Collective Property in Palo Alto

Kate Downing, a member of the Palo Alto Planning and Transportation Commission, has resigned in protest at its no-growth policies. She writes:

After many years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here. We rent our current home with another couple for $6200 a month; if we wanted to buy the same home and share it with children and not roommates, it would cost $2.7M and our monthly payment would be $12,177 a month in mortgage, taxes, and insurance. That’s $146,127 per year — an entire professional’s income before taxes. This is unaffordable even for an attorney and a software engineer.

…I have repeatedly made recommendations to the Council to expand the housing supply…Small steps like allowing 2 floors of housing instead of 1 in mixed use developments, enforcing minimum density requirements so that developers build apartments instead of penthouses, legalizing duplexes, easing restrictions on granny units, leveraging the residential parking permit program to experiment with housing for people who don’t want or need two cars, and allowing single-use areas like the Stanford shopping center to add housing on top of shops (or offices), would go a long way in adding desperately needed housing units while maintaining the character of our neighborhoods and preserving historic structures throughout.

The vituperative responses to her letter in the local paper (quite a few now deleted for language) included many like the following:

What with everything going on I have come to realize there is a vast difference between Baby-Boomers, X-Generation, and Millennials. Not sure where Kate falls into that, suspect she is a Millennial, but her overall lack of experience regarding city planning shouts out. “Disruption” is code for the Millennials, not so for Baby-Boomers. We are not going to turn ourselves on our heads because the younger group demands change.

And another:

I’m so glad we have one less inexperienced, new resident on the Planning and Transportation Commission that is demanding that long-time residents sacrifice their hard-earned quality of life for young, new residents that want the benefits without the sacrifice and hard work.

These kinds of claims are perfectly sensible. The people who bought their homes a long time ago lucked into a windfall and they resentfully lash out at anyone trying to cut in on that windfall. But notice how un-American these claims are. The current residents want to protect their gains by telling other people how they can use their property. When a new restaurant starts to take patrons from an old restaurant we generally don’t think that the old restaurant–the long-term resident–has the right to prevent the new restaurant from opening. The same is true, by and large, for new technologies and ways of doing business. Yet when it comes to residential land we give the old residents a veto on the new.

We have collectivized property in the United States (unlike in say laissez-faire Tokyo). Property is not fully collectivized, of course, but a person’s land is not their own–it’s subject to the dictates of the collective. Collectivization has been tried in many other times and places and the results are by now predictable. Collectivization in Palo Alto has produced inefficiency, high costs and a politicization of choice that makes for ill-will and endless conflict.

Comments

'Property is not fully collectivized, of course, but a person’s land is not their own–it’s subject to the dictates of the collective.'

As noted here - 'No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.'

Then there is the reality that the U.S. is full of land that is so collectivized that anyone who is a citizen is only allowed to experience it in its natual state, without being allowed to any opportunity to purchase or develop it, and that for more than 150 years. Surprisingly, it was the first Republican president (not the Nobel Peace Prize winning one) that allowed the conditions leading to creation of what would become the American national park system - https://en.wikipedia.org/wiki/National_park#History

As always in California, a lot of this goes back to Proposition 13 -- the property-tax windfall that forever insured longer-term homeowners would benefit at the expense of newer homeowners.
The house that Kate Downing is renting might be worth $2.7 million on the open market, paying $35,000 a year in property taxes, but there's a decent chance she's renting from someone whose parents bought the house in the Prop 13 era and and picked up the parents' below-market assessment.
In that case it's entirely possible that the person renting out the house for $6,200 a month is paying as little as $1,000 or $2,000 a YEAR in property taxes.

It gets worse. Some counties have one time exceptions to the rise in tax basis for residents 55 and over. So, one phenomenon in the Bay Area is the downsizer. It works like this. Some 25 years ago you bought a large house where you could raise kids in a fancy area for $250,000. Now the kids are out of the house and you want to live closer to the downtown. So, yous sell the house which is worth $3,000,000 now and use the proceeds to buy a smaller house for $1,500,000 near the downtown, often for cash. You stll get to pay taxes on the $250,000 basis.

At least this frees up the larger house, but if you're competing with the downsizer, you are screwed.

This scenario, including the numbers, exactly describes my parents.

That is what makes these regulations so insidious. The accumulation of them amounts to a taking but people do not want to pay for them. More judges really ought to incorporate Richard Epstein's view of regulatory takings.

For the record, the key Supreme Court decision was Village of Euclid v. Ambler Realty Co. The vote was 6-3. Somehow I doubt that the majority was comprised of "collectivists" or opposed to "property rights". They were, however, aware of "externalities", something modern "libertarians" seem ignorant of.

"Externality" is too often the cry of statists and entrenched interests. Even the Court has admitted this on occasion (though not in the abominable Kelo decision): “We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.” (Pennsylvania Coal Co. v. Mahon)

Anon7,

Sadly, "Libertarian" has come to mean something who thinks they can profit from the exploitation of the tragedy of the commons and worse, thinks they have a "right" to do so. A generation or two ago, Libertarians respected patents, copyrights, and even the idea of private property. Now "libertarian" has come to mean something closer to degenerate license. i.e. everyone has the right to do anything they please irrespective of the harm they impose on themselves or society.

Trashing zoning in Palo Alto is just cynical rent-seeking and greed disguised to populism.

You may have to enlighten me; when did libertarians celebrate strict zoning and building codes? In what sense can calls for looser zoning restrictions be deemed "degenerate?" Furthermore, I fail to see how the rent seekers in this situation are those wishing to remove restrictions rather than those who have used those restrictions to increase the value of their property; such an argument appears to abuse the definition of "rent seeking." Who in this situation is greedy--those who purchased their property long ago and have used regulations to increase their wealth without building anything of value or those who wish to improve their property in ways other people find valuable? If such externalities as you speak of justify strict regulation, what types of activity cannot be banned using this justification?

These arguments are, perhaps, too ingenious for me to comprehend.

Suppose the old residents give way and the population rises. Who pays for the new schools, new roads, new sewerage, new everything?

All the residents?

That certainly magnifies the incentive to the old residents to dig their heels in.

LOL, well done!

Except there are additional residents paying for the current schools/roads etc too. Look at the amount of people per community goods as a fraction. Increasing the denominator is hardly anything to worry about if the numerator goes up too.

But the running costs for the old kit are likely to be dwarfed by the capital cost of the new.

k,

Apartments can't pay for public schools, much less maintain the quality of them...

Peter,

Property tax revenues per acre are higher for apartments than single-family homes, not lower. Maximizing tax revenue means maximizing density.

But the old residents, by the rules of Prop 13, are pretty locked into low rates. The new residents will pay much higher property taxes. So wouldn't the burden of the new costs fall disproportionately on the new residents?

Actually, with Prop 13, this isn't true at all. The incumbent residents don't even come close to paying for their own Maintenance and Operations cost (just maintaining streets, sewer, sidewalk, PD, etc.). The new residents pay for the old residents PLUS the new residents needs.

I have working hypothesis that I am trying to figure out how to model (and a source of data), that much of - if not most of - the "value" in the housing in "et al," "trusts," and corporate owned land is really unpaid property taxes whereby the young and striving are forced to transfer their wealth to aging baby boomers via property taxes. Furthermore, I think there are a number of extra legal ways that tax reassessment is avoided via trusts, etc. - which force someone like me (midwestern "best and brightest" who moved to CA for opportunity) to transfer large portions of my income to other people my age and younger who have not been reassessed.

