[HN Gopher] Launch HN: Homestead (YC W20) - Lot-splitting to bui...
___________________________________________________________________
Launch HN: Homestead (YC W20) - Lot-splitting to build new housing
supply
Hi HN, we're Sean & Sam, the founders of Homestead
(https://homestead.is). We enable homeowners to split their lot,
build a new home, and sell it for a profit. We're taking advantage
of a new California law called SB9, which is designed to expand
housing supply (https://cayimby.org/sb-9/) in the state. SB9 allows
homeowners to split their single-family residential lot into two
separate lots and build up to two new housing units on each. It
just went into effect on January 1. The new development
opportunity opened by SB9 is only available to homeowners, most of
whom are under-resourced to take advantage of it. That's where we
come in. We take care of splitting your lot, financing the new
development, managing construction, and selling the new home. You
receive 80% of the net profit. You can see whether your property
qualifies here: https://search.homestead.is. We're a couple of
architects who have been working on large scale urban plans,
affordable housing financing, and increasing housing supply for a
while now. Our first idea was to help homeowners create lifelong
revenue streams by building ADUs (Accessory Dwelling Units) on
their property. We figured out how to manage builds that finish up
to 5x faster than normal builders and are 2x faster than prefab
from first touch to a turnkey unit. Homeowners have used the income
from our ADUs to start a business, move to a different country
during the pandemic, become cash flow positive on their mortgage,
house grandparents, and move out renters to reclaim their home for
the first time in a decade. The problem was that over 70% of our
leads could not afford the upfront costs of construction. With
Homestead, our latest iteration, we solve this by taking on the
risk of funding the project. We provide a way for homeowners to
finance $400k+ of construction without risking their home or credit
as collateral. We split the lot, bring financing, and our expert
team of architects and project managers oversee the project until
sale. In high value markets, that means a homeowner could make
over $1M without risking, or spending, a dollar. Under normal
circumstances, this would be too good to be true, but that's how
crazy the housing market has become. SB9 represents a $6T (!)
opportunity in California alone. For example, a 1-mile radius of
San Fernando Valley has $3.35B in untapped development equity--
4,600 opportunities to add new homes and duplexes through SB9.
Capturing the opportunity of SB9 requires developing new financing
products, development expertise, and customer-facing sales.
Development is an incredibly regulatory-heavy and location-specific
industry. Homestead is based in Los Angeles (by far the best market
for SB9) and we have sold 80 ADUs (59 since March) with 10 built
and 17 projects underway. Here's an example
(https://www.zillow.com/homes/4511-Sally-Dr-San-Jose,-CA-9512...)
of how this could work for a typical San Jose home -- footsteps
away from one of our customers. The new house on the split lot has
a sale value of $1.5M, based on a same-sized new-build home on the
block. The total cost for building the new unit, including
permitting, local fees, and financing, is $700k. That's a net
profit of $800k, of which the homeowner's 80% share is $640k. Our
mission is to increase the housing supply in California. In
contrast to the develop-and-flip approach, we add new housing while
sharing profit and keeping communities in place. We want to change
the lives of teachers, nurses, social workers--doubling or tripling
their liquid net worth--so they can do things like early retirement
and paying off their kids' student debt or helping them make their
first down payment. We know that a lot of you share our passion
for the housing supply problem, so we're looking forward to a good
discussion. Please share your questions, feedback, ideas, and
experiences in this area!
Author : seanmp
Score : 85 points
Date : 2022-01-07 20:11 UTC (2 hours ago)
| lhorie wrote:
| > The new house on the split lot has a sale value of $1.5M
|
| Maybe I'm just not understanding this right, but does this mean
| that that example house which currently is estimated at a $1.3M
| value would be split into two, each with a market price of $1.5M,
| despite both having half the lot size? How does that work?
|
| And shouldn't the house next door then logically sell for 3M
| based on lot size?
|
| Sorry if I'm missing something.
| thrwn_frthr_awy wrote:
| In my HCOL area houses are mostly prices by price per square
| foot. Lot size obviously has a affect on price, but not to the
| same extent.
| menage wrote:
| That's 1.5M for a brand new house on the half-lot, versus 1.3M
| for the existing 60 year-old house on the original lot. Since
| the new house cost 700K, then in theory the lot next door could
| sell for 1.6M if you're assuming that you can split it via SB9,
| build two 700K houses, and sell them for 1.5M each (one of them
| after waiting 3 years for SB9 requirements).
| notahacker wrote:
| Coming from outside California's property market, it still
| seems odd that faced with a choice of [A] a 60 year old
| suburban home with decent-sized gardens front and rear or [B]
| a brand new property which must be squeezed into a garden
| space taking up less than 1/3 of A's plot with essentially no
| space left over for anything that isn't floorplan, people
| would typically value the latter property more highly? Is the
| build quality or design on older homes that iredeemably bad?
|
| Seems an awkward example of a plot to split without
| demolishing the original house too, but I guess that's more
| common than a plot that's easy to split.
| dionidium wrote:
| Something I've noticed with gut rehabs and new construction
| in my hometown is that a) people routinely express
| disbelief at the asking prices for these homes; and b) they
| easily sell at those asking prices (or above).
|
| The market seems to be saying that people _really value_
| new construction relative to older homes, even if that 's
| surprising to some people.
| kristianp wrote:
| If you imagine that the new house might have more bedrooms
| and bathrooms than the old house, and more modern design. I
| can see why the new one would be valued higher.
