Rent control is keeping rents high in San Francisco

A friend owns a three-unit building in San Francisco, occupying the top floor himself. The two tenants underneath have fled. One lost a job and the other kept the job, but decided to lose the California tax rates and mask/shutdown protocols. Both units are now vacant.

I asked how much rents have fallen and he responded with “30 percent.” Why not rent the units out at the current market rate? “If you ever rent to someone in San Francisco,” he replied, “you can never raise their rent more than about 2 percent per year after that. You’re locked it at whatever rate you start with. So I am waiting until the shutdown ends, hoping that market rents will come back closer to what they were when I bought the building.”

(Why not turn the vacant units into AirBnBs? San Francisco limits AirBnB to 90 days per year, requires them to be part of the owner’s residence, requires a variety of registrations and taxes, etc.)

If his experience is typical, there are a lot of landlords withholding supply and therefore the true market rents should actually be lower than what we’ve heard.

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San Francisco wrap-up

Photos from this week’s visit…

“With all of the trash along the side of the road [I-880], this really looks like a Third World country,” noted Senior Management. Not sure this boarded-up-against-the-riots post office changed her view:

Getting near the freeway entrances was an experience akin to being in a zombie movie, with hundreds of disfigured and derelict humans lining the sidewalks and wandering into the road.

The Ferry Building looks great:

Right across the street a needle disposal toilet represents the height of “civic pride”:

There was also a playground, equipped with elaborate rules and no children:

The science museum is still fun for kids. Family of four… $115. That’s the kind of “social justice” from a nonprofit org that a Silicon Valley millionaire can support!

Reading material at a shop near Union Square (populated during our morning walk by a screaming guy):

Sculpture highlighting the achievements of Eurocopter and mechanics:

And, of course, some helpful tips for urban life..

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Queer Ecology at Muir Woods

From a November 17, 2020 visit to Muir Woods…

Nature is rarely as simple as A, B, or C, especially in the “Queer Woods.”

Preservation of these trees from the commercial saw is mostly due to Native Americans and people who identified as “women”:

“Indigenous” is another way to be queer, apparently. The Native Americans are lumped into this sign series ($100,000 fine and one year in Federal prison if a Native American were to take offense and remove one):

If you’re going to have sex, it is ideal to follow the examples set by the banana slug and some butterflies (“same sex behaviors”):

Some miscellaneous photos, including an explanation of how bad it is for salmon when a river is “straight”:

(What’s the situation at Muir Woods during coronapanic? Parking reservations are required. Hardly anyone was there on a rainy day. About 75 percent of the visitors wore masks when wandering around the empty trails, though wearing a mask was not required.)

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Californians vote against government sorting by victimhood status

In How are Californians doing in restoring their race-based university admissions scheme? I predicted that Proposition 16 would get 45 percent of the vote from people in victimhood categories (Black and Hispanic) and then 15 percent of the remaining vote, thus resulting in a 53-47 overall vote.

The actual vote was 44-56.

Aside from general stupidity, how did I get this wrong? One problem with my simplistic analysis is that a lot of Hispanics are under 18 and therefore ineligible to vote. So I should have looked at the size of these victimhood groups relative to the overall population, but with under-18s excluded. (Median age for Hispanics in California is 29; median age for whites nationwide is 43.6; Black Americans also have a lower-than-white median age, by about 5 years)

Also, not everyone votes his/her/zir/their self-interest. Even a proposition intended to help Blacks and Hispanics might not get 100 percent of the vote from Blacks and Hispanics. Seven percent of Blacks identified as Republicans in 2016 (Pew), for example, despite the party’s Equal Opportunity (as opposed to Affirmative Action) tendencies.

So… chalk this up to another one of my election predictions that failed.

(See also Elite coastal Jews advocate discrimination against white and Asian males on the NYT’s efforts to sway Californians into believing in government-organized sorting by race.)

Let’s also check in with Mark Zuckerberg uses his $110+ billion wealth to lobby for a tax increase on people other than Mark Zuckerberg. The goal of the crazy rich was to soak the not-all-that-rich by increasing commercial property tax rates. This failed 48.3/51.7.

