"The global elite is basically looking for a safe-deposit box."
February 9, 2015 9:31 AM   Subscribe

"The global elite is basically looking for a safe-deposit box." Last July, NYMag published a lengthy piece on rich foreigners hiding hard-to-track money in NYC Real Estate (prev) This weekend, the NYTimes began publishing on "Towers of Secrecy" with the first in several deeply-researched pieces on the very rich, very shady figures buying high-end real estate in Manhattan: Stream of Foreign Wealth Flows to Elite New York Real Estate.

The expose paints a picture of a real estate market that feels close to money laundering - and highlights some of the drawbacks for the city has a whole:

The city’s first condo costing more than $100 million, which sold in the last few weeks at the new luxury tower One57, had property taxes this past year of $17,268, according to the city’s finance office.
posted by entropone (69 comments total) 37 users marked this as a favorite
 
This is where the inflation is going.
Real estate, the Dow, and art.
posted by the man of twists and turns at 9:48 AM on February 9, 2015 [11 favorites]


This series has really been fascinating. The article today is about Jho Low, a Malaysian who has some very interesting connections. Basically, one of the many middle-men who enable they despots to spend their ill-gotten gains.

The things about these articles are the brief quotes from various mortgage lenders, real estate agents etc who just don't question where the money is coming from as long as they're getting their cut.

Remember, it takes money to make money!
posted by misterpatrick at 9:49 AM on February 9, 2015 [4 favorites]


I am really going to dig into this NYT article over my lunch break, but man do I ever hate this trend of starting articles with huge, screen-filling banner images. The web isn't television, and your article doesn't need a goddamned title card.
posted by Steely-eyed Missile Man at 10:01 AM on February 9, 2015 [24 favorites]


Hasn't this been true about the major markets, like, forever? NYC, London, Sydney, Southern California, Vancouver all see inflated prices from offshore money looking for somewhere to park.
posted by simra at 10:03 AM on February 9, 2015 [1 favorite]


The city’s first condo costing more than $100 million, which sold in the last few weeks at the new luxury tower One57, had property taxes this past year of $17,268, according to the city’s finance office

Just the quick math for those who glossed by this like me on first reading: using my real estate tax rate as an example (appx 1.1%) the real estate tax on this apartment should be around $1.1million. Hence all the hoopla. Sorry for the blindgly obvious but that point once I came to it solidified things a bit for me.
posted by chasles at 10:06 AM on February 9, 2015 [37 favorites]


It didn't seem too hard for them to pierce the veil of secrecy. I think the lesson is that if you are going to do something through a third-party, you should make sure that third-party does other work than just you.
posted by smackfu at 10:16 AM on February 9, 2015 [1 favorite]


I agree that the real estate taxes are far too low, but on the other hand, NYC does have a real estate transfer fee of 1.425% for most properties. Which means $1,425,000 on a hundred million dollar condo.

And if these high-end properties are getting bought and resold more frequently because of the low real estate taxes, then that would be a small source of mitigation.

Still if you could drop a hundred mil on a condo, would you even notice a real estate tax of $200-300K? That would be a rounding error to you.
posted by xigxag at 10:23 AM on February 9, 2015 [2 favorites]


When you're predicting the decline of American civilization -- this is MetaFilter, of course you're predicting the decline of American civilization -- this isn't a sign of it. On the contrary, this is a sign of enormous strength, that this real estate is considered so valuable, that bidding is driving up the price.

It's right there in the title of this post. This is very smart, very rich people looking around and thinking, "Where's the safest place to store my money? Where can I have complete faith in a system of laws and courts and commerce? If literally everything turns to shit, where can I go? Because it sure ain't Russia. Not China. Not the UAE."

All of this reminds me of how Japanese businesses were buying up all sorts of properties in the late 80s and early 90s, and then realized you can't move real estate back overseas.
posted by Cool Papa Bell at 10:24 AM on February 9, 2015 [21 favorites]


Previously on MF (comments on a similar July 2014 NY Magazine article).
posted by Mr.Know-it-some at 10:25 AM on February 9, 2015 [1 favorite]




It's a bit disconcerting that we have tax and national security laws that were supposed to keep an eye on this kind of money laundering, and yet everyone on the food chain is basically looking the other way.
posted by a lungful of dragon at 10:34 AM on February 9, 2015 [1 favorite]


I'm just surprised that everyone involved willing to say "yeah, we like the money" are so open about admitting that they like the money enough to be ok with being ethically complicit with corruption.
posted by porpoise at 10:39 AM on February 9, 2015 [2 favorites]


Money laundering is only a problem with certain colours of money. If you have the right colour of money, the right age of money, the right pettigree, it's not money laundering, just necessary privacy.
posted by bonehead at 10:43 AM on February 9, 2015 [4 favorites]


So, all we have to do to ruin these guys then, is destroy the New York real estate, right?