| notahacker wrote:
| The example says it's a "same-size house" which I assume
| means the same numbet of bedrooms and bathrooms. A more
| modern design is a given, but I'm still perplexed by the
| notion a modern design might be expected to be so
| superior that a house squeezed onto a front lawn would be
| worth 15% more than a same-sized house in the same
| location _with_ a front lawn, and a back lawn, and a
| whole double garage and driveway rather than maybe a
| share of it.
| turtlebits wrote:
| The new house has a value of 1.5M. The existing house would be
| worth less because of the smaller lot (but not by a substantial
| value).
| yholio wrote:
| I think the 1.5 million price is a snapshot of the current
| market, with low availability of housing and most people unable
| or not knowing they can split the lot. So houses are priced for
| their livability.
|
| If it starts to happen in mass, either the supply will depress
| prices or the existing houses with splitable lots will close to
| double in value to internalize that unrealized gain.
| loosescrews wrote:
| How big does a lot generally need to be in order to be split?
| [deleted]
| sam_schneider wrote:
| Amazingly, the state minimum is 2,400 sq ft. If you can split
| into two 1,200 sq ft units, you are allowed to build 800 sq ft
| single unit or two 800 sq ft units as-of-right! Tiny homes for
| everyone!
| nicoburns wrote:
| According to a quick google, 729 sq ft is the average
| property size here in the UK.
|
| https://www.housebeautiful.com/uk/lifestyle/property/a354052.
| ..
| dzink wrote:
| One of the other regulations that passed at the same time has a
| caveat that you cannot reduce housing density in the future - so
| any units added or lots split cannot be reunited again. Each new
| lot must be at least 1,200 square feet and the new lots, plus
| likely the old one (if heavily modified), may acquire a new
| assessed value based on current market prices increasing the
| owner's property taxes.
| d_burfoot wrote:
| I wish you well and I hope you win.
|
| I am pessimistic though. I don't think people really understand
| how much current homeowners do not want additional housing to be
| built. It makes sense if you consider that the net worth of a
| typical homeowner is very substantially made up of a highly
| leveraged long position in real estate. If that position goes
| south - because of an increase in housing supply, or because of
| undesirable new people moving into the neighborhood - the
| homeowner's net worth could be decimated.
|
| Now, most people will not come out and say directly that they are
| opposed to new housing for the obvious economic reason, because
| they don't want to seem selfish and greedy and maybe racist. So
| they have to find a socially acceptable cover story to oppose new
| housing - environmentalism, concerns about safety, etc etc.
| williamsmj wrote:
| It's sadly true that many people think like this, but it's not
| relevant. SB9 is a law. My house is eligible and my neighbors
| cannot stop me if I choose to do this.
| jonathanehrlich wrote:
| Excited for you guys. You've worked so hard.
| a1pulley wrote:
| It says my lot isn't qualified because of high fire risk:
| Properties that are located within CalFire's "Very High Fire
| Severity Zones" are not eligible for SB 9 (unless excluded from
| the specified hazard zone by a local agency).
|
| The real reason it doesn't qualify, though, is that my HOA--my
| entire city of ~650 SFH homes exists behind an HOA--has stated it
| won't approve SB9-related lot splits. The city itself wrote SB9
| language into its bylaws, as required, but the architectural
| review committee in the HOA won't approve requests.
|
| Moreover, all homes in my city are on septic systems, and LA
| County has a min lot size requirement for approving new ones.
| Some lots are large enough to split without dipping under that
| threshold, but most aren't; that means we have a sanitation
| reason to reject lot split requests too.
|
| I imagine that similar developments will block lot splits in
| these ways. Have you run into similar issues? Have you
| successfully split any lots yet?
| dragonwriter wrote:
| > The real reason it doesn't qualify, though, is that my HOA--
| my entire city of ~650 SFH homes exists behind an HOA--has
| stated it won't approve SB9-related lot splits.
|
| So get together with other homeowners around that and any other
| dissatisfaction with the HOA and disband it. Or take it over,
| either way.
| ethbr0 wrote:
| Put signs in your neighbors' yards listing how much value
| there is, were their lots to be subdivided. Might get some
| people thinking before an HOA board election... ;)
| hellbannedguy wrote:
| short12 wrote:
| That must be a coast thing for HOAs. A lot of the Midwest
| specify minimum acre(s)
| sam_schneider wrote:
| Hi! Great questions and let me see if I can answer them:
|
| HFZ: Yes, sadly--though i think there is good logic to prohibit
| more density in fire prone area, and HOAs are already dense, so
| in your case it doesn't make sense.
|
| HOA: yes, for now that is a blocker. This was also initially a
| problem with the 2017 legislation enabling ADUs, but in 2019
| the state expanded the law to overrule HOA's. We'd like to see
| that as well, and can easily give you the resources to contact
| your legislators (coming soon on the search tool, we can help
| at connect@homestead.is for now)
|
| LA County had relatively liberal interpretations of the ADU
| law, we hope they will reform some rules to make lot splitting
| easier!
|
| All and all, there are still millions of ideal SB9 lots--I am
| very sorry your's isn't--and i think HOA restrictions are a
| load of crap!
| dragonwriter wrote:
| > HOAs are already dense
|
| Very often not, and a central part of their purpose is to
| _prevent_ densification that might otherwise be allowed by
| law.