...who pays for the new supermarkets, vehicle service stations, clothing stores, electric power??

How would Americans ever survive without politicians supplying all our needs?

"Collectivized" is not the correct term-- oligarchic government rule is more accurate. Bottom line is the same though, you don't actually own your home or commercial business real estate. And the real owners have plenty of arbitrary rules on use of their property.

Everybody "rents" their real estate from the local government oligarchy.
If you doubt that -- stop paying your property taxes (rent) and find out who the courts think is the ultimate property owner.

Oligarchic Government is Join-able with enough money.

"“Collectivized” is not the correct term– oligarchic government rule is more accurate. "

Collectivized is definitely a poor term. In terms of land development, many communities seem controlled by a aristocratic oligarchy.

Oh the impressive libertarian who calls up the land under his feet from the void, who summons the ground that he walks uppon! Thank you who through your labor, through your genius, improved land by saying "mine". We are all in your debt! Oh Pioneeeeeeeers!

What a witty response.

Was there supposed to be a point to this?

Customers of the store pay for the store. So if 5000 new residents need water and sewer which includes expanding the exiting system for 50,000 residents, at a cost of one billion dollars, the 5000 new residents will pay the one billion cost, $200,000, or $10,000 per year in added property taxes??

On the other hand, if residents are added one and two by at different places and times really hung that 5000 and overloading the water and sewer requiring one billion investment, then the cost is spread over a longer time and charged to each residence and business based on assessed property value and in higher rates.

Water and sewer investments historically have 100 year useful lives before significant new investment is required. In another note, it's clear Tyler does not think such investment can exist and that everything must be based on ten year, maybe twenty years profit horizons. But that is based on workers having income to spend is harmful to the economy.

Since California cities have very large impact fees for development, it is typically the new residents who pay for the new services.

Ah, but that is part of the problem the letter and Alex are pointing to.

Winston,

Econ 101 says that impact fees come out of land prices. New residents don't pay them at all. They reduce capital gains for old residents.

Of course the imposition of impact fees, by decreasing the potential value of the land, reduces land prices, too. But the actual fees fall on those who wish to undertake new property development, not on those whose properties have already been developed to their satisfaction. Hence the argument that newcomers will pay for expansions in public services.

But Mr. Ward is correct that impact fees, too, are a problem, as they privilege current owners over those who can find better uses for the land.

In California, those old residents are paying hardly anything in property taxes due to Prop 13, and additional taxes can't be raised from them. As such, new residents foot most municipal bills.

This is true. New residents will pay full market value-basis property taxes, but older ones can't have their homes reappraised for property taxes until they leave - so they effectively pocket the gains from capital appreciation of their homes while gaining the spread between their property's appreciation and the 1% annual allowable rise. So in the case of California, new residents will actually be the ones to foot bills.

"...so they effectively pocket the gains from capital appreciation of their homes"

Nonsense -- they "pocket" absolutely nothing unless they sell their house.

So why should old homeowners pay much higher current taxes on the "potential" sale value of their home... when that potential does not even put an extra dime in their pocket to pay higher property taxes now ?

Normal Capital-Gains taxes are zero, until one actually achieves a tangible gain.

How about we base your current personal income tax bill upon your future "potential" earnings if you worked more hours per week or changed jobs ?

Um, see my example below. You can argue against property taxes in general, but not sure I understand how you argue that Proposition 13 makes sense. One neighbor pays $1,500, one neighbor pays $15,000, and one neighbor pays $90,000, all on the same value house??? (Those numbers are about right for my example.)

Most people as they age and become less mobile (moving house is really hard) and often rely on fixed incomes likely see value in locking in their taxes, to an extent. It's an attractive proposition to many.

If the concern were simply resolving future uncertainty over property taxes rather than incumbent voters voting themselves a tax break relative to future voters, there is a fair solution wherein the property owner agrees to pay an annuity to a third party, in exchange for the third party bearing the actual tax liability for the property.

Incumbent voters voting themselves future certainty vs versus voting themselves a tax break vs simply NOT voting to increase their taxes above what they are now are all effectively the same thing.

Your solution may be technically effective but administratively impossible.

"So why should old homeowners pay much higher current taxes on the “potential” sale value of their home… when that potential does not even put an extra dime in their pocket to pay higher property taxes now ?"

OK, so, a new resident buying a property and improving that property should pay 100% for
1) the inflation in wages of the city workers who bought in town a year after they started work in the small town in the boonies before the California population doubled
2) improvements to public infrastructure to reverse the environmental harms caused 50% by the old residents, eg smog, water pollution, traffic
3) construction standards to prevent destruction of the structures in earthquakes while ending up paying to bailout the old resident when his house collapses

Prop 13 is a free lunch. The residents get benefits they want that cost a lot but don't have to pay for them.

Because thats how the government collects money. The government could charge everyone individually for everything, police protection/parks/roads/schools etc. but that isnt efficient by a long shot.

Property tax stability is also implementable in a way fair to older and newer residents by assessing tax on appreciated real estate as a portion, payable now, on the original value, and a portion as a non-forcloseable lien, on the difference between the original and appreciated values.

So if a longstanding resident prefers not to pay rates similar to their neighbors now, they have the option of reverse mortgaging their residence to the state.

They pocket if they downsize. Most crucially, their heirs pocket, paying neither the capital gain tax *nor* the ongoing market rate property taxes. We permanently subsidize people tens of thousands of dollars a year based on who their parents were. This is immoral.

I love it that this got a +1. Sure they pocket the difference. Their property taxes don't go up but the cost of providing them the services that they demand does. Furthermore, the burden of providing those services is shifted from the old and rich to the young and striving. My neighbor pays $600 a year and I pay $600 a month into the general revenues that pay for police, fire, sewer, water, etc - plus I pay some extra on top that he does not. This is fundamentally unfair - as I am subsidizing a 60 year old with millions in wealth and who makes 4x what I do on other properties in town where he also pays little in property taxes. This is the best way to achieve the same outcomes as 1860's Ireland that I can think of.

"Nonsense — they “pocket” absolutely nothing unless they sell their house."

Or if they rent it. And renters will certainly see their rents rise if their area becomes more valuable without any corresponding increase in the quality of their own housing. Are you saying it is all good and fair for renters to pay more for the same goods, but not for owner-occupiers?

That's called regulatory/tax certainty, and it's good the people.

It is good for rich people and their heir - not so much for me or for any of the other smart people that moved here for opportunity that doesn't exist in the hinterlands. I am paying for my rich neighbor's police, fire, etc. I am fine with prop 13 - but only if land trusts, investment properties, second and third homes, and commercial properties are exempt. I don't want to kick anybody out - but I have friends that spend most of their time on vacation who pay less in property taxes than me - and have 4x or more the income I have because their daddies worked at Lockheed in 1969. That is immoral on its face.

When I bought my house in the Bay Area, I was paying literally 10X the property tax of the similar house next door - a couple in their late 50s who was well off (not just in land). By the time I sold (unfortunately 10 years ago), new buyers were paying literally 3X the property tax that I was paying - so there was a 30X spread on essentially the same house in the same neighborhood. (And it has about doubled since then, from what I can tell, so make that 60X.) So the "old" residents really do pay nothing.

