I wish the media would stop calling wealthy Russians 'Oligarchs'. It is American billionaires, who are the real oligarchs, meaning that they have tremendous individual power, for good or ill - like Bill Gates or the Coke brothers. Even the wealthiest Russians only have their wealth at Putin's pleasure. That is why many of them (the same is true of wealthy Chinese for the same reason) want to park their money in American real Estate & other American ventures. It's because we have the rule of law - at least for the wealthy, whereas that autocracies they come from do not. If you want to call preventing the dictator from taking your wealth, because for some reason, you're out of favor with him 'Money laundering' go right ahead.
2
Simple--no need to distinguish between "locals" and "foreigners", or even define those slippery terms. Just impose an additional annual property tax assessed on owners and paid out to occupants. It would be a direct wash for owner-occupants, an indirect wash for landlords and tenants (landlords would simply raise the rent by the amount of the tax), and the government would keep the tax from unoccupied structures. The effect would be a sharp drop in purchases by speculators and asset-hiders, plus increased availability of previously empty homes on the rental market.
3
This is happening here in Seattle as well. Housing prices increase much faster than salaries. Vancouver's 15% tax on foreign purchases has pushed some of these buyers down I5 to Seattle and Portland. On my block alone there are two vacant houses purchased by foreign buyers. These vacancies leave gaping holes in the fabric of neighborhood communities. I like the Simon Fraser prof's proposal to tie a surtax to local income tax, or would if Seatlle and WA had an income tax!
4
The irony here of course is that many people voted for Trump to keep immigrants out of the country who, Trump reminded them time and again, were grabbing up all the jobs, as in "Make America Great Again!" Instead, as this article explains, there is something far more insidious going on, and that the culprits are not uneducated, welfare-seeking immigrants but well-heeled oligarchs. Not only is this happening by the way in the U.S. but, as mentioned, in Vancouver, B.C. in Canada and elsewhere, including here in Montreal where both Asian and Russian oligarchs are making their speculative real estate interests readily apparent. So my message to Trump supporters is, to coin a phrase, "You've put your money on the wrong horse."
3
We received an unsolicited "all cash" offer for our house in historic Cambridge, near Harvard Square from a "buyer" "representing a Chinese bank" with a post office address. The only possible reasons for this are to expatriate profits, hedge against political instability and launder money. All symptoms of global disruption that the right champions.
5
There needs to be a clearer distinction between people buying property to launder money and wealthier, better educated foreigners migrating to metropolitan cities as immigrants. In California, we gain almost a 100,000 people a year in foreign migration. These people, on average, are better educated and therefore make more money so they drive housing prices up towards their incomes and far away from the immigrants of the 80s and 90s who were overwhelmingly poor and low skilled and whose children all might been born into the welfare system. The new immigrants are not evil by virtue of being better educated and a lot of them are incredibly valuable to the state. However people who use real estate to launder money are bad and this article has not done a very good job drawing the distinction.
1
Good article, more needs to reported about this -don't think most people understand what's going on with the real estate,the problems of finding an affordable place in these bigger cities. NYC real estate has become so commercialized especially available to foreign money meanwhile many neighborhoods comprised of locals/natives shrink or fade away because of it.
2
Feudalism 14th century style ended when the rich in castles and palaces were brought down by peasants living in huts. 21st century feudalism looks different: Tens of thousands of homes sitting empty while the 99% live in their cars and on the streets with no one home to keep them off the lawn. Los Angeles has a housing crisis, so I propose this: Any habitable property left vacant for more than a year must house the indigent. No exception, Mel Gibson.
5
Why don’t the owners of the empty condos/apartments rent them out rather than leaving them empty? Then they’d income to offset the costs. Probably because of some convoluted tax law or hiding ownership or real estate law.
Zoning restrictions. Prohibitions on absentee foreign ownership. Eminent Domain.
The Capitalist instinct simply cannot be allowed to run amok like this. Heck, I have profited from the ridiculous CA real estate market, mostly on paper but somewhat in reality; and I basically hate the situation. I would've been perfectly happy if my place was worth 15% more than I paid for it years ago, because that would mean that I could move someplace a little bigger on a slightly quieter street. But now, it seems that I have no choice but to get out and be some other livable city's gentrifier. I don't even have one vote's worth of influence over my city's policies, the city's bigwigs get very little from me, so what else is there to do?
The Capitalist instinct simply cannot be allowed to run amok like this. Heck, I have profited from the ridiculous CA real estate market, mostly on paper but somewhat in reality; and I basically hate the situation. I would've been perfectly happy if my place was worth 15% more than I paid for it years ago, because that would mean that I could move someplace a little bigger on a slightly quieter street. But now, it seems that I have no choice but to get out and be some other livable city's gentrifier. I don't even have one vote's worth of influence over my city's policies, the city's bigwigs get very little from me, so what else is there to do?
3
Tax receipts are fungible, whether from property or income tax. Over time cities strike a balance between these two sources that are acceptable to the electorate. Absentee owners mess up this equilibrium as they pay only property tax. The tax codes were simply not designed with this in mind. I think the Kesselman proposal is a great one that allows tax receipts to be supported at resident-like levels, marginally reduces the attractiveness to foreigners and thereby reduces pressure on home prices, and doesn't trample on property rights.
9
Note how many foreign buyers come from undemocratic countries where wealth flows to the politically connected more often than to the talented or hard-working, and where there is little recourse for citizens when that wealth is made illegally. The people buying up our housing stock and forcing longtime residents out are disproportionately other countries' criminals.
15
On my block in Sunset Park Brooklyn, in the last 15 years, Chinese investors (absentee landlords) have purchased every single house that has gone up for sale. Owners of retirement age were happy to sell. In 16 yrs, I've watched house prices to go from 350K to 1.8 Million. These are not "trophy properties" that nobody lives in, the houses are gutted the basements dug out and many small rooms created within. They move people in quickly and continue construction. I spent some time going house by house on the block through the NYC DOB web site, and all of the Chinese owned houses have DOB complaints and violations against them, even vacate orders. One violation said in the description that the owner erected a partition wall and created 6 rooms and 6 bathrooms on the 2nd floor and 5 rooms and 5 bathrooms on the 1st floor. Note, these are legal 2-family houses! I have noted that now the city has allowed many of them to change the C of O to 4 and 5 family now. Almost all of them are owned by an Inc. not an individual. The Latino residents that have lived in the community for generations, but were not owners, are being displaced and wondering why they cannot afford the rent in the neighborhood anymore. No one in the neighborhood seems to understand what is happening.
17
There's a house under renovation now on the 400 block of 63rd street. Permit says "legal 3-family, no change in occupancy." It has been totally gutted. I guarantee it will not be a 3 family and no one will do anything about it.
2
Here is the solution : the buyer has to show up at the county recorder office in person to file the deed as grantee, with proper identification, and the initial purchase must be in the name of a natural person. Transactions below a certain dollar amount would be exempted. Cash transactions above certain amounts would have to be reported to the IRS.
You are all welcome.
You are all welcome.
12
I think fairness is a noble goal to achieve in society, and since we live in a global world, it should have some global aspect as well as a local aspect.
First, somebody did mentioned we apply the logic only in our local back yard, but we don't want to apply it to the communities that we displace with American vacation and retirement homes in other places. I agree that the logic from this article should be applied globally.
Second, this article mentions all the factors that are pushing the prices up, foreign investments, local job market, zoning laws, but it avoids 2 main factors:
1. rent control (especially since it's done in such a big proportion)
2. absentee homes, ie people that live (at least on paper) out of town and come in the city less than 186 days -- in NYC these people don't pay income tax. So basically, because of income tax, our property taxes are lower than say NJ, but the income tax is not fairly distributed, since not everybody is a full time resident. So the part time residents benefit from the lower property taxes (because of the income tax paid by the full time residents). I don't think this is fair. The proposal from this article is very sensible and will fix this.
Both rent control and our approach to taxes are big factors that are affecting the prices, and this article avoided these issues.
First, somebody did mentioned we apply the logic only in our local back yard, but we don't want to apply it to the communities that we displace with American vacation and retirement homes in other places. I agree that the logic from this article should be applied globally.
Second, this article mentions all the factors that are pushing the prices up, foreign investments, local job market, zoning laws, but it avoids 2 main factors:
1. rent control (especially since it's done in such a big proportion)
2. absentee homes, ie people that live (at least on paper) out of town and come in the city less than 186 days -- in NYC these people don't pay income tax. So basically, because of income tax, our property taxes are lower than say NJ, but the income tax is not fairly distributed, since not everybody is a full time resident. So the part time residents benefit from the lower property taxes (because of the income tax paid by the full time residents). I don't think this is fair. The proposal from this article is very sensible and will fix this.
Both rent control and our approach to taxes are big factors that are affecting the prices, and this article avoided these issues.
7
Chinese folks are buying like mad in North Carolina as well. I'm surprised that was left off of this article.
9
Two thoughts: (1) Residential property should stay on the housing market for local fulltime use, or you end up with a ghost town, long commutes, and a poor use of resources. A vacancy tax doesn't go far enough. (2) Dense, middle-rise, middle-class housing is desperately needed in and near San Francisco (which is rent-controlled, although many nearby communities are not), but what is being built is highrise luxury housing, because that's more profitable to the developer, and because low-rise SF neighborhoods resist apartment houses. Yet apartment towers in low rise residential neighborhoods are attractively done in Honolulu.
2
San Francisco's rent control is so dysfunctional that it is actually severely counterproductive.
2
Greed, eminent domain, deterioration in public housing, speculation all drive the cost of housing up resulting in more homeless, more packed in to multigenerational housing, and more driven to counties with lowest concentrations of health and other resources. Those driven off tend to be vulnerable in financial and health dimensions - adding to those already concentrated in these counties. Health care and housing permutations will shape worsening disparities and health outcomes and elections.
3
My biggest problem with the responses to this article are that many of you, while having salient points to make, misuse your own language of choice in an effort to make those points. One person wrote "costing" which is NOT a word. It costs, It will cost, it did cost. If you want to be taken seriously, try to write in a proper manner. And, yes it's funny that when it comes to the liberal cause ce'le'bre of gentrification and it's "ills," which lies in direct conflict with open borders and immigration policy (alas, don't we want immigrants to achieve the American dream and move "Up?") the liberal base becomes very protectionist, nationalistic, and even authoritarian. Suggesting a tax on foreigners or absentee owners is akin to levying a tax on, hold onto your hats...people who don't or won't or can't pay for health insurance, schools, taxes etc...
2
Hey Nels, just a helpful tip that costing is a word. See ya round!
7
Do you know the difference between "it's" and "its"?
10
It's hilarious how Liberals a isolationist when it comes to their own self-interest.
1
I don't think this is a liberal or conservative thing. This is just people discussing a problem and trying to find ways to solve it. Let's keep the discussion to proposing solutions, rather than looking for an opening to attack people you don't like.
This kind of buying creates some serious problems. How can we reduce or eliminate those problems? All of us, together, as Americans, not conservatives or liberals.
This kind of buying creates some serious problems. How can we reduce or eliminate those problems? All of us, together, as Americans, not conservatives or liberals.
10
Isn't the point of the article that money and its possessors are creating problems for people, both where they can live and what they can afford to live?
I'm sure that self-interest is one of the founding principals of conservative economic thought.