| thrwn_frthr_awy wrote:
| Dense in the sense of land to building use, not people per
| square foot. You have a 3-5,000 square foot home for a
| family of four on a quarter acre lot.
| a1pulley wrote:
| This is correct. My city has two zones: min 1 acre SFH and
| min 2 acre SFH.
| annoyingnoob wrote:
| Homestead says my property _might_ be eligible. In fact, my lot
| is small and there is no more room to build. Plus the HOA would
| never allow it.
| theodric wrote:
| This is just adding more cancer, not solving a problem. Great for
| the people who get to cash in, bad for society as a whole
|
| Leave California. Stop privileging it. The world is large.
| haltingproblem wrote:
| Why would you post something like this and that too on HN?
| iso1631 wrote:
| Doesn't this increase properties available, making it good for
| society as a whole?
| analog31 wrote:
| In my view it only does so incrementally. At best you can
| double properties. Society would benefit more from joining
| lots to create a footprint for multi family dwellings, rather
| than dividing them.
| patja wrote:
| It also seems like a bit of wishful thinking. When you ask
| most people, they want to live in a single family home. And
| that's what these guys are building. They're building to
| capitalize on the market, not to the overall benefit of
| society necessarily. But the latter makes great marketing
| so it gets woven into all the messaging, whether it's
| really maximizing social benefit as opposed to maximizing
| developer profit.
| analog31 wrote:
| I certainly admit to preferring a single family home
| myself, though it's never cost me more than about
| $1k/month for rent / mortgage / taxes. My current home is
| paid off.
|
| But a lot of people are willing to make tradeoffs, e.g.,
| the younger people passing through town, the elderly, and
| the poor, all have different housing preferences.
| turtlebits wrote:
| I'm not in California , but am wanting to build several ADUs (in
| the Seattle area) if that is a service you are providing
| consulting for.
| sam_schneider wrote:
| No, I'm so sorry! We'd love to one day, but we avoid consulting
| --we find that without an eye on the whole process, projects
| can still go very awry and the consultant is left with the
| blame. It's why we started homestead--these consultant
| solutions just don't solve end-to-end problems like we'd want
| them to!
|
| You can reach out to connect@homestead.is, let them know I sent
| you, and I'll try to carve out 10 minutes to point you in a
| good direction!
| manesioz wrote:
| This sounds awesome. A few questions: What were some of the
| biggest insights which lead to a 5x faster build process? And how
| do you afford to provide the liquidity upfront?
| sam_schneider wrote:
| To date, every infill residential project is custom. Even if
| its a pre-designed plan on the internet, its a different city,
| different material supplier, different local architect,
| different contractor--every time.
|
| We just put the whole process on rails--a few material options
| and designs still have exponential customization, but represent
| drastic reduction in overall project complexity and project-to-
| project variance.
|
| With a kit of parts we can automate design and management, and
| with 3d scanners in everyone's pocket, we can mostly offsite QC
| with similar or better quality outcomes.
|
| Because we're a repeat provider, we offer builders, cities and
| suppliers consistency that's only been available to date in
| tract housing, which is incredibly environmentally destructive.
|
| One specific example:
|
| When an affordable architect specs a house, they almost never
| spec a shower valve (let alone cabinets, specific flooring
| providers, etc). When you buy a shower fixture, the valve
| doesn't come with it. This means you or the contractor has to
| either drive to home depot to buy a 6 dollar valve, or install
| the wrong valve to pass inspection and then wait and reinstall
| the correct valve.
|
| If they spec the materials themselves, it isn't much better:
| their preferred suppliers never get shop drawings, often are
| out of stock, and are not able to scale with them.
|
| We make sure there is always an interchangeable backup part,
| that any specific finish material or fixture is on site before
| the time it's needed. Designs specs are updated in real time to
| deal with supply chain disruptions.
|
| That is just for a shower valve--it compounds as custom plans
| are changed, materials are out of stock, items don't fit as
| planned.
|
| Prefab solves for a lot of these issues, but because of
| transportation costs and capacity constraints, it usually is
| costlier and longer to delivery from start to finish, even
| though the install is quicker.
|
| We can scale with demand: because their cashflow velocity is so
| much quicker than working with homeowners, contractors always
| want to bid on our projects.
|
| For Sb9 we'll use prefab where it makes economic sense--we are
| solution agnostic!
|
| For existing homeowners, our liquidity is provided by in-house
| debt backed by the future lot asset.
|
| For purchasers, we own part of the purchased home & that
| interest is transferred to the new lot when it is split!
| new_realist wrote:
| Increasing housing supply is like building more roads to reduce
| traffic: it doesn't work. Humans reproduce to fill all available
| habitat. More humans, no tangible benefit, worse Earth.
| jelliclesfarm wrote:
| 'increasing housing supply' is code for 'colluding with the
| state of california to increase their tax monies and property
| taxes because they havent been able to do their jobs and manage
| state pension liabilities'.
| sam_schneider wrote:
| Well, voters capped their ability to make money on property
| tax, so is that the state's fault? (Also it has a budget
| surplus?)
| jelliclesfarm wrote:
| property tax is different from the rest of the budget.
| perhaps you should look into how the state of california
| manages its budget. there are paid professionals and
| researchers who will do the research the work for you.
| sam_schneider wrote:
| I think this is sort of a memory bandwith/memory capacity
| metaphor mix.
| jjcon wrote:
| Have you seen Japan recently?