Yet you were likely paying to fix problems your neighbor caused or shared in causing, like air and water pollution, which they wanted fixed, but they paid next to nothing. A free lunch thanks to Jarvis.

Without Prop 13, all taxes would have been higher, but far less than taxes on even the first wave of new residents, and the ability to pay for expanded water and sewer and roads and schools would have been easier by spreading it over everyone. But without the means to readily pay for infrastructure, the drivers of infrastructure needs must be blocked, and that means blocking new residents, especially residents who will produce kids.

I live in NH, and people are not cagey about why they want zoning codes that make building new housing costly: block any residents with kids, especially young working class residents with kids.

Prop 13 is a no kids law. Let's be honest.

Since these things are largely paid for by property taxes, if the old residents allow population increase by allowing more "affordable" housing, the old residents, being in more expensive properties, will pay a larger proportion of the costs than the new residents.

Not necessarily true because of Prop 13, unless they move .

dearieme,

"Who pays for the new schools, new roads, new sewerage, new everything?"

This is exactly why zoning exists and is enforced. Apartments (typically the real issue) impose vast negative externalities that existing property owners strongly (and rationally oppose). There is simply no way departments can pay their own way in a single-family home owning community.

As I wrote earlier...

I think opposition to zoning is rent-seeking pretending to be “free-market” libertarianism, and worse cynical exploitation of the “tragedy of the commons”. Let me use a trivial example. Imagine a developer wants to build an low-income apartment building in a single-family, residential community. The building will bring crime, congestion, and lower quality schools to the neighborhood.

Of course, the development will be profitable for the developer and property owner who provides the land. Rent-seeking usually is profitable. Exploiting the tragedy of the commons usually is profitable. However, it is still unjustifiable (and economically irrational) exploitation.

What you decry as “exclusionary zoning” is simply logical (and correct) human behavior. Keeping crime, congestion, and lower quality schools out of a community is simply rationale and reasonable. In your worldview, being a “free-rider” in a community is legitimate and appropriate. People who exploit the tragedy of the common always have some excuse for their personal depredations. Rent-seekers always have their pretenses.

In your worldview, putting thieves in prison is “exclusionary zoning” because it enables non-thieves to enjoy the rents associated with living in a safer, lower-crime society. Clearly, the vast majority of folks don’t agree.

As for the literature, let me offer

“An Economic History of Zoning and a Cure for Its Exclusionary Effects”

Quote

“The purpose of this historical inquiry is to offer a test of the thesis of my book, The Homevoter Hypothesis (2001). Its central idea is that the way to understand local government behavior is to see it through the eyes of homeowners — and not renters, developers, business interests, or machine politicians — who are resident in the community. Homeowners have a special interest in their community that helps overcome the free-rider problem in public affairs. For most of them, a home is by far their largest financial asset, and, unlike corporate stock owners, homeowners cannot diversify their holdings among several communities. Fear of a capital loss to their major asset and desire to increase its value motivate owners of homes to become “homevoters.” They vote their homes in local elections and at public hearings.”

And (from the Supreme Court decision upholding zoning as Constitutional)

apartments are “a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district”

See also “ZONING: A REPLY TO THE CRITICS” by BRADLEY C. KARKKAINEN.

As for professional economists, it appear that they generally strongly support zoning. Let me offer, Robert Shiller as an example. Officially, he not a big fan of zoning. However, he lives in a community zoned for multi-acre lots. I have yet to find an economist who doesn’t live in an “exclusionary” zoned community. Presumably they do exist.

The phrase here is “revealed preference”.

departments -> apartments

Firstly, a low income building doesn't axiomatically bring in crime, congestion, or lower quality schools: these are the product of other (often deliberate) policies elsewhere. Roads aren't priced; it's no surprise that increased demand just leads to more delays, and likewise for schools in most places.

Secondly, if what you're saying is true, do the poor have a right to live in a low income dwelling anywhere? Presumably they'd bring crime to any given place, where are you supposing to put them all? In some pre-existing low income ghetto, where their negative externalities fall on one another? Unless your zoning laws can get rid of poverty altogether, I don't see how this is any kind of solution.

RR,

"Firstly, a low income building doesn’t axiomatically bring in crime, congestion, or lower quality schools"

You clearly know that they do. Let me quote "Presumably they’d bring crime to any given place". Indeed.

"Roads aren’t priced; it’s no surprise that increased demand just leads to more delays"

There is no practical way to price each segment each foot of road. Maintaining lower density via zoning is a solution that works.

"and likewise for schools in most places"

The issue isn't school capacity (which typically keeps pace with demand), but school quality.

"In some pre-existing low income ghetto, where their negative externalities fall on one another?"

Yes, that is the solution. Indeed, the solution essentially everywhere (North America, South America, Europe, etc.). For better or worse, that is the solution that everyone (at least in private) agrees on. Conservatives typically overtly advocate it. Liberals publicly disagree, but via revealed preference 100% agree.

"Liberals publicly disagree, but via revealed preference 100% agree."

The entire concept of gentrification disproves that. If your assertion were true, we wouldn't see low-income areas getting an influx of higher-earning residents, and dense apartments renting for more per square foot than single family houses.

>>
apartments are “a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district”
<<

So... most Germans and Manhattanites are parasites because they live in apartments...

There's NO way to tax apartments based on the number of residents in order to cover the cost of roads, schools, etc. Are courts / governments THAT uncreative / stupid?

m716,

"So… most Germans and Manhattanites are parasites because they live in apartments…"

The Supreme Court (in 1926) and I were/are referring to apartments in single-family residential areas. That's pretty obvious from the context (and the actual wording of the Supreme Court decision).

You are describing the dynamic in a typical American community (including where I grew up in SE Pwnnaylvania. But in California under Prop 13 it is simply not reasonable for long term homeowners receiving property tax subsidies of 90% to 95% compared to new buyers to engage in this kind of obstructionism. Fine, freeload off the government, but let those of us paying our way do the voting.

It is especially egregious with prop 13 *heirs* who didn't but in a different environment, they simply have a taxpayer funded permanent welfare check yet deign to prevent others from buying in.

ML,

Prop 13 may well be a special case. However, modern "libertarians" oppose zoning in all cases (as best I can tell). Their mindset amounts to "if I want to build a polluting factory in a residential neighborhood, no one has the right to say no". It's basically a doctrine of degenerate license masquerading as "libertarianism". A generation or two ago, Libertarians respected private property including patents, copyrights, and zoning. Now they don't. A sad decline.

Agree. I am no libertarian. But libertarians are a straw man here. They play a limited role in California. In fact, plenty of incumbent homeowners that lean "libertarian" politically find ways to block development in their communities while pocketing the benefits of incumbency (including, in many communities throughout the country, having bought their homes during periods where minorities were effectively blocked from doing so).

If the fine folks in Palo Alto don't want the boy wonders to move to Palo Alto, why don't the boy wonders go someplace else. There's lots of inexpensive land in Kansas and Oklahoma - and they don't have earth quakes. That way the fine folks in Palo Alto will experience a decline in both property values and their net worth, while the fine folks in Kansas and Oklahoma will experience an increase in both property values and their net worth. Both deserve their fates. Tabarrok's approach, to cram everyone in Palo Alto, looks like the solution one sees in China - call it the China Syndrome.

