Problem is that water is so regulated it impacts what can be developed. Won't be sufficient water, so they scale back the project from 500 units to 300 units. If water was freed up in California with all of the impediments in trade from historical water rights. Archaic water system. Needed in urban areas and home constructions. Restrictions on development ties into artificial impediments on the federal, state levels that prevent water trading. Australia is the modern way to trade water. They move water around very efficiently on an online trading platform.
Waters prices to reflect it's true scarcity and it moves where it is most needed. Production doesn't happen here.
Commercial office space goes up more than housing because it doesn't use any where near the water of a residential zone. Restrictions on commercial landscape watering. New commercial site requires native species that don't require as much water. Developers have gotten into commercial building in California than they have in residential. Show me the water laws cuts into the number of homes built around the state or they downsize the units. Efficient water trade would improve things.
Mayor Lee of SF is in camp with inclusionary zoning. They can claim credit for anything that's built. They're ruining the market for housing in the city. Jerry Brown was anti-inclusionary zoning in SF. He was really good on this issue as mayor. But as he left, the situation has deteriorated. Politicians love it because they get credit for what does get built.
If you became the czar for california real estate.
1. Get rid of the inclusionary zoning mandates.
2.
3. OPen up a lot of the land, reserve space open it up. Privatize it. Don't let the city get a hold of it. Unleash open space and let that be developed. Autonomous vehicle we are on the cusp of radical transportation.
60% of the highway at any given time is empty because of the distance between cars.
Can put a lot more traffic through the pipeline. He thinks it's exciting. Safer, effectively, efficiently. Andrew Galambos, Government
A traffic jam is a collision between free enterprise and socialism. Free enterprise produces automobiles faster than socialism can build roads and road capacity. --Andrew GalambosCalifornia Dreaming, Lawrence McQuillan.
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