| Plasmoid wrote:
| I'm pretty sure most people don't decide to have another kid
| because there's an apartment vacancy in San Francisco.
| xrd wrote:
| Is Oregon next (https://www.oregon.gov/lcd/UP/Pages/Housing-
| Choices.aspx)?
| caslon wrote:
| Obvious warning to all reading: The catch is "net profit."
|
| This is used to harm actors all of the time. Basically, the
| company is heavily incentivized to get really creative with their
| accounting, so even on lucrative projects they don't have to pay
| you much of the value reaped from you. One of the oldest scams in
| the book, and the incentives are such that the company (Homestead
| in this case) would be acting irrationally if they didn't
| practice it. It's a no-win situation. Either they're acting
| irrationally, in which case why trust them? Or they're acting
| rationally, which means that you lose if you trust them.
|
| https://en.wikipedia.org/wiki/Hollywood_accounting
|
| https://en.wikipedia.org/wiki/Creative_accounting
| sam_schneider wrote:
| We pass through building costs, there is perfect alignment in
| our incentives, which is to maximize sales price.
| treis wrote:
| How do you account for the reduction in value of the existing
| home?
|
| Also, how do you deal with existing lein holders? I.e. the
| current mortgage.
| sam_schneider wrote:
| Great Q! As of now, the homeowner has to refinance on the
| smaller lot. We have a partner that will do it at the time
| of application, and underwrite it in consideration of the
| future income.It hasn't been a problem to date, though it
| may hold up some projects.
|
| In theory banks could approve the transfer--certainly they
| could split the lot, but the current lien would be spread
| between the two lots, and we couldn't finance the property
| today.
|
| A crazy insight: Many of the customers we work with don't
| have mortgages.
|
| They intrinsically don't trust debt, because of either low
| income, job insecurity, and/or their long tenure of
| homeownership (often intergenerational). They do like the
| ideal of selling their yard for money, and don't have the
| risk appetite/ability to go it alone!
|
| We're working on a solution that will allow the existing
| lien-holders to stay on title until sale--making a
| refinance less burdensome for the current homeowner.
|
| Down the road, we'd like to provide the owner to keep some
| ownership interest in the property with homestead, if
| they'd prefer long term income. In this arrangement, we
| likely wouldn't
| [deleted]
| sam_schneider wrote:
| For home value: It's about 5-12% decrease depending on the
| setup--in extreme cases as bad as 15%. We haven't had a
| pre-assessment come in lower than 15% (the homeowner still
| going to make a lot----it's a large property). Most are
| around 7-8%. Usually there is 50%+ return, so that
| previously illiquid/non-existing capital has a much higher
| value, but there is real depreciation.
|
| Lower value homes depreciate less, higher value more--but
| are offset by larger returns!
|
| It will likely re-appreciate in a few years, and so the
| loss is temporary/the other capital could be deployed to
| quickly outpace any depreciation.
| iso1631 wrote:
| In theory you could choose a building firm you own that
| charges 500k instead of a different one that charges 400k
| (and even subcontract it to the 400k firm).
|
| If you sell for 1M that means you keep the extra 100k from
| the building firm and 100k from the land.
|
| If you go with the cheaper builder you only get 120k
| sam_schneider wrote:
| I mean, in theory me, who has spent their whole life
| working on solving problems in the physical world at scale
| ---for the last 4 years working on housing--- could run a
| scam that was horrible for homeowners and then get sued for
| price gouging, and expose myself to personal lawsuits,
| legal persecution (imagine how unsympathetic the jury would
| be).
|
| This is true with any product that is new and requires
| mutual trust.
|
| Or we could just deliver a product people want, and make
| much more money at scale than trying to optimize for a
| short term scam!
| badbot5000 wrote:
| This is an amazing mission! Good luck! You're making California a
| better place.
| jelliclesfarm wrote:
| I am not sure increasing housing supply is a good idea in
| California. Taxes are increasing as well as cost of utilities. We
| are in perpetual drought and there is now mandatory residential
| rationing of water to at least 15% lesser consumption(or into
| $500 fine). But with increased rates.
|
| That's just the tip of the iceberg. Schools are over crowded and
| Unions are becoming more and more demanding that state pension
| liabilities keep increasing without any improvement of quality of
| life. There are road diets and traffic jams on the highways to
| hell making multi hour commutes an economic drain. There are
| power cuts and wild fires.
|
| We are 40 million. It's time to consider drastically reducing
| population and housing. We need sustainable housing and better
| infrastructure for walkable high density cities. Perhaps when we
| have figured out infrastructure, they we can consider increasing
| housing stock.
|
| We need public transport, a cut in wasteful spending, better
| schools and roads. Taxes must be diverted provide free utilities
| for all. And free internet. That should be a right. Instead of
| paying for pension liabilities of union employees of public
| sector , I would rather have our taxes go towards creating a
| better California and towards free utilities, healthcare and
| environmental protection/conservation and public transport.
|
| I cannot support your startup and the sector is set up to fail
| and will be damaging to Californians in the long run.
|
| My advice is for you to pivot. Self sustaining tech supported
| 'villages' within Dunbar numbers or anything that creates little
| townships away from the tyranny of Sacramento will be a better
| loftier goal, imo. Create homesteads with large farms that are
| businesses. Look into 3D printed structures and creating high
| density tech-eco cities.
