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July 2, 2014 11:22 AM   Subscribe

Why New York real estate is the best place to hide your millions.
posted by ellieBOA (87 comments total) 20 users marked this as a favorite

 
One of the greatest crimes of the 20th century was that we somehow managed to turn housing (a basic human necessity) into a fungable and deflationary currency.
posted by schmod at 11:25 AM on July 2 [30 favorites]


there are just so many insane quotes in that article.

Someone is trying to flip an 8 figure townhouse near us.
posted by JPD at 11:29 AM on July 2


I'm strongly amused that one of the investors in One57 is "Escape From New York LLC".
posted by Halloween Jack at 11:38 AM on July 2 [6 favorites]


hey, Snake Plissken needs a place to hang his hat, too.
posted by k5.user at 11:47 AM on July 2


It's sickening to see shelter - a basic necessity - turned into an investment commodity.

Manhattan, San Francisco, etc. are no longer long-term housing destinations for middle-class income earners. If you're a cop, teacher, retail worker, restaurant worker, hotel worker, middle manager, fireman, social worker, construction worker, etc. etc. it's impossible to buy a home in many urban areas, let alone rent in a way that leaves sufficient disposable income to pay for other things.

From the perspective of well-knit communities, there is something wrong with large-scale speculation on shelter; that said, I don't see it waning. It's an especially hard pill to swallow the lack of affordability of housing for those who still think that the "American Dream" is a reality.
posted by Vibrissae at 11:49 AM on July 2 [5 favorites]


Wait I thought London was the premier location for hiding millions of pounds worth of assets? Or has London gotten so expensive that only Billionaires can hide their assets there?
posted by vuron at 11:58 AM on July 2 [1 favorite]


Well to be fair Manhattan has not been a housing destination for middle-class income earners for a long time. It used to be a barbell. Low and High. But now the low are being pushed out and the definition of high is becoming more and more rarified. More disconcertingly is how expensive Real Estate is getting in places like Central Queens - which is where those cops, teachers, and workers live.
posted by JPD at 11:58 AM on July 2 [1 favorite]


A few weeks ago, after a major press conference on affordable housing in New York, I wrote to Mayor De Blasio to suggest that a big part of the problem was this very thing - the super-rich who use New York real estate as tax shelters. I urged him to do some kind of non-residency tax to combat this.

Looks like sending him this article is the perfect opportunity to write him again.
posted by EmpressCallipygos at 11:59 AM on July 2 [4 favorites]


Wait I thought London was the premier location for hiding millions of pounds worth of assets? Or has London gotten so expensive that only Billionaires can hide their assets there?

You've got to diversify. Seriously though - I think its slightly different cohorts. NYC real estate also has a higher carrying cost then London Real Estate.
posted by JPD at 12:00 PM on July 2


Was thinking about this the other day...maybe what we need is a federally/state mandated upper limit on what can be charged for rent per square foot...possibly tie it to some multiple of minmum wage. Like 200 sq ft cannot be more than 6x min wage/mo.
posted by sexyrobot at 12:02 PM on July 2 [4 favorites]


Single Page

worlds smallest violin
.....add Dual Income No Kids Professor and Art Director couple to that list Vibrissae.

We would be seriously "upper middle" class anywhere outside of SF/NYC, but anywhere in manhattan south of 70th st is out for us for anything other than the tiniest of alcove studios (less than 450 sq feet). You can't get anything in that resembles a 1br for less than $400k. (.....And maintenance on these places starts at $1k per month and rises to up to $3.5k/month for a nice 1br, mean maintenance is ~$1800!)

More anecdata.

A friend of ours, who is a 7yr+ Senior GOOGLE Engineer (and appropriately rich because of shares) was recenlty trying to buy a 2BR on the Upper West Side. He was outbid on nine separate offers for different apartments, each one significantly above asking, with all-cash offers in excess of one million dollars.

This place is insane.
posted by lalochezia at 12:03 PM on July 2 [6 favorites]


From the article:

Even those with less reflexively hostile reactions to foreign buying competition might still wonder: Who are these people? An entire industry of brokers, lawyers, and tight-lipped advisers exists largely to keep anyone from discovering the answer. This is because, while New York real estate has significant drawbacks as an asset—it’s illiquid and costly to manage—it has a major selling point in its relative opacity. With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account. And that makes the city an island haven for those who want to stash cash in an increasingly monitored global financial system. “With everything that is going on in Switzerland in terms of transparency, people are being forced to pay taxes on their capital that they used to hold there,” says Rodrigo Nino, the president of the Prodigy Network. “Real estate is a great alternative.”

...to paying legally-mandated taxes on obscene wealth, apparently. Piketty's suggestion of a global wealth tax is extemely timely in light of this open, not-even-trying-to-hide-it global arbitrage.

