11 ms·

Stream of Foreign Wealth Flows to Elite New York Real Estate

58 points by peter123 12y ago

ChuckMcM 12y ago
Never sure what people are trying to imply when folks buy real estate via an LLC but this is the key quote: "What is more, ownership of shell companies can be shifted at any time, with no indication in property records." Selling property is a cumbersome and difficult process, selling an LLC is trivial. If you own a property as an investment then you may want to liquidate some or all of that property at a given time to cover other costs. Not really very easy to do if you have to go through a title process. Contrast that with selling someone half interest in an LLC which owns the property. That is easy to do, requires only a notary, and voila you've got cash. I'm all for having direct ownership on your primary residence but for vacation homes, or investment properties, using an LLC is just a whole lot smarter from a money management perspective.
- seiji 12y ago
  The "property owned by LLC" issue isn't a _huge_ problem until it's abused. LLC fixes a lot of problems with inheritance and probate, etc. Look at the property records for Woodside (a city zoned _only_ for residential mansions). Everything is an LLC, but most of them are under the names of the owner (e.g. "Betty Big House LLC") with traceable property tax records. The strange thing about Woodside LLCs are seemingly nobodies own them. Why does the "philanthropy administrator" at Stanford own a $20 million estate in Woodside? Blarg. It's really nice house too: http://www.trulia.com/homes/California/Woodside/sold/7397232-6-Quail-Meadow-Dr-Woodside-CA-94062 http://www.trulia.com/homes/California/Woodside/sold/7397232...
  - deleted 12y ago
    [deleted]
  - safewayclubcard 12y ago
    I rent a guest house in Woodside. I really love it. It is the only place that feels "rural" but still able to commute to the valley below. Its nice to be able to rent a sizable house that was 2x the size of my Palo Alto apartment for the same price. I don't see any negative effects of the LLC property ownership. Woodside is a very tight nit community and I never really felt any wealth gap effects, even though there are a lot of people who are just ranchers. Its not like the people who live in these mansions steam roll over everybody and get what they want they work together to make sure Woodside remains the way it is (small town feel, rural, ranches, horses, etc.) Its rather unfair to go "blarg" just because someone has a nice house.
- deleted 12y ago
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- charlesdm 12y ago
  Indeed. In many jurisdictions, you can also avoid the tax you pay when the property owner changes (stamp/registration duty)
- michaelochurch 12y ago
  Why do we allow LLCs to own residential real estate at all, though, unless they're actively working management companies of rental buildings? It seems like the obvious solution to this loophole is to disallow LLCs from owning residential real estate unless they're management companies that take responsibility for renting out and maintaining the building. Preventing dirty foreign money from entering the real estate market is one of the defining issues of the 21st century. Personally, I think it would be tragic to have all the world's great cities to be owned by Davos shitheads and ex-KGB oligarchs and narcobarons. Let's start fighting this now.
  - charlesdm 12y ago
    Because there are valid reasons to own property through an LLC. For example: investing in residential real estate? 1/ What if an investment fund wanted to buy and hold 20 apartments in a building? 2/ What if I wanted to invest in a property, partially backed by debt (hence the need for limited liability)?
    - seiji 12y ago
      What if an investment fund wanted to buy and hold 20 apartments in a building? That should be illegal in and of itself. People can't afford apartments because "investors" have bought them all to jack up the prices as rent instead of property. If we had true market-clearing prices for ownership (instead of "the rich get richer and use more money to buy more property to get more money to buy more property"), everybody could be less rentfucked. It's "excessive landlord" syndrome. Why should one guy be allowed to own 40 apartment buildings full of residents who have lived there 20 years? Shouldn't they own their own living conditions instead of being locked into capitalist "I got here 3 years before you, now I own everything, and you are my source of income forever" mindsets?
      - refurb 12y ago
        Not sure i understand. Whether an individual buys a home or an investor buys 20, it doesn't change the price.
- eevilspock 12y ago