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Mark Zuckerberg uses his $110+ billion wealth to lobby for a tax increase on people other than Mark Zuckerberg

“California Tax Revolt Faces a Retreat, 40 Years Later” (NYT):

The new initiative, Proposition 15, would amend the state’s Constitution so that properties like offices and industrial parks would no longer be protected by Proposition 13. By creating a “split roll” system, in which residential property would continue to be shielded from tax increases but commercial property would not, backers hope to capitalize on Democratic energy to raise taxes on large corporations without alarming homeowners.

Proposition 15 would raise $6.5 billion to $11.5 billion a year for public schools, community colleges and city and county governments, according to a nonpartisan state agency. The Yes campaign, called Schools and Communities First, is backed by a number of public employees unions and the Chan Zuckerberg Initiative, the philanthropic organization founded by Mark Zuckerberg, the Facebook chief executive, and his wife, Priscilla Chan.

So… Mark Zuckerberg doesn’t want to see higher taxes on all forms of wealth, but only on wealth held in the form of real estate (0.01% of his personal wealth of at least $100 billion?)!

Separately, it turns out that commercial property owners actually don’t pay that much in tax in California:

It is not uncommon for neighbors to pay double or triple the taxes of a similar home on the same block. A recent analysis of property taxes across the Bay Area is rife with eye-popping comparisons, like a $9 million home in an exclusive neighborhood of San Francisco that has lower property taxes than a $331,000 home near an oil refinery across the bay in Richmond.

When Proposition 13 passed, commercial property taxes were almost an afterthought. But since skyscrapers and shopping malls do not change hands as often as homes do, the law has shifted the property tax burden from corporations to homeowners. In 1975, a little under half the property taxes in Los Angeles County were paid by commercial properties. By 2017, commercial properties accounted for just over one-quarter of the property tax roll.

One part of this may be that each commercial property tends to live in its own LLC (oftentimes this is a condition of getting bank/mortgage financing). (So a guy like Donald Trump with multiple properties will inevitably have a complex tax return.) When investors come in and get bought out, the official ownership of the building hasn’t changed (still the LLC). California seems to have a mechanism for updating tax liability if most of the membership interest is swapped out, but I wonder how they enforce this in practice (since membership interest might not be accessible to the California government).

A friend who is a lawyer in Long Beach told me of doing some work for an apartment building owner. While doing this work he discovered that the massive apartment building paid less in property tax than he owed for his modest 2BR house.

As a percentage of residents’ income, California collects the 6th highest percentage of any state (Tax Foundation). On the other hand, the government is not nearly big/rich enough to give voters everything that they want and certainly not to give retired public employees everything that has been promised to them in terms of pensions and health insurance. So the state government will need massive additional revenue. But why not a straight wealth tax on Silicon Valley billionaires?

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Silicon Valley Shutdown Karens move into bigger houses

My rich friends in the Bay Area are tireless Facebook advocates for more shutdown. Most of them live in spacious homes worth $2-3 million or more. Consistent with Your lockdown may vary, here’s “Bay Area home prices soar with suburban boom” (Mercury News, October 7):

Coronavirus drives demand for space, single-family homes

With millions out of work, and restaurants, shops and retailers closing, one spot in the economy shines for thriving and affluent professionals — Bay Area real estate.

As if the devastating pandemic had passed over the tech campuses, Spanish-tiled roofs and Tesla-filled garages of Silicon Valley, luxury home sales exploded in August and drove median prices up 16 percent from the previous year to levels approaching the market peak in 2018.

The median sale price for an existing single family home in August in the Bay Area was $975,000, according to DQNews data. The gains were driven by a limited supply of properties for sale and a greater portion of high-end homes selling, agents and economists said.

“We’ve never seen such high price appreciation in a recession,” said Selma Hepp, deputy chief economist with real estate data firm CoreLogic. “The recession hasn’t hit everyone the same way.”

Bay Area agents say demand is driven by techies and professionals looking for more space for family and home office Zoom-rooms.

If these are the folks making decisions on when to end shutdown, I’m not predicting an early exit from cower-in-place!

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Rich Californians complaining that they aren’t getting federal disaster money from Donald the Cruel

My Facebook feed has been alive for weeks with Californians complaining that the Great Father in Washington does not love them and therefore is not showering them with federal disaster relief cash despite their worse-than-usual fire season.

