UCLA Real Estate Wire

New Field Poll Shows Support for Prop 13

A new Field Poll has been released showing broad continuing support for Proposition 13, California’s famous tax limitation initiative. The main "headline" item from this poll is that "by a greater than two to one margin (63% to 29%) voters say that if Prop 13 were up for a vote again today they would endorse it."  Those two figures are impressively close to the for/against split of 65% to 35% reflected in the actual vote on Proposition 13 in June 1978.  If our taste in music had that kind of durability, we'd all still be listening to the Bee Gees. Pretty impressive. Night Fever aside, there is one disappointing feature of this latest report, which claims to reveal "stronger opposition to a split roll property tax than in any previous Field Poll conducted since Prop 13 was approved."  The report indicates that 50 percent of respondents disapproved of a "split roll" property tax in which "business and commercial property owners would be taxed at a higher rate than owners of residential property" (41 percent approved).  But of course a split roll property tax need not involve a higher rate on business property-- in fact, as I and others have advocated, it might make the most sense (both economically and politically) to eliminate the acquisition value feature of Prop 13 for commercial/industrial property (and replace it with a system of periodic reassessment to market value) but combine that reform with a lower rate for commercial/industrial property.  It would've been useful to have some sense of how voters would feel about that type of reform instead of the split-roll caricature that was actually presented in the poll.

Kirk J. Stark, Professor of Law, UCLA

 

 

 

The Emotional Side of Foreclosure

This piece published in the 9/25 edition of the New York Times Magazine provides a vivid overview of what it is like to foreclose on households. 

A Healthy Debate About the Merits of Rearing Kids in the City vs. the Burbs

This piece (especially the comments at the bottom) neatly summarizes the tradeoffs of living with kids in the city versus the suburbs.  

The Economics of Purchasing and Customizing a Prefab Home

In 2008, I sought to purchase a Los Angeles home.  Home builders quoted me prices of $350 per square foot for the construction cost of building a new home on any land that I acquired.   At the time, it crossed my mind whether a prefab home would offer a suitable alternative.   This article offers an interesting case study.

The article talks about a buyer who received quotes that their "dream home" would cost at least $1 million to construct.

"They bought the house, “a skeleton that had all the wiring, outlets, plumbing, pipes and electrical,” from Segalla’s TurnKey Housing in Canaan, Conn., said Mr. Bristow, 49. “We then built out the remaining parts of the house: windows, doors, lighting, built-ins, bathrooms, kitchen, flooring, baseboard, trim, window and door details, roofing, overhang details, carport and landscaping.”

The total cost was $493,422, including $250,625 for the modular shell. (The price per square foot was about $137, a figure that does not include the kitchen, which Mr. Bristow built himself, or their furniture, a mix of their own designs, refurbished hand-me-downs and vintage store finds.)

As Ms. Proffitt, 44, observed, “The modular house has advantages: 120 workers will build your house in five days in a factory,” and it arrives “at its appointed hour, or there will be penalties.”

 

 

August Existing-Home Sales Rise Despite Headwinds

In response to the National Association of Realtors (NAR) August existing home sales data, released here today showing increased sales and decreased inventories as compared to the previous year, I issued the following statement:

“Although the year-over-year sales numbers look very positive, the reality is that last year’s August sales numbers were unusually low due to the post-Homebuyer Tax Credit hangover effect, so this year looks higher mainly by comparison only.  We’re still below healthy levels.

We are seeing the foreclosure pipeline starting to open up again, which is good news.  This will help achieve price discovery and equilibrium, which has been a huge problem over the past couple of years.  In fact, the average home sold in a foreclosure proceeding has been delinquent for nearly 600 days, up from 478 days the year prior.  In August, we started to see banks unload foreclosures and arrange short sales at a higher pace.  Homes at risk of foreclosure accounted for 31% of sales in August, up from 29% in July.  And because distressed sales occur at substantial discounts, this explains the median price decrease for August.

Overall, I believe these numbers continue to show that the housing market is now basically at the bottom, and although the August numbers appear positive, I don’t believe they foretell ongoing positive movement in the short- or medium-term.”