Well to be fair Manhattan has not been a housing destination for middle-class income earners for a long time. It used to be a barbell. Low and High. But now the low are being pushed out and the definition of high is becoming more and more rarified. More disconcertingly is how expensive Real Estate is getting in places like Central Queens - which is where those cops, teachers, and workers live.

Cops, teachers, and workers have as much intrinsic right to live where they want as anyone else. So you're right that this maybe isn't totally surprising, but the implication that a "fair" analysis wouldn't take issue with apparently-unlimited gentrification is questionable.
posted by clockzero at 12:06 PM on July 2 [8 favorites]


If you walk into a bank with anything over ten grand, they fill out a transaction report. How does "some foreign dude gave me a suitcase of money to buy an apartment" keep the alarm bells from going off?
posted by dr_dank at 12:06 PM on July 2 [11 favorites]


At One57, currently the city’s most expensive new address, the tax break amounts to around 94 percent. A Times analysis estimated that its priciest penthouse, which is reportedly in contract for more than $90 million, would initially be billed less than $1,500 a month.

THIS IS MY RAGE FACE
posted by lalochezia at 12:09 PM on July 2 [17 favorites]


So you're right that this maybe isn't totally surprising, but the implication that a "fair" analysis wouldn't take issue with apparently-unlimited gentrification is questionable.

The point was that the gentrification of Manhattan pre-dates this current trend of vacant foreign owned homes by about 80 years give or take. Take issue with that gentrification, just recognize it has nothing at all to do with the topic at hand - or even the last 35 years of economic policy.
posted by JPD at 12:10 PM on July 2


What an ugly building at the top of the article.
posted by Melismata at 12:11 PM on July 2


Remember when this Onion article was humorous exaggeration
posted by theodolite at 12:12 PM on July 2 [11 favorites]


If you walk into a bank with anything over ten grand, they fill out a transaction report. How does "some foreign dude gave me a suitcase of money to buy an apartment" keep the alarm bells from going off?

Banks and Brokerages have a responsibility to have anti-money laundering rules in place and can be fined if they don't follow them. For god knows why, Real Estate Developers do not have that requirement.

I sorta wonder if that's a reason why they prefer new builds.
posted by JPD at 12:13 PM on July 2 [3 favorites]


Yes, yes. Put all the filthy rich people in one location. When the revolution comes, finding their wealth will be easy.
posted by hal_c_on at 12:16 PM on July 2 [6 favorites]


You guys really see high-rise luxury condos in New York City as a "basic human need"? Because what the
posted by xmutex at 12:18 PM on July 2 [6 favorites]


Well to be fair Manhattan has not been a housing destination for middle-class income earners for a long time.

And yet there remain a lot of middle-class people in Manhattan, including my retired-teacher mother. They're right there. They are, in fact, in the majority.

Their needs are just overlooked, and they don't make great fodder for feature articles.
posted by evidenceofabsence at 12:21 PM on July 2 [2 favorites]


Wait until these people realize that the working class has access to wrecking balls.
posted by Sys Rq at 12:23 PM on July 2 [5 favorites]


Yes, yes. Put all the filthy rich people in one location. When the revolution comes, finding their wealth will be easy.

Assuming it's the two months out of the year they're actually there.
posted by Brainy at 12:25 PM on July 2 [1 favorite]


The point was that the gentrification of Manhattan pre-dates this current trend of vacant foreign owned homes by about 80 years give or take. Take issue with that gentrification, just recognize it has nothing at all to do with the topic at hand - or even the last 35 years of economic policy.

But neither of those things are true.

1. Gentrification has everything to do with the topic at hand. The article is about a novel form of gentrification, in fact.

2. This gentrification is one result of the past 35 years of economic policy, which has utterly failed to deal with the ongoing concentration of wealth globally and hasn't done any better at preventing the kind of tax arbitrage characterized in that bit I quoted above.
posted by clockzero at 12:25 PM on July 2


It's sickening to see shelter - a basic necessity - turned into an investment commodity.

No, it's wonderful - or, well, necessary. Most basic necessities - food, shelter, clothing - are investment commodities. Just as there's nothing wrong with a well-functioning wheat futures market, which reduces the risk that farmers face, there's nothing wrong with companies that buy up apartment buildings, which (again, in a well-functioning market) should encourage developers to build that housing, so that more people have decent places to live.

But a lot more is going on here.

First, there's simply the income inequality driving up the price of premium locations, exacerbated by what I think of as simply "these people must have failed kindergarten, because they didn't learn to share." If someone wants a 3000 sq ft apartment instead of a 1000 sq ft apartment, that's two other families who can't have 1000 sq ft apartments. If someone wants 5 apartments in 5 cities and leaves them each empty 80 percent of the time, that's 4 other families who can't live there.

Then, as this article focuses on, these people are paying a premium to hide their money, which distorts the market. Instead of choosing the best (and generally most productive) investment, they are choosing the best secret investment. Plus it increases the incentive for corruption; you're (somewhat) less likely to be corrupt if it's hard to save or use the money.