Tabarrok isn't trying to "cram everyone" anywhere. He's just advocating more freedom in people deciding what to do for themselves.

Exit is more powerful than voice. If people are unwilling to exit Palo Alto, then it means that Palo Alto really has something that enables them to keep on extracting such rents.

Exit is really useful, but people need to actually be ready to use it. Empty talk about how they could leave doesn't mean squat. Start exiting.

Turned down a job in Palo Alto 2 years ago, because I didn't want a long commute or to live in a tent. Accepted a position with 20% higher salary in a lower cost location.

Palo Alto seems to be doing fine without me. So yea, " Palo Alto really has something that enables them to keep on extracting such rents."

This. I don't think the municipalities will really start to change until their practices actually start costing the current residents something, Financially or in lifestyle. Declining property values may do it.

It appears that "freedom" is in the eye of the beholder. How do Ms. Downing's preferred government diktats differ from the status quo government diktats...freedom-wise?

When I worked in Silicon Valley there was housing available a short distance away in Sunnyvale...it's where all the H-1b visa holders from India and Pakistan lived. But of course, Ms. Downing can't live anywhere but trendy Palo Alto.

The median home purchase price in Sunnyvale these last three months is $1.2 million. Downing is no snob. This is a regional problem. Palo Alto is simply the worst offender.

I say, to Hell with them. That's lots of space in Outer Mongolia or in the Amazon rainforest.

I thought you wanted more people living in urban areas instead of sprawl?

This is the fundamental question so many long time residents here (I work in tech just up the street from PA) are asking. It's happening in pockets around the country but the concentration of a) "prestige" venture capital and angel investing names who often don't (really, despite their public pronouncements) care to invest in companies located more than an 90 minute drive from home, b) multi-billion dollar acquisitions, by FB/GOOG/AAPL/CSCO/et al, of companies who are located within about 90 minutes of their HQ's, c) senior or mid-level engineering talent and serial entrepreneurs-- who both investors and acquirers prefer to see in a business plan before investing or buying-- that has exited successfully to one of these companies or a similar company and who have made enough money to own a home with more than a tiny piece of land in Los Altos Hills, Atherton, or Hillsborough and won't be leaving.

To paraphrase someone contemporary, Silicon Valley loves winners. And people love to work with and invest in and acquire winners. And as soon as another region starts producing winners on some consistent scale, Silicon Valley's dominance will ebb. But we have been hearing rumors of this happening for years (Boston, Raleigh, etc.) and perhaps only NYC has started to give SV a run for its money and the affordability of real estate there only supports my thesis.

Yup, I'm moving to Denver instead of the Bay Area, and I grew up there!

NYC giving SV a run for its money? Perhaps. But God knows if there's one place where the housing market is immune from the laws of supply and demand its NYC.

Lack of affordability is making companies hire remote workers: If you were one of the people that can work for pretty much any company you want, but you didn't buy a cheap house in the valley back in the day, why not work remote? You could barely pay your mortgage in a 3 bedroom in SF, or instead be able to buy a house the same size in a single year in Kansas City? Many startups, realizing this, are just going full remote, leaving a SF office mainly just to talk to venture capitalists.

This is most definitely part of the solution, unfortunately/fortunately remote means including non-U.S. workers, particularly computer programmers. But the core of an engineering team, and usually the marketing and finance/ops teams and execs, remain in SV. Multiplied by the number of new ventures here and this are still plenty of people to drive a huge shortage in affordable housing.

Another thought: restricting immigration visas for non-US programmers is forcing these jobs to move overseas, which intentionally/unintentionally reduces demand for housing in SV, further/somewhat containing real estate prices vs. what life would be like with a bigger inflow of H1-B's.

California's biggest advantage for the tech industry is the lack of non-competes. CA courts don't enforce them. Innovation occurs much faster in the Bay Area, because workers switch firms at the drop of a hat. This quickly disperses new innovations and assures widespread best practices. In contrast highly skilled workers in NYC or Boston often sit out non-competes for six months, a year or even longer. In the fast-moving world of software or biotech, that's an aeon.

I've never heard of one of these being successfully enforced. For one thing the new employer could indemnify the employee. For another, having all their zero day exploits published and the remaining employees commit active sabotage in retaliation make it unlikely the plaintiff could remain solvent long enough to fund a prosecution through the multi-year appeals process,

What people are afraid of is are the chilling effects.

A new employer *could* indemnify an employee, but does that employer really want to risk a long and expensive legal battle over even a invalid non-compete? And they risk that even if they *don't* indeminfy the employee.

"Tabarrok’s approach, to cram everyone in Palo Alto, looks like the solution one sees in China – call it the China Syndrome."

I don't think that's fair to China. One the things that an influx of new residents will bring -- a detriment to quality of life that isn't just about interrupting the astronomical appreciation of property values, no matter how our host tries to insinuate that it is -- is traffic congestion and increased burden on shared networks like the sewage system. Although to be fair, I suppose part of what has caused the appreciation in their property values is that they have managed to keep some of the conveniences and amenities that were quite commonplace 50 years ago, but have since been squeezed out of ordinary neighbourhoods by mismanagement and population increase.

Anyhow, as far as I am aware, China has actually done a reasonably good job building out infrastructure to support the massive population movement towards the cities, even as it has tried to restrict that population movement. And there's stable electricity, etc. There's congestion, but my experience in Shanghai (which is perhaps not representative) was that the congestion was not terrible, and the public transit network, while not as dense as one would really need for a city covering such a huge geographic area, was quite serviceable.

In my opinion, India is really the proper point of comparison here.

I stopped reading when you said Oklahoma doesn't have earthquakes. https://en.wikipedia.org/wiki/2009%E2%80%9316_Oklahoma_earthquake_swarms

Fracking. On the other hand, we on the east coast frown on those on the west coast for living in an earthquake zone, blissfully ignorant as most of us are on the east coast of the huge fault line that runs along the east coast. Taeyoun: if only we could mimic China. Tomorrow's (today's?) Silicon Valley is in Shenzhen.

Every thread on NYC/SF/etc property values has someone chiming in chidin people for not living in some far-off place like the one they live in. There really are advantages and network effects that improve professional prospects and quality of life in certain geographical areas that aren't available in others. As long as we have a society dependent on capital flows for economic opportunity, people will migrate towards where capital is available.

Isn't there a libertarian argument for restrictive housing codes? Suppose I bought a few square miles of property and decided to develop it with strict regulations on what housing looked like. People would be free to rent these homes under these strict regulations. Maybe my business venture would work out. Maybe it wouldn't. But no libertarian would say I didn't have a right to set up my housing development like this. I don't see how this is much different from municipalities. The governing structure is different, but I could set up my development to be governed democratically, too.

That would be Communitarian, not Libertarian. Not enough individualism involved for libertarian

Are you saying that the example of someone developing their own neighborhood with strict regulations on how the houses look and are used isn't libertarian? How so? The person in the example owns the land? The question is whether it's analogous to municipalities.

To see that as analogous to municipalities would be very communitarian, not libertarian.