I'll get back to work on awakening that giant angry sea monster with a hatred of hipsters.
posted by happyroach at 10:49 AM on February 9, 2015 [5 favorites]


I don't have an issue with an influx of money, in itself. It's the idea that some of it is probably stolen from the citizens of other countries--the rich young kids of the connected party leaders of China, gangsters from other countries, etc.
posted by etaoin at 10:53 AM on February 9, 2015 [1 favorite]


When you're predicting the decline of American civilization -- this is MetaFilter, of course you're predicting the decline of American civilization -- this isn't a sign of it. On the contrary, this is a sign of enormous strength, that this real estate is considered so valuable, that bidding is driving up the price.
It's right there in the title of this post. This is very smart, very rich people looking around and thinking, "Where's the safest place to store my money? Where can I have complete faith in a system of laws and courts and commerce? If literally everything turns to shit, where can I go? Because it sure ain't Russia. Not China. Not the UAE."


This signals little to nothing about the quality of the United States as a civilization. It signals its status as an oligarch friendly bank. Basically, the super rich are betting that the United States is the country least likely to ever engage in any progressive redistribution thanks to a stable but inexpensive to purchase political system that is largely impervious to the will of the majority of its population.
posted by srboisvert at 10:58 AM on February 9, 2015 [90 favorites]


I would just like to say that this is great, old-fashioned investigative journalism done right. More like this please, New York Times.
posted by vibrotronica at 11:03 AM on February 9, 2015 [6 favorites]


The "decline of American civilization" interpretation of this seems to be totally made up. The biggest problem for ordinary New Yorkers is that this artificially drives up real estate prices. It makes it harder for people who actually live in New York to acquire places to live and operate businesses.

Since the owners usually aren't there, they aren't contributing to the city in other ways. And it seems like it at least some cases they don't even meaningfully contribute in terms of property taxes.
posted by grouse at 11:17 AM on February 9, 2015 [6 favorites]


NYC, London, Sydney, Southern California, Vancouver all see inflated prices from offshore money looking for somewhere to park.

Not really true for Sydney and Vancouver, where cheap and easy credit has been the major driver of price increases.
posted by one more dead town's last parade at 11:19 AM on February 9, 2015


Just the quick math for those who glossed by this like me on first reading: using my real estate tax rate as an example (appx 1.1%) the real estate tax on this apartment should be around $1.1million. Hence all the hoopla. Sorry for the blindgly obvious but that point once I came to it solidified things a bit for me.

I am sure they would tell you if you are paying that much in property tax, it is your own fault for not buying a $100 million condo.
posted by ricochet biscuit at 11:19 AM on February 9, 2015


No, don't you see, it's great, because *waves hands furiously* STRENGTH.
posted by Steely-eyed Missile Man at 11:19 AM on February 9, 2015


I don't have an issue with an influx of money, in itself. It's the idea that some of it is probably stolen from the citizens of other countries

Ignoring the money laundering, these real estate sales are definitely money stolen from NYC residents, with the tax and other subsidies given to wealthy people who also do not spend much time in the city and thus do not circulate money in the city's larger service economy, while benefitting from the city's economic and social stability.
posted by a lungful of dragon at 11:20 AM on February 9, 2015 [6 favorites]


Hasn't this been true about the major markets, like, forever?

Foreign investment isn't new.

However, the wave of development focused on building high-rise luxury condos for the express purpose of providing opaque (and uninhabited) foreign investment products is specifically tied to Bloomberg's tenure as mayor.

And the anonymity discussed in the article is made possible by a type of incorporation that only dates back to 1977 in the United States.

And the tax abatement program that these developments are taking advantage of—which was ignored by two-thirds of developers between 1985 and 2002—was instituted in the 1970s to spur development during the city's nadir.

There are, in fact, new things under the sun.
posted by evidenceofabsence at 11:24 AM on February 9, 2015 [17 favorites]


Not really true for Sydney and Vancouver, where cheap and easy credit has been the major driver of price increases.