|
| Making housing better in California is useful. Increasing housing
| stock is like scratching a bleeding itch when there is no doctors
| or pharmacies around for miles. Please reconsider. I cannot wish
| you success...it sounds mean, but I am being honest..regretfully.
| But I wish success for you if you can make California better.
| Regards.
| [deleted]
| sam_schneider wrote:
| Uh... do you want this (https://www.neom.com/en-
| us/regions/whatistheline) ? There is a prince in Saudi Arabia
| who'll do it for you!
|
| Interestingly, California is one of the lower direct carbon
| footprint per capita states. With drastically less heating and
| cooling in the Bay, LA and SD than national averages, and
| denser areas, it's a net positive to build more housing here
| than Phoenix, Austin, Houston, Dallas, etc.
| jelliclesfarm wrote:
| i am not clicking on a link supplied out of snark. honestly,
| i am not interested in a debate. thats my opinion. take it or
| leave it.
|
| its startups like yours that try to maximise profits for
| investors who have made california unaffordable for the
| middle class.
| badbot5000 wrote:
| This is an insane comment. how would reducing population not
| reduce revenue source for taxes for pensions and public
| transport? Crowded schools? Build more schools! Traffic on
| highways? Maybe reform your shitty environmental laws that
| cripple public transit project and have dense housing so people
| don't have to drive. Doesn't take a high IQ to solve these
| problems. Also California doesn't have a real drought. Water is
| being used for things like farming almonds which consume a lot
| of it.
| dang wrote:
| Could you please make your substantive points without name-
| calling and swipes? Posting like this is not only against the
| site guidelines, it has the opposite effect of what you
| presumably want, because it discredits the point of view
| you're arguing for.
|
| https://news.ycombinator.com/newsguidelines.html
| [deleted]
| jelliclesfarm wrote:
| shitty environmental laws? we should all suck in toxic fumes
| in california because everyone wants to come here? we are in
| the middle of a drought.
|
| a couple buys a home in 6000 sq ft and takes on a 30 year
| mortgage. they expect to have two or three kids. property
| taxes go towards 24-36 years of public education,
| infrastructure and law and order/utilties management. and
| they expect to retire in a fully paid off home in their old
| age when they dont have any income.
|
| maybe those who cant afford to move into a place, should work
| with the state to build infrastructure and well networked
| public transport instead. how many sardines can you keep
| stuffing into the same little tin can?
| iso1631 wrote:
| A 6000 sq ft house seems ridiculously large, about 6 times
| the size of the average UK home, hardly a "little tin can"
| jelliclesfarm wrote:
| 6000 sq ft lot. the house will likely be 1200-1800 sq ft.
| regardless, this is america. we can live in large homes.
|
| california is 1.7 times bigger than the UK. we have 40
| million vs 68 million population of UK. we are not the
| united kingdom.
| namdnay wrote:
| So there's still lots of space then!
| panzagl wrote:
| I think 6000 sq ft is the lot size.
| jelliclesfarm wrote:
| [..]Here's an example (https://www.zillow.com/homes/4511-Sally-
| Dr-San-Jose,-CA-9512...) of how this could work for a typical San
| Jose home -- footsteps away from one of our customers. The new
| house on the split lot has a sale value of $1.5M, based on a
| same-sized new-build home on the block. The total cost for
| building the new unit, including permitting, local fees, and
| financing, is $700k. That's a net profit of $800k, of which the
| homeowner's 80% share is $640k.[..]
|
| so...this home when split will have two units..each valued at 1.5
| million. the state will get taxes at about $40k/year instead of
| the current 4-5k they seem to be paying for the past several
| decades.
|
| if i were the owner and i have lived there for 30 years..it
| doesnt make sense from the pov of taxes. if i am the child who
| inherited the home, everything is essentially free. so there's
| that. and you make 20% profit.
|
| but as the neighbour..as someone who pays tax for the services
| the city provides, as a renter in the neighbourhood who has to
| deal with higher water charges, crowded schools for my children,
| bad roads, inadequately staffed police stations/fire
| stations/post offices etc.(all public sector jobs that have
| unions and whose employees receive pensions till they die), it is
| a lose lose proposition.
|
| any digression into the 'unfairness of prop 13' is something i am
| not going to engage in..i dont see why a 75 year old resident who
| has lived in the neighbourhood for 30-40 years have to pay for
| schools his children went to decades ago. we owe our senior
| citizens more than envy and jealousy over their hard earned
| money.
|
| there are plenty of land in california that can be developed
| sustainably. and can house people comfortably. the problem is
| with sacramento that makes housing permits and fees and costs so
| high..and the historical unfunded pension liablities of public
| sectors that need more and more and more californians to be taxed
| to death every decade that is the problem.
|
| and not taking into account that we are a desert and we are in a
| drought and we havent developed infrastructure or affordable
| utilities or sustainable public education or public transport.
| all while being taxed to death.
|
| those numbers make NO sense to home owners. especially if they
| are in san jose. i dont know how familiar you are with bay area.
| everyone has something to say about property taxes until they
| become home owners themselves. just like college kids talk about
| 'fair taxes' until they have jobs themselves and see what a huge
| chunk goes away without any discernible benefits or accountablity
| by the state.
| seanmp wrote:
| In your example, only the new lot would be taxed at the higher
| level. Our tax team and California precedent (you mention prop
| 13) advise that the existing parcel's tax burden would not
| change, just the new APN. So, in your example above: yes, the
| state and municipality would receive more income from the new
| unit, and yes the homeowner would earn a profit from splitting
| their lot, but no, their taxes would not dramatically increase.