Finally, there are the distorting tax breaks.
posted by Mr.Know-it-some at 12:27 PM on July 2 [2 favorites]


I came in with a wrecking ball
I never hit so hard in love
All I wanted was to break your walls
All you ever did was wreck my housing eco...on...no...my
Yeah, eco...on...no...my

posted by evidenceofabsence at 12:28 PM on July 2 [1 favorite]


1. Gentrification has everything to do with the topic at hand. The article is about a novel form of gentrification, in fact.

2. This gentrification is one result of the past 35 years of economic policy, which has utterly failed to deal with the ongoing concentration of wealth globally and hasn't done any better at preventing the kind of tax arbitrage characterized in that bit I quoted above.


Yes of course. But the wave of gentrification that priced most middle class families out of buying in Manhattan happened way before any of those things. I mean Mitchell-Lama is from 1955. This has been a long-term problem in Manhattan.

Also its not really "Tax Arbitrage" - its bad tax laws in these peoples home domiciles, not in the US. The US tax code has little to do with this. In fact the US tax code is a bit unique in that it does a decent job in preventing this issue of offshoring personal income.
posted by JPD at 12:39 PM on July 2 [2 favorites]


should encourage developers to build that housing

But that's the thing. Buildings like One57 are almost tailor made as investment properties for speculators rather than actual residential structures. They aren't contextual, they're the opposite of adaptive, and they require residents to contend with a 50-story-plus elevator commute just to get out of the building. Who's going to actually live in this?

Such condo towers cast both a literal and figurative shadow over the rest of the city. By encouraging speculation, they skew sales and rental prices for the rest of the market, i.e., those of us who actually live here.

And god help us if the bubble should burst, and the buildings become neglected. An abandoned three-story brownstone is one thing to contend with. A dilapidated high-rise in midtown is a whole other story.
posted by evidenceofabsence at 12:41 PM on July 2 [3 favorites]


The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.

Where's the squatters?

I'm not snarking, i'm completely serious. If there's this much empty real estate that seems like a fucking goldmine for squatting, and is the equivalent of leaving a bunch of cars parked with the doors unlocked and the keys in the ignition in the worst part of town.

I'm not talking about crust punk type squatters either. I mean the really clever ones who make up fake leases, dress like they'd live in the building, park their cars outside, get their names on bills, everything. If squats in my town get power and everything fairly often, then people have to be doing it there.

Are there any stats or articles about that? Because even where i am it happens at a fairly low but consistent level. It must be HUGE there. Is it being swept under the rug? Do they hire private security companies simply to check on the place once a week or something?

I realize some of these places are likely high tech proxcard secure entry condo towers(at which it would be easy to tailgate your way in a few times, then be recognized and regularly let in if you dressed and looked the part even vaguely, or pulled off eccentric...), but they mentioned tons of browstones and other stuff too...

Am i missing something here?
posted by emptythought at 12:48 PM on July 2 [4 favorites]


Manhattan, San Francisco, etc. are no longer long-term housing destinations for middle-class income earners. If you're a cop, teacher, retail worker, restaurant worker, hotel worker, middle manager, fireman, social worker, construction worker, etc. etc. it's impossible to buy a home in many urban areas, let alone rent in a way that leaves sufficient disposable income to pay for other things.


I'm a science professor at a Manhattan public university. Over the last 5 years, the majority of the assistant professors we've hired have stayed long enough to get their lab up and running, gotten a million or so in grant funding, and left either for one of the private universities in the city that have faculty housing or to universities outside of NYC. The only ones left are those who weren't successful enough to do this, the one exception being a fellow who's wife works on wall street.

These are the middle class people in the city with the most mobile jobs, due to the fact that they bring in more money in overhead than they cost. And they're leaving in droves. Our older faculty all either bought when things were cheaper or got rent-controlled apartments when that was still easy to do. But we are not retaining younger people, and that is already starting to be a major issue as the older ones retire.

Given the lack of national interest in higher education this is happening off of the radar, but it's going to start hitting jobs like cops and firemen soon. Will people start to care if the firemen who answer their 911 calls are all either over 50 or failed out of the firefighter academy?
posted by overhauser at 12:48 PM on July 2 [4 favorites]


Cops, teachers, and workers have as much intrinsic right to live where they want as anyone else.
I don't understand this statement. I mean, I suppose this is true, considering that no one, as far as I know, has an intrinsic right to live wherever he wants, but I suspect that's not what you're saying.
posted by MrMoonPie at 12:49 PM on July 2 [1 favorite]


In London these investment properties are left empty 99.9999% of the time

See also

According to the article, investors prefer new developments, so one assumes developments are being built specifically for these investors, and not as actual housing. That is what is sick and market distorting. Investors often buy sight unseen.
posted by maggiemaggie at 12:51 PM on July 2


Thread is not complete without a mention of the most expensive real-estate market in North America: Vancouver.
posted by jokeefe at 12:54 PM on July 2


Where's the squatters?

