In California, the Realty Interests Are in Charge

To misquote Iris Murdoch, “We live in a fantasy world, a world of illusion. The great task in life is to find realty.” After all, if you have enough money to start with, it’s not terribly difficult to become a millionaire, requires minimal brains. Just invest in real estate. It worked for Trump (if you really believe he’s a billionaire). It can work for you. All it requires is a lack of moral compass: You too can live in a McMansion at the edge of a golf course. Isn’t that what life is all about?

Right now, California politicians are highly disturbed about the increasing rate of homelessness. Of course, they think that the solution is to find housing for all the homeless. Never mind that most L.A. homeless would prefer to live in a tent set up under a bridge, where they can enjoy their heroine and crystal meth without being hassled by John Law. And that doesn’t include the 25-50% who are just plain out of their heads and wouldn’t understand what you are talking about.

The word is out that there are not enough housing units. Then there was an interesting front page article in the Los Angeles Times a couple days ago to the effect that there are approximately 110,000 housing units that are theoretically up for rent, but not really.

The reason is the convenience to landowners of the law governing taxation of housing units. One is taxed not on the gross amount one makes, but on the profit one makes. If too many units are being profitably rented, the best way to lower your taxes is to net the rented units with units that are being deliberately kept off the market. That way, the profit is minimized—or even wiped out—and the NOL (Net Operating Loss) is subtracted from the total income.

From my years in accounting, I have seen dozens of filthy rich landowners living the life of Riley while paying zero taxes. That also is a trick employed by our Presidente.