Paying Top Dollar for Condos, and Leaving Them Empty
nytimes.com
nytimes.com
What side effect is that I would posit that coop owner-occupancy rates are much, much higher.
Coop boards tend to have heavy restrictions on subletting too, which admittedly is more of an issue to lower income earners than the megawealthy (that seem to be the "culprits" for vacant luxury condos).
Personally I'd find it eerie living in a large apartment tower and never seeing any other residents. Lonely is right.
Buildings with modern working sprinkler systems are rarely an issue for firefighters. As for break-ins the concierge rarely let roving bands of hooligans in to trash places / squat.
Empty luxury condos are not the fire / squat hazard that abandoned warehouses, etc are. Nice try.
It's pretty likely that someone would notice a squat in a luxury condo.
As for city services the NYPD could probably greatly improve their budget by not unconstitutionally stopping and frisking people.
And really, the better way to look at it is that the property tax paid by some multi-billionaire who only drops into town for a few weekends a year is all profit for the city. They're not using services. They're not sending their kids to public school or generating garbage or calling the police ... whatever they pay to the city each year is just gravy. They're subsidizing people who actually do live there, and would otherwise have to pay more taxes (of one form or another) for the actual services that NYC provides.
Government services are not something that are "used" in the normal sense of the word. Central Park needs to get mowed, street lights need to be lit, police and fire protection needs to be provided, etc. regardless of whether residents are there or not.
Another way to look at the issue, is to evaluate the 'tax collection opportunity costs' of the absentee owners. For every condo that gets bought by an absentee owner (as opposed to a local owner), NYC loses income tax, sales tax, and general economic activity (these are wealthy individuals, there spending is a boost to the local economy). By increasing the property taxes, NYC would shift the cost-benefit ratio towards those that are actually going to utilize the property (thus resulting in more income and sales taxes), while also bringing in more property taxes
Finally, if these wealthy individuals were so concerned about only paying for what they "use", then it would make a lot more sense if they just got a nice hotel room for the days/weeks per year that they are in NYC, rather than buying a condo that sits empty most of the time.
And your hotel idea is exactly what will happen if property tax rates go up. Think through what the effects of that would be...
I normally disapprove of using tax policy to modify behavior, but in this case it makes sense. Property tax is like the "rent" citizens pay to the government for using land. If the rent is too low, people overconsume the scarce resource.
Property taxes are relatively low but they do exist. So that billionaire is probably still paying for a cop or a Sanitation worker, even if he steps in NY once a year. NYC takes almost 4% in tax, in addition to what the NY (state) takes.
But that isn't true. Real estate isn't that safe in the first place, and they are also throwing money away by not renting it. They'd do better in buying a commercial property and renting it out.
Vancouver is suffering from this with wealthy mainland chinese, leading to the second worst affordability ratio (housing price : average annual income) in the world. You see similar behaviors in condos in china itself.
It has very bad effects for the people who already live there, especially for the young and newly established. Younger people with better opportunities go away once they do the math and the cities eventually suffer brain drain. I would suggest a high long term unoccupied residence tax to avoid the problems of unused property in cities. Hopefully it will prod these people just a little bit to hire property management companies to avoid the tax and rent the places out.
Rich grandmothers are not actually a problem we need to solve.
> If she is burdened by property taxes, it's because she's living in an extraordinarily valuable house.
Or because she's been on a fixed income for several years. Or because she has a lot of medical bills, as most older folks do. Or because any of a myriad of other reason that would cause someone with a piece of land to not be swimming in a pile of gold coins.
> Since property taxes are in the neighborhood of 1% of value, and real estate prices in NYC go up by several percent per year,
I can't speak to the real estate prices or property taxes so I'll take you at your word here.
> your sainted grandmother
I think we can all go without sarcastic ad hominems against our grandmothers. Jesus Christ.
> could borrow the money to pay the property taxes, against the property, and the increase in property value would more than pay the taxes.
For me, this is just the pièce de résistance of this entire convoluted argument. The idea that someone who is having trouble paying property taxes should get a loan and pay the property taxes plus interest is just laughable.
> Rich grandmothers are not actually a problem we need to solve.
You're assuming that because someone owns property in NYC that they're rich, which is clearly not the case, especially if they've been there for half a century.
You need to read what you wrote again. "Just because someone has a very valuable financial asset, doesn't make them rich." ORLY?
Let me quote from a news story:
"These listings, along with several others at the extreme low end of the market, are well below New York City's median sales price of $635,000, according to StreetEasy.com, which excludes foreclosures from its data. They're also below the bottom 10th of the city market, which has a median sales price of $160,000."
Even if your place is worth less than 95% of NYC properties, it's still worth $160,000.
Your argument is that someone who has a giant diamond but little liquid income shouldn't have to pay taxes on the diamond.
People who are having trouble paying property taxes are RICH people. Their problems go away immediately if they sell the giant asset they are holding onto, or if they even take a loan against its value (and payable when the asset is sold, perhaps when Grandma dies).