I wouldn't be so sure about this -- I don't know the research very well, but certainly people have published reputable work arguing that it's the same force of outside investors pushing housing prices up all around the Pacific Rim, including Sydney and Vancouver. E.g. this article on UBC geography professor David Ley's research on the Vancouver market.
posted by crazy with stars at 11:40 AM on February 9, 2015 [4 favorites]


that giant angry sea monster with a hatred of hipsters.

You mean the working class? Mecha-Bloomberg put them to sleep for 10,000 years, it will never work!
posted by Potomac Avenue at 11:48 AM on February 9, 2015


ne57, had property taxes this past year of $17,268, according to the city’s finance office.

Silly proles, taxes are for the poor!
posted by blue_beetle at 11:52 AM on February 9, 2015 [5 favorites]


I wouldn't be so sure about this

It seems incredibly likely that the effect of foreign investors and offshore wealth on the Vancouver (and Canadian) housing market is overstated. A while back people were estimating that maybe a quarter of Vancouver condos were foreign-owned. The real number is a tenth of that.
posted by one more dead town's last parade at 12:00 PM on February 9, 2015 [1 favorite]


Obligatory xkcd: http://xkcd.com/980/

When this chart was made in 2009, the derivatives market (i.e. the place the truly rich, corporations, and the like stash money when there's nowhere else to put it) was about 20x the worldwide real-estate market. It's larger by far than the stock, commodities, and futures markets of the world. In short, the rich have so much money there is nothing they can actually spend it on without driving that sector of the economy into an immediate and crippling bout of inflation, so they've made up a fantasy market where the money can sit and do less harm than actually buying anything tied to the real world. If they really focused on NYC real estate, they'd own all of it. Same with any other asset. They literally have broken the financial system so hard that we live on less than their virtual crumbs, and they have nothing they can actually spend their money on but derivatives and other illusions.
posted by Blackanvil at 12:02 PM on February 9, 2015 [22 favorites]


So, why would someone name a corporation: 25CC ST74B? Is it a random collection of characters.... surely not.
posted by ennui.bz at 12:20 PM on February 9, 2015


When this chart was made in 2009, the derivatives market (i.e. the place the truly rich, corporations, and the like stash money when there's nowhere else to put it) was about 20x the worldwide real-estate market.

And lest anyone think that the derivative / CDO problem has been addressed since 2009, I'm afraid we ain't seen nothing yet:

High Risk Investment That Brought Down The U.S. Economy Returns, With A New Name
Goodbye, "collateralized debt obligations." Hello, "bespoke tranche opportunities." Banks including Goldman Sachs are marketing that newfangled product, according to Bloomberg, and total sales of "bespoke tranche opportunities" leaped from under $5 billion in 2013 to $20 billion last year.

Like other derivatives, these "BTOs" allow investors to place wagers on the outcome of various loans, bonds, and securities in which they are not directly invested. Hedge funds and other sophisticated financial industry actors use derivatives both as a form of insurance to manage the total risk they are exposed to across their whole investment portfolio, and to gamble on real-world economic events such as mortgage payments, municipal bonds, and the price of physical commodities. The resulting web of complicated contracts can be very difficult to untangle, and can involve impossible-sounding amounts of money.

[...]

The new "bespoke" version of the idea flips that business dynamic around. An investor tells a bank what specific mixture of derivatives bets it wants to make, and the bank builds a customized product with just one tranche that meets the investor's needs. Like a bespoke suit, the products are tailored to fit precisely, and only one copy is ever produced. The new products are a symptom of the larger phenomenon of banks taking complex risks in pursuit of higher investment returns, Americans for Financial Reform's Marcus Stanley said in an email, and BTOs "could be automatically exempt" from some Dodd-Frank rules.
Five years later, regulators are still takin' care of business.
posted by tonycpsu at 12:23 PM on February 9, 2015 [5 favorites]


It seems incredibly likely that the effect of foreign investors and offshore wealth on the Vancouver (and Canadian) housing market is overstated. A while back people were estimating that maybe a quarter of Vancouver condos were foreign-owned. The real number is a tenth of that.