Avoiding the SWATers.
posted by srboisvert at 12:55 PM on July 2 [2 favorites]


Am i missing something here?

The cars are parked, but the doors are locked, and the keys are nowhere to be found, and there's a valet, and it's hardly in the worst part of town.

There are residents in the remaining 70% of apartments, and doormen downstairs, and all of Midtown North's police presence to contend with. It might be possible to do what you're suggesting, but it wouldn't exactly be easy, and there's a high probability that even if you pulled it off, you'd be caught.
posted by evidenceofabsence at 12:55 PM on July 2 [1 favorite]


Oh, and on the "cops, teachers, and workers" thing... i think a better way to bring up that point is "How is a city supposed to work if none of those people can afford to live there?"

A better hammer for this nail isn't that they deserve to(which i agree with, but it's a hard sell for some libertarian bootstrapper meritocracy types) but how the hell is the place supposed to work if the guy who serves you your coffee, drives your cab or subway train, fixes your washing machine, makes your lunch, arrests the drunk guy who punched your car window out, etc can't live anywhere within two hours of the place?

Because that's the logical endgame of this. It's being played in a very zero-sum way. What kind of bizarre wasteland is a city in which no one who actually keeps the gears lubed and turning can live going to look like?

Keep it practical. This is a pretty basic problem in that sense.

How are you going to drive if no one who can fix your car can afford to live anywhere near you? I realize this isn't a problem for the people who just buy and never live there, but this is going to hurt the value of their property in the end.
posted by emptythought at 12:56 PM on July 2 [15 favorites]


Am i missing something here?

The largest police force in the world?
posted by bradbane at 12:58 PM on July 2 [2 favorites]


From the perspective of well-knit communities, there is something wrong with large-scale speculation on shelter; that said, I don't see it waning. It's an especially hard pill to swallow the lack of affordability of housing for those who still think that the "American Dream" is a reality.

A relative of mine has said that society starts to fall apart when young people can't afford to buy a house in the neighborhood they grew up in. He might be on to something - there's a continuity of care to neighborhoods and their characters there that just... ends, when it gets to that point.
posted by mhoye at 12:59 PM on July 2 [5 favorites]


Yes of course. But the wave of gentrification that priced most middle class families out of buying in Manhattan happened way before any of those things. I mean Mitchell-Lama is from 1955. This has been a long-term problem in Manhattan.

Right. We agree that Manhattan is gentrified and has been for some time now. I was merely pointing out that this kind of gentrification by the global financial elite is somewhat new, but is still gentrification, and is also very much interconnected with economic policy.

Also its not really "Tax Arbitrage" - its bad tax laws in these peoples home domiciles, not in the US. The US tax code has little to do with this. In fact the US tax code is a bit unique in that it does a decent job in preventing this issue of offshoring personal income.

Sure it's arbitrage. They're shopping around, on a global scale, not merely to invest but to launder money. So it's really regulatory arbitrage rather than tax per se, but arbitrage it is just the same. If the US had different laws about foreign capital, the situation might be radically different.
posted by clockzero at 1:01 PM on July 2 [1 favorite]


From the article (emphasis mine):

Earlier this year, an international team led by Shima Baradaran, a law professor at the University of Utah, published an ingenious study of its mechanics. The academics sent emails to more than 7,000 firms around the world that offer incorporation services, posing as a variety of characters, like a politically connected Uzbek or a Lebanese representative of an Islamic charity. “We purposely made it as shady as possible,” Baradaran says.

The experiment’s results confounded conventional presumptions. It turned out that offshore locales like the Caymans were the most stringent about complying with international anti-money-laundering standards. It was easier to set up an untraceable shell company in the U.S. than in any country other than Kenya. The study found firms in business-friendly states like Delaware and Nevada were particularly “abysmal.”

No federal authority, not even the IRS, keeps track of the actual “beneficial” owners behind LLCs, and the more lenient states don’t even require much record-keeping by the firms that handle incorporation. Many of the service providers Baradaran’s team approached asked for no identity documentation and were willing to set up LLCs in even the most suspicious scenarios. Most surprisingly, Baradaran found that the suggestion of foreign corruption actually increased the likelihood that a provider would agree to do business. “It’s really a race to the bottom,” Baradaran says.


well I'll be
posted by St. Peepsburg at 1:03 PM on July 2 [14 favorites]


I was merely pointing out that this kind of gentrification by the global financial elite is somewhat new, but is still gentrification, and is also very much interconnected with economic policy.

