It's like tariffs:
Tariffs don't make your domestic products more competitive. They make imported products less competitive. The result is higher prices paid by the consumer.
Raising taxes on vacant land doesn't magically make development more economically viable. It makes not developing vacant land less economically viable.
There is nothing about that equation that results in cheaper housing.
Opti said:Im sorry if you dont understand the usefulness of theory.
Id love to hear you try and dispute this simple theory: A certain tax rate, between 0 and 100, exists at which a govt maximizes tax revenue and above and below that tax revenue decreases.
Or you can show me something that actually disputes that, NOT something that disputes a specific argument in which the laffer curve is used as an argument. You say you disagree with the laffer curve, but it seems like you actually have a disagreement with where people think the tax rate falls.
Also your engine algorithm you talked about is called a virtual dyno, its actually very commonly used by engine builders (good ones). Although its raw outputs numbers arent always great it is useful to see what effects changes will have on output and curve. Very similar to the laffer curve.
I actually don't think that were the peak tax rate falls is material to the hazard posed by potential use of the Laffer curve. It would be very difficult to impossible to disprove the core premise of it, that there is a peak somewhere between 0 and 100. The core of it appears to be true in theory, but any application of it is always wrong in practice. As such, AFAIK there is no valid use for the Laffer curve. It is a theoretical observation that can only function as a wrong answer generator, which is why every argument that uses it turns out to be wrong.
A virtual dyno or engine simulator is vastly more complicated than the Laffer curve, and probably has more complicated math in its Print dialog. There is no comparison between them.
In reply to GameboyRMH :
Laffer famously said "not every curve is a straight line". All the Laffer curve means to me is elegantly captured in that phrase.
Linear relationships are very rare...in nearly all cases, you get a boost from scale on the front end and a diminishing return on the back end.
"Giving everyone 1 X dollars did 1 X good so giving everyone 2 X dollars will do 2 X good"
Duke said:It's like tariffs:
Tariffs don't make your domestic products more competitive. They make imported products less competitive. The result is higher prices paid by the consumer.
Raising taxes on vacant land doesn't magically make development more economically viable. It makes not developing vacant land less economically viable.
There is nothing about that equation that results in cheaper housing.
I don't think the point here is cheaper housing. There are plenty of cheap mobile homes in this particular area that can be rented by ranch hands and other lower income people. The point is to keep the "hobby ranchers" from killing the local economy. If a bunch of rich people buy up all the land and sit on it, build big houses on 100 acre lots with no animals on it, that will kill the business at the local feed store and the local large animal vet and the guy who shoes the horses. There will also be less steak for sale at the grocery store. Of course there are some people who have so much money that they will go ahead and pay the higher taxes so they can have their 100 acre homestead. There are guys around here that have that kind of money. Some of them even build Armageddon shelters where they can hide out after World War III. Welcome to Texas.
In reply to Snowdoggie (Forum Supporter) :
The original post's proposal was to use a different taxation scheme to encourage / force development, with the stated goal of reducing housing costs by increasing supply.
encourage / force development, with the stated goal of reducing housing costs by increasing supply.
LA county's new ADU law really has helped increase supply.
EX: You had a SFR renting for 5700-6300 a month. Now ADU will bring additional 2500-3K on same property. Excellent ROI for all the people taking advantage of it.
Bonus: If you can prove you are poor on paper, local government basically giving you free money to build your ADU.
mr2s2000elise said:encourage / force development, with the stated goal of reducing housing costs by increasing supply.
LA county's new ADU law really has helped increase supply.
EX: You had a SFR renting for 5700-6300 a month. Now ADU will bring additional 2500-3K on same property. Excellent ROI for all the people taking advantage of it.
Bonus: If you can prove you are poor on paper, local government basically giving you free money to build your ADU.
They are trying to do that in Dallas too. I don't really want anybody living in my backyard. It belongs to the dogs.
I know somebody who used to live in the San Fernando Valley. Builders were promoting garage apartment conversions. All of a sudden, more people were living in the neighborhood and there were more cars in the street. That created a parking problem, a density problem and a traffic problem. I guess you can convert your garage and build another rental in your back yard and turn your single family home into a three unit rental property and make money now. You can use the income to pay of your mortgage and live for free after you pay the cost of construction. That is the pitch. More rats in the same sized maze equals more stress and a lower quality of life.
That does solve a problem, but I don't want to live in a place like that.
In reply to mr2s2000elise :
Any word if Ventura is going to adopt the ADU law?