1
So we buy their slave-labor factory goods, and they consume our housing market.
11
In the 70s, the rich Arabs were going to swallow America. Then, in the 80s it was the Japanese. Then the Russian oligarchs. Now the Chinese. If someone wants to pay a ton of money for the house across the street, pay huge property taxes, and not use any public services in return because no family lives there, I have come out ahead in some ways.
These investors are purchasing 6,000 square feet houses in West LA. They are buying $50 million high rise condos in Manhattan. These are not places where middle income people would otherwise be living.
Sure there is a need for investment in affordable housing in cities across the US. That requires municipal policies for zoning and willing investors. Don't blame the Chinese. Or the Russians. Or the Japanese. Or the Arabs.
These investors are purchasing 6,000 square feet houses in West LA. They are buying $50 million high rise condos in Manhattan. These are not places where middle income people would otherwise be living.
Sure there is a need for investment in affordable housing in cities across the US. That requires municipal policies for zoning and willing investors. Don't blame the Chinese. Or the Russians. Or the Japanese. Or the Arabs.
6
Pay huge property taxes? Not likely. Many cities, including NYC, have put properties under tax-exemption programs, costing the city and state millions of dollars in revenue, all in the name of pumping up real estate. These buyers aren't paying much in taxes at all, and at the same time, benefitting from appreciation and stability of the US market. It's a lose-lose situation for locals.
14
Often these new ultra luxury high rises are built on torn down middle/lower income housing. The net effect is lost units for those people to live in.
12
In the 1970s and 1980s, newly rich Japanese bought up the suburbs of Honolulu for second homes or envy making baubles. That made houses unaffordable for ordinary Hawaiians who had made their homes in these neighborhoods for years saw their property taxes skyrocket.
When the air went out of the Japanese bubble, my understanding is housing prices and property taxes went back to something approaching normal.
Now, South Florida has become a prime destination for funny money. Not a day goes by without two or three unsolicited offers for our normal house in Boca Raton from brokers claiming to represent out of town or out of country buyers. Some may be monied Venezuelans fleeing for their lives but you can bet ill gotten gains from Russian mafias are not absent from the mix.
It has had an effect on our property taxes and insurance. The legislature could dampen the city fathers rampant greed for a property tax windfall but most Florida legislators are puppets of real estate interests.
When the air went out of the Japanese bubble, my understanding is housing prices and property taxes went back to something approaching normal.
Now, South Florida has become a prime destination for funny money. Not a day goes by without two or three unsolicited offers for our normal house in Boca Raton from brokers claiming to represent out of town or out of country buyers. Some may be monied Venezuelans fleeing for their lives but you can bet ill gotten gains from Russian mafias are not absent from the mix.
It has had an effect on our property taxes and insurance. The legislature could dampen the city fathers rampant greed for a property tax windfall but most Florida legislators are puppets of real estate interests.
8
So is the answer to be patient and all the money available to oligarchs will one day be all used up? But where is someone to live in the interim?
An empty or seldom used luxury condo has no utility. Possible appreciation, sure, but carrying costs and lost income on alternative investments are significant. Therefore, it is mostly a store of value, one of the characteristics of money.
Its value depends on the willingness of others to accept it, and that is a big problem. The investment requirements of the small global cohort of possible buyers could change rapidly. In any case, the market will be sated one day, and then prices will drop. Who will be the first willing buyer to catch a falling knife?
Has anybody figured out a way to securitize the short side of this bubble?
Its value depends on the willingness of others to accept it, and that is a big problem. The investment requirements of the small global cohort of possible buyers could change rapidly. In any case, the market will be sated one day, and then prices will drop. Who will be the first willing buyer to catch a falling knife?
Has anybody figured out a way to securitize the short side of this bubble?
9
I like the way you think.....During the Japanese takeover of NYC real estate in the 80's and 90's ...it was the bigger fool theory of real estate...and the bigger fool was the Japanese. If these neighborhoods collapse it will be the same thing.
The more regulation you try to stop it, the more the market will skew due to unintended consequences. Eventually it will take care of itself...again (just like '08). Keep your powder dry so you can take advantage of the bottom.
The more regulation you try to stop it, the more the market will skew due to unintended consequences. Eventually it will take care of itself...again (just like '08). Keep your powder dry so you can take advantage of the bottom.
1
This situation wouldn't be so bad if the homes were just rented out. At least then communities would be preserved, and people could still find homes, even if it's as renters, not owners.
Which raises the question: why aren't the homes being rented out? These locations all have sky-high rents. The return on these "investments" could be far higher if rents were actually collected, even if a cut is paid to a management company to manage renters. In California, I'd wonder if the rent control laws would discourage renting b/c then the asset becomes less liquid. But not all of these cities have those rent control laws, so it must be something else
Which raises the question: why aren't the homes being rented out? These locations all have sky-high rents. The return on these "investments" could be far higher if rents were actually collected, even if a cut is paid to a management company to manage renters. In California, I'd wonder if the rent control laws would discourage renting b/c then the asset becomes less liquid. But not all of these cities have those rent control laws, so it must be something else
6
In Tahoe, a lot of these second (and third, fourth fifth) condos and houses are not vacant, but they are being rented out on AirBNB or similar companies, without reporting or paying taxes on their income. The out-of-towners are not just taking up housing, but they are refusing to pay their fair share for road maintenance and other community expenses. The money spent by the extra tourists does not make up for the lack of housing and lost jobs. There is no upside.
7
When you pay dollars for all those trinkets made in China, those dollars have to go somewhere. If there are widgets you can sell to China, the dollars will flow back in exchange for those widgets. But if you don't make enough of the right widgets to sell, then those dollars get turned into investment instead of spending. The choices for investment include real estate. So the possible solutions to this problem are very simple - either stop buying so many trinkets form China or sell more widgets to China. If you don't balance your trade deficit, then the dollars sent to China will continue to flow into the investment side of the ledger.
10
The Chinese don't buy our widgets. They learn from us how they're made, then make their own.
3
*steal, you mean
Perhaps a City or State can institute an "If You Buy A House, You Must Live In It" law, such that the person actually buying has to be the one to make that house their primary residence. Note, this DOES foreclude people using housing as an income source and companies that buy tons of housing and mismanage it for high profits.
Housing, like medical care, is something that should not be allowed to be legislated and run by the sharks of society.
It is time to remove the sharks from the Housing Pool, and by doing something as simple as that; allowing people to only own one home and to have to live in it to continue owning it, would open up a great deal of housing to those struggling to find a place to live even in the face of so many empty, otherwise available buildings.
The City or State could use 'Iminent Domain' clauses to remove ownership of properties (after a grace period that owners of more than one property could sell down in) from those who try to flaunt said law, in which case the properties would be confiscated and the 'owners' paid a reasonable amount for the property.
But no more of these foreign or out-of-town landlords and slumcorps, most folks would find that being able to own a home is so much cheaper in some ways, but there are always unforseen costs, but if folks are not overpaying in rent, they can afford the costs of ownership.
It would be a win for the City/State and for the People on the low economic end, and the buildings!
Housing, like medical care, is something that should not be allowed to be legislated and run by the sharks of society.
It is time to remove the sharks from the Housing Pool, and by doing something as simple as that; allowing people to only own one home and to have to live in it to continue owning it, would open up a great deal of housing to those struggling to find a place to live even in the face of so many empty, otherwise available buildings.
The City or State could use 'Iminent Domain' clauses to remove ownership of properties (after a grace period that owners of more than one property could sell down in) from those who try to flaunt said law, in which case the properties would be confiscated and the 'owners' paid a reasonable amount for the property.
But no more of these foreign or out-of-town landlords and slumcorps, most folks would find that being able to own a home is so much cheaper in some ways, but there are always unforseen costs, but if folks are not overpaying in rent, they can afford the costs of ownership.
It would be a win for the City/State and for the People on the low economic end, and the buildings!
5
Sure - and then the government can next exercise "imminent domain" [sic] and take you car because it isn't an electric car and then it can take you watch computer because you use it in ways the government doesn't approve, and then they can take you savings because you have been frugal and other people "need" that money more than you do.
4
This is a bubble like any other. There is no stream of endless money whether it is Russian, Chinese or Brazilian. This money is borrowed somewhere, somehow through underground, shadow banks. The real problem is the endlessly long permitting, approval process that creates an artificial hurdle to supply. The housing bubble collapsed in 2007 when we started building 2 million homes a year. If these oligarchs want condos, the right response should be to construct 1000's of skyscrapers and let them choke on their multi million empty condos. Their underground, shadow lenders behind the purchases will collapse along with the oligarch. The condos will soon be back on the market at affordable prices.
8
It can help Americans too. A few years ago, an acquaintance of mine was try to sell a home in Orlando that was $200k under his purchase price. A Chinese couple bought it for $830k all cash. Miami has been a haven for foreigners who want a place to stash their cash and escape from home if they need to get away. Empty condos are a way of life there and have been for decades.
7
"...it may also be distorting the market," is a huge understatement. Consider the empty store fronts of SOHO and the Upper East Side, and East Village, in NYC.
13
I have trying to explain to friends about this phenomena since I get it see it up close. In Philadelphia we have seen a series of whole floor condo buildings rise the last few years with insane sticker prices. Everyone want to know who is buying them. I explain that they seem to be foreigners and that even when the building is all sold and built out, it is half full most of the time. Now, that is all any developer wants to build...6 million dollar condos while the citizens have been pushed out of Center City.
8
"“We’re not talking about an asset bubble in apples, or copper or something that you could easily forgo". What? Try a day without copper sometime. Don't plan on using your brass keys in your brass door lock to get into your apartment to turn on the copper-wired lights and crank up your copper-laden IMAC. Ditto for your car, and your iPhone, and your television, and your electric toothbrush. I could go on and on, but where there's a need for electricity or machineable durability, you'll find copper.
Nice thought, poor choice.
Nice thought, poor choice.
I think you missed the point.
7
Copper is more needed than 3/4MM 500 sq ft apartments.
But your point is heard, "poor" folk need houses in places they want to live, not that they can afford to live.
But your point is heard, "poor" folk need houses in places they want to live, not that they can afford to live.
2
Yes, the fact is that we all use copper, but there is no bubble in copper price - it is priced right, as proportional to the demands of market. If the producers tried to artificially raise it - by, say, diminishing the production the way OPEC does with oil prices - the market would react by looking for alternatives or technical solutions.
Not possible with limited space, limited apartments offered in dense urban areas,
Bad thought, poor analogy.
Not possible with limited space, limited apartments offered in dense urban areas,
Bad thought, poor analogy.
1
I would argue in favor of punitive taxation for anyone, foreign or domestic, who wants to buy a property with the aim of leaving it sitting empty, rather than making it available by renting it out. Punitive taxation in this case means something on the order of 10%-15% of the property's assessed value, every year.
14
As a San Francisco resident, all I can say is no (something).