In typical gentrification people live in the place they bought, even if they're different people from a different economic strata. That is not the case here.
posted by mhoye at 1:04 PM on July 2 [2 favorites]


What's really crazy about this to me is, given the prices (demand) for urban living, that we're not really building any more of it. Obviously lots of people want to live in a fairly dense, mixed-use, walkable environment for economic, cultural, and social reasons, but we're mostly not building places like that anymore.
posted by entropicamericana at 1:05 PM on July 2 [2 favorites]


No federal authority, not even the IRS, keeps track of the actual “beneficial” owners behind LLCs, and the more lenient states don’t even require much record-keeping by the firms that handle incorporation.

Is this what people are talking about when they are saying that the Hobby Lobby decision will "pierce the Corporate Veil"?
posted by maggiemaggie at 1:05 PM on July 2


schmod: One of the greatest crimes of the 20th century was that we somehow managed to turn housing (a basic human necessity) into a fungable and deflationary currency.

I don't think this is a creation of the 20th century. Sure, the practice was refined and expanded in such a way as to make it more lucrative for the well-to-do, but prime territory has long been traded as currency (warning: real estate blog/PR site, but with a decent long-range view; alternatively, The Complete History Of US Real Estate Bubbles Since 1800, from Business Insider).

Shelter has never been a universal right (though many countries claim to recognize it as such), and making property more valuable through ridiculous extravagances takes a home beyond shelter to a luxury in some cases.
posted by filthy light thief at 1:07 PM on July 2 [1 favorite]


Cops, teachers, and workers have as much intrinsic right to live where they want as anyone else.

Is this something people believe? That folks have some kind of magical right to live where they want? This doesn't make any sense to me.
posted by xmutex at 1:08 PM on July 2 [2 favorites]


Is this what people are talking about when they are saying that the Hobby Lobby decision will "pierce the Corporate Veil"?

Probably, but you know it wont. In 3 weeks to a month the vast majority of people will have completely moved on from that on to the next "omg plane crash!" collective consciousness fervor, barring a few activists and some people on the internet.

You know it's true. It's an outrageous story, but when there's no clear path of what to do but be outraged the average person moves on.

That, and there's a lot of money interested in that not happening, who can flex and shift the focus on every news channel to something else people will get worked up about.
posted by emptythought at 1:09 PM on July 2 [2 favorites]


A relative of mine has said that society starts to fall apart when young people can't afford to buy a house in the neighborhood they grew up in. He might be on to something - there's a continuity of care to neighborhoods and their characters there that just... ends, when it gets to that point.

I grew up on the UWS. No way in hell I could afford to live there now. I can barely afford to live in rural Oregon.
posted by rabbitrabbit at 1:10 PM on July 2


Sure it's arbitrage. They're shopping around, on a global scale, not merely to invest but to launder money. So it's really regulatory arbitrage rather than tax per se, but arbitrage it is just the same. If the US had different laws about foreign capital, the situation might be radically different

They really aren't. Once the money is out of their home domicile - or never touched their home domicile- its not taxable no matter what because those countries don't have global taxation. Now - how they got that money out of their home domicile might be shady as hell - but the US doesn't have anything to do with that.

Take the Italian woman in the story. They are expats, earning money in Nigeria, looking to put it somewhere safe. They can literally put that anywhere and it would not be taxable.

Is this what people are talking about when they are saying that the Hobby Lobby decision will "pierce the Corporate Veil"?

No. Piercing the Corporate Veil means that underlying owners of a limited liability entity can be held liable because of something illegal they did.
posted by JPD at 1:10 PM on July 2 [2 favorites]


entropicamericana: What's really crazy about this to me is, given the prices (demand) for urban living, that we're not really building any more of it. Obviously lots of people want to live in a fairly dense, mixed-use, walkable environment for economic, cultural, and social reasons, but we're mostly not building places like that anymore.

Throughout the US, there are varying notions of what "dense" is, but to most people outside of major cities, the notion of "a home of your own" does not include a shared wall. This is changing with the Millennials, but developers haven't quite accepted that reality (and/or planning laws and zoning regulations may hamper additional high density development).
posted by filthy light thief at 1:11 PM on July 2


BTW: the cost of our 2-bedroom apartment on 84th and Amsterdam in 1993? $1,000/month.
posted by rabbitrabbit at 1:11 PM on July 2


No federal authority, not even the IRS, keeps track of the actual “beneficial” owners behind LLCs, and the more lenient states don’t even require much record-keeping by the firms that handle incorporation.

But the LLCs file tax returns.
posted by JPD at 1:11 PM on July 2


clockzero: Cops, teachers, and workers have as much intrinsic right to live where they want as anyone else.

xmutex: Is this something people believe? That folks have some kind of magical right to live where they want? This doesn't make any sense to me.

Mixed housing options (affordability for all within a region/block), not just mixed use (residential, commercial, office, etc) are goals promoted by planners, but it's a hard sell. In reality, the wealthy need those support systems (schools, emergency services, grocery stores and restaurants) just as much as the less well-to-do, so by creating areas of super-high cost housing only makes issues of commute times, congestion, sprawl and all the related investments in infrastructure a foregone conclusion.