  We could have a healthier, more rational discussion here on HN if we all could be more critical of popular libertarian dogma[1], and not take it as self-evident that private ownership of land is both a right and good economics[2][3]. - [1] By “popular libertarian dogma” I refer to popular dogma that isn’t necessarily supported by and may even contradict true libertarian principles. [2] For a critique of private land ownership, read about Georgism (https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism) and Geolibertarianism (https://en.wikipedia.org/wiki/Geolibertarianism https://en.wikipedia.org/wiki/Geolibertarianism). Are you a Real Libertarian, or a ROYAL Libertarian? (http://geolib.com/essays/sullivan.dan/royallib.html http://geolib.com/essays/sullivan.dan/royallib.html) makes the case against land as private property very plain. [3] If you believe in the free market and it's ability to find the "right" price for everything, even the abstract (e.g. the time value of money), then how can you support a government enforced system that allows a finite amount of money to purchase an infinite amount of something, which is what ownership of land in perpetuity amounts to? How can $10,000 or even $10,000,000 be the price of full rights over a plot of land for an infinite amount of time?
  - seiji 12y ago
    Best comment in this entire thread. Infinite ownership of land and "I got here first, screw you" mentality doesn't work when everybody wants to live in the same place.
  - ende 12y ago
    Good post. It's important to recognize that libertarianism is itself a diverse collection of philosophies, many of which resemble georgist, anarchist and even some strains of socialist thinking at their foundation. These variants all tend to differ on notions of property as first principal. I think the 'traditional dogmatic libertarianism' you mention can best be described as paleoconservativism or something similar. It is one end of an extreme with complete disregard of property as the other extreme. Georgist treatment of land as property is interesting because it doesn't actually deny land as private property, it just treats it as a negative externality to the commons and demands a Pigovian land value tax as recompense. This same philosophy can be extended to any tragedy of the commons, be it environmental, land use, radio bandwidth, etc. One may make property of these things, but at infinite cost for the privilege of such monopoly; a privilege that is guaranteed not by one's own right, but by the social contract of the state.
seiji 12y ago
There's no way left to win. All the "nice" places to live have been taken over by either corrupt foreign actors using illegal money (buying $50 million condos with literal duffel bags full of untraceable cash) or by bubbleheads cashing out funny money and living ego filled nouveau riche lifestyles. Step in to my own pity party for a moment. Last year my apartment lease went up by $300/month. I have no reason to believe the same won't happen again this year. The employer "yearly raise" last year increased my income by $70/month. Now, it's not my employer's fault I work from home and need space to both sleep _and_ work (in a lavish 700 square foot apartment that's half a mile away from any subway entrance). Forget about trying to move up either. Larger place? An extra $1k-$2k per month. Nicer area? Extra $2k per month for a smaller apartment. Uncontrollable rage starts bleeding from my eyeballs when apartment costs get within horseshoe distance of $50k/year. What's left? Seattle? Full of Amholes. Chicago? Too cold. San Francisco? Too poor, dirty, and it'll take them at least another 50 years to build out modern-day infrastructure (high density housing + transit). And that's only if current levels of local government corruption don't increase. There's nothing quite like arriving at SFO and being greeted by a BART car from the 1970s then riding into the city past tract house slums cluttering the hills of South San Francisco. But, in rage, I digress. One can always just give up and move to Austin. It's okay. All the other people who failed out of life and moved to Austin seem to like it just fine. Also see https://medium.com/@ryanpbroderick/why-im-leaving-new-york-5629bf28e05e https://medium.com/@ryanpbroderick/why-im-leaving-new-york-5...
- api 12y ago
  Agree with the sentiment if not the particulars. Real estate hyperinflation is the devil and must be destroyed.
- rayiner 12y ago
  Buy some Merino wool underwear and move to Chicago. Enough rich people and old money to have many of the amenities of NYC, with fewer hipsters and much more reasonable housing prices.
  - Slartibreakfast 12y ago
michaelochurch 12y ago
Dirty foreign money is more of a problem in NYC real estate than most people realize. Unless we do something about it, it's only going to get worse. London is even farther gone than we are. It's ugly. Most people see it as a non-problem because they assume that they're in a separate property market from the billionaires, and because the billionaires are such a small set of people. What they don't realize is that housing is an extremely inelastic good, so even a 1% supply destruction is going to have major effects on price-- possibly a 20, 50, or even 100 percent bump. It's not about high incomes (NYC incomes are high, but not that high for average people) or some amorphous "people want to live here". It's demand inelasticity coupled with our failure to keep dirty foreign money out. And the ultra-rich and middle-income markets do interact, if not directly. There's a push-down effect. If dirty billionaires are taking apartments that should be "only" $5-10 million at 5x prices, then the working rich get pushed down into upper-middle-class housing, the upper-middle-class gets pushed into middle-class housing, and on down the line, with the working classes getting absolutely fucked and having 1+ hour commutes. Moreover, in addition to the foreign scumbag money (which is a problem on the West Coast, just as in New York) you have a lot of gray-water foreign money: overseas speculators who aren't criminals themselves but are betting on increased scumbag-fueled demand for U.S. real estate.