8
Taxing foreigners who want our real estate won’t deter them (any more than higher taxes on the rich has driven them out of places like Manhattan ...right?) Foreign investors & first home buyers don't compete for the same properties. Foreigners prefer new, high-density, city properties.The heat is at the higher end of the market, with a $1 million average way beyond the reach of an aspiring first home buyer. It's a supply and demand issue.California is a good example. State, county, & municipal legislators have made it impossible for new housing to be built quickly. This is a Democratic controlled state from top to bottom. Affordable housing has always been one of the cornerstones of the Democratic Party. This state should be a showcase on how well we can execute this policy. No excuses. Instead, it's yet another example of our complete intellectually bankruptcy. Incredible. It should never have gotten this bad this fast. There were warning signs. It's symptomatic I think of a much bigger problem. The growing divide between some Democrats who want to practice what they preach & fanatical progressives who want to strangle everything. Environmentalists will go to the barricades to stop any housing project from being built here. Mind you we are talking about affordable housing for working class and middle-income families. Thanks to their efforts the gateway to middle-class security, is beyond their reach. We don't need people in the party who are subverting core American values.
7
I live in the 6 the district of GA( remember our recent election?) which is quite Republican. We are experiencing the same pushing out of the middle class and loss of affordable housing. It has nothing to do with restrictions on building or environmental concerns.They are busy tearing down lower density housing and commercial properties and building much more expensive and denser housing. So quit spinning this as a Democratic Party problem. Our local government also has no plan to solve our existing traffic problems which are severe and getting worse.
7
Before spouting off, I suggest you visit one of the areas mentioned in the article. As a former resident of Silicon Valley (I lived there 46 years), I can tell you two things: this trend isn't new (it happened in the 90's) and it slowly eats away at neighborhood communities. As for not building enough high-density housing, THERE IS NO ROOM, period.(Unless people start commuting to work and school via drone.) Many of the foreign buyers tear down single family homes and build monstrosities in unincorporated pockets with tiny lot lines, no or cement-only yards, and zero curb appeal. I walked every day to the park with my children past a huge million-dollar home (this was 15 years ago) that sat unoccupied for years, grass knee high, windows covered with newspaper, etc. It replaced a smaller home that had living, breathing, caring members of a close-knit neighborhood. It's too late for Silicon Valley but hopefully other communities can be spared their fate.
7
Developers are in business to make money. Just like it doesn't make sense for a developer to build a house in the suburbs that is on the small side with a small price tag when they can build a huge house and reap more $$$, why shouldn't an urban developer do the same? As long as there are buyers, there will be properties built to satisfy. Communities can tie affordable housing requirements to luxury permits if the issue is lack of affordable housing. But how to force occupancy on empty luxury units is another story. Most condo/co-op buildings will not allow rentals. Do we require that new buildings only sell to US citizens? No one really knows who the LLP purchaser really is anyway...
And the ripple effects spill far out from the urban center. The same process is happening in and around Boston, NYC, Washington, DC, Miami, Los Angeles, Seattle, San Francisco, San Jose, and on and on. East of Vancouver, BC, housing price inflation is driving prices higher in the Okanagan Region of Central BC, four hours from Vancouver.
Your assertion that this is good for the selling homeowner overlooks the fact the seller may well realize a fine return on the initial investment, but once the house is sold, the seller musty compete in the same overheated markets. Reult? No net gain, except on paper.
Could this phenomenon be a consequence of the globalization of trade and capital, but not labor, rewards the upper classes while punishing everyone else further down the food chain?
Your assertion that this is good for the selling homeowner overlooks the fact the seller may well realize a fine return on the initial investment, but once the house is sold, the seller musty compete in the same overheated markets. Reult? No net gain, except on paper.
Could this phenomenon be a consequence of the globalization of trade and capital, but not labor, rewards the upper classes while punishing everyone else further down the food chain?
17
Thanks for your second paragraph. As a NYC homeowner I live with that contradiction: I could sell for much more than I paid, but the gain wouldn't buy me anything nearly comparable to what I have.
12
The handful of serious real estate investors I know all distinguish their own residences from the properties in their portfolios. For the exact reason you mention. Buying and selling properties as prices change isn't something people do with their homes. Unless I want my kids to inherit or plan to retire to Nebraska, I have no interest in seeing my home increase in price. It attracts speculators, pressures neighbors to sell and increases property taxes. That's the problem from the owner's side, the sell-side.
As for potential buyers, for Americans not living in a handful of big cities, the most overlooked driver of real estate prices is quality of the local schools. When I drive through fancy suburbs, I wonder how families with young kids can afford to live there. By the time they can afford such houses, their kids college age. That's when mom and dad focus on paying tuition.
The messy real estate-schools nexus is going to be the next political battle. The mismatch between the high prices sellers expect and what buyers can afford will wreck neighborhoods. Decades of student loan payments means a generation of Americans who can't afford what we consider middle class housing.
Public policy has always encouraged home ownership. Democrats wanted better housing. And owners are more more likely to vote Republican. The result of this bipartisanship was the subprime mortgage fiasco. Owning and speculating have different public policy implications.
As for potential buyers, for Americans not living in a handful of big cities, the most overlooked driver of real estate prices is quality of the local schools. When I drive through fancy suburbs, I wonder how families with young kids can afford to live there. By the time they can afford such houses, their kids college age. That's when mom and dad focus on paying tuition.
The messy real estate-schools nexus is going to be the next political battle. The mismatch between the high prices sellers expect and what buyers can afford will wreck neighborhoods. Decades of student loan payments means a generation of Americans who can't afford what we consider middle class housing.
Public policy has always encouraged home ownership. Democrats wanted better housing. And owners are more more likely to vote Republican. The result of this bipartisanship was the subprime mortgage fiasco. Owning and speculating have different public policy implications.
10
The only way it 'works' for the seller is when the seller plans on leaving the area entirely and moving to a smaller city (usually with fewer opportunities)
1
The giant cash hoards of China alone can and seem to be buying Canada and Australia in one gulp and the often nefarious cash flows through the system are very problematic. Governments at all levels should halt and reverse the enormous broad residential and commercial purchases that leave the local existing populations beyond property ownership. Why hand the country off to strangers who would not let us buy their nations in the same fashion.
22
"it may also be distorting the market, to the detriment of life-long residents." Well, duh!
12
Readers may want to look at the decline of the dollar, about 9 percent against the Euro and other currencies, since Trump was elected. Makes it easier for purchase of US property by other nationals.
4
Consider this; does anyone not think that the Chinese leadership would like to see the USA overwhelmed by 'personal' problems, paving the way for their ascendancy? Ergo, do not think that they would not permit their citizens to invest private funds inflating the US property market. That will both make it harder for residents to find housing, and by increasing their indebtedness, will precipitate a financial crisis as mortgage rates increase.
While one may think foreign investors are not a threat, think again. A rising market has a superficial appeal, but can do so for a variety of reasons, some benign, some not. The US leadership cannot simply trust the markets 'hidden hand' when diabolical forces are at work.
While one may think foreign investors are not a threat, think again. A rising market has a superficial appeal, but can do so for a variety of reasons, some benign, some not. The US leadership cannot simply trust the markets 'hidden hand' when diabolical forces are at work.
6
Try buying a house in large parts of Asia. Normally, they are simply a poorly designed shell. No plumbing, electrical, doors. Windows are poor quality, need replacing You'll have to knock down walls, brick in windows, knock holes in walls. ~ 10 % of the block, brick, concrete that you paid for, is waste. Just getting the place livable is going to ad ~15% or more, depending on your tastes. Then another ~8% in taxes and fees. Want a garage? Add ~20%. By the time you have the place livable, that 400000 place you bought is going to be + 40%.
Thin walls and floors; you'll hear your neighbors screaming during sex, listen to their media, crying babies, barking dogs, all in your brand new home.
Still wonder why people buy in America?
Thin walls and floors; you'll hear your neighbors screaming during sex, listen to their media, crying babies, barking dogs, all in your brand new home.
Still wonder why people buy in America?
6
Poor quality Asian housing is not the reason Asians buy American housing. The reason is a search for places to park cash. There is too much cash chasing too few investments worldwide. Why do you think the stock market has been doing so well? Because interest rates are so low.
7
"...could imminate domain be used to condemn these under utilized properties?"
The above excerpt appeared alongside this article (on foreign ownership)) in the 'Comments' column. It is beyond dispute that, in many places, some of them as big as whole countries, literacy is in a state of decline.
A people who can't communicate clearly is in trouble. The NYT has an important role in establishing correct usage of the language in its reading population. It stands out like a beacon in my memory for that reason. I would suggest that your editors are no more required to publish the faux pas of commenters than they are those of the journalists who they are paid to oversee. Rendering these in correct usage contributes to a raising of the standard of literacy, rather than the opposite.
Illiteracy is a corruption that not only prevents the semantic intentions of those whose material you publish from coming across effectively, it has negative developmental effects on those exposed to it, particularly the young.
The above excerpt appeared alongside this article (on foreign ownership)) in the 'Comments' column. It is beyond dispute that, in many places, some of them as big as whole countries, literacy is in a state of decline.
A people who can't communicate clearly is in trouble. The NYT has an important role in establishing correct usage of the language in its reading population. It stands out like a beacon in my memory for that reason. I would suggest that your editors are no more required to publish the faux pas of commenters than they are those of the journalists who they are paid to oversee. Rendering these in correct usage contributes to a raising of the standard of literacy, rather than the opposite.
Illiteracy is a corruption that not only prevents the semantic intentions of those whose material you publish from coming across effectively, it has negative developmental effects on those exposed to it, particularly the young.
11
Thank you for your comment. It never occurred to me how important it is that our written language be accurate so as not to propagate incorrect usage. Thank you, copy editors everywhere!
The problem: rich people with excess money buy up property worldwide, driving up real estate prices, driving locals out of the market. Eventually, worldwide, ordinary folk will never be able to own their own home, their own farm, their own store. Soon, if this is allowed to continue, the small clique of people who now own most of everything will end up owning all of everything.
The solution is simple: pass laws worldwide to prohibit anyone who is a citizen of a foreign country from owning real property in any given country. Yes, you noticed correctly: those with dual or multiple citizenship would be prevented from owning property anywhere in the world -- if you can't commit to being a citizen of a single country, you shouldn't interfere with the economic affairs of that or any other country. Of course, you could rent property in which to reside.
This principle also applies to corporate ownership or real estate, mineral rights, water rights, lumber rights, etc.: a corporation would be allowed only to own such assets if all of its owners (such as shareholders of publicly owned companies) are citizens solely of that country. Of course, the corporation could rent property in which to do business.
This whole foreign ownership thing is yet another mechanism that has been set up to tilt the economic playing field in favor of a worldwide elite ownership class.
The solution is simple: pass laws worldwide to prohibit anyone who is a citizen of a foreign country from owning real property in any given country. Yes, you noticed correctly: those with dual or multiple citizenship would be prevented from owning property anywhere in the world -- if you can't commit to being a citizen of a single country, you shouldn't interfere with the economic affairs of that or any other country. Of course, you could rent property in which to reside.
This principle also applies to corporate ownership or real estate, mineral rights, water rights, lumber rights, etc.: a corporation would be allowed only to own such assets if all of its owners (such as shareholders of publicly owned companies) are citizens solely of that country. Of course, the corporation could rent property in which to do business.
This whole foreign ownership thing is yet another mechanism that has been set up to tilt the economic playing field in favor of a worldwide elite ownership class.
17
years ago when my husband got a job in Zurich it was impossible for an american citizen to buy an appartment/home in Zurich city limits. We didn't move there. Just saying: the Swiss have always known how to protect their borders.