"Suppose I bought a few square miles of property and decided to develop it with strict regulations on what housing looked like. People would be free to rent these homes under these strict regulations." wouldn't be what most people talk about when they talk about regulations, if you only applied them to yourself. It would be more like a government's administrative rules. The more I think about it, the more it sounds like socialized housing if you were to act as owner/government.

I agree. None of us has to live there, and in a certain sense they are well within their rights to destroy themselves, just as we are free to make fun at their stupidity.

A good model is Irvine, CA - started by the Irvine Company.

Oklahoma does have earthquakes.

I remember having a conversation about Palo Alto after a few beers, so memory may be fuzzy.........but Palo Alto is a charter city. In a certain way, Palo Alto is the epitome of success story for charter cities. Why success is being bashed?

What can be more "laissez-faire" than a charter city that has relative sovereignty over state and federal laws? http://www.cityofpaloalto.org/gov/topics/municode.asp Problems in Paradise?

Charter cities in the sense of Paul Romer are a crude mechanism for exporting passable governance to places with awful governance.

https://paulromer.net/tag/charter-cities/

Its proponents do not claim it's a method for improving governance within a jurisdiction. Furthermore, it's a very distinct idea from charter cities in CA, a term which appears to be used to denote any city that uses a form of government other than the default "General Law City" model.

> What can be more “laissez-faire” than a charter city that has relative sovereignty over state and federal laws?

“Laissez-faire" denotes no or little government regulation, not regulation at a particular level.

Actually, let me correct that description. Proponents do apply the idea to developed countries, but it is considered less promising there. The idea is to avoid existing local minima and to experiment with new rules. And many of those experiments will fail.

Not a single one of the people who have been there in the long-term are the causes of the extremely high housing prices that drive an interest in such policies.

They do not deserve credit for their fantastic wealth from real estate, no matter that they might literally have built the town from their bare hands.

I don't hold it against them. But I do hold it against them that they might go beyond saying "no, I just don't like it that way and there are lots of people like me around these parts" to make up such silly excuses.

Well here is a good opportunity to cite prop 8. These entrenched interests see a huge winfall because of rising property values but don't pay higher taxes. They might be so inclined to increase supply if there was an incentive.

*Prop 13

"It's unfair I should pay previously agreed upon taxes on my windfall. No, I still get to keep my windfall."

“It’s unfair I should pay previously agreed upon taxes on my windfall. No, I still get to keep my windfall.”

Wait, are people arguing they should be exempt from capital gains too?

It was in 1978 that is passed, right? Don't you think most of the current homeowners bought AFTER that passed? In which, everyone knew what they were getting in to.

Yes thank you for the correction.

"We have collectivized property in the United States (unlike in say laissez-faire Tokyo)."

I don't think the problem is collectivized property rights. Tokyo also has zoning restrictions on how people can use property; it's just that the zoning commission seems more interested in maintaining housing stock for a growing population.

I think the problem is that the incentive of the vast majority of home owners in Palo Alto is to let it ride. Just because the incentives of a large group pf people are aligned does not mean their property rights have been collectivized.

And because their interests are aligned against diluting the housing stock (and brining prices down), it make the problem in Palo Alto intractable, given the local planning commission is a political entity which answers to the voters (and home owners) in Palo Alto.

You see this throughout California, by the way, and it always falls under the rubric of "neighborhood preservation" or "keeping the character of our town." The reality is no-one who bought their small bungalow which is now worth millions wants to see the value of their property fall or the character of their town change--not realizing that their wealth is built on suffering.

"not realizing that their wealth is built on suffering"

Oh, they realize that it's built on suffering. It's just that it's the good kind of suffering, i.e. the people who suffer are out of sight. What more can they ask for?

By collectivized he just means that the aligned interests have gotten large enough that they can impose their will on those outside of the aligned group, eg those who own land and want to build high-density housing, but aren't allowed to.

People generally prefer to live in gated apartments, gated neighborhoods, gated communities -- even when they're not actually physically gated, like the large Sandia Labs and Intel neighborhoods here in New Mexico that are largely isolated and have had little impact in most way on the surrounding areas. They offer a sense of security and stability through market mechanisms. Governments exist in part to solve large-scale collective action coordination problems in producing and delivering public goods, including a sense of security and stability. (And including that they're not going to move a 24-7 factory in across the alleyway from where I live dagnabit.) Phrasing it this way I can't help but notice that zoning laws Brexit issues seem somehow related -- that with free markets the bigger the better but that democracies thrive best with small, mostly culturally homogeneous populations -- because with small mostly culturally homogeneous populations there are good conditions for the development of a sense of security and stability. In Tokyo, as in Japanese culture generally, there are probably strong(er) social norms about being considerate of others when you decide where to locate your factory? This could facilitate the continued absence of zoning laws. And of course Tokyo is probably more culturally homogeneous than Palo Alto.

"People generally prefer to live in gated apartments, gated neighborhoods, gated communities — even when they’re not actually physically gated, like the large Sandia Labs and Intel neighborhoods here in New Mexico that are largely isolated and have had little impact in most way on the surrounding areas."

Indeed, the revealed preference of almost everyone is for controls. The "libertarians" who advocate Open Borders boast about living in a "bubble". Where/when governments fail to enforce borders, the private sectors tries to provide them via "gated...".

It is a sad truth, that "Open Societies" require high fences. Fences are always needed. Either they are erected at the border or somewhere inside. The need for fences can not be eliminated.

Houston does fine with almost no zoning... Maybe cuz everyone and their brother is armed.

m716,

"Houston does fine with almost no zoning… "

Not really. Houston is the mostly tightly zoned city in the U.S. From a prior post of mine.

"It is well known that Houston, TX has no city zoning. The local business community is notably hostile towards zoning. However, essentially everyone (who is anyone), lives in neighborhoods with restrictive covenants that make zoning (elsewhere) look like legalized anarchy."

Tabaorrok's analysis of Tokyo was pretty sloppy, and I don't think anyone over there would call it laissez-faire.

https://www.expatistan.com/cost-of-living/tokyo

Average rent for 900 sqft apartment in expensive area: $3,576
Average rent for 900 sqft apartment in normal area: $2,110

Doesn't seem all that different from NYC. Alex is just manipulating start/end dates along with Japan's deflation to disguise the fact that the 1990 bubble he doesn't talk about at all is driving his cherry picked data. His housing starts number isn't all that reliable either, given how often Japanese people tear down their pretty cheaply built homes to rebuild fairly often.

Nevertheless, the best thing Japan has going for it is a low crime homogeneous population and great public transport. One notices this right away when living in Tokyo, and its key to achieving higher density.

Tabarrok may be referring to the centralized (i.e., national) regulation of land use in Japan (as opposed to local regulation as in the US). I seem to recall that Tabarrok favors devolution. Except when he doesn't.

Some friend-of-friend on FB lamented gun crime in the US and asked why can't we get rid of guns and be safe like Japan?

I pointed out that New Hampshire is one of the highest gun ownership states in the country but has homicide rates as low as Japan's. Might there be a demographic explanation rather than a gun-law explanation?

Of course this went over like a lead balloon.

Certainly, demographics and history cannot be related. Because who wants to talk about history.

You know, if I got carded 5 times a year for a decade or two, and then found out that white guys normally don't get carded once in their life, y'know, I might just not be feeling very nice about things.

