Areas where it is profitable to do this are areas where housing demand is increasing. Which means that anybody who owns property in such an area can sell it for more than they paid for it, move somewhere else and have the significant monetary gain to compensate them for their trouble. And the gain wouldn't exist with stricter zoning because it comes from the fact that your property is worth more when somebody can buy it and build twice as much housing on it.
> And the gain wouldn't exist with stricter zoning because it comes from the fact that your property is worth more when somebody can buy it and build twice as much housing on it.
Counterpoint Bay Area. Industry hotspot, liberally allows office development, aggressively fights any new residential develpment and also freezes property taxes at the time of purchase.
Three of those are just other ways of increasing real estate prices. They're additive, not alternative.
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?
Prices are high because there is demand. Zoning keeps supply scarce. The reason why you can sell these condos for 750k is because of demand and scarcity. If everyone turned their million dollar home into condos, supply would increase, demand would be met, prices would fall, and suddenly you wouldn't have a million dollar home or 5 750k condos.
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.
> Prices are high because there is demand. Zoning keeps supply scarce.
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.
> move somewhere else and have the significant monetary gain to compensate them for their trouble
People don’t want to leave their homes and move away from family and friends just so a city can grow.
Life isn’t just about money.
I don’t want my city to grow any larger - higher density means lower quality of life for the people who have lived here for decades - aka my actual community.