| jelliclesfarm wrote:
| Will the proceeds for the home owner be taxed as capital
| gains?
| jermaustin1 wrote:
| What are the risks for the homeowner? The wording seems too good
| to be true.
|
| It seems like it would be better for me to just sell you the land
| for $640k, then you take on the risk of developing and selling
| it, but if that was how much the land is now worth, it might
| still be better for me to hold on to it and let it appreciate for
| a while without neighbors spitting distance from my back porch.
| sam_schneider wrote:
| There is a non-zero chance---very unlikely: it would require a
| 50%-60% decrease in housing prices---that they could lose the
| backyard without making income. The weighted probability might
| lower the Expected Value 1k. That said, foreclosure would still
| be beholden to the profit split agreement should the lot be
| profitable.
| treis wrote:
| Can you share numbers from completed projects?
| dzink wrote:
| You can't undo the split. One of the caveats passed in the same
| vote states that you can't reduce housing density - so if you
| build two units, they can't be reunited into one lot again.
| halpert wrote:
| Now that SB9 is in effect, shouldn't the ability to split a lot
| and build on it be priced in to the price of the original lot? It
| seems like you would just be extracting your 20% from wealth the
| owner already has, leaving them poorer. I guess this could be
| good if they really didn't want to move.
| frakkingcylons wrote:
| That extra value of the lot isn't exactly liquid on its own.
| That's what you get in exchange for 20%.
| lazide wrote:
| Uh, not really? They have to stay there anyway for SB9 - this
| gives them a tractable (aka actually) doable way to get more
| wealth now without having to leave, and still retaining their
| home as-is in many cases. And it means SB9 like densification
| and additional housing is more likely to actually happen.
|
| 99% of homeowners could not actually do what you need to do for
| this densification - the planning, paperwork, and execution to
| get everything done is very difficult. 20% of net profit in
| exchange is pretty good actually. You'd need some truly crazy
| levels (several million+) of pure gain before it would make
| sense to try it yourself IMO.
|
| I've done a decent amount of permitted work and far smaller
| projects can easily burn a year of nights and weekends.
| halpert wrote:
| But you wouldn't actually have to do the work. The value of
| the land should increase because the work _could_ be done. It
| really comes down to whether or not the 3-year provision of
| SB9 can be enforced, because then there is some value in the
| homeowner staying in their home while the work is done.
| Apparently, this is enforced by making the home owner sign an
| affidavit and then charging them with perjury if they lie. It
| will be interesting to see if that holds up in court.
| metadat wrote:
| Yes, it's mostly only good for the company owners / YC. Doesn't
| seem in most individuals best interest unless they really need
| the funds and don't want to move.
| jelliclesfarm wrote:
| the problem with this business model is the lack of
| understanding of mass psychology. in san jose, if someone has
| a SFH lot/home, they are not hurting for cash. people who can
| afford homes want their backyards.
|
| and if an ADU is renting 40% above market..isnt this exactly
| why housing is becoming unaffordable in california.
|
| plus: where is the water for the dense housing? right now,
| bay area gets water from hetch hetchy aka little
| yosemite..which was completely razed down for our water
| needs. how many new schools are being built? how many new
| teachers will be needed? how much road infrastructure? how
| will law enforcement increase to provide safe neighbourhoods?
| fire stations? power loads? traffic woes? and how much more
| will the state's tax liabilities increase? are we going to
| keep exporting our trash to poor countries?
|
| we dont need to increase housing stock. we dont need to
| increase california population over the current 40 million.
| we need to take care of californians who have paid taxes for
| decades and decades..and are losing quality of life that is
| fast becoming unaffordable.
| woah wrote:
| Are you saying we need to "build the wall" around
| California? To protect those saintly old timers paying
| property taxes for an assessed value of $100k on a house
| worth $2m?
| itake wrote:
| What about the "californian's who have paid taxes for
| decade"'s kids? Where do they live? Their parent's attic?
| jelliclesfarm wrote:
| are you saying tax benefits should be inherited? are they
| disabled? why pay for schools for all if the kids still
| want to live behind their retired parents resources meant
| for their old age. children already inherit their parents
| homes without paying market rate tax rate. even though
| that isnt relevant to my point. driving out californians
| who have build cities by creating more and more
| unaffordable housing is a ponzi scheme.
|
| perhaps if housing stock is increased for those who dont
| use public utilities and said homes are fully sustainable
| for utilities and trash, power(solar), water...and they
| submit to using roads only 2-3 days/week..well..then it
| would make sense. but thats not possible.
|
| people who live in homes need utilities/services.
| infrastructure has to be scaled along with population
| increase. children need to go to school. schools need
| teachers. housing stock increase without a proper plan
| for utilities and infrastructure just seems like a plan
| that is set up to fail. and the only ones who lose are
| the tax payers.
| woah wrote:
| I feel like you're about to make a "modest proposal"[1]
| for a possible solution to this terrible problem
|
| [1]
| https://www.gutenberg.org/files/1080/1080-h/1080-h.htm
| sam_schneider wrote:
| We disagree! Most people do not have access to the equity
| underneath their feet--they do not have the income to utilize
| it as cash, and so it amounts to golden handcuffs. We enable
| middle and lower income homeowners to access it without
| moving--a huge plus for communities.