In short: by ensuring a good balance of housing options in urban developments will enable better cities for everyone. But then the well-to-do are rubbing elbows with the riff-raff who bus their tables and teach their kids.
posted by filthy light thief at 1:16 PM on July 2 [3 favorites]


But the LLCs file tax returns.

Keep in mind the members of the LLC (roughly the equivalent of a shareholder of a corporation) can be other corporate entities, not people. You can do some really creative finagling with corporate regulations across states (and countries) to avoid ever tying a human being's name into any of the dealings.
posted by griphus at 1:19 PM on July 2


Well, without ever tying a human being's name in such a way that said human being can be held legally responsible for the entities' dealings even if the corporate veil is pierced.
posted by griphus at 1:20 PM on July 2


There is probably no chance of making it illegal for an LLC to buy residential property... is there?
posted by maggiemaggie at 1:27 PM on July 2


Keep in mind the members of the LLC (roughly the equivalent of a shareholder of a corporation) can be other corporate entities, not people. You can do some really creative finagling with corporate regulations across states (and countries) to avoid ever tying a human being's name into any of the dealings.


Sure, but my point was that if you are doing that and doing that to avoid taxes you are committing a crime. Its not some free tax dodge as folks here seem to think.

"Oh rich people just set up corporate entities and don't pay taxes on anything" - that's just simply not true.
posted by JPD at 1:27 PM on July 2 [1 favorite]


Is this something people believe? That folks have some kind of magical right to say what they want? This doesn't make any sense to me.

Rights exist when people collectively say they exist, put a framework for them in place and enforce that framework.

That said, I do not necessarily think there will ever be a framework that would allow everyone to live where they chose, though--as with all other necessities of a non-monstrous life--the market system is bullshit.
posted by Steely-eyed Missile Man at 1:30 PM on July 2 [1 favorite]


NYC should jack up property taxes. Makes it a lot harder to buy a property and sit on it.
posted by MisantropicPainforest at 1:31 PM on July 2


There has got to be a way to penalize buying property as investment and letting it sit empty... it is too unhealthy for the surrounding community.
posted by maggiemaggie at 1:34 PM on July 2


Here is a pretty good primer on how taxation for foreigners works - and compares owning through an LLC or personally. Notice the witholding taxes.

NYC should jack up property taxes. Makes it a lot harder to buy a property and sit on it.

Good idea in theory, but every mayor we've had since Giuliani needed to pull votes from the middle class parts of Queens and BK to win - and they would have a heart attack about that. The real way to do it would be to eliminate the city income tax and create some incredibly progressive property tax rates - but I've never heard of that. But I think you might need the state for that, and again that wouldn't happen.
posted by JPD at 1:36 PM on July 2


"Oh rich people just set up corporate entities and don't pay taxes on anything" - that's just simply not true.

Yeah, it's absolutely not as simple as "get a slick lawyer and never pay taxes."

There is probably no chance of making it illegal for an LLC to buy residential property... is there?

It would completely fuck up the real estate market (or, sigh, moreso) in places like NYC for a number of reasons, including the fact that "residential property" can apply to a) a physical apartment building, b) the individual units within an apartment building (an individual condo apartment), c) shares of an apartment building corporation attributed to a specific unit (an co-op apartment) and so on. No one would buy something like an apartment building without the protection granted by an LLC. Simply barring LLCs from being able to purchase residential property helps no one.

Also it would cut off a nice revenue stream to the state. I work at a company forming LLCs and NYS (among other states) makes a pretty penny from us fronting filing fees alone. And we're pretty small.
posted by griphus at 1:41 PM on July 2 [2 favorites]


NYC should implement a pied-à-terre surtax. Any property that isn't occupied by a full-time NYC resident (and the NYS Department of Taxation invests a great deal of effort in determining who is and isn't a full-time NYC resident) should get a hefty surcharge. No voters would be harmed in the process.
posted by 1970s Antihero at 1:45 PM on July 2 [12 favorites]


Like 200 sq ft cannot be more than 6x min wage/mo.

That's a great idea. And it might get some landlords and rich folks behind municipalities raising like the local minimum wage (like Seattle did recently, to $15).
posted by drjimmy11 at 1:48 PM on July 2 [1 favorite]


It would completely fuck up the real estate market (or, sigh, moreso) in places like NYC

I do see all your points, and I absolutely get it, however the real estate market in NYC has so little bearing to reality right now that I could not give a crap whether or how it gets fucked up at this point... some real estate interests can lose everything for all I care. In fact I would prefer it.