Does your argument work for all taxes? Should I just convert all my money into a single diamond and then claim I don't have any liquid cash to pay my income taxes?
"Oh, my diamond is too big to carve up to pay the taxman! Whatever shall I do!?!?"
Not actually a problem.
In cases where the property has appreciated so much that the increase in property taxes is a burden, surely there is a corresponding increase in equity to lessen the blow.
The "CA Prop 13" option pretty much makes newcomers finance existing landowners' property taxes - not my favorite option.
Since they are never sold, their property tax base never increases (re-assessment happens most often after a sale). So there has also been a net transfer of property tax burden from commercial to residential property.
Isn't keeping people in the city the whole reason you want to raise property taxes in the first place? Reduce the incentive of people to hold empty condos, so people can live in the city. So asking her to leave is the opposite goal to raising the real estate taxes.
I live upstate, and pay about 2.5% of my home's value in taxes. Every time they give the cops another 5% raise, it has an immediate, measurable impact on my homes value. For older people, it makes it very difficult for them to live without assistance.
Income tax is a far more just system. Poor and elderly people pay almost nothing, and everyone else contributes regardless of whether they own property.
Can somebody send me the AirBNB link to that one please?
She looks much older than 22. Then again, with all that money, you'd never have to worry about finding funding for a startup again.
Now squatting is illegal again.
These residents winter in Hong Kong, Phoenix, San Diego, etc. I don't really blame them. I'd rather spend the rainy months in a warmer climate, too.
I would imagine that the case may be similar for New York. If you can afford a multi-million dollar place in New York, you can probably afford another multi-million dollar place in some other place, too.
If you live in New York, even in an otherwise empty building, and feel lonely, you're doing it wrong.
[1]: http://www.aeonmagazine.com/being-human/olivia-laing-me-lone...
Plainly because everyone is like visitors, I see thousands of people every day, and I don't know any of them, as I move around the city (I lived in 4 different places in the city over the years), I noticed that I never felt at home, it is like being a eternal stranger, a eternal visitor.
When I lived in a 100k people town, I remember that I could realiably find the same people in the same places, for example I could go eat a hot dog at night in a park, and talk with the regular, build friendships, and so on. And yet, it was still strange...
But São Paulo? Well, I could take the same route every single day, and don't see the same people twice. It is just horrible.
I only don't feel depressingly lonely, because I made friendship with some people over internet, and every month we all meet on someone house.
Have you tried to see them twice? Have you asked?
Having lived in quite a few large metros in my life, and now living in NYC, I have to say: the city is as impersonal and isolating as you let it be.
My challenge to you: forget every preconceived notion you have about strangers, how you're supposed to behave in public, and the how and the whys of friendship and hanging out - and go talk to some strangers.
You'll get some weird looks, but your success rate will be 1-2 orders of magnitude higher than what you'd expect.
I've seen this stance expressed on HN before and receive some flak - but I say fuck the naysayers. They can have solitude if they wish, but there is no crime in asking a stranger to shoot the shit over coffee, and anyone whose day would be ruined by such a request is oversensitive and paranoid to the point of absurdism.
My biggest gripe with SP insofar as loneliness is concerned is that although there are tons of people to meet and be friends with, the shitty logistics of moving around the city made it very unlikely that I would actually get out of the house and visit my friends. In SF I can get to the house of practically any friend in 10-45 minutes. In SP, it often took more than double that to meet my friends. When you can bank on spending ~40 minutes each way to visit a friend, you start going out a lot less.
This trades off the progressive goals like affordable housing against providing a baseline of consumption activity to sustain NYC's tax base and its service workers.
I've also got the impression that consumption of various luxury goods and services in NY is highly coupled to bonus season in the financial sector. Millionaires from Kansas etc are likely to consume such services like Broadway, Bergdorfs etc year around because there are a lack of equivalent services back home.
[citation needed] Property tax in NYC is pretty low; this $3.35m condo in Tribeca is just over $20k/year in taxes and maintenance: http://streeteasy.com/nyc/sale/809162-condo-22-warren-street...
I would be more interested in knowing the stats for luxury housing across the whole city.
-The Nanny Diaries: A Novel by Emma Mclaughlin, Nicola Kraus
Note they all seems to own the place, ie it's not a rent.
Residences have something of a P/E ratio: market rent vs cost of the property. Perhaps the foregone rents are a drop in the ocean, but I don’t think so.
If it’s a question of luxury – the desire to have one’s own place even if it lies fallow – well, someone would have to be very idle rich to allow that to happen. Certainly there are high-end brokers who could host parties, or special visitors, in such places.
"Not living full-time in your home can invalidate your insurance"
and that's it, especially with Chinese, Russian or ME oil money. If you have $1++ bilion, you want to safely put away enough to live comfortably for the rest of your life, should government act up and taketh it. Maybe you are on a foreign trip, or you make it to the border, fake a passport or whatever, and then your property in NY or London awaits you. No need to work as a busboy or at a dry cleaning service.
In US, rich people may buy land, bunkers, gold and silver coins. But USA is much more stable and property rights are relatively safe so we call them paranoid.