Can you provide a source for that real number? The most fascinating thing about these NYT investigations is that they are confirming what people have long suspected -- that wealthy foreign investors are really buying many of these new constructions, particularly at the highest levels. In this summary, they show that in one building 37% of the condos are owned by foreigners.
posted by crazy with stars at 12:23 PM on February 9, 2015


From a services perspective isn't this exactly what you want? A giant tower filled with empty apartments generates tax revenue and consumes no services. That's the opposite of free riding.

If they were buying up existing apartments maybe it'd be a concern but it sounds like it's mostly new construction, which would probably not be happening were it not for the foreign investors themselves. So they are basically building giant glass and steel boxes in order to get the privilege of paying taxes.

I can think of a lot of US cities that would like to have problems like that.
posted by Kadin2048 at 12:34 PM on February 9, 2015 [3 favorites]


From a services perspective isn't this exactly what you want? A giant tower filled with empty apartments generates tax revenue and consumes no services. That's the opposite of free riding.

The link talks about how these ultra-high-end condos drive up other real estate prices, receive huge tax breaks, and don't cause any meaningful dollars to be spent in the city.
posted by entropone at 12:36 PM on February 9, 2015 [9 favorites]


srboisvert--your analysis, while interesting rhetorically, does not hold up unless you assume Canada, UK, Switzerland, Spain, etc share similar characteristics. Put a negative spin on it if you want, and I see a number of posters do, but I will stick with Cool Poppa bell as being more on target than you. Money wants stability, predictability, safety, legality--if in fact there is a populist/progressive turn around in US politics ( and I hope there is) NYC will still be a relatively safe haven
posted by rmhsinc at 12:43 PM on February 9, 2015 [1 favorite]


also, surely there's nothing the mayor of new york can do about wasteful tax breaks for condo development and surely there's nothing the president of the US can do about lax treasury rules for money transfers involving foreign LLCs?
posted by ennui.bz at 12:43 PM on February 9, 2015 [1 favorite]


Regardless of what ends up in the building the entire cost of actually putting the thing up is going into the local construction industry which is significant. There's also the jobs of all those agents and lawyers and banks, etc which is probably zilch compared to the missed tax revenue but also not nothing.

About half the units mentioned in the article were for investment and intended to be either flipped or rented out. Both scenarios net some non-trivial money to the city from either the real estate transaction tax as mentioned above or income from the rental. The IRS doesn't have to find out who you are to be darn sure it gets its cut of the income.

As a consumer (but not owner) of New York City real estate the prices drive me insane but I think the question of whether it's a net win for the city is pretty nuanced.
posted by Skorgu at 12:47 PM on February 9, 2015


Cities full of empty apartments owned by the rich while homeless people freeze to death in alleys. Aw yeah, capitalism.
posted by emjaybee at 1:01 PM on February 9, 2015 [14 favorites]


So, why would someone name a corporation: 25CC ST74B?

25 Columbus Circle Suite 74B.
posted by grouse at 1:08 PM on February 9, 2015 [5 favorites]


Can you provide a source for that real number?

Condo foreign ownership less than 2.4%, CMHC says
posted by one more dead town's last parade at 1:12 PM on February 9, 2015


I agree that the real estate taxes are far too low, but on the other hand, NYC does have a real estate transfer fee of 1.425% for most properties. Which means $1,425,000 on a hundred million dollar condo.

There is a deal where the higher property taxes are paid by the developer through building subsidized housing elsewhere. Those tax dollars are basically paying rent somewhere else. This isn't simply a give-away to the rich. The government decided to offer this tax break so that there would be more development of affordable housing.

It is not the job of real estate agents or developers to investigate sources of wealth. That is not their business. An individual's money must be proven illegal by the government, not proved to be legal by the real estate industry. It is not the law, nor is it reasonable, that one must positively prove or demonstrate that all one's wealth was earned according to ethical standards. It is not the job of the New York real estate industry, or the city government, or the United States government, to police corruption in the entire world.

Nothing in this story so far is of sufficient interest to justify the NY Times randomly invading the privacy of unknown foreign policy. Why don't they write a story about the prime minister of Malaysia's possible corruption? The angle of his family's supposed business associate buying and selling property is really the least of it.
posted by knoyers at 1:34 PM on February 9, 2015 [1 favorite]


"BTOs"

In other words, you ain't seen nothing yet.
posted by one more dead town's last parade at 1:47 PM on February 9, 2015 [5 favorites]


Here in the Hell's Kitchen/Midtown West/Lincoln Square area, our state senator Brad Hoylman is pushing a pied a terre tax. Real estate groups oppose it (obviously). His district includes Columbus Circle and borders One57. Pretty much no chance of it passing, unfortunately.

