But that's all irrelevant and somehow the article is overblown FUD? Is the point that all the lawyers and construction jobs outweigh taxes? I think the fundamental argument is one of fairness, the people who benefit the most from a wonderful city should pay their share to maintain and support it.

All the more reason to tax them. When I bought my house, its assessed value was the price I paid for it. Why not here?

However the tax rates are much higher areas using the 6% method versus the 100% method. For example in NYC the tax rate is 19.157% while in San Francisco is 1.1743%. If you do the math the tax rate on market value is about the same. 6% * 19.157% = 1.149% in NYC versus 1.1743% in SF. In most places it is around 1% but can be over 2% in place like New Jersey, Illinois or upstate New York which unlike NYC relies more on property taxes.

None of this says anything about the NYC system for condos (class 2) that the article talks about but is often a source of confusion when comparing areas that use different systems.

http://www1.nyc.gov/assets/finance/downloads/pdf/brochures/c...

http://www.socketsite.com/archives/2014/09/san-francisco-pro...

EDIT: Here's a good recent review of residential real estate taxes across the US (290kb pdf):

http://www.brookings.edu/~/media/research/files/papers/2013/...

This was very confusing to me when I lived in New York. The property tax rate is terrifying (19 percent annually???), but then you realize that the basis for each property is reduced by a fudge factor such that the effective rate is in the same range that it is in other places.

I suspect that the reason that they do this is to stop people from hassling the city constantly about their assessment. In places like MA, where they make an honest attempt to keep assessments close to 1:1 on value (mine changed annually in the time that I owned the house, often going DOWN -- this was 2007-2010), people are constantly appealing their valuations.

The only relevant distinction would be if tax or assessment were curved as a function of actual value.

If you used the last sale price and didn't adjust, people who bought 30 years ago would benefit unfairly. If you used the sale price and adjust annually, how do you do it? By inflation, by average country/state/city/neighborhood increase in sale prices, etc.? Each has problems. If you hire people to assess the current market value, they can be bribed or make mistakes.

I really like property taxes as a way to fund government, but determining the value of something like a house/condo is actually a bit tricky.

Allow the government to set the rate as they see fit (with all the normal controls of an iterative democratic/representative process), but the assessed value is also a bid of sorts.

Of course there are flaws: an assessment shouldn't vary based on how willing someone is to move, it's still easy to under-assess by a little (but then that drives the rate higher to make the budget), and I'm still a little disquieted by the idea that the control against under-assessing so undermines property rights.

I think that Cambridge (MA) gets this reasonably right. My assessments have tracked the overall market in my area (at least loosely). They might be 10-20% off in a rising market, but they're not 50% off.

The problem lies in the nature of politicians... Reassessments upset people whose assessments go up, so the big players lobby to defer the re-basing. Or in the case of California, you never revisit until the property changes hands.

In a metrics-based way (#BR, #Baths, square footage)? In an aggregate neighborhood-based way (all 02138 is up 3% this year)? Via drive-by appraisals? Via invasive inside the house appraisals or "broker price opinions"? (The last clause would seem to have significant Fourth Amendment concerns.)

That's exactly how mortgage underwriting works. It's not 100% accurate, but there is an appeals process to address inequities.

This is pretty much the answer. Everyone who argues that it's impossible to figure out a fair value for the property without a change in ownership has to face the fact that lenders do it on demand and (admittedly only theoretically at certain points in recent history) are incentivized to get it right because that's the final method available to them to get their money back if a loan goes south.

2. That process is labor-intensive and therefore expensive. Typically, the borrower is on the hook for the approximately $500-1000 cost of the appraisal. (If you don't see a line item charge, it's safe to assume that was buried in the discount rate.) On the high side of that range, appraisal costs would be > 10% of the tax collected if you appraised annually. Presumably, doing every property in the municipality at one time would make this process more efficient, but it's still a labor intensive and invasive process. The city's largest commercial landlord, Boston Properties, pays about 4% of the total tax revenue in Cambridge. This process could literally siphon more money out of the system than all Boston Properties buildings pay.

Allowing a mandated and periodic governmental inspection of my property to determine its value and funding that appraisal work present significant hurdles to universal application. In this case, I think that approximately wrong is better than precisely correct.