Most often, I think we should have serious admiration for the ability of many minorities to hold their composure when dealing with people like ... well, y'know, those people that they sometimes have to deal with, or at least overhear.

"I pointed out that New Hampshire is one of the highest gun ownership states in the country but has homicide rates as low as Japan’s. Might there be a demographic explanation rather than a gun-law explanation?
Of course this went over like a lead balloon."

Except the actual NH homicide rate is ~3.3x the Japanese rate.

Japanese homicide rate: 0.3 per 100k [1]
New Hampshire homicide rate: 1.0 per 100k [2]

[1] https://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate#By_country
[2] https://en.wikipedia.org/wiki/Murder_in_the_United_States_by_state

"Nevertheless, the best thing Japan has going for it is a low crime homogeneous population and great public transport. One notices this right away when living in Tokyo, and its key to achieving higher density."

The low crime thing is actually really important . . . your averages may be correct, but you can find places that size for <$1,000 still within the central 23 wards of Tokyo (e.g. in Taito or Bunkyou wards), and within 10 minutes of the subway. (I just checked on SUUMO). The buildings won't be shiny and new, but they'll generally be in decent condition, and crime is practically nonexistent, so you don't face anything like the same risks as you would renting low-rent property in an American city. Our public servants have convinced us that poverty breeds crime, so they can shrug their shoulders and no one will hold them accountable for crime in low-income areas. But this is lazy and wrong.

Anyhow, to be frank, I suspect that those averages are based on Minato/Chiyoda/Chuo ward prices, which are the most expensive. Tokyo really is not that expensive, as cities goes. It's only super-expensive if you insist on living an American-style life with a huge home and steak for dinner every night (in all seriousness, low-cost beef is a huge perk of living in the US).

The benefits of a high trust culture often are most valuable to its lower middle class. The rich can wall off, the poor don't care about living a degenerate life. The fact that a cheap neighborhood can still be a good neighborhood is a testament to Japan's culture and immigration policies.

"the poor don’t care about living a degenerate life."

Many poor do care not to lead a degenerate life. It is true that leading a degenerate life has a high probability of making/keeping one poor.

Pshrnk,

You misread asdf's (poorly written) comment. Let me rephrase it for you.

"The rich can wall off the poor, who don’t care about living a degenerate life"

His comment was a critique of rich people who use their income to isolate themselves from the poor.

It's part of the de facto classism/racism that defines coastal leftists. Warped property values and high minimum wages are nothing if not a great way to get rid of the riffraff.

And they can still feel morally superior for voting in progressives.

And this is why I'm moving to Denver!

Also I would point out that it is only those "young, new residents" that are providing the "quality of life" that these current house owners enjoy. Or perhaps they would rather move to Nebraska, where they can easily find their desired housing density. I'm sure there's an app for that.

"Small steps like allowing 2 floors of housing instead of 1 in mixed use developments, "

That's amazing. I had never heard of a single-story zoning limit. Ah well, this will never be solved at the local level. Somehow a national law will have to be passed that limits building codes to safety issues.

Is that constitutional? I hope so. Otherwise it will be a slow slog until companies start relocating to Iowa City or wherever.

The State of CA is considering legislation that will pre-empt a lot of local planning if there are enough "affordable" units. If the zoning allows for a certain use then local planning boards will lose their ability to block with other mechanisms such as permitting, parking requirements, etc. The state Democrats apparently are beginning to recognize that supply and demand aren't just neo-fascist constructs developed to forestall the brilliant planning of the top men.

http://www.latimes.com/politics/la-pol-sac-brown-housing-plan-20160514-snap-story.html

The Legislative Analysts Office thinks the proposal of Gov. Brown doesn't go far enough.

http://www.lao.ca.gov/Publications/Report/3470

Thanks, internet-informed, that is the kind of news I miss. It does seem like a positive development, but I agree that it doesn't go far enough. I'm also far enough right wing that "reserved for low income" seems too intrusive. Better to just streamline density, by eliminating minimum lot size, minimum unit size, etc.

Check out the Google Street View of Palo Alto some time.

There are a lot of rather unimpressive single story houses, the kind that sell for about $120,000 in suburban Cincinnati.

I'm for more freedom, except when it means I must live in a place where land values exceed the price of gold. A problem with all the boy wonders locating in one place is that they mimic each other (Rene Girard). Anything new come out of Silicon Valley since digital advertising? Google and Facebook together receive roughly 64% of total revenues from digital advertising, and almost 80% of the marginal dollar spent on digital advertising. Do advertising companies really need to be located in Silicon Valley? Flying cars and spaceships to Mars. Sure. There's a reason why one of the presidential candidates is running a campaign based entirely on the idea that people will believe anything. I suspect that the so-called tech companies all want to be located in Silicon Valley so the rest of us don't see what foolishness they are up to, like boys living in a college dorm.

Yes, the region is still "Hollywood for nerds" and like Hollywood attracts world wide talent on a daily basis.

Niantic, the creators of Pokemon Go is headquartered in San Francisco. Recent headline: Pokémon GO passes 100 million Play Store downloads in just a month.

As I mentioned in a lost comment, that's interesting from the new economy perspective.

They were a division of Google before being spun off, so of course they were located where Google was located.

Not really sure that follows or adds anything. Google has divisions all over by now.

https://www.google.com/about/company/facts/locations/

This is the standard externality argument - new residents create a negative externality on current residents by increasing congestion, noise, pollution etc. Like any externality owners have some rights over their neighbors, so not sure what is surprising here - this is why we have planning boards, as otherwise going to the extreme your neigbor could open a nightclub or brothel and there's nothing you could do about it.

Yeah but the idea of externality gets overextended and I think its being used here to justify a FYIGM mentality. Current homeowners around the county got their homes at a time when new construction didn't need to be justified to existing property owners as being in their interest (it never will be because more houses means current houses will appreciate in value less). The number of homes per capita has been declining in the US since '08 and continues to decline, even as there is a need for more homes because of smaller family sizes. Note that you could still have planning and aesthetic restrictions without every new construction needing to be justified as being in the current owners' interests. Zoning right now is just way to restrictive.

"The number of homes per capita has been declining in the US since ’08 and continues to decline, even as there is a need for more homes because of smaller family sizes."

Why isn't that: The number of homes per capita has been declining so there is a need foe larger family sizes? :-)

This is an attitude that would be easily solved if these original property owners were liable to pay taxes on the actual value of their homes.

The more I investigate this, the more convinced I am that if zoning is the problem, no city in the whole world seems to have found a solution. Which means it may be a politically intractable problem, and Alex doesn't offer many ideas for solving the gordian knot.

We can say three things:

1) Top Tier cities are accumulating vast amounts of wealth, and real estate has become a kind of lottery ticket where you might bump into the right person and they become a millionaire. Obviously, people are willing to pay a lot for such lottery tickets. The already rich people don't care about the price of real estate, or as people who already own are chill with it.

2) Nobody seems to have solved the problem of how to built vertically over land that is already built on in already crowded cities. All of the zoning success stories all seem to be about building out, not up, on virgin land in Sun Belt cities starting out with lower density levels. That's a different problem to solve then what places like SF face.

3) Due to history many top tier cities also have geography that was once beneficial but now a hinderance. SF is a peninsula with mountains. NYC is an island. Almost every city has some river, coast, or some other geographical feature that becomes a commuting bottleneck. By contrast the booming cities of the Sun Belt are mostly just flat land as far as the eye can see.