I hope they don't due to the reduced quality of life it would cause but at least I've got an out as I could exploit it, rent out the units, and move away.
Snowdoggie (Forum Supporter) said:That does solve a problem, but I don't want to live in a place like that.
I agree with you 100%. What is happening is, most people who are doing ADU conversions, aren't living in them anymore. Most people who are doing ADU, have already left, and are getting more ROI from the same property with lower build costs.
Are there people in SFV who are living in the house, and filling garage or backyard with others? - sure. And as you said, you wouldn't really want to live there anyways. I think SFV and other ADU (which aren't what I am necessarily talking about - speaks to a different demographic of people and your assessment in those neighborhoods are accurate)
The 4 examples where I converted them (210/2 corner, by JPL) from SFR to SFR + ADU:
1) I filled the pool on two properties. The rent on the property wasn't significantly more when I had the pool. Property was 12,000 sq feet. We built two ADU in the very back. From the front of the house, the garage and all remains intact. Property was large enough, that it doesn't interfere as much as you would think. City was very particular on parking situation and with a driveway that holds 8+ cars, no issues.
2) Other two properties had detached (very far) 3 car garage (think old NE style houses). We built separate entrance above garage flats (2 bed+2 bath + kitchens). I negotiated with current renters, where one family uses the driveway (4 car driveweay), and the family who lives above 3 car garage, has the full access to the 3 car garage.
Most of the ADU I am talking about that is happening, is happening very similarly. One of my neighbors had a 22,000 flat lot. One house one it. He divided it into 3 lots, and is building 3 places for rental. Given the cost of the land in the area, making them slighly higher density is giving the best ROI in the current and short term future market.
When we sell any of these in these neighborhoods, our only buyers are cash Asian, who will demo it all and build a large house on it.
RX Reven' said:In reply to mr2s2000elise :
Any word if Ventura is going to adopt the ADU law?
I hope they don't due to the reduced quality of life it would cause but at least I've got an out as I could exploit it, rent out the units, and move away.
I haven't seen it at all. We have been increasing our portfolio in VC, but our AirBnB business is much stronger there. Given the lots we own, ADU isn't a feasibility, and I don't see county pushing for it yet. Probably not in the 8 years you have left ;)
In reply to mr2s2000elise :
Do you know something I don't?
The SS Admin's actuarial tables say I've got 23 years left to live...what's this eight years you speak of?
RX Reven' said:In reply to mr2s2000elise :
Do you know something I don't?
The SS Admin's actuarial tables say I've got 23 years left to live...what's this eight years you speak of?
You keep talking about 8 years till your kids etc etc - independent etc etc ;)
In reply to mr2s2000elise :
I don't remember saying eight years and nothing really significant happens then.
My hard stop is four years...four years ago I would have said eight years.
Edit - Wally mentioned being on the eight year plan in the Minor Rant thread the other day.
Getting rid of Air BnBs would be a way of opening more houses for long term rentals. Of course the investors are screaming but the City of Fort Worth banned them in residential areas. The owners are appealing in court, but it will be interesting to see how this case goes. Some investors would rather dump the houses that rent them long term. Are they really that much more profitable than a long term rental?
Are they really that much more profitable than a long term rental?
Depends on location, VERY much so. The AirBnB that I run in two vastly different demographics (one caters to snowbirds, other cater to hipsters).
Hipster area - monthly rental would be 2500-3000. I get 4800-5500.
Snowbird - monthly rental would be 3100-3600. I am getting 5800-6700 (depend on month of the year).
Both of those counties - AirBnB will not be outlawed for sure in the next 10-15 years.
I sold 3 properties in Imperial Beach in San Diego during Covid. All 3 were AirBnB. County made a rule, I have to rent minimum of 30 days, and certain streets we couldn't have AirBnB. (lots of ways of getting around the 30 day rule). We did traveling nurses for a while, but the writing was on the wall. Plus with all the Mexican sewage problem, it wasn't a long term good hold for me. We dumped the properties, as having those as SFR rentals make no sense for us on a ROI front.
Inverse is also true. Our La Canada Flitridge properties, I couldn't AirBnB any of them. There just isn't any demand. Trust me I tried.
The monthly rent is significantly higher, due to proximity to downtown/JPL/excellent schools/and dual immersion Japanese/Korean public schools. However, when Olympics/WorldCup is here, I am planning to AirBnB all of them, as the leases are structured in a way, to plan for vacancy at that time.
Of course with the new Medical school/residency programs few miles away, 2023 should see a great buying opportunity for many people in the area as well for long term ROI.