Your other points all stand.
posted by maggiemaggie at 1:56 PM on July 2


As someone who is like this close to closing on a co-op in Brooklyn (to live in) all I ask is that the Revolution kindly wait until we at least get our stuff into said apartment.
posted by griphus at 2:07 PM on July 2 [4 favorites]


all I ask is that the Revolution kindly wait until we at least get our stuff into said apartment.

But that means we'll be coming for you.
posted by overhauser at 2:14 PM on July 2


As someone who has a great interest in urbanism, I find the tears from folks in Manhattan and San Francisco to be amusing. It's true that those places need more housing that is affordable, but if you look at the national outlook for cities in this country, too many people trying to live in central cities is literally the tiniest problem ever. (Even in NYC and the Bay Area, there are large swathes of the Bronx/Brooklyn or Oakland/Richmond that folks simply don't consider as part of the housing market). Most metro areas would love if people were competing to live (or even pretend to live) in their central cities.
posted by Octaviuz at 2:15 PM on July 2


too many people trying to live in central cities is literally the tiniest problem ever

They aren't trying to live here. That's the whole point.
posted by evidenceofabsence at 2:24 PM on July 2


Yeah, I actually do wish I could live somewhere else, and I'm jealous of my friends who settled in places like Chicago and Baltimore.

However, I've lived in NYC almost all my life, (briefly in London which is even more expensive), and at this point I have a good job, my professional and social network is here, and it would not do anyone any good for me to try to move and start all over again, especially since I'm at the age were people are starting to look askance at hiring me at all.

I'm attached to this place, so I have feelings about it. Not everybody cares, but then they could go start a thread about their own city.
posted by maggiemaggie at 2:29 PM on July 2 [2 favorites]


Also griphus, thanks for answering my question about making LLCs illegal.
posted by maggiemaggie at 2:34 PM on July 2 [1 favorite]


"Cops, teachers, and workers have as much intrinsic right to live where they want as anyone else."

Is this something people believe? That folks have some kind of magical right to live where they want? This doesn't make any sense to me.


Perhaps I was unclear. I meant that they have that intrinsic right to the same extent as anyone has it; that is, their position in society as it derives from their occupation and associated socio-economic status shouldn't automatically relegate them to certain neighborhoods. I didn't mean that they have a right to live wherever which supersedes the basic reality of costs and resources.

"Sure it's arbitrage. They're shopping around, on a global scale, not merely to invest but to launder money. So it's really regulatory arbitrage rather than tax per se, but arbitrage it is just the same. If the US had different laws about foreign capital, the situation might be radically different"

They really aren't. Once the money is out of their home domicile - or never touched their home domicile- its not taxable no matter what because those countries don't have global taxation. Now - how they got that money out of their home domicile might be shady as hell - but the US doesn't have anything to do with that.

Take the Italian woman in the story. They are expats, earning money in Nigeria, looking to put it somewhere safe. They can literally put that anywhere and it would not be taxable.


I see your point, JPD. I was using the term in a somewhat imprecise way, upon closer thought.
posted by clockzero at 2:35 PM on July 2


(Even in NYC ... there are large swathes of the Bronx/Brooklyn ... that folks simply don't consider as part of the housing market).

Which folks? Considered by whom? I honestly have no idea what you mean.
posted by griphus at 2:38 PM on July 2 [2 favorites]


I find the tears from folks in Manhattan and San Francisco to be amusing.

I find this.... weird.

Anyway, housing is almost always people's number one expense, so I don't see how having housing prices artificially inflated by investors is the 'tiniest problem ever'.
posted by MisantropicPainforest at 2:39 PM on July 2 [2 favorites]


I recently hired a NYC native that moved from Queens to Dallas out of the blue because of the housing situation (among other things). His rent was skyrocketing and his salary not so much. So, the solution was to move away to a large city with great jobs and comparably low housing rates. That is certainly not an ideal situation, but it does explain the recent influx of professionals in Texas.
posted by Benway at 3:03 PM on July 2


Which folks? Considered by whom? I honestly have no idea what you mean.
I'm referring to people who complain (with very good reason) about insane housing prices in Manhattan yet would not even consider non Park Slope/Williamsburg portions of Brooklyn which are substantially more affordable, I was leaving implict my suggestion that said lack of of consideration is a product of demographic factors.
posted by Octaviuz at 3:03 PM on July 2


Time to eat the rich. Totally keto.

Even house prices in Brisbane, which is a shitbox dustbowl fucktown in Australia, are prohibitively crazy. I can't say I have much empathy for anybody who decides to go anywhere near Manhattan on less than a mil, but I can see how it would be, y'know, annoying or whatever.
posted by turbid dahlia at 3:07 PM on July 2


I'm referring to people who complain (with very good reason) about insane housing prices in Manhattan yet would not even consider non Park Slope/Williamsburg portions of Brooklyn

Those people are hardly the only ones complaining about the current state of affairs.
posted by evidenceofabsence at 4:23 PM on July 2 [1 favorite]


The laundering process typically happens in stages: Illegal cash enters the world financial system somewhere....