Another issue of concern, especially on the UWS and in areas of Brooklyn, is conversion of multi-family brownstones to single-family residences.
posted by melissasaurus at 1:52 PM on February 9, 2015


From the NYMag link:

Escape From New York LLC’s three-bedroom condo, purchased for $32 million, was immediately placed on the resale market. Asking price: $41 million.

I want to file incorporation papers for Duke Of New York LLC.
posted by charlie don't surf at 2:02 PM on February 9, 2015 [1 favorite]


Cool Papa Bell: All of this reminds me of how Japanese businesses were buying up all sorts of properties in the late 80s and early 90s, and then realized you can't move real estate back overseas.
You had me until this sentence - those Japanese businesses aching under the decades-long fall of the yen wanted their US real-estate $ to STAY THE HELL IN US$!
posted by IAmBroom at 2:18 PM on February 9, 2015


It is not the job of real estate agents or developers to investigate sources of wealth. That is not their business. An individual's money must be proven illegal by the government, not proved to be legal by the real estate industry. It is not the law, nor is it reasonable, that one must positively prove or demonstrate that all one's wealth was earned according to ethical standards. It is not the job of the New York real estate industry, or the city government, or the United States government, to police corruption in the entire world.


Actually, it is the law according to "Know Your Customer" and "Enhanced Due Diligence" rules in the U.S. and other countries. Banks and other financial institutions are required to verify the identity of their customers and monitor and report suspicious transfers of funds. This is to prevent money laundering, bribery, extortion, drug trafficking and terrorist finance. Real estate developers are intimately involved in banking activities.
posted by JackFlash at 2:19 PM on February 9, 2015 [11 favorites]


The government decided to offer this tax break so that there would be more development of affordable housing.

Well, the affordable part isn't working out very well, is it?
posted by emjaybee at 2:25 PM on February 9, 2015 [3 favorites]


When this chart was made in 2009, the derivatives market (i.e. the place the truly rich, corporations, and the like stash money when there's nowhere else to put it) was about 20x the worldwide real-estate market. It's larger by far than the stock, commodities, and futures markets of the world. In short, the rich have so much money there is nothing they can actually spend it on without driving that sector of the economy into an immediate and crippling bout of inflation, so they've made up a fantasy market where the money can sit and do less harm than actually buying anything tied to the real world.

OK, say what you will about financial derivatives, but this is not the right way to interpret notional volume at all.
posted by PMdixon at 2:46 PM on February 9, 2015 [1 favorite]


>Cool Papa Bell: All of this reminds me of how Japanese businesses were buying up all sorts of properties in the late 80s and early 90s, and then realized you can't move real estate back overseas.

You had me until this sentence - those Japanese businesses aching under the decades-long fall of the yen wanted their US real-estate $ to STAY THE HELL IN US$!


Yeah that didn't work out at all. Trophy properties are risky and illiquid.

Japanese Cut Losses In U.s. Real Estate - June 3, 1996

..No property epitomizes failed Japanese investment in U.S. real estate more than New York landmark Rockefeller Center.

Mitsubishi Estate Co. paid the Rockefeller family $1.4 billion for an 80 percent stake in the complex in 1989 and 1990. By early 1995, Mitsubishi had lost more than $600 million on its investment and put the property under bankruptcy protection. Late last year, it decided to hand the property over to its lenders.

Aoki Corp. of Japan, which bought the Westin Hotels and Resorts chain in 1988, hasn't fared much better. In 1988, it paid United Air Lines' parent Allegis Corp. $1.35 billion for the company. It ended up selling the chain's North American and European operations and some other assets to two U.S. investment firms for $561 million in December.

Japanese real estate developer Minoru Isutani's purchase of the Pebble Beach golf resort is another famous case. In 1990, he bought the California championship golf course for $841 million. Isutani sold the property about 18 months later to two Japanese companies at a $340 million loss.

posted by charlie don't surf at 3:03 PM on February 9, 2015 [1 favorite]


On the contrary, this is a sign of enormous strength, that this real estate is considered so valuable, that bidding is driving up the price.

