Prop 13, That’s Why

Big Media Matt wonders why construction in Texas has outstripped that of California:

Houston is the fastest-growing city in America, but what’s really remarkable about Houston is that it’s not just Houston. The Dallas, San Antonio, and Austin metro areas are all also growing super-fast and so are several of Texas’ smaller metro areas. There are many factors inspiring this population growth, but as you can see above one striking thing is simply that Texas is handing out building permits at a rapid clip (data here).

It used to be that California led the nation in building permits. That makes sense. Even though California’s not as geographically expansive as Texas it is extremely large. And a whole bunch of factors would lead you to assume that California would add people more rapidly than Texas. They share proximity to Mexico, but California is home to our Pacific Ocean ports and certainly trade with Asia has exploded. What’s more, California has better weather than Texas and substantially higher wages. But in the nineties California downshifted its permitting and ran neck-in-neck with Texas for a while. Then starting in the mid-aughts Texas has just gobbled up a bigger and bigger share of America’s permitting. The precise legal and economic underpinnings of this are complicated, but the key difference to me is simply a different mentality. Texas politicians of both parties by and large want to see growth. They brag about it. California politicians fear it, as if we’re one new building away from dystopia.

He is ignoring the elephant in the room, Proposition 13.

Proposition 13 limits the amount that property taxes can go up by 2% a year, so if you bought a 4BR house in 1980 for $60,000, you would be paying property taxes for a value of $120K.

If you downsize to a bungalow, and it costs $300K, you would be paying 2½ times as much in taxes, because when you buy a new house, the level starts at the sale price.

It really does not make sense to downsize if your property tax bill triples, so you stay in your old home, which restricts the supply, and makes housing more expensive, and reduces demand.

Any analysis of California which does not take into account the suicide pact that is their culture of initiative petitions.

If you bought a house in 1980 for $80,000.00

One comment

  1. DJ says:

    No, prop 13 is NOT the reason building is falling off in California, it is the incredible cost to build here, due to fees and regulation. I was Building Services Manager for a city in Southern California (name witheld to cover for the guilty). I wanted to add a garage and bedroom to my small, built in 1929 home. The permit fees exceeded $20,000 and te extra costs did not stop there.

    I would have been reqired to hire a soils engineer ($3,500 minimum) a landscape examiner to review the vegetation on the site (at least another $3,500) and I would be required to replace all windows and doors in the existing home as well as insulate to current specifications.

    We have a small (40,000 btu) gas furnace and no airconditioning at all, because the weather is so benign here. The total costs of required upgrades and permits was more than triple the cost of building the addition, so I gave up on doing it. New construction is subject to considerable more fees, including school fees that can exceed $30,000. Just before I retired, the permits my department was issuing for actual construction had all but stopped.

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