- rayiner 12y ago
  People don't think enough about the dirtiness of foreign money. In the Middle East, parts of Eastern Europe, and parts of Asia, the fortunates are to a much lesser degree the product of meritocracy and much more the product of oligarchs robbing countries of their resource wealth and laundering it abroad.
- stegosaurus 12y ago
  In London the idea of a 'seperate property market' is totally bunk; it seems like every day a new story comes in with social housing being demolished to fill with fancy apartments. The residents then have to be rehoused somewhere. There are also tens of thousands (possibly 100K+) empty residences in London. The other problem is that those who already own are both insulated from the effects (mortgage payments from 10 years ago) and stand to benefit if they ever decide to move out of the capital. It's a huge issue. Re 1 hour commutes; London is far enough gone now that 'the working class' need to cohabit to manage at all. I have no idea how service workers get by - either they live with friends and family, or they house share. 7-800pm (~9000pa) is pretty much the bare minimum outside of remote areas with no transport links; UK minimum wage is roughly 13K. State benefits jump in to cover the shortfall. Huge numbers of young people are staying in the family home for much longer. At least they can stay - but it also affects talent moving to the area. A lot of very skilled people are going to be put off by the prospect of permanently 'existing' rather than 'living' in and around the capital.
smutticus 12y ago
Allow squatting in buildings that are unoccupied for more than 6 months. That way even the super rich are required to actually have someone live in their unoccupied buldings. If they buy them and live in them then fine, but if not they need to find someone to put in them. You can't stop people from buying property, and you probably shouldn't. However, you can force them to use it.
- woah 12y ago
  How do you decide who gets to squat there? Cronyism? Fist fights? Lottery?
  - RockyMcNuts 12y ago
    Well, you could just have a higher tax on residences not used by someone as a primary residence. Or basically give a tax break/rebate when someone claims it as a primary residence. Which NY already does, actually.
  - smutticus 12y ago
    First come first served. And if you leave your squat unattended, someone else can take it. The point is to incentivize rich people to put someone in their building. Not to divy up unused buildings among the homeless. There are tons of details that would have to be worked out with this idea. But luckily many european nations have been allowing squatting for decades, so there are lots of case studies, and legal examples to draw from.
- DanBlake 12y ago
  That should be a great outcome for soldiers who go over seas and have to leave their place vacant. Or people in the hospital. Or people that work on long haul shipping jobs. Breaking and Entering is exactly that: A crime that should land you in jail. If you want free housing, go get section 8- Thats what its built for.
jcdavis 12y ago
At least NYC builds up, so they fit all of their foreign real estate money in not much space. London is in a much worse position - huge foreign demand with very little new housing supply has made anything remotely close absurdly expensive, which forces everyone to move further and further away and spend $5k+/yr commuting 1hr+ each way on trains.
- arbuge 12y ago
  >> huge foreign demand with very little new housing supply has made anything remotely close absurdly expensive I think this accurately describes NYC too at this point...
- _delirium 12y ago
  Manhattan, at least, hasn't really had an increase in housing supply. The population is actually lower today than it was in the post-WW2 era (down ~20%, from just under 2 million then, to around 1.6 million today). Some of that is because of changing demographics (e.g. apartments that once held 4-person families now holding a 2-person couple), but the housing-supply constraint has been a pretty hard cap on population. There has been a lot of construction, but it's gone into mainly: 1) expanding commercial real-estate; and 2) replacing older, smaller residential units with newer, bigger ones. Redevelopment of the 2nd variety sometimes even reduces the number of housing units (but each unit is nicer).
datashovel 12y ago
I think people need to come to the realization that real estate purchases by super wealthy is nothing more than a ponzi scheme.
- dba7dba 12y ago
  I could care less what the super rich do with their money. What bugs me is they are hoarding limited resource (housing) in an already impacted area and everyone else ends up suffering for it.
  - datashovel 12y ago