Strength for whom, exactly? I'm pretty sure the people living in shoeboxes and paying thousands of dollars for the privilege don't feel particularly strong.
posted by feckless fecal fear mongering at 3:31 PM on February 9, 2015 [5 favorites]


From a services perspective isn't this exactly what you want? A giant tower filled with empty apartments generates tax revenue and consumes no services.

Maybe if you built it in East Podunk on land nobody wanted, that would be true. In New York, these empty units consume the scarcest resource in town, space, while providing no habitation value to any actual resident.
posted by enn at 4:24 PM on February 9, 2015 [2 favorites]


I'm pretty sure the people living in shoeboxes and paying thousands of dollars for the privilege don't feel particularly strong.

Right, because they should be getting their cut through taxes. That they're not is in some sense a political problem more than an economic one, to the extent those are separable. Look at the Swiss. You can be a parking lot for wealth without pricing out your own citizens. Whether you can get there from here is a different question. (Or would want to; is the Swiss xenophobia an inseparable part of the package?)
posted by PMdixon at 4:24 PM on February 9, 2015


I wonder how much of this wealth pouring into Real Estate is a direct result of stricter Swiss banking regulation and the HSBC data leak
posted by Stu-Pendous at 4:34 PM on February 9, 2015 [2 favorites]


I wonder how much of this wealth pouring into Real Estate is a direct result of stricter Swiss banking regulation and the HSBC data leak

Well there's also this.
posted by PMdixon at 4:56 PM on February 9, 2015


On the contrary, this is a sign of enormous strength, that this real estate is considered so valuable, that bidding is driving up the price.

Strength for whom, exactly? I'm pretty sure the people living in shoeboxes and paying thousands of dollars for the privilege don't feel particularly strong.


THIS. This is an incredible article and explains quite a bit about the baffling NYC market. Now I understand where the bubble is coming from. I was wondering why $1million is considered this pathetic amount of money to spend on real estate (see below) - in Brooklyn, not even trying for Manhattan:

Brooklyn now the most unaffordable place to buy a home in America
Unbelievable "the hunt" article about moving to Brooklyn
posted by rainydayfilms at 4:59 PM on February 9, 2015 [2 favorites]


Swiss banks don't lead to an inability for other people to use a bank. Real estate is literally a finite resource, and the article spends some time on how a $100million or $30million apartment raises the prices artificially on the market below. People working and living in NYC are priced out, even with very high incomes by US standards. Forget about people who are middle class or lower, they are losing apartments in newly gentrified neighborhoods to the overflow on these empty luxury towers.
posted by rainydayfilms at 5:05 PM on February 9, 2015 [1 favorite]


Actually, it is the law according to "Know Your Customer" and "Enhanced Due Diligence" rules in the U.S. and other countries. Banks and other financial institutions are required to verify the identity of their customers and monitor and report suspicious transfers of funds. This is to prevent money laundering, bribery, extortion, drug trafficking and terrorist finance. Real estate developers are intimately involved in banking activities.

Real estate developers are only responsible for their own banking activities. As you say, issues regarding the source of a buyer's funds would be of concern to the bank that issues the check or wires the funds to the seller. Sellers of goods, property and services are obviously not responsible for investigating and discriminating against histories or sources of income of buyers. If they did so, that might be illegal discrimination and a violation of fair housing laws in the case of real estate. Condos (unlike co-ops) are never allowed to deny buyers because they disapprove of where they come from, what they do or who they are. If an individual is a crook, then it would be the responsibility of law enforcement and financial institutions to respond to that. When law enforcement does not do its job, it is not the job of real estate or other businesses to decide to discriminate against people who might be shady.

Well, the affordable part isn't working out very well, is it?

Compared to what? A large number of affordable units that would not otherwise exist have been built as a result of this tax break. Properties like the Time Warner Center would never have been affordable housing anyway. There is no zero sum choice or actual competition between the existence of luxury and subsidized housing.

Maybe if you built it in East Podunk on land nobody wanted, that would be true. In New York, these empty units consume the scarcest resource in town, space, while providing no habitation value to any actual resident.

New York isn't (yet) a communist state where the government enforces what it considers best use. Property owners do and should have the right, within reasonable parameters, to choose the usage that makes the most sense economically. And how many nights someone stays in their own, non-subsidized apartment is no one else's business. The only way to resolve New York's housing shortage would be to forget about preserving neighborhoods and bulldoze all of those charming but tremendously inefficient low-rise brownstones and prewar apartments that make up the bulk of the housing stock. Obviously no one wants to do that because it would destroy the city, turn it into Houston.

