On top of that in CA, if you were to hold your million dollar home, your property taxes are locked in even while the asset value increases exponentially. You can even give your house to your kid, and they will pay the tax rate you paid. If you tear out your house and build 5 new condos, suddenly you are paying market rate property tax again.
Which is why the price falls from a million dollars to $750k for the same amount of square footage. But now you have five times as much square footage on the same piece of land, which is more than the decrease in price per square foot. And still would be even if the price per unit fell to $400k.
> On top of that in CA, if you were to hold your million dollar home, your property taxes are locked in even while the asset value increases exponentially.
Which is just a facet of existing local tax law. You could get to the same place by just having very low property taxes in general.
Not really. Zoning specifies density limits but demand depends of far more factors. If you replace a mansion with a low density housing project, the reason the price will go down is not due to an increase in supply.
Now suppose somebody could knock down your million dollar three bedroom home there, put up five condos that size on the same lot and sell them each for $750K. That'd make the property itself worth more than a million dollars, right?