    During the housing bubble (as it was about to burst) I recall reading several stories about governments pursuing fraud charges where a family (or a bunch of close friends) would purchase several houses in a neighborhood from one another, each time raising the purchase price. I would posit that probably in most cases of "real estate investment" by super wealthy, there is little to no difference, except it is not a "family bond" that exists, but a bond of being a member of the most exclusive club on earth. In many cases my hunch is (because of the opaqueness of the market) super wealthy can, and probably do, orchestrate purchases from and to themselves (not even requiring a separate purchasing party), each time raising the prices. I think noone could argue that this kind of behavior doesn't affect surrounding real estate prices, and thus negatively affect everyone in the surrounding areas.
    - datashovel 12y ago
      I should clarify. In fact I don't think super wealthy are necessarily corrupt in this way. I do, however, believe the people they may entrust with managing their wealth are in many cases. And it's not necessarily through any fault of their own. As a wealthy person I want the people who I entrust with managing my wealth to be very successful at what they do. So I make sure I get only the best. That said, I don't care to know "how the sausage is made". I think the only thing that really fixes this sort of thing is transparency in markets.
disputin 12y ago
http://www.landvaluetax.org/what-is-lvt/ http://www.landvaluetax.org/what-is-lvt/
impendia 12y ago
> As nonresidents, they pay no city income taxes and often receive hefty property tax breaks. This strikes me as the problem. Why should these people, or for that matter any extremely wealthy homeowners, get property tax breaks? Indeed, this article makes an excellent argument that high surtaxes should be imposed upon ultra-high-end real estate, and that the proceeds should be invested in infrastructure, public education, and/or tax breaks for the bottom 90%. The usual counterargument against incresing tax rates at the top is that it will drive some of these taxpayers to take their business elsewhere. Seems like a win-win to me.
dba7dba 12y ago
What really bugs me about such realty story is these expensive homes are owned but rarely used. I was at a coastal town 1-2 hours away from Los Angeles a few years ago. Nice houses ON the beach. Bet each house was worth a million to a few million easily. What REALLY struck me was that virtually ALL the houses facing the beach seemed EMPTY. And this was over a weekend. I didn't see kids/family lounging on the deck or the beach. These nice, big houses were all empty. The town is too far from centers of commerce like LA to support a large population of people who would make big enough salary that can support multi-millions dollar houses. This means most of the houses are 2nd homes for families. And I bet a family owning a million dollar beach house would also live in a everyday house that costs similar.
dba7dba 12y ago
Money laundering is considered a big crime and I agree. But sometimes these foreign money flowing into US to buy up realty often smell like a form of money laundering. Can't explain it why but just feel that way...
karzeem 12y ago
Why does the article blithely take it for granted that we should treat investments by rich foreigners suspiciously while investments by rich Americans are no problem? The big problem in New York real estate is lack of supply — the vacancy rate in rentals hovers around 1%, and building new apartments is a nightmare. So of course, prices go up as demand keeps growing and supply is prevented from growing. There may be some extremely marginal contribution to housing costs that you can blame on these ultra-premium buildings, but it's not the root cause, and playing whack-a-mole with these symptoms is what got the city's real estate so expensive in the first place. Do folks think that if One57 hadn't been built, a building full of $150k studios would have gone up in its place? Because of the difficulty and cost of building, these money towers are increasingly the only thing that developers can afford to build. Build something more palatable and you'd go out of business. The backlash to these buyers is IMO a misguided blend of economic misunderstanding and xenophobia. Something tells me that if the rich buyers were all from Colorado, people wouldn't have quite so much to say about it.
- seiji 12y ago
  economic misunderstanding and xenophobia. Something tells me that if the rich buyers were all from Colorado, people wouldn't have quite so much to say about it. It's not kind and successful foreign Tim Cooks who just want a place to live. It's foreign criminals who are laundering money gained illegally through either graft or outright murder/exploitation into US property. Once money turns into property, it becomes "pure" and the chain of illegalness vanishes from view. American politics has the revolving door between congress critters and lobbyists, but it's not nearly as bad as other countries. The US can't become a safe haven for all the powerful bad people in the world to hide from the consequences of their actions. Vlad Pootie is worth over $40 billion dollars. Think he's just "a really good businessman?"
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mahyarm 12y ago
This has been going on for over a decade in many cities in the world. Vancouver is probably another good example of this.