Most any New York apartment house with hundreds of units will have various owners or residents whose biographies would not put them in the running for canonization. It's unfortunate that the Times is running with that, and sticking its nose into random private lives that are immaterial to the public interest of New Yorkers in the process, in order to pander to economic discontent, envy and xenophobia and attempt to foment public opinion into an unnecessary, punitive and economically harmful tax hike.
posted by knoyers at 7:07 PM on February 9, 2015 [1 favorite]


There is no zero sum choice or actual competition between the existence of luxury and subsidized housing.

Yes, there is. Real estate is finite. Real estate that's some kind of reasonable distance from a job is even more finite.

Property owners do and should have the right, within reasonable parameters, to choose the usage that makes the most sense economically.

The problem is that the most sense economically means building $100mm condos while people freeze to death in the streets below.

in order to pander to economic discontent, envy and xenophobia and attempt to foment public opinion into an unnecessary, punitive and economically harmful tax hike.

Oh. You're doing that thing where ideology trumps reality. A tax hike on luxury housing--even a whole percentage point--would be a net benefit to the economy.
posted by feckless fecal fear mongering at 7:35 PM on February 9, 2015 [3 favorites]


Swiss banks don't lead to an inability for other people to use a bank.

My point was that the world's uber-wealthy needed a place to park their (often ill-gotten) funds, after the banks in Switzerland no longer offered the anonymity and subsequent "tax advantages" that came along with those accounts. High-end Manhattan real-estate developers stepped in and filled that void, and to your point, they filled it to the detriment of the average city dweller by driving up their cost of living.
posted by Stu-Pendous at 8:31 PM on February 9, 2015 [1 favorite]


When this chart was made in 2009, the derivatives market (i.e. the place the truly rich, corporations, and the like stash money when there's nowhere else to put it) was about 20x the worldwide real-estate market. It's larger by far than the stock, commodities, and futures markets of the world.

The derivatives market is definitely not a place where anyone 'stashes' money, that would be insane. Also, that's the size of the notional that the derivatives are based on, not the actual size of the derivatives market.
posted by atrazine at 4:13 AM on February 10, 2015 [2 favorites]


knoyers: New York isn't (yet) a communist state
And right there, with that ellipsissed(sp?) snark, you explained yourself to me.

(NYC:communist state) :: (banana cream pie:the Soviet-era Kremlin)
posted by IAmBroom at 9:28 AM on February 10, 2015


Yes, there is. Real estate is finite. Real estate that's some kind of reasonable distance from a job is even more finite.

There is zero chance that anyone could possibly afford to build affordable housing on land that costs somewhere in the mid 9 figures. So affordable housing is not an actual alternative for sites like the Time Warner Center (unless you are talking about the tax break where a luxury rental contains a relatively small number of affordable units and even then, a site like the Time Warner Center would be too expensive and valuable to build rental apartments there). If you think that the solution is for the land not to be worth hundreds of millions of dollars, that would probably require a worse recession than the last one to destroy a sufficient number of jobs in New York City.

The problem is that the most sense economically means building $100mm condos while people freeze to death in the streets below.

The fact that homelessness and poverty exists juxtaposed against wealth (as it always has) is not especially related to the existence of some expensive building. And homeless people in New York do not currently have to freeze to death either.

A tax hike on luxury housing--even a whole percentage point--would be a net benefit to the economy.

The revenue projections for this proposed tax are not great. It could easily cause substantially more economic damage than it raises in revenue, by deceasing demand for construction and sending a message to foreign investors and visitors to take their money where it is welcomed.

And right there, with that ellipsissed(sp?) snark, you explained yourself to me.
(NYC:communist state) :: (banana cream pie:the Soviet-era Kremlin)


You explain yourself as well by focusing on that rather than anything substantive.

This attempt by the Times to manufacture outrage over evil foreign bogey men in order to bring about a destructive, unnecessary and punitive tax based on animus and envy more than anything else definitely represents that type of spirit.
posted by knoyers at 12:48 PM on February 10, 2015 [1 favorite]


The fact that homelessness and poverty exists juxtaposed against wealth (as it always has) is not especially related to the existence of some expensive building. And homeless people in New York do not currently have to freeze to death either.

You seriously don't see the serious social problem involved in creating massive luxury housing when there are people living in the streets? Really?