 

Quality of Life Progress in Big Cities

I have lived my life in big cities.  Here is a heart warming article about a cat that migrated thousands of miles from Colorado to New York City (without the help of its owner).  Somebody must have read my paper to this cat.  In this paper, I document the pollution and crime progress in U.S big cities. Yes, commute times are still slow but on these other two key dimensions cities such as Los Angeles and NYC have enjoyed great progress.  We will see if this cat prefers to remain in the Big Apple rather than returning to small town Colorado.

Do Liberal Cities Block New Housing Construction?

There are relatively few homes being built in liberal cities such as Berkeley and Santa Monica.  What role does local government policy play in inhibiting such growth?  I discuss these issues in this cross-post.    There are plenty of homes built in Republican areas such as Texas.  Is there a correlation between political party and ease of new housing construction?    In this academic paper  , I argue that the answer is "yes".

Real World Experience

Written by Vince Wong, UCLA School of Law Class of 2013

Real world experience.  Those three words (well, along with “excessive road rage”) kept me going through a summer’s worth of Westwood-Downtown rush-hour commutes.  Those three words were precisely what sold me to the Eviction Defense Network.  The staff attorneys told me about the accelerated nature of an unlawful detainer case, and promised I would be able to work on all stages of a case.  At first, I smiled and nodded dumbly, wondering why this was such a huge selling point for them.  I soon found out, however, that many young attorneys in large law firms do not get to follow a case from start to finish and the value of this opportunity became clear.

As promised, I was able to follow several cases from start to finish, and worked on nearly every part of it – just short of actually showing up to trial and fulfilling my lifelong goal of objecting to something in an overly-dramatic fashion. 

Green Cities

Today, The Wall Street Journal published my thoughts on readings on "sustainable cities".

To minimize conflicts of interest, the WSJ wouldn't let me mention my own work!   For those interested in empirical evidence documenting that cities with more vibrant downtowns have a smaller carbon footprint, please read my new paper with Matthew Holian. 

Public Expenditure to Rebuild Downtown Manhattan After 9/11/2001

According to this article, "The cost of rebuilding the trade center, several related projects and the downtown public transportation system will run close to $24 billion — probably not all that surprising given the institutional rivalries, the political squabbling and the complexity of building 26 interdependent projects on a cramped 16-acre site next to a river and with two transit lines running underneath.

Financing the reconstruction has been equally complex. After the terrorist attacks, President George W. Bush promised more than $20 billion in federal aid for New York. But slightly more than $6 billion was spent on the clean-up and emergency aid. Of the remaining $14 billion, only $8 billion was actual cash for rebuilding — the rest came in the form of tax incentives. The insurance proceeds from the site itself came to $4.5 billion."

"Goldman Sachs’s new tower across West Street from the World Trade Center site, a relative bargain at $2.4 billion, received $1.65 billion in tax-free Liberty Bonds, which saved the bank millions in financing costs. Goldman threatened to abandon the project after the state botched negotiations for the tower. That led the state to enlarge its incentive package to include $115 million in tax breaks and cash grants, in what critics described as the most egregious example of corporate welfare in city history."

Recognizing the emotion tied to the 9/11 attacks, these examples highlight an important issue concerning commercial real estate in this age of terrorism.  Should private companies (such as Goldman Sachs) be responsible for their own terrorism insurance or should the government (and national taxpayers) be the ultimate insurer?    

In the aftermath of the attacks,  Manhattan would have suffered a loss in real estate value if companies such as Goldman Sachs moved to the suburbs.  The land owners and voters of Manhattan benefited from having these companies receive federal $ to rebuild and remain in Manhattan.   Do people in Nebraska care if Goldman Sachs is located in Manhattan or New Jersey?   As this article highlights, everyone's tax dollars (including the people of Nebraska) were used to subsidize the rebuilding of downtown New York City.  An important policy question is to ask;  who should pay for such rebuilding efforts?   Private insurance companies or public taxpayers?    Dwight Jaffee of UC Berkeley has written on this important issue of disaster insurance.