Duke said:Snowdoggie (Forum Supporter) said:In reply to Duke :
The solution is to build more supply.
Yes... WHEN IT MAKES ECONOMIC SENSE TO, more housing supply gets built.
The originally-proposed solution was to artificially force it to make economic "sense" by jacking the proforma calculations out of whack (via excessive social-engineering property taxation). I still fail to see how making it too expensive to not develop a property is expected to solve the original problem of housing not being cheap in popular areas.
So would a potential solution be to reduce the cost to build affordable ie/cheaper housing?
Basically, no impact fees, no permit fees, no fees of any sort if you build cheap housing?
One of the problems I've heard is that the high density affordable housing typically does not have high profit margins. Can we make those margins greater by making it virtually free (in terms of government costs) to build that type of housing?
Locally to me at least, our city government has been offering those types of discounts to developers who dedicate units to meet affordable housing rate standards, but its not doing much to reduce that rent that most people in town are paying.
mr2s2000elise said:I sold 3 properties in Imperial Beach in San Diego during Covid. All 3 were AirBnB. County made a rule, I have to rent minimum of 30 days, and certain streets we couldn't have AirBnB. (lots of ways of getting around the 30 day rule). We did traveling nurses for a while, but the writing was on the wall. Plus with all the Mexican sewage problem, it wasn't a long term good hold for me. We dumped the properties, as having those as SFR rentals make no sense for us on a ROI front.
Any idea if you sold to owner-occupants?
Did you feel that the county was stealing from you by denying you the ability to maximize income potential?
pheller said:So would a potential solution be to reduce the cost to build affordable ie/cheaper housing?
Basically, no impact fees, no permit fees, no fees of any sort if you build cheap housing?
You're resolutely refusing to address - or even acknowledge - the elephant in the room.
The Law of Supply and Demand doesn't just go away because you (or the government) wish it would. We're really never going to make any progress here until you can bring yourself to admit that.
It's going to be expensive to live in an area where lots of people want to live.
Period. Full stop.
Having the government subsidize the kind of construction you think is important doesn't make those costs disappear. It doesn't mean that 10,000 new residents no longer need to flush their toilets or heat their houses or turn their lights on. No matter how disadvantaged or deserving they may be.
Just transferring the costs of providing those things to someone else doesn't make the costs go away. It just means you're using someone else's money to provide something you have deemed necessary but that doesn't make actual sense.
That affordable housing development has a big impact on the land and the infrastructure. It needs a lot of things to work right. If the potential return for providing all of that investment in land acquisition, infrastructure expansion, and building construction doesn't make economic sense, no amount of wishing or pretending otherwise will ever change the equation.
I understand that isn't the answer you want to see.
Tough.
Larger question then: should homeless people be forcibly shipped to cheaper areas for which to house them? Or should the Feds provide a housing stipend that a homeless person could take anywhere in the USA, but is a fixed amount?
My experience working with refugees had some relation to this. People wanted out of refugee camps. The US government was willing to pay to resettle them, but they had to go where the government wanted them. At least for the first year.
Erie, PA had a good infrastructure for which to deal with refugees. Lots of non-profits that dedicated themselves to employing and integrating these people into American life. Erie also has cheap housing, for which the stipend the government gave the refugees adequate housing. Hardly any of the refugees I knew personally were in Section 8 housing, unless they had moved to those locations after their stipend had ran out.
This poses a problem in places like California where almost all refugees have to get housing through the state or local Section 8 programs. The Federal stipend isn't anywhere near enough to pay for rent in the state.
Of course, what does that do for people who aren't homeless, aren't refugees, but just can't work enough to avoid costing tax payer money AND afford housing?
If we can't make housing more affordable in high demand area, how do we reduce the demand without throwing people on the streets?
Duke said:
You're resolutely refusing to address - or even acknowledge - the elephant in the room.The Law of Supply and Demand doesn't just go away because you (or the government) wish it would. We're really never going to make any progress here until you can bring yourself to admit that.
pheller said:Any idea if you sold to owner-occupants?
Did you feel that the county was stealing from you by denying you the ability to maximize income potential?
2 of the properties we sold were to Vancouver residents who use them as their winter homes. 1 of the property I sold to an investor who owns 3 other units in the same building, and is basically trying to own all the properties in the buidling. Given I sold it off market, and no RE fees, it was an excellent deal for me, having owned it for 9 years, and very little cash outlay in terms of maintenance.
