You get a housing crisis when apartments become safety deposit boxes, not homes

new york times screen
Screen capture New York Times

As one who agrees with the preservation crowd's mantra, The greenest building is the one already standing, and disagrees with Edward Glaeser and Ryan Avent and Matt Yglesias and others who want to get rid of height restrictions and historic preservation rules and let a thousand towers bloom, suggesting that this would result in more affordable housing, I offer as evidence a remarkable and very long article in the New York Times, Stream of Foreign Wealth Flows to Elite New York Real Estate.

In it, Louise Story and Stephanie Paul report that New York City gives big property tax breaks to the ultra-rich who don't live in their units long enough to be liable for New York's income tax. They allow the units to be purchased by shell companies so that nobody knows who is in them, essentially letting wealthy foriegners use "high-end real estate as a safe deposit box."

Many of these apartments are in super-tall high sliver buildings, because there are few height limits imposed in Manhattan, often with one unit per floor. Do they add much to the economy of the city?

As nonresidents, they pay no city income taxes and often receive hefty property tax breaks. A program aimed at new condo development doles out about a half-billion dollars in tax breaks a year, according to the city’s independent budget office. These savings are passed on to owners in the form of lower property taxes.

Do they affect the prices of less sky-high real estate in New York?

The skyrocketing prices of the pieds-à-terre are affecting the price of real estate in the city more broadly. “There’s a downside to having such pressure at the top. It pulls up the prices overall. When owners of $10 million condos see that there’s a big market for $95 million condos, they’re more likely to raise their prices,” he said. “Then the person at $2 million raises his prices, then the person at $1 million sees that and there aren’t any prices below $1 million.”

That's why I continue to say that The problems in our big cities aren't caused by restrictions on density and height, but by inequality.

Meanwhile, in London:

the Guardian/Screen capture

According to Ed Cumming in the Guardian, Restaurants in some of the fanciest parts of town are closing down for lack of customers. The owner of Racine, a french restaurant on the Brompton Road, notes that " the main cause was the shrinking residential population in what should be a saturated area." - there are now 22,000 empty properties in London, which even more so than New York, work like safety deposit boxes. A candidate for the Labour Party says it's a scandal.

Today in London hundreds of thousands of people are stuck in temporary accommodation, on social housing waiting lists, or years of saving short of buying their first home. At the same time the global super-rich buy London homes like they are gold bars, as assets to appreciate rather than homes in which to live … Absentee owners should live in the house they own or sell up – or face uncapped charges until they do. No dodges or clever schemes to get round that.

Regulating absentee ownership isn't going to suddenly make apartments in Manhattan of Kensington affordable, but let's just acknowledge that this upward pressure at the top lifts all prices. It isn't NIMBYs and preservationists causing the housing shortages for young people, it is, as I said before, inequality.

Tags: Housing Industry | New York City


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