You use square footage of livable area and land. The rates for each (which are different) are the average sale price of all houses in the neighborhood per square foot.

The only hard part is determining neighborhoods. Sure some houses are extra fancy and worth more, but the difference is not large enough to worry about since fancy houses also tend to be larger.

If you choose a whole year, your assessments will lag badly in a fast moving market. If you choose a shorter time period, you risk the small number of sales making the measure a noisy one. I suspect the whole year basis is a better balance.

Then of course, there's the "is a garage livable area? is it land? is it neither?" "is a basement livable area?" "what makes an attic livable area vs storage?" "what about porches? patios? sheds? gazebos?"

Livable area is already very well defined in law, so no need to do it again. Every real estate listing has this number. There's even an ANSI standard Z765-2003 for it.

"For instance, when former Citigroup Inc. Chairman Sanford Weill sold that 6,744-square-foot condo at 15 Central Park West for $88 million, the city valued it at only $2.8 million. The entire 201-unit building, which is also home to rock musician Sting and hedge fund manager Daniel Loeb, was valued at $242.6 million."

source: http://www.bloomberg.com/news/articles/2014-03-10/nyc-proper...

Man, talk about letting huge amounts of tax revenue walk out the door.

    They are money laundering/tax shelter vehicles for the uber-rich, especially foreigners

or the TLDR version

http://www.occupy.com/sites/default/files/medialibrary/globa...

And that fact that when a billionaire leaves their home country, it is often for shady reasons, not innocent enduring persecution or suffering.

Which is the reason some people in San Francisco are skeptical about the ability of increased housing supply to contain or decrease housing prices. Adding supply that ends up being unoccupied because it's owned by absent uber-rich does little or nothing to decrease housing prices for locals. And if you demolish existing housing that is occupied by locals and replace it with housing that becomes pied-à-terres for the absent wealthy, you can, paradoxically, actually increase the price of housing for locals by adding new housing.

Of course, never building anything (like David Campos apparently wants) isn't the solution. But if one wants to decreasing housing prices for locals by adding supply, one needs to ensure that the housing is actually used by locals. Which I don't think anyone knows how to do.

People are skeptical because they don't understand basic economics: see http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0... or http://www.amazon.com/Gated-City-Kindle-Single-ebook/dp/B005.... When building in desirable neighborhoods is exceedingly difficult developers target very high-end housing. When building policies are reasonable developers target wider swaths of the market.

Or they've learned that simple models don't always capture reality.

> When building policies are reasonable developers target wider swaths of the market.

Do the sources you've cited here or any others you're aware of present a reasonable number of situations where this has happened and led to a decrease in housing prices?

Because I've never been able to find any kind of decrease independent of a demand collapse.

The only guarantee one has is that developers will build what generates the most profit for them. That's basic economics. If the most profit is found in housing for locals, then locals get housing. If it's in pied-à-terres, then they don't.

It only seems that way sometimes in SF because there is literal decades of pent-up demand that needs to be satisfied, resulting in people willing to pay quite high prices.

Neither is the supply of land.

The question is, can San Francisco build enough to satisfy this demand, without replacing so much of the existing housing stock that San Francisco doesn't look like San Francisco any more? I don't know. And maybe it's not important. Cities do evolve, after all.

But I do think the question needs to be asked, and debated.

The answer is: yes. The heart of San Francisco lives not in a brick or a stone or a board, but in the hearts of San Franciscans. Gold in peace, iron in war.

Even if some new luxury apartments are pied-à-terres which would not be in SF in the absence of new construction, if some are actually occupied then rents for the city in general will also benefit. (New downtown high-rises with super-fancy penthouses can easily have many real residents on the lower floors.)

2) Buying an investment home in SF is basically a bet that the authorities will continue to keep housing supply growing much slower than demand, causing prices to rise. Speculation just causes current prices to better match expected future prices.

Do they really not? Seems pretty simple to just make regular small family apartments. If the apartment you're building looks like this: http://cdn.theatlantic.com/assets/media/img/posts/2015/04/On...

then it's probably going to attract the uber-rich. Why not just make a bunch of boring utilitarian apartments (not crappy ones, just high bang for the buck) and set restrictions on the scope of improvements allowed?