58 points by peter123 12y ago

Never sure what people are trying to imply when folks buy real estate via an LLC but this is the key quote: "What is more, ownership of shell companies can be shifted at any time, with no indication in property records." Selling property is a cumbersome and difficult process, selling an LLC is trivial. If you own a property as an investment then you may want to liquidate some or all of that property at a given time to cover other costs. Not really very easy to do if you have to go through a title process. Contrast that with selling someone half interest in an LLC which owns the property. That is easy to do, requires only a notary, and voila you've got cash. I'm all for having direct ownership on your primary residence but for vacation homes, or investment properties, using an LLC is just a whole lot smarter from a money management perspective.

seiji 12y ago
The "property owned by LLC" issue isn't a _huge_ problem until it's abused. LLC fixes a lot of problems with inheritance and probate, etc. Look at the property records for Woodside (a city zoned _only_ for residential mansions). Everything is an LLC, but most of them are under the names of the owner (e.g. "Betty Big House LLC") with traceable property tax records. The strange thing about Woodside LLCs are seemingly nobodies own them. Why does the "philanthropy administrator" at Stanford own a $20 million estate in Woodside? Blarg. It's really nice house too: http://www.trulia.com/homes/California/Woodside/sold/7397232-6-Quail-Meadow-Dr-Woodside-CA-94062 http://www.trulia.com/homes/California/Woodside/sold/7397232...
- deleted 12y ago
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- safewayclubcard 12y ago
  I rent a guest house in Woodside. I really love it. It is the only place that feels "rural" but still able to commute to the valley below. Its nice to be able to rent a sizable house that was 2x the size of my Palo Alto apartment for the same price. I don't see any negative effects of the LLC property ownership. Woodside is a very tight nit community and I never really felt any wealth gap effects, even though there are a lot of people who are just ranchers. Its not like the people who live in these mansions steam roll over everybody and get what they want they work together to make sure Woodside remains the way it is (small town feel, rural, ranches, horses, etc.) Its rather unfair to go "blarg" just because someone has a nice house.
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charlesdm 12y ago
Indeed. In many jurisdictions, you can also avoid the tax you pay when the property owner changes (stamp/registration duty)
michaelochurch 12y ago
Why do we allow LLCs to own residential real estate at all, though, unless they're actively working management companies of rental buildings? It seems like the obvious solution to this loophole is to disallow LLCs from owning residential real estate unless they're management companies that take responsibility for renting out and maintaining the building. Preventing dirty foreign money from entering the real estate market is one of the defining issues of the 21st century. Personally, I think it would be tragic to have all the world's great cities to be owned by Davos shitheads and ex-KGB oligarchs and narcobarons. Let's start fighting this now.
- charlesdm 12y ago
  Because there are valid reasons to own property through an LLC. For example: investing in residential real estate? 1/ What if an investment fund wanted to buy and hold 20 apartments in a building? 2/ What if I wanted to invest in a property, partially backed by debt (hence the need for limited liability)?
  - seiji 12y ago
    What if an investment fund wanted to buy and hold 20 apartments in a building? That should be illegal in and of itself. People can't afford apartments because "investors" have bought them all to jack up the prices as rent instead of property. If we had true market-clearing prices for ownership (instead of "the rich get richer and use more money to buy more property to get more money to buy more property"), everybody could be less rentfucked. It's "excessive landlord" syndrome. Why should one guy be allowed to own 40 apartment buildings full of residents who have lived there 20 years? Shouldn't they own their own living conditions instead of being locked into capitalist "I got here 3 years before you, now I own everything, and you are my source of income forever" mindsets?
    - refurb 12y ago
      Not sure i understand. Whether an individual buys a home or an investor buys 20, it doesn't change the price.
eevilspock 12y ago
We could have a healthier, more rational discussion here on HN if we all could be more critical of popular libertarian dogma[1], and not take it as self-evident that private ownership of land is both a right and good economics[2][3]. - [1] By “popular libertarian dogma” I refer to popular dogma that isn’t necessarily supported by and may even contradict true libertarian principles. [2] For a critique of private land ownership, read about Georgism (https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism) and Geolibertarianism (https://en.wikipedia.org/wiki/Geolibertarianism https://en.wikipedia.org/wiki/Geolibertarianism). Are you a Real Libertarian, or a ROYAL Libertarian? (http://geolib.com/essays/sullivan.dan/royallib.html http://geolib.com/essays/sullivan.dan/royallib.html) makes the case against land as private property very plain. [3] If you believe in the free market and it's ability to find the "right" price for everything, even the abstract (e.g. the time value of money), then how can you support a government enforced system that allows a finite amount of money to purchase an infinite amount of something, which is what ownership of land in perpetuity amounts to? How can $10,000 or even $10,000,000 be the price of full rights over a plot of land for an infinite amount of time?
- seiji 12y ago
  Best comment in this entire thread. Infinite ownership of land and "I got here first, screw you" mentality doesn't work when everybody wants to live in the same place.
- ende 12y ago
  Good post. It's important to recognize that libertarianism is itself a diverse collection of philosophies, many of which resemble georgist, anarchist and even some strains of socialist thinking at their foundation. These variants all tend to differ on notions of property as first principal. I think the 'traditional dogmatic libertarianism' you mention can best be described as paleoconservativism or something similar. It is one end of an extreme with complete disregard of property as the other extreme. Georgist treatment of land as property is interesting because it doesn't actually deny land as private property, it just treats it as a negative externality to the commons and demands a Pigovian land value tax as recompense. This same philosophy can be extended to any tragedy of the commons, be it environmental, land use, radio bandwidth, etc. One may make property of these things, but at infinite cost for the privilege of such monopoly; a privilege that is guaranteed not by one's own right, but by the social contract of the state.