10
What a pleasant surprise, the "solution" results in government getting increased tax revenues, and a tax break for the rich.
Boy, that is rich.
Boy, that is rich.
2
could imminate domain be used to condemn these under utilized properties? They are causing the loss of tax revenue and jobs.Does this not impose economic,social and environmental distress but what seems to be the money of international gangsters,dictators and friends of Trump and family.
I paddle my kayak at dawn in a big loop around Richardson Bay in Marin county just north of SF. Ten years ago all of the waterfront houses in Tiburon had lights on before the sun was up. Now almost none of them do.
19
I read yesterday that upward mobility in China is unlikely - with 83% of the real wealth still held by party elite and inherited by their cadre and families
so I'm thinking - empty apartments in Vancouver and Melbourne - are unlikely to be held by aspiring Chinese - and more likely just one of many overseas properties bought by rich elite Chinese party cadres who already have stolen too much wealth from the proletariat
so as in Australia - a healthy tax of empty properties can be just the start of payback for a cruel elite who have stolen from their people.
so I'm thinking - empty apartments in Vancouver and Melbourne - are unlikely to be held by aspiring Chinese - and more likely just one of many overseas properties bought by rich elite Chinese party cadres who already have stolen too much wealth from the proletariat
so as in Australia - a healthy tax of empty properties can be just the start of payback for a cruel elite who have stolen from their people.
21
Other downside to the current surge in house prices and rents is the damage to GDP. I know in Portland, OR the amount of discretionary income for normal "consumer spending" is being reduced as wages are no keeping up with housing costs. We are starting to see that effect. It has taken nearly a decade but consumer debt has surpassed 2008 levels and now sits at an all time high. The next recession will be devastating.
13
I agree; I am amazed that so few people see this coming. This is like being in 2006-2007, and crying "the sky is falling" and everyone laughs and ignores you.
Prices in the very modest central Florida area we had hoped to retire in -- far from theme parks and as far from the ocean as you can get in that state -- have doubled in 24 months. And 2015 was not even the low point. Since 2009, they have almost tripled! but most of the run up in just the last 24 months.
From the homes we have tracked, most are bought by investors and "flipped". On late night TV last evening, I caught not one but TWO "home flipping shows" -- the scams that ruined so many people just 10 years ago. But here it all is again.
Just as in 2008....they were telling people to "buy" and "invest" and "real estate never loses value".... right up until the crash. Then it was everyone to the life boats!
But I agree; next time will be much worse. It will take a major depression to "shake out" the hucksters and investors who have ruined the housing market for ordinary families -- the last recession wasn't severe enough, apparently.
Prices in the very modest central Florida area we had hoped to retire in -- far from theme parks and as far from the ocean as you can get in that state -- have doubled in 24 months. And 2015 was not even the low point. Since 2009, they have almost tripled! but most of the run up in just the last 24 months.
From the homes we have tracked, most are bought by investors and "flipped". On late night TV last evening, I caught not one but TWO "home flipping shows" -- the scams that ruined so many people just 10 years ago. But here it all is again.
Just as in 2008....they were telling people to "buy" and "invest" and "real estate never loses value".... right up until the crash. Then it was everyone to the life boats!
But I agree; next time will be much worse. It will take a major depression to "shake out" the hucksters and investors who have ruined the housing market for ordinary families -- the last recession wasn't severe enough, apparently.
12
Anyone running to unseat Mayor di Blasio would do well to campaign on this tenet of taxing the empty boxes owned by foreign absentees (di Blasio seems to be too much of a friend of big real estate development to even think about addressing this).
16
San Francisco reportedly has at least 30,000 vacant residential units, mostly owned by speculators and foreigners who purchase American real estate to launder, bank and/or invest money. The city's unaffordable rents and stratospheric home prices are well known.
I rent adjacent to one of the higher-end neighborhoods in San Francisco, and there are at least two speculator-owned $2-million-plus townhouses on the next block that have been vacant for a year or more. Never lighted, curtains always drawn, their facades are grimy, their front yard and sidewalks gone to weed and littered with paper. This demonstrates how much the owners care about their neighbors and the city at large.
Paris, France, has reportedly levied a heavy tax on real estate used essentially as bank accounts. Here in the US, we might do well to consider legislation that does the same, while differentiating between bona fide full- or part-time owner-residents and non-resident speculators. The intent should be to prevent residential real estate units from being used solely as instruments to park money, and make those vacant units available to renters.
Ownership that in the absence of compelling personal or family needs leaves residential units unoccupied is antisocial and negatively impacts the quality of life in any city.
I rent adjacent to one of the higher-end neighborhoods in San Francisco, and there are at least two speculator-owned $2-million-plus townhouses on the next block that have been vacant for a year or more. Never lighted, curtains always drawn, their facades are grimy, their front yard and sidewalks gone to weed and littered with paper. This demonstrates how much the owners care about their neighbors and the city at large.
Paris, France, has reportedly levied a heavy tax on real estate used essentially as bank accounts. Here in the US, we might do well to consider legislation that does the same, while differentiating between bona fide full- or part-time owner-residents and non-resident speculators. The intent should be to prevent residential real estate units from being used solely as instruments to park money, and make those vacant units available to renters.
Ownership that in the absence of compelling personal or family needs leaves residential units unoccupied is antisocial and negatively impacts the quality of life in any city.
68
"Care" about their neighbors? Actually, not. If it is foreign money, the owners may dislike their neighbors, perhaps even hate them, which is among various reasons the property sits empty.
4
2 million plus townhouse? I'm confused. In Manhattan, a townhouse sells for 20 million. In NYC, a townhouse for 2 million would be in a low-rent neighborhood. By "townhouse," I mean 3-4 floors and over 5000 sq ft. In NYC, lots of low-rent townhouses are dilapidated. Not true fo the 15-20 million dollar townhouses.
1
Oh you New Yorkers. ("richguy"? Oh please.) We have $10-$30-plus million dollar townhouses here in SF too. And note I said "$2 million-plus" which means $2 to $3 million. For folks who are not a rich guy like you, dropping three large ones on a townhouse such as defined by Merriam-Webster ("a usually single-family house of two or sometimes three stories that is usually connected to a similar house by a common sidewall") is a big deal. NYC has townhouses that go beyond the traditional definition. SF has a few like it and a lot of little townhouses - lovely things in neighborhoods to die for, that don't remotely qualify as low-rent - unless you consider Bay and ocean views, back yards and rents of $15-20K a month low-rent.
1
Minimizing distortions that prevent resident ownership, like Air BnB, are a legitimate function of government. Preventing hedge funds and other groups from turning first time owners into long time renters is another. The first is ignores licensing and insurance requirements (do you really think your Uber driver doubled his cost of insurance?) is mostly not legal or ignores incumbent rights. The latter "freedom of capital" allows capitalists to run roughshod over the young trying to establish families.
11
Why no mention of the impact of AirBnb and other vacation rental sites? In my neighborhood houses are being bought up by investors for the purpose of turning them into short term rentals. I wish I had the problem of empty housing next door, instead we a revolving door of obnoxious people who have no regard for the neighbors (have loud parties, throw trash everywhere, etc). These rentals destroy neighborhoods and drive up the cost of long term rentals and housing for everyone. If you try to enact a tax law where investors are charged more, expect a big fight from AirBnb which is notorious for suing any city for trying to restrict it.
36
Got the order wrong. People can't afford mortgages anymore so gave to turn to renting out rooms and suites at prices the tourist market will bear.
5
I agree; another problem is that during the recession, many people who could not sell a home that was "underwater"....turned to renting to large numbers of students in what had been owner-occupied solid neighborhoods.
My old neighborhood went from being very middle class, neat and stable...to being a kind of "Animal House" atmosphere where 4-6 students shared a 3-4 bedroom suburban home...had parties, made noise...driveway or street parked up with 4-5 automobiles. These homes were NEVER designed for this kind of multiple occupancy! and the students are generally not responsible and don't care about annoying the neighbors -- why, when you will be graduating shortly and then leave?
My old neighborhood went from being very middle class, neat and stable...to being a kind of "Animal House" atmosphere where 4-6 students shared a 3-4 bedroom suburban home...had parties, made noise...driveway or street parked up with 4-5 automobiles. These homes were NEVER designed for this kind of multiple occupancy! and the students are generally not responsible and don't care about annoying the neighbors -- why, when you will be graduating shortly and then leave?
5
If AirBnb and the host of copycat firms actually paid taxes on their rental income, it would be less of a problem. Truckee has implemented a program to track and tax owners who have been evading paying their share, and I expect most of Tahoe will be following suit soon. For those renters gloating about how much they're saving by using AirBnb, think about the damage you are doing to the communities you are renting in. Maybe you're the same people who don't bother paying for camping or hiking permits as well?
the solution to foreigners who want to money launder & dodge taxes (how American of them!) is easy to solve.
put a restriction on deeds that requires an owner to occupy the property at least say 3 months a year or no sale. but the NAR who want to act like gatekeepers are just camp followers as lower sale prices hurt their inflated commissions. and I used to sell on the side for fun. the full-timers hated the agents like who they looked on as interlopers standing in the way of "their" cxommission profits.
plus, and this will play to the greedy county tax officials who think the answer to their general incompetence is to raise somebodys property taxes, pass local ordinances that triple taxes on absentee landoeners to pay for add'l police, fire and public services these people create with their vacant props.
nah, that'd make them think too hard.
put a restriction on deeds that requires an owner to occupy the property at least say 3 months a year or no sale. but the NAR who want to act like gatekeepers are just camp followers as lower sale prices hurt their inflated commissions. and I used to sell on the side for fun. the full-timers hated the agents like who they looked on as interlopers standing in the way of "their" cxommission profits.
plus, and this will play to the greedy county tax officials who think the answer to their general incompetence is to raise somebodys property taxes, pass local ordinances that triple taxes on absentee landoeners to pay for add'l police, fire and public services these people create with their vacant props.
nah, that'd make them think too hard.
4
Sam, your idea is unenforceable. Are you going to put cameras in the bedrooms?
3
Isn't it possible that it the realtors taking 6% and 9% on sales ?? The home owner then has to factor in these cost and raise the price of his or her home. There should be a cap of 3% per sale for the realtor like Germany! The greed of the realtors has driven up the market! Why should someone who took a three week course make $10,000 off the sale of my home? I don't remember them scraping wallpaper or helping me change light fixtures? It is ridiculous that they make this money. My husband, a German mathematician with a Phd., has said many times he should just become a realtor because the money is 5 times what he makes in academia. They do not work for you when you are selling or buying; they simply figure out which party is more desperate to sell or buy and then screw them over in the sale. We have moved four times and it is the same every time. In our experience, they show you the house but do not know anything about building and foundation that is the home inspector's job. Wake up America and smell the coffee!
20
But hey New York State and city sucks up all that property tax on these super health go rise ultra expensive structures , that's a lot of coin to pay Medicarde mta , roads etc ....higher the better , more tax revenue to use for Cuny or some other good purposes like preparing for rising oceans flooding NYC .
3
High real estate prices, low income levels? The author could be describing Berlin, Germany.
But for those in the USA, what about the free alienability of property, etc.? If you buy a piece of land, zoning restrictions aside, shouldn't you be free NOT to use it as you see fit? If I buy a house, why should government policies be allowed to dictate how many nights I must occupy it?