The fact is, people do freeze to death on the streets. Homeless shelters aren't exactly pleasant or welcoming places most of the time.

The revenue projections for this proposed tax are not great. It could easily cause substantially more economic damage than it raises in revenue, by deceasing demand for construction and sending a message to foreign investors and visitors to take their money where it is welcomed.

OH NO some developer might only make $90mm on a property instead of $100mm. Watch. Me. Weep.
posted by feckless fecal fear mongering at 1:05 PM on February 10, 2015 [4 favorites]


Yes unfortunately I read knoyers comment in the combined voices of William Kristol, Dr. Evil, and a Koch bro
posted by aydeejones at 4:54 AM on February 11, 2015 [5 favorites]


From the first season of 30 Rock, one of my favorite scenes:

Real estate agent
And this is the two-bedroom.
Liz:
Wow. By the hammer of Thor. Can you afford this place?
Floyd:
Yeah. l can with this new promotion. lt's a lot more money. Like ''get away with murdering my first wife'' kind of dough.
Liz:
Mm-hmm.
Floyd:
See, now, l could hang a huge TV right there. You could get that third humidifier you always dreamed about.
Liz:
Slow down. l'm not ready to move my humidifiers yet.
Floyd:
Oh, l know. l don't mean right away. l just meant. . .someday, hopefully.
Liz:
Yeah, good. Someday.
Floyd:
But for now, l got a great job, a kick-ass girlfriend. l deserve an apartment to match. And l think this is definitely it.
Arab Gentleman:
l'll take this one, too. My son Akhmed will keep his motorcycles here.

Real estate agent:
Oh. Thanks for coming.
Liz:
Oh.
posted by discopolo at 12:53 PM on February 11, 2015 [5 favorites]


PMdixon: "Well there's also this."

The swiss exchange rate / interest rate thing is relatively new, IIUC.
posted by pwnguin at 7:18 PM on February 11, 2015


You seriously don't see the serious social problem involved in creating massive luxury housing when there are people living in the streets? Really?

No, the existence of poverty nearby doesn't make building luxury housing wrong. Some privately developed building is not particularly related to, let alone responsible, for the fact of homelessness which would exist with or without it, and private endeavors are not required to work towards some larger social goal. Luxury condos like the Time Warner Center are not a cause of homelessness. Nor would some action against buildings like the Time Warner Center do anything to prevent homelessness.

Right the homeless can go into a shelter. People rarely freeze on the street because they go to shelters, go into the subway, or get picked up and taken to shelters when it is cold. Acting as if the existence of some fancy building is causally related to people freezing on the street is falsely hyperbolic both because there is no actual causality and because the homeless are not actually left to freeze.

OH NO some developer might only make $90mm on a property instead of $100mm. Watch. Me. Weep.

The tax would be more likely to damage the city's budget. It would drive away investment by specifically targeting visitors and would negatively impact construction demand. Fewer affordable units would be built since they are frequently built to offset condos that may be used as a place to visit or for an investment.

Yes unfortunately I read knoyers comment in the combined voices of William Kristol, Dr. Evil, and a Koch bro

Not assuming that all additional taxation is a brilliant cure doesn't make one a Republican. I've never voted for a Republican.

This series of articles and the idea for the tax both lack any necessary or practical reason to exist.
posted by knoyers at 9:45 PM on February 12, 2015


If you say so. I tend to think that there are practical reasons for taxes. So do most people who are conversant with reality.

Again, space is finite. Expensive dwellings drive up prices.
posted by feckless fecal fear mongering at 5:55 AM on February 13, 2015 [2 favorites]


knoyers: The tax would be more likely to damage the city's budget. It would drive away investment by specifically targeting visitors and would negatively impact construction demand.
Citation needed. I'm really tired of hearing people argue about how "X would cause Y" in economics, when reality is infinitely more complex than such reductions. But I'd be content with hearing a study to back up this claim. I'll be patient.
knoyers: Fewer affordable units would be built since they are frequently built to offset condos that may be used as a place to visit or for an investment.
Wow. Gonna have to cite that ridiculous-sounding piece, too.
posted by IAmBroom at 8:19 AM on February 13, 2015 [2 favorites]


Agree.
Many people are complaining about the fact that One57 gets tax breaks via the 421a exemption. However this exemption is given explicitly in exchange for the developer creating new affordable housing.
posted by mgalka at 6:50 AM on March 4, 2015


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