We can bitch about zoning all day, and I can certainly see cases I don't like, but not a lot of realistic political solutions, and little thought as to how much can really be accomplished here. The last time SF built enough housing to keep up with demand was 1941! So many NIMBYs in 1941.

Meanwhile, here in Baltimore they are using Section 8 to try and flood surrounding suburbs with people from the ghetto to make way for gentrifiers. This ruins the value of middle class people's homes. I'd sure like to ability to zone out "affordable housing" if it means keeping my neighborhood and schools safe. If you go take a look at a map of SF area prices I think you'll find lots of pockets of low rents...who lives there. Home much incentive do people have to make sure such people don't end up moving in next to them.

Housing regulations make sense in principle. Because a house is the largest investment that most people make, efforts to maintain relative stability in property values is largely desirable. If a new restaurant overtakes an old restaurant, that hurts the owner and staff of the original business -- but it doesn't devastate the entire community. Conversely, if housing values in a given town or neighborhood decline dramatically as a result of new development, the consequences are widespread and profoundly painful.

I'm not sure we want to use Palo Alto as an example to derive generalizations about the problems of housing regulations. It isn't as though Silicon Valley is a typical industry that's having a typical effect on local real estate prices.

That ins't to say that the status quo in the Bay area -- or New York, DC, and Boston -- should be maintained. But solutions for these cities may not be widely appropriate.

The claim that private property is collectivized sums up everything. When the situation is much worse than France, you know you are in big trouble.

Interesting how the hypocritical elites are able to come to one conclusion locally ("preservation of community") and the exact opposite conclusion in aggregate ("pro-immigration"). What if all new immigrants were randomly assigned to a neighborhood...would there still be support? Doubt it.

My comment from that local news thread:

Two possible solutions here:
1. Reduce job growth rate.
2. Increase housing growth rate.
Which is better for the world? #2!
I say this as someone who lived in Palo Alto and Menlo Park for 10 years out of college. Decided to leave the Bay Area and move back east when it was clear all of you would never increase the housing growth rate enough to make a difference. I miss the weather and friends and the "energy" of living in Silicon Valley. But I don't miss the housing costs. I now live in a 4-bedroom. 3-bath, 2500 sq ft house in one of the best school districts in NJ. Big downtown, Walk Score of 85. House was just $850k. Feels like a bargain compared to the Bay Area!
Good luck everyone, get out while you can. The NIMBYs are winning.

So, almost 50 comments, and not a single one referring to HOAs or homeowner's association?

'n the United States, a homeowner association (HOA) is a corporation[citation needed] formed by a real estate developer for the purpose of marketing, managing, and selling of homes and lots in a residential subdivision. It grants the developer privileged voting rights in governing the association, while allowing the developer to exit financial and legal responsibility of the organization, typically by transferring ownership of the association to the homeowners after selling off a predetermined number of lots. It is generally required that anyone who wants to buy a home within the area of a homeowners association must become a member, and therefore must obey the several restrictions that often limit the owner's freedoms. Most homeowner associations are incorporated, and are subject to state statutes that govern non-profit corporations and homeowner associations. State oversight of homeowner associations is minimal, and varies from state to state. Some states, such as Florida[1] and California,[citation needed] have a large body of HOA law, and some states, such as Massachusetts,[citation needed] have virtually no HOA law.

The fastest-growing form of housing in the United States today are common-interest developments (CIDs), a category that includes planned unit developments of single-family homes, condominiums, and cooperative apartments.[relevant? – discuss][2] Since 1964, HOAs have become increasingly common in the United States. The Community Associations Institute trade association estimated that HOAs governed 24.8 million American homes and 62 million residents in 2010.' https://en.wikipedia.org/wiki/Homeowner_association

It even seems that some people recognize this aspect of potential power abuse in the hands of an actor interested only in its own benefit - 'In The Voluntary City, published by the libertarian Independent Institute, Donald J. Boudreaux and Randall G. Holcombe argue not in universal favor of homeowners associations, opining that they do not necessarily have advantages over traditional governments. These include the fact that the association's creator, e.g. a developer, has an incentive to set up a government structured in such a way as to maximize profits and thus increasing the selling price of the property. If a certain decision would increase the selling price of certain parcels and decrease the selling price of others, the developer will choose the option with the highest net income to itself. This will sometimes result in suboptimal outcomes for the homeowners.'

"We are not going to turn ourselves on our heads because the younger group demands change."

A little change now or big change later.

The two tier living arrangement in California with all the nicer places being out of reach of "regular" middle class people won't last forever. The "regular" people have the vote too and if they cannot get change at the local level, they will get it at the state level.

Yes, I saw that, too. Also comments that millennials aren't saving or working enough. The Baby boomers got their properties when conditions were much more favorable with higher wages per unit housing. And what if the millennials work more and save more? They can't work on building housing, so that additional money they have will just bid up prices and leave them where they are.

I'm pretty sure that most boomers couldn't afford a house in Palo Alto even back then. That's kind of what this is all about, if you ask me. This is a lot more specific that the usual inter-generational crap. I live in Mountain View, within easy walking distance of Google's HQ. There are lots of baby boomers here, too. I'm one. And there are housing projects going up everywhere - condos or apartments, higher density, multiple stories. All the stuff the lady in the OP wanted and more. It isn't enough, but it's something.

This isn't about baby boomers. This is about Palo Altan's and their expectations.

Yeah, PA was still unafforable back in 1980, but less unaffordable.

Median home price was $148,900 back then, which is about $435k in today's dollars. While high, that's nowhere near what houses in PA cost today.

The people who bought their homes a long time ago lucked into a windfall and they resentfully lash out at anyone trying to cut in on that windfall. But notice how un-American these claims are.

That sounds like one of the most consistent American things to do! Aren't business owner suppose to take that attitude towards their employees? Anyway, I assumed the biggest problem with zoning is the laws and rules are local issues and my experience of local government and city council is they are dominated by LONG time residents.

So how do you get the local residents to change their interests?

But notice how un-American these claims are.

Sorry. Those claims are very American. Being inconsistent and wrong is not sufficient to make claims un-American.

Also, how are they un-American? Remember, New England was settled by Puritanical religious zealots who had to flee England because it wasn't zealous enough! And then they banished Roger Williams for his extremist views, and he went and founded Rhode Island. Now, the sorry history of American religious pecksniffery is not, perhaps, directly analogous to wanting to prevent one's neighbours from building 10-storey multi-family housing apartment blocks on their property (though it certainly has a strong analogue in the fanatic adherence to intolerant notions of "social justice" common in the Bay area), but it is, at least, clear that there is a longstanding and vigorous American tradition of injecting oneself into one's neighbours' business.

I would argue that the mentality is less the collectivization of property rights and more the individual view of property rights running amok. After all, much of what sets the value of a quarter-acre of land is external to that piece of property — the character of neighborhood, the traffic, the view, the nearby amenities, the weather, and so on. Thus property owners react to changes to these externalities as if they're victims of theft, being robbed of the characteristics they value in their property. Hence the constant fretting over property values attached to any unwanted change.