seiji 12y ago

There's no way left to win. All the "nice" places to live have been taken over by either corrupt foreign actors using illegal money (buying $50 million condos with literal duffel bags full of untraceable cash) or by bubbleheads cashing out funny money and living ego filled nouveau riche lifestyles. Step in to my own pity party for a moment. Last year my apartment lease went up by $300/month. I have no reason to believe the same won't happen again this year. The employer "yearly raise" last year increased my income by $70/month. Now, it's not my employer's fault I work from home and need space to both sleep _and_ work (in a lavish 700 square foot apartment that's half a mile away from any subway entrance). Forget about trying to move up either. Larger place? An extra $1k-$2k per month. Nicer area? Extra $2k per month for a smaller apartment. Uncontrollable rage starts bleeding from my eyeballs when apartment costs get within horseshoe distance of $50k/year. What's left? Seattle? Full of Amholes. Chicago? Too cold. San Francisco? Too poor, dirty, and it'll take them at least another 50 years to build out modern-day infrastructure (high density housing + transit). And that's only if current levels of local government corruption don't increase. There's nothing quite like arriving at SFO and being greeted by a BART car from the 1970s then riding into the city past tract house slums cluttering the hills of South San Francisco. But, in rage, I digress. One can always just give up and move to Austin. It's okay. All the other people who failed out of life and moved to Austin seem to like it just fine. Also see https://medium.com/@ryanpbroderick/why-im-leaving-new-york-5629bf28e05e https://medium.com/@ryanpbroderick/why-im-leaving-new-york-5...

api 12y ago
Agree with the sentiment if not the particulars. Real estate hyperinflation is the devil and must be destroyed.
rayiner 12y ago
Buy some Merino wool underwear and move to Chicago. Enough rich people and old money to have many of the amenities of NYC, with fewer hipsters and much more reasonable housing prices.
- Slartibreakfast 12y ago

michaelochurch 12y ago

Dirty foreign money is more of a problem in NYC real estate than most people realize. Unless we do something about it, it's only going to get worse. London is even farther gone than we are. It's ugly. Most people see it as a non-problem because they assume that they're in a separate property market from the billionaires, and because the billionaires are such a small set of people. What they don't realize is that housing is an extremely inelastic good, so even a 1% supply destruction is going to have major effects on price-- possibly a 20, 50, or even 100 percent bump. It's not about high incomes (NYC incomes are high, but not that high for average people) or some amorphous "people want to live here". It's demand inelasticity coupled with our failure to keep dirty foreign money out. And the ultra-rich and middle-income markets do interact, if not directly. There's a push-down effect. If dirty billionaires are taking apartments that should be "only" $5-10 million at 5x prices, then the working rich get pushed down into upper-middle-class housing, the upper-middle-class gets pushed into middle-class housing, and on down the line, with the working classes getting absolutely fucked and having 1+ hour commutes. Moreover, in addition to the foreign scumbag money (which is a problem on the West Coast, just as in New York) you have a lot of gray-water foreign money: overseas speculators who aren't criminals themselves but are betting on increased scumbag-fueled demand for U.S. real estate.