I'd have liked a little more detail on this stage of the process. Suggestions for good sources on this sort of thing would be most welcome.
posted by BWA at 4:26 PM on July 2


NYC should jack up property taxes. Makes it a lot harder to buy a property and sit on it.

That's exactly what I told the Mayor today. (I'm not kidding, I really did send him a link to this article.)

I'm referring to people who complain (with very good reason) about insane housing prices in Manhattan yet would not even consider non Park Slope/Williamsburg portions of Brooklyn

yeah, see, we're talking about people who live in, like, Sunnyside, and are facing having to move to Poughkeepsie and have a two-hour commute to their New York job.
posted by EmpressCallipygos at 4:44 PM on July 2 [3 favorites]


I'm referring to people who complain (with very good reason) about insane housing prices in Manhattan yet would not even consider non Park Slope/Williamsburg portions of Brooklyn which are substantially more affordable, I was leaving implict my suggestion that said lack of of consideration is a product of demographic factors.

I wonder how recently you've priced this out. I have a friend looking for a one bedroom in Brooklyn and she's waiting to hear back from a middle income rental that she will feel super lucky to get for $1450-1500ish - this is off Nostrand Avenue south of Eastern Parkway. Bedstuy, Crown Heights, Lefferts Gardens, Flatbush, thee are all expensive now. East New York and Brownsville really can't be far behind.
posted by Salamandrous at 5:05 PM on July 2 [1 favorite]


It's gonna go south (literally) before it hits Canarsie/Brownsville/Easter New York, IMO.

Ditmas Park's border has been curiously getting higher and higher in the last year or so and average prices around Kensington, Ditmas Park and north Midwood have gone up nearly $100K in 5 years.

I assume the part of Midwood I'm moving to is soon going to be "Ditmas Park South."
posted by griphus at 5:09 PM on July 2


No federal authority, not even the IRS, keeps track of the actual “beneficial” owners behind LLCs, and the more lenient states don’t even require much record-keeping by the firms that handle incorporation. Many of the service providers Baradaran’s team approached asked for no identity documentation and were willing to set up LLCs in even the most suspicious scenarios. Most surprisingly, Baradaran found that the suggestion of foreign corruption actually increased the likelihood that a provider would agree to do business. “It’s really a race to the bottom,” Baradaran says.

This is why I suspect Chicago's Mayor Daley sold the parking rights to himself. I mean really, who could pass up that kind of sweet deal?
posted by srboisvert at 5:55 PM on July 2


I keep wondering when insane pricing--really insane pricing--will hit Chicago. It's got nearly everything NYC has and is dirt-cheap by comparison.
posted by persona au gratin at 7:53 PM on July 2


I live in HK and pay US$3400 for a 500 sq ft 1 bedroom. To purchase it would cost US$1.5-2m.

I earn in the top 10% of people here, but my wife and I can't really fathom to how to purchase a place at those rates, let alone for a larger place where we could have kids. Neither of us from HK and we just don't understand who exactly is purchasing all these extremely middle-of-the-road flats at such inflated prices (I guess there's a lot of mainland Chinese involved).

NYC sounds somewhat comparable.

That said, it also shows that contrary to what someone suggested upthread, an inability to purchase doesn't mean a "collapse in society" - HK has been ticking along just fine in that sense. People just have different expectations of housing arrangements, and a massive flow of wealth continues upwards to property owners. It's a shitty way to organize a society, and the inequality here is far higher than I ever experienced living elsewhere, but it doesn't result in its collapse.
posted by modernnomad at 11:32 PM on July 2


...yet?
posted by Steely-eyed Missile Man at 5:27 AM on July 3


Both NYC and HK are international cities with real geographic limits and a limited supply of housing.....but....

I think one of the differences between HK and NYC is that 1) NYC will protect Capital at all costs, whereas chinese rule of law wrt rich people is less certain and 2) while it is a capital hoarding-zone it is also perceived as one of the most dynamic places culturally in the world.

Both of those forces existed in an uneasy tension (with 1 winning slowly until the mid-late 90's..) but recently the acceleration of 1's dominance is very depressing to see and experience.
posted by lalochezia at 5:42 AM on July 3


HK far more ruthlessly capitalistic than anywhere in the US when it comes to real estate.

The entire reason why HK has seen property prices do what they've done is constrained land - essentially no where to grow, and a desire by mainlanders to protect capital by owning HK Real Estate. That and a rental market where Expats on packages have always been big consumers. And an oligopoly of developers.

NYC has a safety valve of 70 miles of suburbs in 3/4 of a circle surrounding the city most of them with transit. HK doesn't have that.

Modernnomad - HK is still moderately more expensive in absolute terms than NYC - but is crazy relative to median household income of ~34k USD vs 66k in Manhattan.
posted by JPD at 7:23 AM on July 3


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