You might be surprised just how profitable those parking lots can be. Putting in a 10 to 25+ million dollar multiple level parking garage can pay off, but only if there is enough demand for it and you can get zoning permission.
Yes it is profitable to wait for land to appreciate.
Land appreciates either way.
It’s far more profitable to charge people 20$ to use 1/300th of an acre for a few hours than to actually do nothing with it. Which means the opportunity cost to build something is higher.
Unless the building is going to clearly be wildly profitable it may be better to stick with a parking lot.
All homeowners are real estate speculators. Wouldn't you also consider anyone buying a "starter home" a speculator? Their goal is to continuously flip their house.
I bought my starter home to live in for 5 years while I continued building my career, not to flip.
You bought it to live in for 5 years and then you flipped it for more money than you bought it? That's the definition of successful speculation.
This is one area where (I hate to say it) the red states have tended to do a better job than the blue states. Take Texas as an example. Up until this last year at least, Texas had relatively low property values but high property taxes. But high property taxes on a $200,000 house aren't the end of the world. But here's a big one: in Texas, seniors (65+) can defer their property taxes to be settled upon their death. Th…
> children and grandchildren can inherit the artifically low property tax rates
Grandchild -> child is readjusted to market rate property taxes. Only parent -> child IFF both are and continue to be primary homes, does it receive the previous tax treatment.
What author is saying is that if a property has a high yearly ongoing costs, it becomes tougher to just hold onto it and not put it into the market i.e. this causes increase in supply. If I have a $10k/year expense on a property, I am forced to at least generate a yearly $10k+ from the property. This would keep the rentals and property prices in the area in check
The elephant in the room is the amount of housing supply being held by banks and private equity in an effort to shore up housing prices. They can afford high property taxes. Your elderly parents might not be able to. Obama should have let the bankers twist in the wind when the citizenry was out for blood in 2008. They repaid him by channeling money to Republicans. Put them all in jail.
> They can afford high property taxes. Your elderly parents might not be able to.
Texas has an interesting solution to this. Homeowners over 65 can elect to defer the payment of their property taxes indefinitely, although the taxes eventually get paid when the house changes owners.
Why is that necessarily the case? The market has much better information about the demand for 3bdr apartments than cities and counties do. Mostly we have the opposite problem: top-down policy from local governments impedes the construction of 3bdr apartments.
It's a mistake to assume that builders are responding to demand. All actors in a market have only partial information. To take my city as an example, the housing market started heating up, so builders started constructing condos and tried to pack as many units into their building as possible, thus improving supply. This created a vibrant urban centre for young people who live on their own in modest apartments and dro…
I don't think it's housing that's driving families to the suburbs. A normal 2 or 3 bedroom apartment shared by roommates could just as well house a family.
Imho it's more about safety, schools and amenities.
American inner cities have a reputation of being unsafe, both in terms of road safety as well as violent crime.
With schools being locally funded many families choose to move to less diverse and more affluent suburbs for the school district.
Lastly, many places in inner cities don't have parks and playgrounds within walking distance and thus no proper replacement for the suburban backyard.
Prop 13 solved two problems at once. It forced a reduction in the out-of-control government spending, and it saved seniors from losing their houses. IMHO the only problem with Prop 13 was the "grandfathering" clause. The cuts should have been perpetual and across the board.
> It forced a reduction in the out-of-control government spending No, it didn't. California just kept adding taxes everywhere else to make up the difference and still had an annual deficit most of the 13 years I lived there. > It saved seniors from losing their houses Why are seniors magically allowed to be immune to basic market forces when no one else is?
> California just kept adding taxes everywhere else to make up the difference and still had an annual deficit most of the 13 years I lived there.
The state taxes were added to partially backfill the lost local taxes. Prop 13 was a major contribution to moving control from local governments (which it kneecapped fiscally) to the State (which it also kneecapped, because of the supermajority requirement to raisd any tax, but not as badly.)
Land value taxes are even better. Property taxes provide a disincentive to making the land more productive. A land value tax would incentivize residential landowners to build more units which provides more supply and would lower rents.
> disincentive to making the land more productive. Isn't that like saying income tax disincentives people from making more money.
This is local democracy in action. Vested landowners can put up barriers to entry to prop up their investments. They can also hand it down to their family, entrenching wealth for generations. Sucks to be an outsider.
The biggest barrier to entry for first time home buyers is by far mortgage rates. Low mortgage rates cause house values to go up because value is based on what an affordable monthly payment for that house. Low rates means value goes up to equalize payments which is mostly superfluous for people with only one home and good for anyone with investment property but it causes a 20% down payment to be an unsurmountable bar…
If we're talking California, I'd argue a 200k down payment on a million dollar house is a bigger barrier.
Land value taxes are even better. Property taxes provide a disincentive to making the land more productive. A land value tax would incentivize residential landowners to build more units which provides more supply and would lower rents.
I'm not clear on how land value taxes would incentivize the right kinds of units. For instance, would a land value tax incentivize the creation of tiny bachelor apartments, or larger apartments that families can use? We need incentives for both, and larger units are not very common these days.
This could have extremely negative side effects.
A really expensive house on cheap land in some exurb would be comparatively cheap, thus encouraging sprawl.
Old, cheap high density housing in desirable cities would all of a sudden become really expensive, hence massively acceleration gentrification.