| metadat wrote:
| Sam, do you personally plan to live in the kind of
| community y'all are aiming to create?
|
| A scaled denser version of the house linked in your post
| doesn't seem like particularly appealing scenario for
| individuals, in the long run.
|
| OTOH, I can see the appeal from a pure capitalist
| perspective. You guys won't be the only ones seeking to
| take advantage of the new rules, it's not personal and I
| can't fault you for it.
| seanmp wrote:
| I personally live in this kind of density and really
| enjoy it. I have great relationships with my neighbors. I
| think you'd find that many people use their backyards
| much less than they would initially plan to, and many
| would happily trade it for income if they had an
| opportunity like this.
| dionidium wrote:
| I live in Providence, RI, which, like my hometown of St.
| Louis and every other pre-war U.S. city, contains a
| diverse mix of building styles co-mingled on small lots.
| The home I own is a two-family; I live upstairs and rent
| the bottom unit, just like many generations of owner-
| occupiers in Providence have done before me. My
| neighborhood is a mix of single-family homes on small
| lots, duplexes like my own, some great examples of the
| vaunted triple-decker, and all kinds of other buildings,
| besides.
|
| This is a very natural way for cities to develop. So
| natural, in fact, that it's how every city in the country
| _did_ develop before planners made that development
| pattern illegal via zoning. SB 9 isn 't some kind of
| radical new way of doing things; it's a partial unwinding
| of rules that prevented the kinds of development that
| occurs when the market is allowed to meet the demands of
| buyers and sellers.
|
| At some point in Providence's history they changed the
| rules here, too. My building is "non-conforming." It'd be
| illegal to build a two-family home on this lot today.
| Further, my building has a generous side lot, which was
| at some point combined with my own lot into one, leaving
| a conspicuous gap between my house and its neighbor. I
| _would love_ to sell this land to a developer and would
| welcome an SB-9-style law in Rhode Island.
| sam_schneider wrote:
| I am doing it as soon as I purchase a house! I couldn't
| afford one until SB9--I could make the down payment, but
| because of my low income (obviously its relative) it
| would be hard to make loan payments. With SB9, I can
| develop with Homestead, and use the sale value to reduce
| my payments, so I can focus on adding more housing with
| Homestead!
|
| Most of the homeowners who wanted ADUs were lower income
| & couldn't find financing (likely not HN community).
| These are multigenerational households where the children
| live in the house their parents bought with them and
| their kids. They work two jobs--their yard is rarely used
| --no one stopped to mourn it.
|
| They wanted to make money to help lighten the economic
| burden of living where they grew up, and maybe not work
| the night shift, or have to provide their own childcare
| while working full time.
|
| I imagine a large subset of HN and the tech community
| will not want to lose their yards-and its a free world,
| we aren't going to take them away!
|
| Most of our team is signed up for our buy product. If you
| think people you know would be interested, send them our
| way!
| jelliclesfarm wrote:
| ok. you are young and not a home owner. i mean this
| sincerely..please pivot. increasing housing stock almost
| always makes the cities unaffordable in the long run.
| this is how we have landed in the current predicament.
|
| true to the name of your startup. consider collective
| homesteads. high density housing is definitely a
| sustainable solution, but high density without also
| scaling infrastructure is a bad idea.
|
| like everything, it is a numbers game. and the only
| numbers that make sense here is in $$$$ that makes sense
| for investors and the taxman.
|
| not everyone can own homes. and its ok. building
| affordable rentable communities that are sustainable is
| also a laudable effort. and it definitely is a profit
| maker. first infrastructure, then housing. otherwise, its
| set up for failure.
|
| and the state of california has a really bad record when
| it comes to how counties are run. their mismanagement
| over decades have made the state highly taxed and yet
| unaffordable to most of the population.
| sokoloff wrote:
| I don't judge a developer of high-density housing for
| wanting to live in a low-density location. If you're
| creating or financing the creation of housing, it's an
| overall contribution to the solution. I don't blame you
| for doing that but living in a lower density area any
| more than I'd judge you for creating a bunch of small,
| affordable housing units and living in a large, expensive
| house.
| toomuchtodo wrote:
| I think you've got first mover advantage until someone with
| deep pockets (Zillow, OpenDoor, SVB, Rocket Mortgage)
| copies this, FHA 203k style (this is sort of, but not
| quite, like a construction or rehab loan). Best wishes for
| the endeavor if you can scale fast and stay ahead of
| competitors. Anything that provides more housing with
| minimal negative impact is welcome.
|
| The riskiest part is extending credit (imho) to marginal
| borrowers (low to middle class), but the value of the land
| is proven, so the rest is logistics.
| theptip wrote:
| I'd guess the new house is collateral, and there is some
| Joint Venture vehicle (LLC?) that the financiers invest
| in and that owns the new house, so no credit needs to be
| extended directly to the homeowner. You don't need to
| structure this with credit risk on the original
| homeowner.
|
| The investment risk would presumably be mostly if the
| owner moves and the subdivision becomes inegligible. Or
| of course if they aren't as good at building as they
| think and can't clear 20%, or housing market tanks...
| toomuchtodo wrote:
| The land is the collateral. The risk is the homeowner
| forecloses while you're mid project (or the title is
| otherwise impaired, making it difficult to unwind the
| transaction or recoup any funds).
| nrmitchi wrote:
| > they do not have the income to utilize it as cash
|
| I take it by this you're specifically targeting individuals
| who can't qualify for a HELOC or other (very common)
| methods of accessing home equity?
