The top-voted comment for the same piece in the Economist explores the rent-seeking behavior of SF landlords, the origins and the conditions that gave rise to Prop 13 in the first place and proposes a set of (albeit, I admit, a bit far-fetched) solutions:
I am one of these SF oligarchs, and I benefit from high rents of
both types. Nevertheless, I have long called for an end to the
rent-seeking. To me, the problem started when the boomers of
old voted themselves two enormous market distortions over 30 years ago.
Proposition 13 was sold as a means of keeping granny in her home,
but it does not particularly benefit the elderly, the sick, or the
needy. It benefits land owning incumbents (like me) at the expense
of everyone else. Kill it. Start with the grotesque subsidy for
commercial property, and then phase out the residential subsidy.
Not to be outdone, SF renters voted themselves a rent control
ordinance. This also does not particularly benefit the elderly, the
sick, or the needy. Like Prop 13, it benefits one thing only -
incumbency. I know fairly wealthy 50-somethings who have rented
apartments for decades, and now pay a third or a quarter of market
rates thanks to rent control. They keep these now as pied-a-terres,
while they own comfortable homes in Marin or the wine country. For
each one of these old renters, there are ten smart ambitious young
people desperate to contribute new creativity and energy into the
community if they could just find a room. Only the wealthiest of
these can compete for the few remaining market rate units, and they
must pay plenty of both kinds of rent, to people like me.
This may be seem like daydreaming, but I hope Governor Brown and SF
can someday create a grand bargain. Kill Prop 13 AND rent control
with the stroke of a pen.
As for overall supply and demand, I would support a state law that creates
1 - an estimate of statewide population growth
2 - a requirement that every municipality periodically rezone to
accommodate a portion of that growth proportional to its current
size; or
3 - pay another municipality to take its share
This would create something like a reverse cap and trade system to
manage the supposed externalities of growth. This way, NIMBY cities
would have to pay growth-friendly cities, and NIMBY voters would have to
pay for their selfish rent-seeking behavior. Who knows? There might even
be less of it. [1]
Something I'm coming to learn: for any bureaucratic system, those who are most capable of taking advantage of the system are the privileged. Every time we try to arrange a benefit for the poor, infirmed, disadvantaged, disabled, we create a tool for the more privileged to advance themselves. The poor hit a rough spot and they can't hold onto their homes – only the well off can hold their property for decades. Even rent control: who is most able to ward off an eviction? Who can access the legal system? Who can mount their own defense? Who can see the machinations of their own landlord and work in advance to counter? At every turn, when we make a rule, we give a tool to those who can work with rules; if those people were at one time not privileged, they are privileged now, and have been for some time.
I wonder how that cap-and-trade system would be gamed by different interests?
The city would have to zone for the growth, or trade for credits. But zoning isn't the same as construction. It's hard to imagine an alternative without putting the city in the construction business, but it opens up loopholes. The existing system of "housing elements" http://www.hcd.ca.gov/hpd/hrc/plan/he/ seems broadly similar, and leads to some strange planning decisions.
I remember my conservative/blue collar father breathed a huge sigh of relief when prop 13 was passed. Before prop 13 property taxes were kicking older/retired/sick/middle income people out of their homes--yearly.
If you are lucky and can buy a home in the Bay Area--believe me forced retirement comes pretty quick.(This goes 10 fold for non-union workers). Getting old sucks! Having to get rid of a house you maintained for years because you can't afford the property taxes is criminal.
I was a child, but state and local taxes were completely out
of control. Home owners listened to every angry word Howard Jarvis spewed out. Even as a child, I knew that angry man was right.
(To be completely honest; I still think property taxes are too high. All those bonds and temporary scare tactics add up. It's almost like people don't realize just because
some politician's pet project looks good in the ballot box doesn't mean you don't need to pay for it? )
I know rents suck. I don't have any respect for people who make their living off renter either--yes, I think it a horrid
way to make money! If I pissed off a Landlord, all that comes to mind is a image of Eddie Murphy behind bars on SNL--repeating, "I hate my landlord!"
That said, I don't think rents would go down if they got rid of prop 13. Why--because people are greedy bastards! Rah-rah Capitalism!
The problem is when you cap gains at 1-2%, any time inflation is higher, that person is now getting a subsidy.
This is why CA has enormous debt and swaths of areas that have gone bankrupt. It's not sustainable.
Get rid of Prop 13 (or raise the limit) and rent control. I'd say cap it at 5% because if inflation is higher than that, well that's on the Federal Government more than local.
SF isn't making more land and they're also making it impossible to build up. Hell, my buddy looked into adding a deck onto his house. After doing research he figured it wasn't worth it (some people face years of delays getting neighbors to sign off on a deck on their own f'ing property).