But for those in the USA, what about the free alienability of property, etc.? If you buy a piece of land, zoning restrictions aside, shouldn't you be free NOT to use it as you see fit? If I buy a house, why should government policies be allowed to dictate how many nights I must occupy it?
8
Why? For precisely the reasons described in the article.
4
If you buy a home in a non-commercial zone, you are not free to build or renovate a property as a rental property. Why do people buy homes in residential neighborhoods with good schools? Why don't families buy expensive small sq. footage apartments in a downtown area? Real estate markets do change; people who want a family home remain the same; that is why suburbs grew outside crowded expensive city venues. That is why there are still residential neighborhoods in cities. SF has those neighborhoods.
1
What Ho' !?!
Globalisation is not an inherent good ?
Millennials and Hipsters are being priced out of the "In Cities"
to people who don't even live there most of the year.
And so the wheel of greed turns on even those who thought
they were immune to income disparities because they were 'Globalists'.
And you wonder why 'Brexit' won.
Globalisation is not an inherent good ?
Millennials and Hipsters are being priced out of the "In Cities"
to people who don't even live there most of the year.
And so the wheel of greed turns on even those who thought
they were immune to income disparities because they were 'Globalists'.
And you wonder why 'Brexit' won.
17
Well, just bloody DUH! This has been happening for decades!!! I remember the tsunami of cash that showed up in SF in the 80s when the transfer of Hong Kong was looming. A seller of luxury silks was forced to move when the new owner of the building tripled the rent. They were able to buy their own building and stay in business but the new space (and the old) were gutted and totally lost their charming character. Between the mortgage crisis and anonymous flight money, our housing market has turned into the same casino as the stock market.
13
We were "lucky" enough to have the means to overpay for a fixer in a nice Los Angeles neighborhood. The homes on either side sit empty as they're owned by foreigners who visit for a week or two a year. I feel much less safe on a semi-vacant street and sad that people who would love to live in those homes and contribute to the neighborhood aren't able to. I think Kesselman's idea is a worth a try.
15
The U.S. let these oligarchs and everyone else from foreign countries buy our real estate while other countries never allowed it. One reaps what one sows.
18
But only in 2017 America will you be labeled a xenophobe and racist for such a suggestion.
5
Ok. I walk around TriBeCa at 1AM and see many unlit windows, Entire buildings look uninhabited. I think to myself, "EVERYBODY can't be out clubbing, can they?" I just assumed everybody was out at clubs. That shows wha I know, These units and buildings are unlived in.
4
Or maybe at 1 am people are asleep because they have to work at 9 am. Try walking around at 9 or 10 pm and count the lit windows.
13
I mean on Friday and Saturday nights. I myself get you at 6:50AM Monday-Friday to trade stocks.
It *could* be that people are away for the weekend, but I see the unlit windows in spring and fall, which are usually not weekend vacation seasons (s much as winter and summer).
It *could* be that people are away for the weekend, but I see the unlit windows in spring and fall, which are usually not weekend vacation seasons (s much as winter and summer).
2
Exactly like Australia, where it's now openly referred to as money laundering, even by one of our major banks:
http://www.abc.net.au/news/2017-07-13/should-australias-anti-money-laund...
The other word used is 'bubble'.
You can't sell a property & buy because you can be priced out of the market. No-one wants to take the risk of buying first.
The market has ground to a halt except for the trashy garbage developers are dumping on the market, a substantial amount of which as been 'designed' to appeal to 'the Chinese market': small, badly built & finished - just like back in Shanghai.
They aren't fussy - they just want to get their money out & a guarantee that as property owners they can immigrate at will. (It worked for Peter Thiel in New Zealand).
All this has been done with the blessing of local councils, most of which are run by real estate agents. We now have entire new suburbs, built on previously industrial land, which are fit only for demolition.
They lack amenities, transport, everything. We had a once in a century chance of doing something spectacular, & we ended up with street after dismal street of urban blight. Check out Zetland, Waterloo, Alexandria, Rosebery, and you'll see how to destroy a city.
http://www.abc.net.au/news/2017-07-13/should-australias-anti-money-laund...
The other word used is 'bubble'.
You can't sell a property & buy because you can be priced out of the market. No-one wants to take the risk of buying first.
The market has ground to a halt except for the trashy garbage developers are dumping on the market, a substantial amount of which as been 'designed' to appeal to 'the Chinese market': small, badly built & finished - just like back in Shanghai.
They aren't fussy - they just want to get their money out & a guarantee that as property owners they can immigrate at will. (It worked for Peter Thiel in New Zealand).
All this has been done with the blessing of local councils, most of which are run by real estate agents. We now have entire new suburbs, built on previously industrial land, which are fit only for demolition.
They lack amenities, transport, everything. We had a once in a century chance of doing something spectacular, & we ended up with street after dismal street of urban blight. Check out Zetland, Waterloo, Alexandria, Rosebery, and you'll see how to destroy a city.
8
Walk down Bleeker St. or West 4th in the West Village, it used to be full of bars, restaurants, bodega's, pizza shops, take-out, laundries - everything you needed was in the neighborhood. Now it's empty storefronts and empty apartments, a wasteland of greed.
27
Put a limit on how many properties they can buy. One is fine with me.
5
Wow. It's really splitting hairs when communities try to assert they have a problem with foreign money, and not foreigners. That is an impossible position to defend. Foreigners come with foreign money. What other kind would they have? And, sellers are happy to take those foreign dollars, so who's kidding whom? Of course it's the foreigners themselves that are the problem.
2
There's a difference between arriving with foreign money in order to take part in the community and just parking foreign money in a usable physical space then and leaving that space vacant to the detriment of a community.
It seems that it would less of an issue of community decline if these empty investments were rented out.
It seems that it would less of an issue of community decline if these empty investments were rented out.
2
I don't find it particularly hard to grasp the distinction between taking issue with foreigners buying properties (with foreign money) purely as an investment and not living in them, and taking issues with foreigners themselves. If a foreign family buys a property with foreign money and then moves in to become members of the community, I think people would have much less of a problem.
2
Why would the apartment next door not be owned by the same person who owns your apartment? They're in the same building, after all.
The apartments being discussed here are not rentals. People in cities buy apartments as coops or condos, so every apartment has a different owner.
8
Imagine, Real Estate " Developers" selling their flashy, trashy " luxury"
Properties to shady foreigners. What a perfect way to launder illicit CASH.
Wow, just who would do THAT????
Properties to shady foreigners. What a perfect way to launder illicit CASH.
Wow, just who would do THAT????
15
In my job we see foreigners coming into Chicago with huge sums of money, sometimes not declared, which is when we get involved. The money is inevitably intended for two purposes: college tuition which these worthy parents and students pay in cash up front; down payments on condos and houses to have a bolt hole to escape a future crackdown in their despotic Middle Kingdom. Some of these people are so wealthy that instead of making a phone call from somewhere in China, where the bulk of them reside, they fly over directly to discuss the issues in person...
9
In Palo Alto, California, housing prices are so high that not one single policeman or fireman can afford to live in the town. Maybe they should create moderate income housing for public servants - moderate being $100,000 per year or less.
6
I thought I heard something about a proposal to set low income in Palo Alto to less than $250k or $200k. That would be better. Even software developers can't afford homes at this point.
Seems to me that the great weakness of an empty house as an investment is that it sits empty. That is, they investment is tremendously vulnerable to vandalism.
Just sayin'.
Just sayin'.
4
It's the free market, you can't have it both ways......
This is the way it goes.
This is the way it goes.
1
Are you unfamiliar with the concept of regulated markets?
I believe some places like Hawaii have higher property taxes for residents and non-residents. This is another solution that has actually been implemented.
7
Some approaches to the problem of unaffordable housing, which like all our other economic problems, require citizen involvement and planning:
"Yes, in My Backyard" (the Atlantic) Out of a desire for more-equitable housing policy, some city dwellers have started allying with developers instead of opposing them.
http://www.theatlantic.com/business/archive/2017/07/yimby-groups-pro-dev...
The Denver Post recently (July 2017) ran a story on a local cooperative housing effort, citizens organizing to raise funds for land and building purchase to form their own nonprofit housing cooperative. The obvious idea, not entirely a new one, is that those in need of housing become the investors in same, rather than non-local profit seeking entities.
"Yes, in My Backyard" (the Atlantic) Out of a desire for more-equitable housing policy, some city dwellers have started allying with developers instead of opposing them.
http://www.theatlantic.com/business/archive/2017/07/yimby-groups-pro-dev...
The Denver Post recently (July 2017) ran a story on a local cooperative housing effort, citizens organizing to raise funds for land and building purchase to form their own nonprofit housing cooperative. The obvious idea, not entirely a new one, is that those in need of housing become the investors in same, rather than non-local profit seeking entities.
2
This is a problem not just with ownership, but with foreign investors buying houses with all cash offers and then flipping and/or renting them. Numerous friends of mine house hunting in Oakland, CA said that they were routinely outbid by Chinese investors making all cash offers on houses with the intent of flipping and/or renting them. This has made fixer uppers essentially unreachable for individuals such as myself and my husband, who would love to fix up a house with our own four hands (he is an architect and has years of carpentry experience).
It also seems to me like neighborhoods in which many homes are bought and flipped by investors would quickly become dull and monotonous, with all of the homes having the same countertops, paint colors, floors etc. What a bore! I would expect that when homeowners are able to make renovation decisions for themselves, they are better off and housing stock stays more diverse, more interesting, and meets the needs of more people.
On a separate note, when I was visiting Innsbruck, Austria a few years ago (~2014), I was shocked to learn that foreigners are not able to purchase houses (or maybe property at all?) in Innsbruck (and I think all of Austria). Maybe it's time for some of the areas whose housing markets are being distorted by foreign investors to implement similar laws. For example, what if to purchase a single-family home or apartment in San Francisco or Oakland you had to be a U.S. resident or green card holder?
It also seems to me like neighborhoods in which many homes are bought and flipped by investors would quickly become dull and monotonous, with all of the homes having the same countertops, paint colors, floors etc. What a bore! I would expect that when homeowners are able to make renovation decisions for themselves, they are better off and housing stock stays more diverse, more interesting, and meets the needs of more people.
On a separate note, when I was visiting Innsbruck, Austria a few years ago (~2014), I was shocked to learn that foreigners are not able to purchase houses (or maybe property at all?) in Innsbruck (and I think all of Austria). Maybe it's time for some of the areas whose housing markets are being distorted by foreign investors to implement similar laws. For example, what if to purchase a single-family home or apartment in San Francisco or Oakland you had to be a U.S. resident or green card holder?
20
You can no longer buy property in Switzerland if you are a foreigner. You MUST live in Switzerland, full time, if you care to purchase there. One of the reasons was because they were tiring of seeing villages empty of people and recognized this unhealthy imbalance. The Swiss are always smarter in so many ways.
8
So... we're only worried and writing articles when it's foreign oligarchs who are the purchasers? This is NOT a new problem. Let's talk about all the local families who have been displaced throughout many years by distorted housing markets in Montauk, the Hamptons, MV, Cape Cod, etc. whose values are inflated by second home demand from wealthy USA buyers.
15
Off with their heads!!!!! Except for you and me, of course.