rayiner 12y ago
People don't think enough about the dirtiness of foreign money. In the Middle East, parts of Eastern Europe, and parts of Asia, the fortunates are to a much lesser degree the product of meritocracy and much more the product of oligarchs robbing countries of their resource wealth and laundering it abroad.
stegosaurus 12y ago
In London the idea of a 'seperate property market' is totally bunk; it seems like every day a new story comes in with social housing being demolished to fill with fancy apartments. The residents then have to be rehoused somewhere. There are also tens of thousands (possibly 100K+) empty residences in London. The other problem is that those who already own are both insulated from the effects (mortgage payments from 10 years ago) and stand to benefit if they ever decide to move out of the capital. It's a huge issue. Re 1 hour commutes; London is far enough gone now that 'the working class' need to cohabit to manage at all. I have no idea how service workers get by - either they live with friends and family, or they house share. 7-800pm (~9000pa) is pretty much the bare minimum outside of remote areas with no transport links; UK minimum wage is roughly 13K. State benefits jump in to cover the shortfall. Huge numbers of young people are staying in the family home for much longer. At least they can stay - but it also affects talent moving to the area. A lot of very skilled people are going to be put off by the prospect of permanently 'existing' rather than 'living' in and around the capital.

smutticus 12y ago

Allow squatting in buildings that are unoccupied for more than 6 months. That way even the super rich are required to actually have someone live in their unoccupied buldings. If they buy them and live in them then fine, but if not they need to find someone to put in them. You can't stop people from buying property, and you probably shouldn't. However, you can force them to use it.

woah 12y ago
How do you decide who gets to squat there? Cronyism? Fist fights? Lottery?
- RockyMcNuts 12y ago
  Well, you could just have a higher tax on residences not used by someone as a primary residence. Or basically give a tax break/rebate when someone claims it as a primary residence. Which NY already does, actually.
- smutticus 12y ago
  First come first served. And if you leave your squat unattended, someone else can take it. The point is to incentivize rich people to put someone in their building. Not to divy up unused buildings among the homeless. There are tons of details that would have to be worked out with this idea. But luckily many european nations have been allowing squatting for decades, so there are lots of case studies, and legal examples to draw from.
DanBlake 12y ago
That should be a great outcome for soldiers who go over seas and have to leave their place vacant. Or people in the hospital. Or people that work on long haul shipping jobs. Breaking and Entering is exactly that: A crime that should land you in jail. If you want free housing, go get section 8- Thats what its built for.

jcdavis 12y ago

At least NYC builds up, so they fit all of their foreign real estate money in not much space. London is in a much worse position - huge foreign demand with very little new housing supply has made anything remotely close absurdly expensive, which forces everyone to move further and further away and spend $5k+/yr commuting 1hr+ each way on trains.

arbuge 12y ago
>> huge foreign demand with very little new housing supply has made anything remotely close absurdly expensive I think this accurately describes NYC too at this point...
_delirium 12y ago
Manhattan, at least, hasn't really had an increase in housing supply. The population is actually lower today than it was in the post-WW2 era (down ~20%, from just under 2 million then, to around 1.6 million today). Some of that is because of changing demographics (e.g. apartments that once held 4-person families now holding a 2-person couple), but the housing-supply constraint has been a pretty hard cap on population. There has been a lot of construction, but it's gone into mainly: 1) expanding commercial real-estate; and 2) replacing older, smaller residential units with newer, bigger ones. Redevelopment of the 2nd variety sometimes even reduces the number of housing units (but each unit is nicer).

datashovel 12y ago

I think people need to come to the realization that real estate purchases by super wealthy is nothing more than a ponzi scheme.

