Comment by AngryData
3 days ago
Token reduction in labor costs are not going to solve housing to start with. It doesn't cost a 2 million dollars to build a house in California because we pay framers $1,000 an hour, it is property costs and a shitty political class blocking competition to their and their buddy's current investments.
What surprised me the most was the fees that just piled on. I knew the land, labor and materials costs.
Just the sewer (the capacity only, no work done) was $11k. Then add on the park and school fees which both were over $10k. No wonder it a builder has to build something over 2000 SQFT to make it pencil out.
The reason for most of those fees for parks and schools is because Prop 13 has prevented property taxes from raising with the market on older property owners (and the LLCs that own commercial properties), so cities and school districts have to instead turn to newcomers to get some amount of revenue to cover the costs of providing public services.
We have a great system here I believe - or at least great enough? - councils charge a percentage of the hypothetical rental value of the property in fees/taxes (in reality this hypothetical rental value is quite a bit below actual rental values - they don't seem to minmax their income).
It shouldn’t be a surprise.
Buying property should have the same transparency (into costs and fees) as breakfast cereal with nutritional labels.
> No wonder it a builder has to build something over 2000 SQFT to make it pencil out.
I'm with you up until that. Maybe there are places where you have to build over 2000 sf due to regulations. For the most part, this is an industry talking point to justify building expensive houses on the limited land that gets zoned for residential. It gets repeated a lot.
You can build smaller houses but you can't charge as much for them. I'm not faulting the builders for maximizing profits, but it's still a talking point. (And in the grand scheme of things, it's not the reason housing is unaffordable.)
> I'm with you up until that. Maybe there are places where you have to build over 2000 sf due to regulations. For the most part, this is an industry talking point to justify building expensive houses on the limited land that gets zoned for residential. It gets repeated a lot.
I kind of feel it is the inverse.
If you can build a house for X$/sqft, you have a linear relationship. If it costs 100k _plus_ X$/sqft (for sewer, permits, etc) now you have a floor. You can sell a bigger house for 600k, or a 35% smaller house for 425k, odds are you’ll sell the bigger house quicker. I bet the 325k homes would sell like beanie babies in the 90s in places like sf.
The actual problem, the elephant in the room, is that California is expensive, both by popularity and regulation. This makes for an embarrassing conundrum where California is simultaneously pushing poor people out while trying to subsidize their life via social programs.
I don’t think it’s working.
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Tangibly related.
IMO the North America economic-societal "model" is High cost + More regulation. Everything is legal and proved by some experts, and regulated to the maximum, but in reality they also build moats after moats for existing interest groups (landlords, insurance companies, big contractors, etc.).
And everyone thinks this is the right model for "democracy" and "ruled by law". People may blame for part of the model (e.g. landlords) but never realize that the whole model is built to support this.
This is my observation so definitely biased.
California < USA < North America.
It’s wild to hear people scape goat REIT funds and campaign for rent control when the real problem happens to be “average people” owning investment properties. Step 1 of fixing the problem is the immediate repeal of Prop 13.
Repealing Prop 13 would be good, but wouldn't fix the core problem, which is that CA (and most of the US) is literally decades behind on building sufficient housing units for population growth because of self-inflicted zoning and permitting problems. California isn't unique in this, Prop 13 just makes it even more painful because old people hang onto houses that are too big for them and so constrain the already-limited supply more.
Prop 13 isn’t the reason old people hang on to their property. You can downgrade and maintain your Prop 13 tax advantage.
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I kind of think prop 13 was for "normal people" but has benefitted corporations, which can lease out a property forever without changing hands.