Stream of Foreign Wealth Flows to Elite New York Real Estate
nytimes.com
nytimes.com
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.
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...
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.
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.
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)?
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?
What makes this so frustrating is that anyone moving to the city has to either pay exorbitant amounts of money for tiny apartments or rooms, or live far out of the center.
As a result, despite Copenhagen getting really popular as a culinary/cultural/etc. destination in the past decade, housing is still cheapish (1-bd ~$800-1100/mo, 2-bd ~$1300-1600/mo).
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[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) and Geolibertarianism (https://en.wikipedia.org/wiki/Geolibertarianism). Are you a Real Libertarian, or a ROYAL Libertarian? (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?
Infinite ownership of land and "I got here first, screw you" mentality doesn't work when everybody wants to live in the same place.
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.
I think it goes beyond land ownership too. In theory, I should not be judging other people's values and what they choose to spend their own money on. But when the free market tells us to dedicate our resources to building things like $500,000-per-month apartments, I am not sure I am willing to blindly agree.
I understand the debate about property ownership, but you can either choose to discuss using the system we have in place, or you can talk about the system itself. But trying to talk about both at the same time robs both points of view from the first principles they are starting from. Any argument in one system can be refuted by changing the principles in the other.
The land ownership system, currently in place in the US, may or may not be morally reprehensible and unfair, but that is not the issue to which the NY Times speaks.
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.
I think this accurately describes NYC too at this point...
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.
You can't stop people from buying property, and you probably shouldn't. However, you can force them to use 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.
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.
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.
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?"
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-5...
Seattle? Full of Amholes.
I worked at Google, which is similar to Amazon. Most people weren't assholes. A company can have a really negative culture (most large tech companies do, and I'd include Google insofar as it has stack-ranking, the 18-month rule, and internal-mobility issues) and still have 60-70% of the people be decent, admirable, even fun to be around. Trust me on this. Stop stereotyping people by their company; these "change the world" startups really aren't superior to Google or Amazon or even Goldman Sachs.
New York isn't ruined by Goldman Sachs and Seattle isn't going to be ruined by Amazon.
Chicago? Too cold.
Overstated. Today, it's beautiful. Actually, the average winter day is quite nice: slightly below freezing (great for cross-country skiing, winter running, etc.) but not unpleasantly cold. The coldest winter days require long johns. It really isn't bad if you know how to dress for it.
I won't claim that the climate here is as agreeable as San Diego's, but for a climate north of 40 degrees, it's fine. The coldest days are very cold, but the winter is not as cloudy as Seattle's, not as long as Europe's (mid-late March is actually spring), and not as stormy (in winter) as New York's.
North of 40 degrees, you're going to pay one way or another in winter, whether it's the clouds of Seattle (or Europe) or the cold/snow of Chicago or the 35-degree rain of the East Coast. Personally, I'd pick dry cold and semi-frequent sun.
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.
I'm not going to defend SF. It's a nice place to visit and its topography is incredible. The weather isn't bad. However, it's not a great place to live, and it's already been compromised by foreign money laundering. And, unlike in NYC, that has spread out to the suburbs (Silicon Valley) as well. There's a lot of scumbag money propping up Palo Alto.
All the other people who failed out of life and moved to Austin seem to like it just fine.
That's a crappy characterization of a place, if I've ever heard one. I found Austin to be alright. Remember that 50 years ago, California had the stigma of being where "people who failed out of life" ended up. Then they took over entertainment, technology, and agriculture.
It's a fine place, but nobody thinks "You know, I'm going to become a tech billionaire then live in Austin for the rest of my life."
It's a fallback city. When you realize you can't make it in SF or NYC or other collapsing-under-wealth locales, Austin looks like a safer alternative.
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.
I think the only thing that really fixes this sort of thing is transparency in markets.
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.
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.
I tend to think that those who were brought up in a certain area, or have some sort of personal attachment (family, significant other) do deserve some thought.
What we're seeing now is just people downgrading and downgrading, professionals living in tiny apartments, the prospect of raising a family disappearing, housing rising to encompass higher and higher shares of income - but demand is not really letting up.
It reminds me of working hours. The economy is not a zero sum game, but after a point it seems as if people are just competing for competition's sake, and everyone suffers as a result - stratification of people with long hours and people with zero/unstable hours, disregard for work/life balance, etc.
Maybe also related: a lot of startups take VC funding and current VC funding has shady origins. Some funds are powered by illegal russian investment money hidden through one or two layers of LPs, some is money of different questionable provenance, and some is actually clean money from sources you would expect. but, free money, so who cares if your startup is built on peasant blood money?
Once you've taken VC funding, you're not just in startups anymore, you're in politics of money. Money politics are the worst kind — it blinds you to anything illegal or immoral as long as the money keeps flowing.
Indiscriminate down votes have to be met with indiscriminate up votes. What a daft situation.
Edit: Ah! That also explains why explanatory comments aren't required for down votes - preferential control. I didn't realise how rigged this is.
(I doubt it's Evan Spiegel himself. It would be hilarious if it were so. I'd guess that it's a Snapchat employee of relatively low significance, but I really have no idea who it is.)