This former is the crux of the problem: California entered into a suicide pact with real estate speculators in the 70s, from which it seems entirely unwilling to extricate itself. It’s an incredibly destructive drag on the state’s entire economy that prevents new business formation and labor mobility.
I tried to look for a home there once. I watched a homeowner break in with a ladder after being evicted then the realtor showed for the viewing then stole his ladder and left.
Another said their house was for sale but the garage was occupied by people who broke in and they could not be evicted until summer was over and before it became winter. The home owner was unavailable to speak to due to health issues related to the struggles.
Found a decent place then looked up the history of the property to find it had many owners and were re-sold due to a sober living halfway house next door.
I have several other examples and many news stories similar including long commutes, higher prices/taxes, etc made moving there or owning a home to rent out a non-starter.
Since we present tax burdens as a share of income as a relative ranking of the 50 states, slight changes in taxes or income can translate into seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. Tax revenue growth during the pandemic, however, has not only increased overall tax burdens but also expanded variance among states. In our last pre-pandemic analysis, the 20 middle-ranked states differed by less than a percentage point on effective rate, but in 2022, the difference between New Hampshire (16th) and Maryland (35th) is 1.8 percentage points. While burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages: the state with the highest burden, New York, has a burden percentage of 15.9 percent, while the state with the lowest burden, Alaska, has a burden percentage of 4.6 percent.
And before someone else rushes in with "Oh yeah, California subsidizes all the hillbillies in the red states!": No, that is not true. Only CT, NJ, and MA's citizens on average paid more federal taxes during 2015-2021 than they received back from Washington. <https://news.ycombinator.com/item?id=38839499>
Insurances generally want your money unless stuff is just too risky. But some folks are eager to build real estate literally on top of dynamite factory if that land would be cheap enough.
So, why are those houses un-insurable is a good question for a start.
Also, OP writes their observation specifically about California.
But in general the bottom of the pyramid lies outside California. All that money that eventually ends up in the pocket of California real estate speculators? Most of it comes from the pension funds and 401(k)s of ordinary workers in the rest of America, which invest in the darling companies of the day not realizing that everything is temporary. Those $2M ranch houses in Silicon Valley are bought by folks bringing in $500K in stock options per year, which is all fueled by their employers being worth $2T.
California's problem today is that we're between pyramid schemes. Most of the old-line web/mobile/marketplace schemes have reached maturity and are nearing collapse, but new pyramid schemes like crypto and AI are just getting started. Until the dollars start flowing in earnest California will likely teeter and stagnate at the top.
And, for small businesses, there are the frankly rather silly taxes on small businesses. Want to be a small business doing business in the Great State of California? You will pay $800/year (minimum) for the privilege. Does the state get any value whatsoever from this?
Want to employ anyone? Prepare for a whole pile of taxes, each of which is small, but you need to do an utterly absurd amount of paperwork.
Would it kill the state of California to let a business employ someone and fill out one form and pay one tax?
California is dying because businesses can't pay their employees $75k and expect them to be able to afford a place to live.
The state has problems but they are not as structural and intractable as most people want to be believe.
I'd have to make like 3x more than I do now to keep the same quality of life and nowhere comes close to that at the moment.
My whole family still lives there but I'd rather them move closer to me than me move there.
I had for years a fantastic job in one of the inner engineering groups at Apple, loved it, loved the coworkers, the culture, and earned and saved very well, which is the point in mentioning this. but I quit to move far away eventually because I obstinately refused to pay exorbitant real estate prices to get a non shitty home.
Sadly I could understand how folks from outside the US have less perspective on what a shitty ripoff it is, but if you're from a well off suburbia in different parts of the US, it was clearly nonsense to buy there.
One factor that looms large is the gig economy: Uber/Lyft/DoorDash/etc. They've become a lynchpin in providing delivery services that restaurants have come to rely on, while hitting both them and consumers with large fees. Pizza delivery is being shifted from actual drivers to gig workers, to avoid a recent law change requiring more pay; this has become an act of cost-externalization, and further increases the dependency on the gig workers. And overall the gig workers aren't necessarily seeing gains from this change, since their employers fight tooth and nail on efforts to increase their pay.
This doesn't even begin to cover what's happening in the agricultural and creative industries; the latter of which I believe has been covered writ-large in this space.
See also: "Supply and demand is a capitalist hoax, let's ban the construction of houses other than the ones I'm renting out."
this sounds like an exaggeration, but I'm not familiar with the law you're referencing. what exactly are you talking about?
I’m not saying prop 13 shouldn’t apply to primary residence, but it’s insane investors can just sit on land and use that as leverage.
"Prop 13 is the worst thing to happen to California in a long time. It has lasting effects today. At the time, the press was full of 'tax fighter' stories about saving the poor old retirees from having their homes taken away sourced from Howard Jarvis Taxpayers Association among others. This is not the real story. The real story is that big corporations in California own land and do not sell it in practice. Prop 13 froze the property tax that Corporations pay at the same time as the homeowners."
I call it a cartel because the scarcity is 100% a policy choice. Density is not high, public transit is awful, and there is a ton of land left to develop on. Real estate in California is like diamonds from DeBeers.
If you aren't rich, don't stay there. All your surplus will go to landlords. If you buy at these high prices >50% of your income will go to servicing the mortgage and if the property market there ever does crash you'll be ruined. You’ve basically bought into a cartel.
I'd say for the Bay Area it's worthwhile to go to build out your career but if you aren't making at least $350k/year by age 35 leave.
Personally I’m glad I left because I loathe this property cartel and what it does to people and wouldn’t want to put my money into it.
IMHO the state has this totally fake reputation as a liberal “woke” place when in reality it’s a landlords kingdom. Texas is more progressive than California because a working class person can afford a home.
Prop 13 caps property taxes at 1% and also limits the increase in assessed value to 2%/year. In a region where housing prices appreciate by ~7%/year and that filters down into the basic cost of living for most municipal workers, this makes it impossible for local municipalities to balance their budgets without a steady influx of new buyers. The only way they can bring their tax basis up is to ensure that new homeowners buy in at ever-increasing prices, so that the tax basis can be reassessed upwards on purchase and the new homeowners can subsidize old homeowners who are paying well below market rates on taxes. Local municipalities in turn control planning and zoning, and so they pass zoning codes and approve projects on the basis of what will increase assessed values and hence tax revenue the most. This further exacerbates the housing shortage, raising inflation and increasing the need for ever-increasing home values even more.
Basically CA voters enshrined a pyramid scheme into the state constitution in 1978, and it's filtered down into every aspect of the state's economy by now.
Literally the political power that got Tesla off the ground (with fed funding) to save real estate prices in the San Bernadino Valley, LA, etc.
My biggest hangup isn't jobs but housing. You have to be a millionaire to afford a small house far away from any city. And if you decide to rent instead, then even making 200k+ you are unlikely to afford a house at all. By the time you save up a million, housing prices increasing and inflation will push you back to square one. If you go through the debt route, interest and monthly payments will drain you dry for the rest of your life (unless your plan is to start your real life at 55+). I feel like high speed railways to desirable places like cali to affordable states will sove a lot of issues.