1
Why can't non-resident property owners be taxed at a higher rate? I live in Hawaii, where local families cannot afford property, much less find affordable rentals. Land banking is common here, and agricultural acreage has been transformed into gated estates for wealthy nonresidents. This phenomenon is worldwide and can be seen in places like Venice, Italy and Cornwall, England – any beautiful destination where the living is easy but jobs and businesses are all tourism based.
The practical effect is that full-time residents become domestic staff for the offshore part-time homeowners; we mow their lawns, caretake their estates or manage it if it's a vacation rental. We pay the price for maintaining paradise for the 1%.
The practical effect is that full-time residents become domestic staff for the offshore part-time homeowners; we mow their lawns, caretake their estates or manage it if it's a vacation rental. We pay the price for maintaining paradise for the 1%.
16
Adding insult to injury is that a lot of the new high end properties come with decades worth of property tax breaks - breaks that the unknown wealthy get to benefit from.
11
The best way to deal with these economic distortions is a "Non-resident tax" levied on those who don't pay local, state and federal income taxes.
7
As someone else mentioned, add Seattle to that list, including purchases around the University of Washington which are only going to accelerate as zoning is lifted in the area.
12
The deductible property surtax could drive out retirees. They may not have enough taxable income to avoid the surtax. Retirees are often the "glue" that holds neighborhoods together through volunteerism, etc.. Perhaps they could be exempted from the surtax.
7
From the article: "(with some concessions for resident retirees)"... already part of the policy idea.
4
It's no secret here in Seattle that foreign money has tilted real estate prices beyond any measures of "extreme" and "up". But like American cities money brings privileges that override the good of the many. And I am guessing that we are either going push back those foreign privileges soon, or there will be no place left for the lower classes.
10
Citizens of China and Russia and other countries with communist backgrounds don't trust traditional financial investments like stocks and bonds, and look at them only as short-tern trading instruments. Instead, they feel comfortable only owning physical things. They don't worry about overpaying for real estate because nobody will take it from them, so it's 100% safe once they've purchased it.
Add to that what's been pointed out in this article, that a lot of dirty money has flooded the USA and Canada's RE markets. Our citizens need representation in government to protect our ability to find and afford safe shelter. Who ever would have thought it would have come to this?
Add to that what's been pointed out in this article, that a lot of dirty money has flooded the USA and Canada's RE markets. Our citizens need representation in government to protect our ability to find and afford safe shelter. Who ever would have thought it would have come to this?
12
Xi has now restricted assets leaving the country. You can move to the U.S. or Vancouver from China; however, you cannot take your bank account with you. SF and NYC were once destinations for Chinese citizens who developed whole neighborhoods within those cities.
Many properties in Harvard Square, Cambridge, just outside Boston, were purchased by Gerald Chan, one of Hong Kong’s billionaires. He contributed a fortune (and perhaps acquired Harvard’s cooperation in buying real estate ) by contributing enough to Harvard to rename the public health school the Harvard T. H Chan School of Public Health. He does not hold a monopoly in Harvard Square but the number of corporate owners increases and they are not concerned about keeping maintaining any local character or personality for the Square
As properties in Harvard Square are purchased by fewer owners the inevitable result is that rents increase and locally businesses cannot continue to keep their businesses in the Square. The quintessential college town environment turns into just another mall of franchises and chain stores. This devolution began 20 years ago but now is escalating.
I learned that in real estate the most important words are: location, location, location.
Apparently in modern retail real estate the three most important words are: homogenize, homogenize, homogenize.
As properties in Harvard Square are purchased by fewer owners the inevitable result is that rents increase and locally businesses cannot continue to keep their businesses in the Square. The quintessential college town environment turns into just another mall of franchises and chain stores. This devolution began 20 years ago but now is escalating.
I learned that in real estate the most important words are: location, location, location.
Apparently in modern retail real estate the three most important words are: homogenize, homogenize, homogenize.
16
Perhaps these US cities should consider 1) taxing the holders of vacant properties and/or 2) seizing the properties and offering them as low-cost housing. Perhaps a little draconian but could clearly put a damper on this enthusiasm.
2
Seizing property simply for being unoccupied would probably not pass constitutional muster.
1
all that matters to the government of the US is the creation of "wealth" for the speculative class. the rest of us merely exist to serve them. there is NO evidence of any other motive. NOTHING will be done to make housing markets favorable to actual citizens. WE aren't Hobby Lobby or Hedge Hogs. We are merely the human "resources" that are to be sacrificed to the Jesus-riding-the golden calf that is the GOP in this one-party state.
23
One wonders how much distortion to the housing market- not just the where the oligarch class wants property in America- is driven by the fact that essentially free money in the form of Quantitative Easing by the US Fed, the ECB and others has destroyed savings as a stable long term investment.
When parking your money in a bank pays a rate less than consumer inflation it would seem prudent to park your money elsewhere. That is where the distortions of real estate begin.
Our friends who champion free markets would tell us that if wages are flat to declining in real terms and population is stable the price for housing should decline and that is the exact opposite of what has happened in communities all over the US. It is exacerbated by the stuff detailed here, but in many more communities the relationship between the local wage base, demand, supply and pricing has been seriously warped by the consequences of our central bank giving away money essentially for free for about a decade now. I would contend it has also warped price discovery in the stock market.
The unelected members of the Federal Reserve have been shoveling cash at Banksters without the permission of any President or Congress ever since the meltdown and it has had seriously perverse consequences for people far removed from Wall Street or the City of London. An accountability is in order and the Fed Rate needs to rise sharply.
When parking your money in a bank pays a rate less than consumer inflation it would seem prudent to park your money elsewhere. That is where the distortions of real estate begin.
Our friends who champion free markets would tell us that if wages are flat to declining in real terms and population is stable the price for housing should decline and that is the exact opposite of what has happened in communities all over the US. It is exacerbated by the stuff detailed here, but in many more communities the relationship between the local wage base, demand, supply and pricing has been seriously warped by the consequences of our central bank giving away money essentially for free for about a decade now. I would contend it has also warped price discovery in the stock market.
The unelected members of the Federal Reserve have been shoveling cash at Banksters without the permission of any President or Congress ever since the meltdown and it has had seriously perverse consequences for people far removed from Wall Street or the City of London. An accountability is in order and the Fed Rate needs to rise sharply.
17
Excellent analysis. It didn't seem to be covered as news as it was happening. Prices is some areas were doubling and tripling in no time but it didn't seem to raise any red flags.
Quantitative easing seemed to somehow lead to shadowy overseas banks with zillions to invest almost overnight. Nothing about the deals seemed to add up.
When our building was sold the rent checks were being deposited in the Safra bank. Look up Guilded Lily for a colorful story.
Quantitative easing seemed to somehow lead to shadowy overseas banks with zillions to invest almost overnight. Nothing about the deals seemed to add up.
When our building was sold the rent checks were being deposited in the Safra bank. Look up Guilded Lily for a colorful story.
8
The one time Fed audit that Bernie Sanders and Ron Paul secured showed the Fed distributed over $16 Trillion created out of thin air and distributed to Banks here and abroad. Then add in the Quantitative Easing that has gone on since that time. Much of that money flowed into Real Estate and Stocks.
At the same time, the cheap money drove down interest paid on savings and drove people seeking growth for income into Real Estate Investment Trusts and even personal purchase of properties for income.
The 2007-8 meltdown should have driven a broad correction of housing prices, which largely did not happen. What should have been a broad opportunity for liquid individual investors did not happen in part because of the easy money from the Fed.
At the same time, the cheap money drove down interest paid on savings and drove people seeking growth for income into Real Estate Investment Trusts and even personal purchase of properties for income.
The 2007-8 meltdown should have driven a broad correction of housing prices, which largely did not happen. What should have been a broad opportunity for liquid individual investors did not happen in part because of the easy money from the Fed.
7
I have some modest retirement savings -- money that my husband and I worked very hard to save for over 30 years.
It is in the bank, in a secure CD -- we can't afford to gamble AT ALL with this money, as we are nearing retirement and could never hope to earn it back again -- which is paying 0.1% interest. That is not a typo. It is 1/10th of 1 percent.
This is our regular bank, where we are established customers with thousands of dollars on deposit. It does not matter; that's the interest rate. Under Bush 43, I was getting at least 2.5-3% -- under Obama, it sunk steadily every year until it hit 0.1%. For a while it hung at around 0.35% but then it fell and fell. I used to joke to my banker that "pretty soon you'll charge ME to let me keep my money here!"
I'm not laughing any more.
THANKS OBAMA!
It is in the bank, in a secure CD -- we can't afford to gamble AT ALL with this money, as we are nearing retirement and could never hope to earn it back again -- which is paying 0.1% interest. That is not a typo. It is 1/10th of 1 percent.
This is our regular bank, where we are established customers with thousands of dollars on deposit. It does not matter; that's the interest rate. Under Bush 43, I was getting at least 2.5-3% -- under Obama, it sunk steadily every year until it hit 0.1%. For a while it hung at around 0.35% but then it fell and fell. I used to joke to my banker that "pretty soon you'll charge ME to let me keep my money here!"
I'm not laughing any more.
THANKS OBAMA!
1
With a homeless rate above 6%, the US has a vacant home rate that's even higher. There is no shortage of empty housing.
Meanwhile in Germany, after the acceptance of 1,000,000 refugees, the homeless rate is around 2%.
Maybe our homeless should take refuge in Germany. Oops, unlike Middle-Eastern and Afghan refugees, they don't have enough money to get there.
Meanwhile in Germany, after the acceptance of 1,000,000 refugees, the homeless rate is around 2%.
Maybe our homeless should take refuge in Germany. Oops, unlike Middle-Eastern and Afghan refugees, they don't have enough money to get there.
11
Would you propose paving the Atlantic ocean so they could walk there as many of the Middle Eastern and Afghani refugees had to do?
3
Outside of very specific markets like Vancouver, the main culprits for rapidly housing prices are not foreigners, but the entrenched American homeowners who support zoning laws that block construction of dense, multi-unit housing or severely slow planning approvals and increase development costs to the point where these projects don't pencil out as entry-level, low-priced housing. The city councils and planning departments listen to these people, as they are politically active. They block buildings over 2 or 3 stories, they make the planning process long and arduous with multiple revisions before approval is granted, massively increasing costs for developers, who then pass those costs on to consumers. Established homeowners get rapid home value appreciation and think they'll get to freeze their neighborhoods in time. In most markets, it's not foreigners, but pure, self-interested NIMBYism, and THIS is one of the biggest problems facing america these days. Cost will not go down until we build more homes. And we just don't build enough.
11
There are too many cars on Cape Cod and no where to park them. Whenever a multi storied parking garage idea comes up it is always squashed like a bug. Not allowed here on 'pristine' historic Cape Cod. Can't have ANY building upwards.
McMansions are A-Ok though. Especially on the shorelines, to block EVERYBODY'S view.
McMansions are A-Ok though. Especially on the shorelines, to block EVERYBODY'S view.
4
The proposed solutions to the problem entail additional expenses for the buyers. But in NYC we sense the buyers pocketbooks wouldn't be discouraged by paying even 100% more. These apartments seem like temporary parking spaces for money, nothing more.
18
So, the U.S. is a highly desirable location in which to own real estate. It is not "in decline" and a 'realignment of global capital' is not deflating the U.S. economy. Money from authoritarian nations (China and Russia) is entering the U.S. because of a lack of faith in the economic and political leadership of those countries. Got it.