Don't live in Palo Alto if you're not already rich. Anyone could have told you that. (Really rich, not just new-professional-degree high income.) Snark aside, imagine if Silicon Valley were one municipality. Palo Alto would be the rich district, and most people wouldn't expect to be able to afford living there.

I don't think collectivism is a very good word for this. Property owners get full enjoyment of their property as they've customarily used it. They've essentially just made a pact not to sell to anyone who would build high density. Sounds more like a cartel. Non-owners are shut out.

In some ways, more "collective" organization could fight the cartel. If Palo Alto and the nearby towns merged, Palo Alto owners would be reduced to one interest group among several and might not get their way as much. Sufficiently active state housing policy could go even further. And that already does happen: cities that go too far in restricting residential development get sued by the state and forced to alter local policy.

Down here it is Newport Beach and Costa Mesa. Same same. NB has high prices and growth restrictions (though 2, maybe 3 stories if you squeeze it in, not just 1). Costa Mesa is much more dynamic, with large-scale conversion of industrial land to residential going on. On, and NIMBYs http://www.savenewportbanningranch.org/

It will all work out, but I think it is pretty inefficient and growth reducing at current pace.

There is a version of this up here, and it's Redwood City, a couple of miles north of Palo Alto. RWC is building like crazy: new office buildings and new apartment buildings are going up nonstop. What was once a sleepy, much-poorer version of PA is becoming very different and very crowded. There is no way to increase the actual roads and they haven't added enough parking, so driving downtown is becoming very difficult. In a few years it will be easy to compare the two cities and see how people like the outcomes. House prices are lower than PA, but rising very quickly. It is a very interesting experiment.

My sister in law rents out rooms in her house to 4 or 5 tech workers from India or students at Stanford. It's illegal. But it's the only way she can keep her house. She almost went bust in 2001 when she and her spouse lost their jobs. Then again after her divorce.

She turned the dining room, the garage, and the two bedrooms into furnished lets, and sometimes someone lives on the upper landing...heh.

I couldn't live like thato. But she does and her house is getting paid off.

Real Estate has certain restrictions which may not conform to the "ideal" Libertarian model, but I suspect that avoiding Hatfield vs McCoy feuds makes zoning requirements necessary. I wonder if there's a ceiling population density above which land development is subject to restrictions, whereas below it there may be little or no restrictions (on which legal uses are legal there)? It seems to me that when ever, where ever people congregate that regulation naturally follows. Are there counter examples? I certainly wouldn't want a strip club next to my kindergarten. If two stories, why not 6? 10? 80? And can I rent out my front lawn for pup-tent cities? I doubt anyone is arguing for no regulation on housing, are they? It's like the joke about the woman who is willing to go to bed with the guy for the $250,000 Porche and a $10,000,000 necklace but gets incensed when offered $10 for her companionship. What, she exclaims does he think she is? To which he replies, madam, we've already established that, now we are just haggling over price.

Houston has no zoning laws, so apparently they aren't necessary.

No zoning, but plenty of regulations.
http://marketurbanism.com/2008/12/10/is-houston-really-unplanned/

txsir,

"Houston has no zoning laws, so apparently they aren’t necessary." From a prior post of mine.

"It is well known that Houston, TX has no city zoning. The local business community is notably hostile towards zoning. However, essentially everyone (who is anyone), lives in neighborhoods with restrictive covenants that make zoning (elsewhere) look like legalized anarchy."

I would prefer no regulations. But of course in an ideal world I would want 10k acres so I don't have to look at anything I don't own again ever. That is the dream.

of course in an ideal world I would want 10k acres so I don’t have to look at anything I don’t own again ever.

While I realize that everyone is different, this is certainly an extreme outlying level of eccentricity, and we don't make public policy decisions according to the preferences of the least socially functional among us.

Not collectivization. This is property owners (many of whom are rentiers) pursuing their interests by political means to enforce monopoly property rights: a yawn inasmuch it is a normal interplay between economic and political power under capitalism; one of many wastes which are ignored by apologetic libertarian/neoliberal/conservative economists.

A typical AlexT post, spoken as a true renter, lol. As a DC property owner and member of the 1%, I fully agree with AlexT in spirit, but not in practice. Get the heck back to your cubicle, renter. I am a member of the rentier class, not the renter class. And if I was a California still, I'd stay Yes to Proposition 13, forever!

Hello Economists,

Land Value Tax. Land Value Tax. Land Value Tax.

The more NIMBYs block development, the higher and higher tax brackets they push themselves into.

Perfect for internalising the externiality that NIMBYs can create.

Land Value Taxation is endorsed by Milton Friedman.

Milton Friedman talks about property taxes https://www.youtube.com/watch?v=yS7Jb58hcsc

OK now I understand why driving through Palo Alto feels so weird. All these famous companies and so few houses. And no decent restaurants. Huh? This is the famous Silicon Valley? That was my reaction.

Folks who bought before Prop 13 saw property taxes rising dramatically and simple calculations showed that tax windfall for the state was going to force us out of our homes in a few years.
Moving to another state for lower taxes did not appeal (our jobs were not moving). The state was not about to change the real estate tax formula. Hence the tax revolt and Prop 13. It's as simple as that: we did not want to be forced out of our homes by the very rapidly rising, and unbounded, tax.

A Land Value Tax is merely the way by which we directly and equally share the value nature supplies for free.

I existing residents block the building of new homes in their area, those excluded will be compensated will lower tax liabilities and visa versa.

The market can only allocate resources efficiently when property rights are fairly apportioned. That cannot happen without a 100% LVT.

Mr Tabarrok wrote: "The people who bought their homes a long time ago lucked into a windfall and they resentfully lash out at anyone trying to cut in on that windfall. But notice how un-American these claims are." Really? That seems the principle by which every nation on this planet operates, except those which are too weak to defend their own borders.

Yes, I know that if Mr Tabarrok had his way, national boundaries would not exist and migration would be completely free. But I seriously doubt many people find that vision an appealing one.

Zoning laws are the same kind of phenomenon as immigration controls.

One interpretation: Pro-zoning liberals are hypocrites.

Another interpretation: Anti-immigration conservatives are acting as obnoxious elites.

"We rent our current home with another couple for $6200 a month". Thats absolutely insane!!!!

I certainly sympathize with the folks who would like yo live in Palo Alto but can't afford it.

But the real problem isn't the Palo Alto planning commission exclusively, it's labor daily mobility. Mass transit infrastructure investments in the Bay Area are abysmally short of the opportunity. BART ringing the bay? Links directly across the Bay from Hayward to San Mateo, Fremont to Palo Alto? Spurs out to Santa Cruz, Half Moon Bay, Gilroy/Salinas?

Forget about Marin, Napa, Sonoma.

If Palo Alto's residents woke up tomorrow and doubled the supply of available units. It would make almost no dent in the affordability of Bay Area housing. The MEDIAN house price in Santa Clara County is $900K - most of those homes are not in Palo Alto. SF is $1.1M, same for San Mateo County.

Those counties account for 3.4M people - Palo Alto is 64K and in a prime location (Stanford) with nice weather, great amenities. They are just being scapegoated. How about Atherton, Woodside, Los Altos Hills, Hillsborough? Where's their high density plans? LOL.

Upper middle class people under 35 with kids haven't been able to buy into Palo Alto since the 1970's. Any more than they can live on Manhattan's east side. Even with two incomes.

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