Q: So, why is Silicon Valley studded with an implausibly large number of abandoned barns, shacks, and other things that don't look like they belong here?
A: Because this all used to be orchards. This all made sense, fifty years ago.
Q: Right, but shouldn't they have, like, torn them down by now?
A: No. Abandoned barns in Silicon Valley are a better investment than historical stock market returns.
Q: Wouldn't they be an even better investment if there were, like, usable buildings on the land?
Q: You have got to be shitting me.
A: Proposition 13 makes abandoned barns an enormously lucrative investment. You see, the assessed value of a piece of property is capped at a rate well below the rate of increase in property values out here. So you can just get the price of the land reevaluated every year and take tax-free loans against the increase in equity. This is a huge amount of untaxable money. Especially if you're an abandoned shed that's worth seven figures, right smack dab in the middle of the Google campus.
Q: Right, but that's just about low taxes, right?
A: Yeah. Well. Uh. I was going to get to the "except" part.
Q: And what's that?
A: The increase is capped except upon the sale or the completion of new improvements. Like an apartment building, for instance, to partially solve the housing crisis out here. Or a new building on the Google campus. This means that if the value of the improvement is less than the compounded increase in the value of the property absent the improvement, then it doesn't make any sense to actually build anything.
Q: That's horrible. Why aren't people, like, vandalizing abandoned buildings to get rid of them?
A: The only way you can vandalize anything in California that solves the problem is to literally build a new improvement on the property without the landowner finding out. That resets the tax basis and gives them an incentive to stop holding the land off the market.
Q: That's... double horrible.