13
Don't discount the effect that Airbnb has on housing. More and more, homes in many coastal towns on the west coast that would be housing middle-class families are being snapped up by unseen (but organized) buyers and turned into "vacation rentals", permanently removing them from the local supply. It's all made easily possible by Airbnb, who provide a ready-made infrastructure that hugely lowers the bar for entry into this sort of business.
26
The NYT online has listed, as we speak, 1,000's of summer rentals on Cape Cod alone. Some going for north of 10,000 a week, many for 5-7 thousand. They are just as culpable as ABnB.
3
I dislike when politicians tell anecdotal stories, but I'm not a politician, so… I live not too far from a district now described as Little Moscow, in Miami, Florida. A few years back, a neighbor bought a pricey condominium in one of the new glitzy towers, pre-construction, to be closer to her office in the area. While the building was said to be sold out, only 15%of the units were ever occupied. While unusual, this was not a particular problem to my friend, until there was a serious flood from the condo unit above. The flood was clearly the responsibility of the unit owner above, but the owner was an LLC, owned by another LLC, traced to yet another layer of LLC. The outcome was lots of legal fees, with no trace of an actual owner to hold responsible for the damage.
41
Perhaps we could ban deeds issued to LLCs or, if allowed, require posting of a bond to cover such losses.
7
Funny how a problem only becomes a problem when it reaches the city. This phenomenon has long existed in desirable rural communities where urbanites park their spare cash in seasonal homes that sit empty, encouraged by an open-ended mortgage interest deduction.
18
Cape Cod. Been going on for many decades now. Same with Hawaii.
6
Has anyone investigated to find out the real extent that Donald Trump’s real estate businesses; and those of his family and Russian oligarch friends, are effectively involved in pushing the middle-class out of towns across America?
28
Another problem to which the Georgist principle beautifully applies. Derive ALL public revenue from the value of land and absentee foreign investors will have no incentive to speculate.
Tax the land! (and nothin' else)
Tax the land! (and nothin' else)
5
In post 9/11 downtown NYC we got a pretty good deal on a loft rental on a street where they now film Cadillac commercials. Ten years later the landlord sold the 5 unit building to an anonymous foreign LLC that paid a price completely disconnected from the rents we were paying.
The new landlords didn't want to raise rents 2% every year. They wanted all of the existing tenants out so they could double and triple rents. A campaign of harassment didn't drive us out immediately but caused enough problems that when the landlord offered to buy us out of the lease we took the money and left the city. That buyout helped fund a down payment on a lovely little place by a waterfall out in the sticks.
There comes a point when living in the city is just not worth the rent that has become fully disconnected from any rational perspective. So people leave. Lives are disrupted. Families are uprooted. Children have to move to new schools. That's the ripple effect. None of this happens in a vacuum.
The new landlords didn't want to raise rents 2% every year. They wanted all of the existing tenants out so they could double and triple rents. A campaign of harassment didn't drive us out immediately but caused enough problems that when the landlord offered to buy us out of the lease we took the money and left the city. That buyout helped fund a down payment on a lovely little place by a waterfall out in the sticks.
There comes a point when living in the city is just not worth the rent that has become fully disconnected from any rational perspective. So people leave. Lives are disrupted. Families are uprooted. Children have to move to new schools. That's the ripple effect. None of this happens in a vacuum.
93
And we wonder - and lament - how NYC is not the town it used to be.
4
My husband and I own a co-op in the West Village, one of the most desirable neighborhoods in Manhattan. We bought it back in 1999, when real estate prices were just starting to climb. We were barely able to afford it, even though the apartment and building weren't "high end" and the corner of the Village where we were located was considered by most to be the armpit of the neighborhood. We didn't care; we were just happy to have our little slice of Greenwich Village.
Since then, that little corner of the Village has become exceedingly moneyed. Part of it is the influx of Wall Street and tech millions; part of it is the influx of foreign investment. In fact, the new condo complex behind us sold out in weeks, even though the cheapest unit was $1.2m for a studio. It no longer feels like a cohesive neighborhood but rather like a gated community for the wealthy. So we rented out our place for a crazy amount and moved to rural New England. We now live in a small town filled with writers and artists and musicians and retired professors, most of whom also fled the overheated market of New York or Boston. And we couldn't be happier.
Since then, that little corner of the Village has become exceedingly moneyed. Part of it is the influx of Wall Street and tech millions; part of it is the influx of foreign investment. In fact, the new condo complex behind us sold out in weeks, even though the cheapest unit was $1.2m for a studio. It no longer feels like a cohesive neighborhood but rather like a gated community for the wealthy. So we rented out our place for a crazy amount and moved to rural New England. We now live in a small town filled with writers and artists and musicians and retired professors, most of whom also fled the overheated market of New York or Boston. And we couldn't be happier.
54
How do the locals in the "small town filled with writers and artists and musicians and retire professors" you moved to feel about your big-city $ coming in and buying up homes and inflating their small town real estate, not to mention property taxes?
9
Hmmm.....
"...a property surtax tilted toward high-end homes that would be deductible against the owner’s income tax. Local residents paying income taxes would effectively owe no surtax."
Now THAT'S an idea I could get behind. To the extent the local property valuation escalation is a function of foreign money pouring end this is an elegant solution that can mitigate the problem. I LIKE IT! Where do I sign up to get it approved, and pronto?
John~
American Net'Zen
"...a property surtax tilted toward high-end homes that would be deductible against the owner’s income tax. Local residents paying income taxes would effectively owe no surtax."
Now THAT'S an idea I could get behind. To the extent the local property valuation escalation is a function of foreign money pouring end this is an elegant solution that can mitigate the problem. I LIKE IT! Where do I sign up to get it approved, and pronto?
John~
American Net'Zen
31
Maybe NYC should just stop giving tax abatements for luxury housing projects, so at least these empty apartments would pay hefty real estate taxes (for which the city wouldn't have to provide any services.) But the politics of the city makes that impossible...
55
The real problem in hot housing markets are LLC investors, those investors hiding behind a curtain of laws obscuring who those investors actually are. The second "problem" is Americans simply wanting to own a home; most people don't seriously--or at all in most cases--check out the land plats in a city's planning commission department before buying. Most cities plan the urban and suburban 20-30 years in advance of the present. Most city planners know exactly what is coming down the road long before it does. That's where developers and investors go to learn exactly where to build or purchase. Even in urban cores, depending on a number of issues such as future street widening and planning for future through-fares can be highly instructive insofar as where to buy property, or determine where, physically, will be built up, or where a strip-mall will be approved. This is what investors do--their homework. Most Americans don't do their due diligence in this regard. Least one thinks just wanting to purchase a home is a straight forward project, it most certainly is not. Always check with your city's planning department for their future plans--it may surprise and inform you.
18
And so... if all the investors who are skewing the market and who have billions to invest already have access to this information as you say they do, exactly what advantage does the local resident homebuyer who has much more limited funds gain by gathering this information? Your comment displays knowledge that you seem to have, but it is not at all useful in fighting the problem described in the article.
14
Unless Americans are real estate developers or investors, they, as you say, simply want a home. They don't care much about what's going to happen in 20 or 30 years, they want their kids in school today. The only due diligence they do is finding out which towns near their jobs have the best school systems, then they examine whether they can afford a house in that town. What the planning department has on the boards doesn't matter because they can't wait. So there's no way to eliminate this "problem."
2
"what advantage does the local resident ... gain by gathering this information?"
The advantage gained is the avoidance of making mistakes. Homebuyers should do their homework to find out which neighborhoods are expected to increase in density. There may be road widening. There may be plans for rezoning to replace homes with multi-story apartments. This is the stuff developers always check on. Private individuals should check as well. It is the prudent thing to do. The information gained may cause the prospective purchaser to look in a different area instead.
The advantage gained is the avoidance of making mistakes. Homebuyers should do their homework to find out which neighborhoods are expected to increase in density. There may be road widening. There may be plans for rezoning to replace homes with multi-story apartments. This is the stuff developers always check on. Private individuals should check as well. It is the prudent thing to do. The information gained may cause the prospective purchaser to look in a different area instead.
1
But this ground was planted long ago. In NY, for instance, rent control was mostly ended and along with it, diverse neighborhoods. I wonder what was gained? To buy a place, then pay soaring condo fees, instead of the modest cost of rent and security of rent control. I know, there were people who took advantage by subletting at high rates and living elsewhere, but that could have been fixed. Here, on my retail street in CA, stores stand empty for years because tax deductions make it as desireable to rent as not to rent.
Economies are human constructions. When we buy a piece of fruit or pair of shoes or visit the dentist, what piece of the proverbial economic pie goes to real estate -- landlords, banks, lawyers, agents, brokers, etc.? And why would we want to base the wealth of our economy on housing? It is only valuable when we sell and leave, and the people next door won't be neighbors or friends, they're fellow investors -- that means it isn't and never will be a home or a neighborhood, even for local residents. The foreign investors stepped into a prepared market.
Economies are human constructions. When we buy a piece of fruit or pair of shoes or visit the dentist, what piece of the proverbial economic pie goes to real estate -- landlords, banks, lawyers, agents, brokers, etc.? And why would we want to base the wealth of our economy on housing? It is only valuable when we sell and leave, and the people next door won't be neighbors or friends, they're fellow investors -- that means it isn't and never will be a home or a neighborhood, even for local residents. The foreign investors stepped into a prepared market.
14
If there's an increase in demand for (say) potato chips, then more can simply be produced.
But houses are not like potato chips. They are expensive, requiring months or years to plan or produce, and often decades to pay down. Houses cannot move, and land is not being produced anymore.
For those reasons even a small increase in demand can increase prices dramatically over the short and medium term. There are other reasons why house prices increase, including zoning and lending practices, but the demand side of the equation is important and frequently ignored. As an immigrant to a city where average house prices are now nearing $1 million, I'm acutely aware of this fact.
But houses are not like potato chips. They are expensive, requiring months or years to plan or produce, and often decades to pay down. Houses cannot move, and land is not being produced anymore.
For those reasons even a small increase in demand can increase prices dramatically over the short and medium term. There are other reasons why house prices increase, including zoning and lending practices, but the demand side of the equation is important and frequently ignored. As an immigrant to a city where average house prices are now nearing $1 million, I'm acutely aware of this fact.
15
I live in medium-priced condos in a small town in the middle of nowhere. Several of these condos were owned by Japanese investors. These investors made a silly decision to dump the condos during the last real estate downturn at the worst possible time, further exacerbating the drop in prices, instead of holding til things got better.
6
Here in Honolulu there are whole neighborhoods of large ocean-front homes which are occupied only a few weeks out of the year. Needless to say, these are "neighborhoods" in name only; most of the time they've ghost towns. This doesn't just distort the real-estate market; it warps the whole fabric of our civic life.
118
I have a serious problem with this idea that foreigners are pushing up housing prices.
If a bunch of foreign billionaires start bidding up luxury mansions in Hollywood or on London's Billionaire Row, I can see how that would indeed raise prices, but only in those specific markets, super-high end luxury properties.
But last I checked foreign billionaires weren't jumping into the market for median priced homes in large numbers.
IF middle-class foreigners are arriving in droves and competing in large numbers with local buyers to buy median priced homes, then there would be a market impact. But I just don't see that happening. If that is indeed happening, I need to see the statistics that prove it.