(As with many complaints about Trump, emotions may be more important than facts. The Great Father actually declared a disaster in California and approved federal aid last month: “California Wildfires Burn Million Acres; Trump OKs Disaster Aid” (VOA, August 22))

Suppose that Trump had not approved federal aid for the richer-than-average state. The fire are upsetting, yes, and sometimes tragic. And of course we can all sympathize with anyone who has lost a loved one or a home. However, in light of their own cherished values, third and thirdmost of which is fighting inequality (avoiding COVID-19 and BLM being #1 and #2, of course), should Californians even ask for aid? California is a rich state with 40 million people. Why does it need to be bailed out by lower-middle-class taxpayers in Arkansas, Indiana, Maine, and Kentucky? Why not use state funds to assist those who have been affected by the fires?

The standard Righteous Californian response to this on Facebook is that he/she/ze/they believes that there is already at least some wealth redistribution from California to lower-income states. Perhaps there is, but California remains much richer than average. So if we hate inequality (and of course I hope that everyone does), this redistribution should be intensified, not reversed via emergency relief funds. Californians should be able to tax themselves, e.g., with an income surtax, a car registration tax, a higher gasoline tax, or a statewide property tax, to buy whatever they want, including disaster relief for those who have us suffered this fire season.

Another issue with taxing low-income folks in the Midwest to buy things for rich people in California is that Californians seem to change their minds regarding infrastructure. Federal taxpayers paid for a jet-capable airport in Santa Monica, for example, and Californians then decided to destroy it. Why should a worker in Iowa pay to protect some rich Californians’ infrastructure if the rich Californians may later decide that they didn’t even want that infrastructure?

Readers: How can it make sense for those who decry inequality to demand federal funds for a state that is much richer than average? (Above, the Golden Gate Bridge, whose most recent federal bailout was $30.2 million in May. Thus, low-income taxpayers in New Mexico and West Virginia get to subsidize the owners of brand-new Teslas and Mercedes SUVs as they glide across to their Marin estates.)

Related:

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California: Masks will stop a viral epidemic, but won’t help with smoke

“Bay Area smoke: To breathe safely, stay inside and don’t count on masks” (Mercury News):

Don’t count on masks to help with bad air, experts say

But people shouldn’t expect much protection from the bandanas or surgical masks they have become accustomed to wearing in public to prevent the transmission of COVID-19. Experts also caution against relying on the more sought-after N95 respirator masks because they are in short supply.

With wildfire smoke, microscopic soot particles, about 2.5 microns in size, can be inhaled and cause inflammation, explained John Balmes, a professor of medicine at UC San Francisco, in an article published on the university’s website.

There also is concern that poor air quality from the wildfires could increase the severity of COVID-19 symptoms. Dr. Stephanie Christenson, an assistant professor of pulmonology at UC San Francisco, said this concern is based on preliminary research linking air pollution to increased COVID-19 susceptibility, severity and death.

Because of the pandemic, people should continue to wear cloth and surgical masks in public, because they block respiratory droplets and help slow the spread of the coronavirus, Christenson said. Unfortunately, these masks don’t block out the “very, very small” toxic particles from wildfire smoke, she said.

So the coronavirus is smaller than 2.5 microns?

Back in February, in “Can Masks Capture Coronavirus Particles?”, our big enemy was “spheres with diameters of approximately 0.125 microns (125 nm). The smallest particles are 0.06 microns, and the largest are 0.14 microns.”

As of July, the coronavirus was still 0.125 microns in size, according to “Can HEPA Air Purifiers Capture the Coronavirus?” (Wirecutter).

The McKinsey folks responsible for Enron’s success, in “Can HVAC systems help prevent the transmission of COVID-19?”, describe humans being victimized by particles as small as 0.1 microns.

Science tells us that masks are useless against smoke particles that are 2.5 microns in size and also that masks will stop a 0.125-micron coronaplague dead in its tracks. #FollowScience !

(From the New York Times, the progress of coronavirus in a state under a universal mask order and blessed with science-informed leadership:

)

See also the higher rates of coronavirus infections in masked U.S. and France compared to never-masked Sweden and barely-masked Netherlands:

From Bar Harbor, Maine:

Related:

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