Building it is an excellent first step. Housing that is never built will with 100% certainty not actually be used by locals.

For example, say that a developer tore down housing for 1,000 people on some property, and then replaced it with housing for 3,000 people. That adds capacity for 2,000 people. But if 950 people were domiciled at the old property, but only 750 people are domiciled at the new property, then it's actually a net decrease in supply for people who reside in San Francisco. If the original property was old and run-down (which is what usually gets replaced in these situations), and the new property consists of units that have great appeal to wealthy people looking for a San Francisco pied-à-terre, then a situation like this is certainly possible.

There is a limited number of wealthy people looking for a San Francisco pied-à-terre, and that is a market that can be exhausted without driving all other residents out. At which point standard market forces mean construction for the less wealthy will occur.

The number of wealthy people looking for a pied-à-terre in SF is not a fixed quantity. It seems to me that that number has grown significantly compared to, say, 10 years ago. And that that's mostly due to the increased prestige of the city (as perceived by that wealthy set). That prestige comes from economic growth, but also from a sense of how friendly the city is to pied-à-terres for wealthy people. So building more of them might just end up increasing the demand for them.

Sure, the process won't go on literally forever until the city is nothing but vacant luxury condos, but the total demand after that compounding effect has gone on a while may be much more than it appeared at first.

Thankfully, this not-fixed number is also not infinite. Just as the housing market also does not need to operate over a fixed quantity of housing. Building more increases that not-fixed quantity so that the not-fixed quantity of demand might be met.

When you have an economic boom, you need to grow your infrastructure to match. Not sit around bemoaning that that might enable future growth that will, to a great degree, happen even if you don't grow infrastructure.

Look no further than the current housing crisis - accurately predicted in 2000 - to see the results of the notion that growing infrastructure is bad because it encourages use of infrastructure.

There are exactly zero tricky debate tactics going on here.

If that's true, then why should they pay higher taxes? If they're not actually living in the community, they're not using services. Seems fair.

Also note that of course the owners are deriving a great deal of benefit from city services, both directly in that they are counting on the NYPD and FDNY to keep their property safe, and indirectly insofar as the whole reason these apartments are valuable in the first place is that NYC is a world-class city where many people desire to live.

I'm building a tower. The sweet tax situation means I can sell some extra units as tax shelters, so I slap on a couple more floors. Is that then space that would've been occupied by others?

For better or worse, building rights are extremely limited. Developers do everything they can to get more building rights. I can't think of any recent building that went up and was limited by demand for space and not by what the building code would allow them to build.

You can assume that given a different set of incentives, the buildings going up would have a different mix of units.

Meanwhile, since there are people willing to pay to simply own portions of that floor, he builds it. In the future, if there is a high enough demand for that particular space, the owners of those portions of the floors could sell the floors. For those owners, they have effectively used the space on the extra floors as a property investment. However, the floors are still available in use when the time is necessary.

Comparatively, if those floors weren't built, no one would have made use of that space. If the building wasn't designed to accommodate future expansion vertically (is that even possible at that scale), then that space would have gone unused even when a demand for that space finally exists.

Thus, no one is being deprived of space because those extra floors were built. If at all, that space will be more likely to be utilized in the future, since it will have been built and ready for sale.

That space is being used to drive up the prices of the space actually being used.

1. You do not know that.

2. Boo hoo. He wouldn't have built the building, but someone else would have.

In that case, what does the height of the building matter?

To me this illustrates perfectly why it's not unfair that the people in a shorter building taking up the same surface area are taxed at a higher rate.

Taxing property values much like sales taxes is already regressive as % of income spent on housing decreases as income increases. EX: A firefighter might spend 45% of their income on housing costs where many billionaires spend less than 1% of their income on housing costs.

PS: Though this does bring up the question of what bill Gates’s hypothetical 60 billion dollar house might look like. 15 one world trade centers lined up in a row? How about 1/2 of the ISS?

Most zoning laws force people to park real estate, walk around anywhere in SF, and look up, the lack of an additional 55 floors are 'parked' condos that aren't even allowed to exist, let alone sit empty.