Thursday, October 29, 2009

Why is Housing So Expensive In California? Part 1

The Fiscalization of Land Use

So what does that mean? Cities make money through property, sales, and business taxes. Because property taxes are restricted and hard to raise in California, that leaves sales and business taxes. What produces the most money in sales and business taxes for cities? Retail businesses: things like drug stores, restaurants, and especially car dealerships.

Housing doesn't create as much in property taxes as it "costs" in services, like schools and police. So, cities try to allow the construction of as little of it as they can, and as much retail as they can.

The supply of housing doesn't grow as fast as the population and the price of housing goes up as it gets more scarce.

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