
Stream of Foreign Wealth Flows to Elite New York Real Estate - peter123
http://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html?_r=0
======
ChuckMcM
Never sure what people are trying to imply when folks buy real estate via an
LLC but this is the key quote: _" What is more, ownership of shell companies
can be shifted at any time, with no indication in property records."_

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.

~~~
eevilspock
We could have a healthier, more rational discussion here on HN if we all could
be more critical of _popular_ libertarian dogma[1], and not take it as self-
evident that private ownership of land is both a right and good
economics[2][3].

-

[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](https://en.wikipedia.org/wiki/Georgism))
and Geolibertarianism
([https://en.wikipedia.org/wiki/Geolibertarianism](https://en.wikipedia.org/wiki/Geolibertarianism)).
_Are you a Real Libertarian, or a ROYAL Libertarian?_
([http://geolib.com/essays/sullivan.dan/royallib.html](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?

~~~
ChuckMcM
Heh we could but then we wouldn't be talking about what we're talking about
:-). As my philosophically focused friends tend to point out you can talk
about anything at all, and still not have a discussion of substance.

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.

------
dba7dba
What really bugs me about such realty story is these expensive homes are owned
but rarely used.

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.

------
jcdavis
At least NYC builds up, so they fit all of their foreign real estate money in
not much space. London is in a much worse position - huge foreign demand with
very little new housing supply has made anything remotely close absurdly
expensive, which forces everyone to move further and further away and spend
$5k+/yr commuting 1hr+ each way on trains.

~~~
_delirium
Manhattan, at least, hasn't really had an increase in housing supply. The
population is actually lower today than it was in the post-WW2 era (down ~20%,
from just under 2 million then, to around 1.6 million today). Some of that is
because of changing demographics (e.g. apartments that once held 4-person
families now holding a 2-person couple), but the housing-supply constraint has
been a pretty hard cap on population. There has been a lot of construction,
but it's gone into mainly: 1) expanding commercial real-estate; and 2)
replacing older, smaller residential units with newer, bigger ones.
Redevelopment of the 2nd variety sometimes even reduces the number of housing
units (but each unit is nicer).

------
impendia
> As nonresidents, they pay no city income taxes and often receive hefty
> property tax breaks.

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.

------
disputin
[http://www.landvaluetax.org/what-is-lvt/](http://www.landvaluetax.org/what-
is-lvt/)

------
mahyarm
This has been going on for over a decade in many cities in the world.
Vancouver is probably another good example of this.

------
smutticus
Allow squatting in buildings that are unoccupied for more than 6 months. That
way even the super rich are required to actually have someone live in their
unoccupied buldings. If they buy them and live in them then fine, but if not
they need to find someone to put in them.

You can't stop people from buying property, and you probably shouldn't.
However, you can force them to use it.

~~~
woah
How do you decide who gets to squat there? Cronyism? Fist fights? Lottery?

~~~
smutticus
First come first served. And if you leave your squat unattended, someone else
can take 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.

------
karzeem
Why does the article blithely take it for granted that we should treat
investments by rich foreigners suspiciously while investments by rich
Americans are no problem? The big problem in New York real estate is lack of
supply — the vacancy rate in rentals hovers around 1%, and building new
apartments is a nightmare. So of course, prices go up as demand keeps growing
and supply is prevented from growing.

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.

~~~
seiji
_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?"

------
seiji
There's no way left to win.

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...](https://medium.com/@ryanpbroderick/why-im-leaving-new-
york-5629bf28e05e)

~~~
rayiner
Buy some Merino wool underwear and move to Chicago. Enough rich people and old
money to have many of the amenities of NYC, with fewer hipsters and much more
reasonable housing prices.

~~~
Slartibreakfast
I thought Chicago was hilarious - it's the only place I've lived where two
people can walk in opposite directions and both still have the wind blowing
directly in their faces.

~~~
rayiner
My perception is that it's sunnier and brighter than NYC, even though its
colder.

------
dba7dba
Money laundering is considered a big crime and I agree. But sometimes these
foreign money flowing into US to buy up realty often smell like a form of
money laundering. Can't explain it why but just feel that way...

------
datashovel
I think people need to come to the realization that real estate purchases by
super wealthy is nothing more than a ponzi scheme.

~~~
dba7dba
I could care less what the super rich do with their money. What bugs me is
they are hoarding limited resource (housing) in an already impacted area and
everyone else ends up suffering for it.

~~~
datashovel
During the housing bubble (as it was about to burst) I recall reading several
stories about governments pursuing fraud charges where a family (or a bunch of
close friends) would purchase several houses in a neighborhood from one
another, each time raising the purchase price.

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.

~~~
datashovel
I should clarify. In fact I don't think super wealthy are necessarily corrupt
in this way. I do, however, believe the people they may entrust with managing
their wealth are in many cases. And it's not necessarily through any fault of
their own. As a wealthy person I want the people who I entrust with managing
my wealth to be very successful at what they do. So I make sure I get only the
best. That said, I don't care to know "how the sausage is made".

I think the only thing that really fixes this sort of thing is transparency in
markets.

------
michaelochurch
Dirty foreign money is more of a problem in NYC real estate than most people
realize. Unless we do something about it, it's only going to get worse. London
is even farther gone than we are. It's ugly.

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.

~~~
stegosaurus
In London the idea of a 'seperate property market' is totally bunk; it seems
like every day a new story comes in with social housing being demolished to
fill with fancy apartments. The residents then have to be rehoused somewhere.
There are also tens of thousands (possibly 100K+) empty residences in London.

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.

~~~
stegosaurus
Oh; and to comment on the 'efficient use of land' argument that often comes
up;

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.

