A few years ago I worked with a Mountain View start up and commuted from Houston for a year. The most striking difference to me is that here in Houston, older homes and commercial buildings are routinely and aggressively remodeled or bulldozed and replaced, frequently with duplexes or triplexes in the denser parts of the city where demand supports it. In Mountain View and all the way to San Francisco I saw decades old homes and businesses that were virtually untouched. I couldn’t figure out why all that valuable real estate was so underutilized until I read up on prop 13. California’s RE tax system combined with their aggressive no development policies provide enormous disincentives to invest, upgrade, or even move. Rent control reduces the available stock even further, and exacerbates the housing shortage simply by reducing the availability of potential tear downs that facilitate the creation of additional housing units. Existing homeowners are loathe to move or remodel because if they do they’re hit with massive tax increases when they lose the tax subsidy built into Prop 13th that kept their taxes much lower than later arriving buyers. Worse, that unfair tax system, over time, guarantees that California real estate investment and the tax basis for California property grows more slowly than normal markets. Well connected real estate developers and existing homeowners don’t care because the artificial government created “shortage” guarantees them higher returns. Over time though, the entire state is left with older less dense, less efficient homes and buildings, a smaller tax base, and massive local and state debt. California’s housing shortage and fiscal problems are almost entirely government inflicted.
I looked for a home in the Mountain View area, and considered moving my family from the Houston suburbs. Mountain View offered a two bedroom one bath one car garage forty year old home with siding, not brick for $850K.
For a point of comparison, here’s a similarly priced home available in my area today; http://www.zillow.com/homedetails/14-Little-Rise-Dr-Missouri-City-TX-77459/120891528_zpid/
For those who don’t wish to click through, it’s a five bedroom, 41/2 bath, three car garage home with an outdoor kitchen and a pool on 4/10 of an acre built in 2013. At $149 a foot, it’s actually a little high… Texas has no income tax, so real estate taxes are higher. For this $875,000 home you will pay about $26K a year in taxes. Your kids can walk to school or the water park, downtown is 45 minutes, and one of the best medical centers on the planet is 25 minutes away. Think about what California could do with all that tax revenue…