dba7dba 12y ago
I could care less what the super rich do with their money. What bugs me is they are hoarding limited resource (housing) in an already impacted area and everyone else ends up suffering for it.
- datashovel 12y ago
  During the housing bubble (as it was about to burst) I recall reading several stories about governments pursuing fraud charges where a family (or a bunch of close friends) would purchase several houses in a neighborhood from one another, each time raising the purchase price. I would posit that probably in most cases of "real estate investment" by super wealthy, there is little to no difference, except it is not a "family bond" that exists, but a bond of being a member of the most exclusive club on earth. In many cases my hunch is (because of the opaqueness of the market) super wealthy can, and probably do, orchestrate purchases from and to themselves (not even requiring a separate purchasing party), each time raising the prices. I think noone could argue that this kind of behavior doesn't affect surrounding real estate prices, and thus negatively affect everyone in the surrounding areas.
  - datashovel 12y ago
    I should clarify. In fact I don't think super wealthy are necessarily corrupt in this way. I do, however, believe the people they may entrust with managing their wealth are in many cases. And it's not necessarily through any fault of their own. As a wealthy person I want the people who I entrust with managing my wealth to be very successful at what they do. So I make sure I get only the best. That said, I don't care to know "how the sausage is made". I think the only thing that really fixes this sort of thing is transparency in markets.

disputin 12y ago

http://www.landvaluetax.org/what-is-lvt/ http://www.landvaluetax.org/what-is-lvt/

impendia 12y ago

> As nonresidents, they pay no city income taxes and often receive hefty property tax breaks. This strikes me as the problem. Why should these people, or for that matter any extremely wealthy homeowners, get property tax breaks? Indeed, this article makes an excellent argument that high surtaxes should be imposed upon ultra-high-end real estate, and that the proceeds should be invested in infrastructure, public education, and/or tax breaks for the bottom 90%. The usual counterargument against incresing tax rates at the top is that it will drive some of these taxpayers to take their business elsewhere. Seems like a win-win to me.

dba7dba 12y ago

What really bugs me about such realty story is these expensive homes are owned but rarely used. I was at a coastal town 1-2 hours away from Los Angeles a few years ago. Nice houses ON the beach. Bet each house was worth a million to a few million easily. What REALLY struck me was that virtually ALL the houses facing the beach seemed EMPTY. And this was over a weekend. I didn't see kids/family lounging on the deck or the beach. These nice, big houses were all empty. The town is too far from centers of commerce like LA to support a large population of people who would make big enough salary that can support multi-millions dollar houses. This means most of the houses are 2nd homes for families. And I bet a family owning a million dollar beach house would also live in a everyday house that costs similar.

dba7dba 12y ago

Money laundering is considered a big crime and I agree. But sometimes these foreign money flowing into US to buy up realty often smell like a form of money laundering. Can't explain it why but just feel that way...

karzeem 12y ago

Why does the article blithely take it for granted that we should treat investments by rich foreigners suspiciously while investments by rich Americans are no problem? The big problem in New York real estate is lack of supply — the vacancy rate in rentals hovers around 1%, and building new apartments is a nightmare. So of course, prices go up as demand keeps growing and supply is prevented from growing. There may be some extremely marginal contribution to housing costs that you can blame on these ultra-premium buildings, but it's not the root cause, and playing whack-a-mole with these symptoms is what got the city's real estate so expensive in the first place. Do folks think that if One57 hadn't been built, a building full of $150k studios would have gone up in its place? Because of the difficulty and cost of building, these money towers are increasingly the only thing that developers can afford to build. Build something more palatable and you'd go out of business. The backlash to these buyers is IMO a misguided blend of economic misunderstanding and xenophobia. Something tells me that if the rich buyers were all from Colorado, people wouldn't have quite so much to say about it.

seiji 12y ago
economic misunderstanding and xenophobia. Something tells me that if the rich buyers were all from Colorado, people wouldn't have quite so much to say about it. It's not kind and successful foreign Tim Cooks who just want a place to live. It's foreign criminals who are laundering money gained illegally through either graft or outright murder/exploitation into US property. Once money turns into property, it becomes "pure" and the chain of illegalness vanishes from view. American politics has the revolving door between congress critters and lobbyists, but it's not nearly as bad as other countries. The US can't become a safe haven for all the powerful bad people in the world to hide from the consequences of their actions. Vlad Pootie is worth over $40 billion dollars. Think he's just "a really good businessman?"

deleted 12y ago

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mahyarm 12y ago

This has been going on for over a decade in many cities in the world. Vancouver is probably another good example of this.