|
| I assume you have data to suggest that "most people" with
| SB-9 eligible lots are incapable of opening a heloc?
| celestialcheese wrote:
| Can't pay off your house with a HELOC.
|
| If your goal is to pay for college or buy a boat, HELOCs
| can be great.
|
| This is super appealing to me because its a path I hadn't
| considered to becoming debt free with your primary
| residence, which is a large goal for many people,
| including myself.
| nrmitchi wrote:
| That's a bit of a goal-post-moving response. The
| statement I responded to was that people can't "use their
| equity as cash". Saying that you can't use a heloc to pay
| off your home is *true*, but not really related to using
| equity as cash.
| dragonwriter wrote:
| > Now that SB9 is in effect, shouldn't the ability to split a
| lot and build on it be priced in to the price of the original
| lot?
|
| Once the market has a consensus.on what the change is, sure;
| it's fairly speculative what it will be, though; it's not like
| homes are a fixed price per housing unit and, because _who_ can
| afford to live nearby also affects value in a positive feedback
| way (because people pay a premium to _not_ live near poorer
| people), the relation is not simple or easily predictable.
| sam_schneider wrote:
| Great Q! For a sb9 lot split, the homeowner legally must intend
| to stay in place on one of the lots for 3 years--we haven't
| seen a measurable price hike for SB9 eligible lots. We've built
| a lot of ADUs and they rent about 40% above market, so combined
| with our better pricing and more efficient & automated
| processes, we'll definitely create more value for the
| homeowners than if they did it on their own. If they do elect
| to do it on their own--it's a full time job--they'd have to
| price in that labor in a cost-benefit analysis.
| halpert wrote:
| That makes sense. The value of the land will probably
| increase once you show how profitable it can be. Best of
| luck.
| TimTheTinker wrote:
| I'll be interested to know if "SB9 eligible" becomes a
| popular detail to include in NMLS property descriptions. If
| so, I bet it's not long before SB9 eligibility gets priced
| into properties, causing even more price hikes (at least in
| the short term).
|
| Would you pay 20% more up front for an SB9 eligible lot if
| you're guaranteed 20% overall profit from living in the
| residence for 3 years while doing a lot split and sale of
| the second property?
| iso1631 wrote:
| > https://search.homestead.is
|
| So this is an Icelandic site?
| gruez wrote:
| Yeah, just like all the artificial intelligence companies
| operating out of Anguilla.
|
| https://en.wikipedia.org/wiki/.ai
| datavirtue wrote:
| Please mention that this is for California in the title.
| jfmatth wrote:
| Sorry to say, i hope this is unsuccessful for you. I'm not a fan
| at all of this bill and will only make single family homes and
| non-SB9 neighborhoods more expensive.
| dionidium wrote:
| > _In high value markets, that means a homeowner could make over
| $1M without risking, or spending, a dollar. Under normal
| circumstances, this would be too good to be true, but that's how
| crazy the housing market has become. SB9 represents a $6T (!)
| opportunity in California alone._
|
| This hits on something really important. There's a lot of talk in
| housing circles about how "greedy homeowners" block new supply to
| increase the value of their homes, but this is a bit confused.
| Blocking supply can be good for landlords, in some cases, who
| command higher rents in constrained markets, but it's not clear
| why that's good for homeowners; the value of the land underneath
| their houses increases in value because it's in high demand and,
| crucially, the _land_ remains desirable even as density increases
| [0]. Upzoning increases the value of a lot, because it means the
| lot is more attractive to developers. And lot-splitting gives
| homeowners a tool for unlocking that added value that doesn 't
| require them to sell their land and move to a cheaper market. For
| existing homeowners, upzoning is an opportunity, not a cost.
|
| [0] This is why upzoning can reduce the cost of individual units
| even as it increases the value of the land underneath those
| units. That's a win-win.
| l33tbro wrote:
| How do you guys ensure the character of a neighbourhood remains
| in tact? That's the only thing I see wrong when people do this.
| Banging up a cheap white/grey box that just looks so incongruous
| with all of the older surrounding homes.
| woah wrote:
| "Neighborhood character" is a NIMBY dogwhistle
| l33tbro wrote:
| Lol - I can see how that could be construed that way. No, I'm
| definitely no NIMBYist. But I think character of
| neighbourhood is really important, and I think it is
| definitely possible to do these kinds of developments in
| harmony with the existing landscape environment.
|
| Probably well exemplified by Frank Lloyd Wright in the mis-
| century who created what he called 'usonian' homes. These
| were small block specific homes intended for workers that
| were completely in keeping with the surrounds.
| Pxtl wrote:
| "character of the neighborhood" is hollowing out the bottom of
| Maslow's hierarchy of needs to decorate the top.
| seanmp wrote:
| Historic conservation areas (as determined by the local
| municipality) are exempt from SB9, and cities are allowed to
| put in place "objective design standards" that apply to SB9 as
| well as new single family housing. But, we're also a team of
| great designers developing many unit types that will complement
| what's already there.
| thebradbain wrote:
| Have loved working with Homestead so far! My lot is already zoned
| as multi-family, so I can't take advantage of SB9 lot splitting,
| but they're currently in the process of building an ADU in my
| backyard, and I couldn't be more pleased - both from a
| price/design perspective and from a customer service perspective.
___________________________________________________________________
(page generated 2022-01-07 23:00 UTC)