We parlayed all 3 property profit, into 1 property, very close to Doug Demuro, which we full time AirBnB now.
To answer your second question, I do not have any feelings towards the county/city/govt. I am an objective person, doing everything in my power to maximize my ROI given opportunity around me. I work hard, make $. I will go where the $ is, regardless of my feelings. I learned a long time ago, feelings have no dollar value.
In reply to Duke :
Think more than 1 step Duke;
Food, clothing, and shelter are the minimum requirements. Any job that doesn't pay for that, The tax payer has to make up the difference.
So in effect your taxes pay for his employees.
And it's not just those3 items. Medical needs. The poor are required to be treated, something g about the Hipocratic oath. Same with transportation etc. More from the pockets of you tax payers. But hey the owner of the company doesn't care about you.
Then there is things like quality. Want to make/build/ sell/ good stuff? Employees that eat gruel, wear Hand -me- down clothing and live in a rat infected slums are not going to build or sell anything high quality.
Want smart employees who can be an asset to your company? They'll be smart enough to get the best paying jobs.
Minimum wages get you minimum workers ( or less)
So realize good things are expensive. Yes that includes housing.
I assume you are well paid , because you are a good hard worker? That's what everyone deserves.
pheller said:Duke said:Snowdoggie (Forum Supporter) said:In reply to Duke :
The solution is to build more supply.
Yes... WHEN IT MAKES ECONOMIC SENSE TO, more housing supply gets built.
The originally-proposed solution was to artificially force it to make economic "sense" by jacking the proforma calculations out of whack (via excessive social-engineering property taxation). I still fail to see how making it too expensive to not develop a property is expected to solve the original problem of housing not being cheap in popular areas.
So would a potential solution be to reduce the cost to build affordable ie/cheaper housing?
Basically, no impact fees, no permit fees, no fees of any sort if you build cheap housing?
One of the problems I've heard is that the high density affordable housing typically does not have high profit margins. Can we make those margins greater by making it virtually free (in terms of government costs) to build that type of housing?
Locally to me at least, our city government has been offering those types of discounts to developers who dedicate units to meet affordable housing rate standards, but its not doing much to reduce that rent that most people in town are paying.
https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_011314.html
The government could go into the business of running apartment complexes for low income people like they do in Austria. It seems to work there. But when we do it here, they turn into "the projects". We have done that here before and it was a mess.
The problem with some homeless people is not just that they don't want to be moved to a cheaper area, but they would rather live on the street than play by the rules. Most homeless shelters and rehab programs won't allow them to stay drunk or do drugs all day. That is what the want to do. They don't really want shelter. They want to be in the area were drugs are sold and there are enough people passing by to beg from. They want to be where the action is.
For those who actually want help, you would have to have them near therapists, drug and alcohol rehab centers and places were they could get job training. That would mean the big city, not empty rural areas. You don't want to put them in expensive neighborhoods for the same reason you don't put warehouses and storage lots on the expensive part of town. You would blow all your money just acquiring the land. The place would have to have rules. I'm not sure our current civil rights laws would allow for that sort of thing. We aren't Austria. There would have to be some serious changes in our country to create something like this here. As long as people have a 'right' to stay drunk and do drugs and live on the street, there really is nothing you can do.
I was even just thinking about the "near homeless" as in people who work jobs that aren't not location dependent, but are struggling to afford housing.
These types would probably move if someone said "here's $10,000, go find a better life. The following companies in the following cities are hiring people with your background."
How are you going to convince two minimum wage workers with 3 kids and no savings to move from San Diego to Tusla? Especially if their local family and support network is really all that keeps them from being homeless. If they move to Tusla, they are gambling with their kids lives if they'll be successful in that transition, if they can make it at all.
In reply to Duke :
You seem to be operating with the assumption that some kind of perfect, natural supply and demand balance has created the current situation and that any attempts to fetter with it would be tainting it with artificial constraints, setting it out of alignment with reality. I see it as the current situation already being berkeleyed all to hell with artificial constraints which we should not be afraid to fetter with in the process of trying to unberkeley it since it's already completely divorced from reality. There are so many different types and layers of artificial constraints that have led to and are still contributing to the current situation that it's unrealistic to even expect a layman to wrap their head around all of them.
I don't think a "pure" supply and demand situation is necessarily a good one, but the housing market is one of furthest things from that in physical goods.
If we're going to start talking about what's necessary vs. what "makes actual sense" (meaning, is profitable currently), we'll start exposing how bizarre and apparently anti-life economies can become.
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