In markets like San Francisco, and Portland, Oregon, where I am now, the competition is not from foreigners, its from hordes of people from other US states, coming here for the tech and better paying jobs.
If a bunch of foreign billionaires start bidding up luxury mansions in Hollywood or on London's Billionaire Row, I can see how that would indeed raise prices, but only in those specific markets, super-high end luxury properties.
But last I checked foreign billionaires weren't jumping into the market for median priced homes in large numbers.
IF middle-class foreigners are arriving in droves and competing in large numbers with local buyers to buy median priced homes, then there would be a market impact. But I just don't see that happening. If that is indeed happening, I need to see the statistics that prove it.
In markets like San Francisco, and Portland, Oregon, where I am now, the competition is not from foreigners, its from hordes of people from other US states, coming here for the tech and better paying jobs.
6
I don't know how property taxes work in your area, but I know how they work here (and have recently learned quite a bit more on the subject when I attempted and failed to challenge a 91% annual increase in the market value assessed on my house which is located in a "transitional" neighborhood). Tax authorities here (and in many places I suspect) assess against what they call comp sales, and they pick whatever comp sales they want to, obviously preferring the most expensive ones they can get by with to increase your assessment. So if you live in an area where even a few incursions of developers building new, expensive properties can affect your taxes, then you will not be able to afford to live there for long. And that affects both prospective buyers and current owners, who are more and more often forced out, where I live, if they are on fixed incomes or in professions where they do not have potential for large increases in earnings.
21
Cash home purchases by foreign (Chinese) investors are happening in Boston suburbs although "media priced home" here may mean something different than in Oregon. And they do not sit empty because their children are living in the properties while they attend schools and hope to move on to a green card. I suspect the Hong Kong situation on one hand and the horrible air quality in mainland China also play in this trend. The cash purchases make it hard for local buyers because mortgage purchases are rejected in favor of a sure deal.
24
California, my home state, and Oregon, where I am now, have similar, not identical systems. Home property taxes are based on the assessed value at the time it is purchased. Then after that the assessed value can only go up a small percentage each year, something like 2-3%. When the house is sold the new owner pays based on the current market rates.
Property 13 in California was so popular precisely because of the problem you described. Long-term low income owners, such as retirees were being hit with huge increases in their taxes. It put a stop to that.
Granted, Prop 13 caused a lot of other budget problems. But it's a fair approach.
My main point is that it just doesn't make sense that "billionaires" are causing problems by buying homes in median priced neighborhoods. If, on the other hand, we really are seeing "hordes" of "Chinese businessmen" purchasing median priced homes and renting them out, I would like for the author to have provided some statistical evidence.
Back in San Francisco in the 1980s we had rumors of Hong Kong buyers arriving with suitcases full of cash. But nobody I know ever encountered one. What I did see was lots of Americans from other states moving to the high-tech, finance hub of San Francisco.
Property 13 in California was so popular precisely because of the problem you described. Long-term low income owners, such as retirees were being hit with huge increases in their taxes. It put a stop to that.
Granted, Prop 13 caused a lot of other budget problems. But it's a fair approach.
My main point is that it just doesn't make sense that "billionaires" are causing problems by buying homes in median priced neighborhoods. If, on the other hand, we really are seeing "hordes" of "Chinese businessmen" purchasing median priced homes and renting them out, I would like for the author to have provided some statistical evidence.
Back in San Francisco in the 1980s we had rumors of Hong Kong buyers arriving with suitcases full of cash. But nobody I know ever encountered one. What I did see was lots of Americans from other states moving to the high-tech, finance hub of San Francisco.
4
Great idea unfortunately we have politicians who are just as bought as the houses and condos.
16
This is happening in Hawaii, too, as government chooses density over affordability, allowing developers to build and sell dozens of luxury, high-rise condominiums while the population of homeless grows, wages stagnate (even in the midst of historically low unemployment), and in a place where the only option for a less expensive lifestyle is to move all the way to the Mainland. The *median* home price now exceeds $500,000, in a state where the majority of the wage-earning population works in the tourism and service sectors. Hawaii already had a serious affordable housing shortage before the building boom began, and it has only worsened in the decade or two since. For the most part, the luxury housing being built now does not serve the local population. This not only distorts the housing market, in small, geographically isolated Hawaii the very culture is being altered, as it has been in many other places.
46
And what about absentee landlords who don't keep up their properties? Perhaps we need a rule that says that if you own the property you have to live near it or in it and take care of it or you can be charged for not taking care of it because the town or city or village will step in.
What I'd like to understand is why it's okay to drive prices up to the point where no one can afford a decent place to live.
What I'd like to understand is why it's okay to drive prices up to the point where no one can afford a decent place to live.
26
This is neo-liberal economics, a perfect example. (Don't be confused by the word "liberal".) It's just free-market fundamentalism. The completely free movement of products, people and money. No more borders.
According to the theory you and I will have to go somewhere else.
It's the theory subscribed to by nearly all of the elites; Democrats, Republicans, E.U. ministers, the World Bank and the IMF.
They're winning.
According to the theory you and I will have to go somewhere else.
It's the theory subscribed to by nearly all of the elites; Democrats, Republicans, E.U. ministers, the World Bank and the IMF.
They're winning.
29
The freedom of movement is related to the amount of money that you have. A person with a medium income will have to pay taxes if he/she wants to move his/her money from one country to other, while the riches would avoid pay taxes through loopholes and exceptions.
And don't make me start with the requirements that you need if you are looking for move to other country.
And don't make me start with the requirements that you need if you are looking for move to other country.
10
Let's face it: When the wealthy do it, it's not a crime.
31
Can anyone explain how Chinese nationals are legally capable of buying houses in the US? Do they simply just move here whenever they feel the urge to or ?They don't invade countries or cities, they just buy them.
The money is pouring in from abroad, from South American drug thug scions, ruthless Russian oligarchs and corrupt Chinese bureaucrats and nobody is questioning their filthy lucre? Crazy.
The money is pouring in from abroad, from South American drug thug scions, ruthless Russian oligarchs and corrupt Chinese bureaucrats and nobody is questioning their filthy lucre? Crazy.
71
Any non-citizen may purchase legal residence status in the United States by investing $500k or $1m, depending on the circumstances of investment. Having a Green Card allows one to buy a mortgage or real estate directly, just as any US citizen may do so.
If you can buy property without a loan, it is unlikely the seller or agent particularly cares where your money comes from — and, indeed, that has regularly been the case with Russian gangsters/"oligarchs" buying property in New York City, as was recently reported in the NYT.
Real estate agents don't care to ask too many questions about where dirty money comes from, so long as the check clears.
If you can buy property without a loan, it is unlikely the seller or agent particularly cares where your money comes from — and, indeed, that has regularly been the case with Russian gangsters/"oligarchs" buying property in New York City, as was recently reported in the NYT.
Real estate agents don't care to ask too many questions about where dirty money comes from, so long as the check clears.
59
Cod, the problem is that they're not using filthy lucre. They're using US dollars. This is the inevitable consequence of Americans buying Chinese goods in US currency. The only way that those dollars are good to Chinese people is if they can spend them on goods and services, which for the most part means spending them in America. If we prevent them from spending our currency on our goods and services, then the currency is useless to them, and they will stop accepting the US dollar for payment. Which means that we won't be able to buy things from China any more unless we get our hands on Chinese currency, and the only way to do that would be to sell things to China, e.g. property. Leading us right back to the situation we were trying to avoid in the first place, except that we will have entirely upended the world financial order, to our detriment, in the meantime.
9
google "chinese buy visas"
Also some parents buy property for their children while the kids are in college here.
Also some parents buy property for their children while the kids are in college here.
2
So much for the vaunted market being self-correcting. There is a big, fat real estate bubble on the coasts.
29
And, Don Geddis: you have my prediction in black and white. Any comments?
4
It happened in Palo Verde, California due to the Japanese purchasing homes and letting them rot...prices went up as the inventory went down.
Additionally, it occurred in Creekside Forest, The Woodlands, Texas because of purchases made by wealthy Mexicans seeking a second home in the States to escape to when south of the border violence escalated too much...neighborhood prices went up and houses sat empty and neighborhoods were lost because people didn't live there.
Additionally, it occurred in Creekside Forest, The Woodlands, Texas because of purchases made by wealthy Mexicans seeking a second home in the States to escape to when south of the border violence escalated too much...neighborhood prices went up and houses sat empty and neighborhoods were lost because people didn't live there.
27
Fraser institute is usually horrid, but that's pretty clever. I guess they actually want to solve this problem as their employees are exactly the people being priced out of Vancouver.
3
Simon Fraser University, not Fraser Institute...
13
Kesselman is a professor at SFU, a local university, not a member of the Fraser Institute, a local right-wing think tank.
13
Money laundering. Everyone should read this:
https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-t...
As they always say, follow the money. Trump's in it deeply and we need all of the "family's " financial info.
https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-t...
As they always say, follow the money. Trump's in it deeply and we need all of the "family's " financial info.
34
The extra property tax would probably not help high income U.S. buyers either. They lose deductions after a certain income & the AMT adds some taxes back into the taxable income.
4
"They lose deductions after a certain income"
They do? That's news to me.
One of the factors distorting the entire US economy, demographics, commuting patterns, in-city tax revenues, cost of farmland etc, is the lack of limits on the mortgage-interest deduction and local real estate taxes.
Any limits have been inevitably and violently opposed by the construction, real estate and financial industries to whom the MID has been a massive taxpayer giveaway. The AMT is a band-aid.
Anyway - was someone here worried about high-income US home buyers?
They do? That's news to me.
One of the factors distorting the entire US economy, demographics, commuting patterns, in-city tax revenues, cost of farmland etc, is the lack of limits on the mortgage-interest deduction and local real estate taxes.
Any limits have been inevitably and violently opposed by the construction, real estate and financial industries to whom the MID has been a massive taxpayer giveaway. The AMT is a band-aid.
Anyway - was someone here worried about high-income US home buyers?
4
The ham-fisted way that capitalism solves this problem is environmentally and income distribution-wise unsustainable.
First, it causes larger and larger carbon footprints as people commute from more affordable outlying housing areas increasingly farther out, to urban-centered jobs with downward-spiraling service sector wages (witness the hollowing out aspect of neighborhoods without a vital customer base).
Then, when prices surge too high for economic fundamentals to sustain the regional economies, there is a recession which lowers housing prices allowing more speculators to purchase housing at lower prices creating fewer middle class homeowners and more renters before prices rise again. This contributes to the hollowing-out of the middle class who can't afford to buy during a recession.
Seems like a problem that only more not less government intervention will solve. Wealth tax and strict and sweeping rent control are good starts but laissez faire capitalism nearly always trumps housing as a basic human right.
First, it causes larger and larger carbon footprints as people commute from more affordable outlying housing areas increasingly farther out, to urban-centered jobs with downward-spiraling service sector wages (witness the hollowing out aspect of neighborhoods without a vital customer base).
Then, when prices surge too high for economic fundamentals to sustain the regional economies, there is a recession which lowers housing prices allowing more speculators to purchase housing at lower prices creating fewer middle class homeowners and more renters before prices rise again. This contributes to the hollowing-out of the middle class who can't afford to buy during a recession.
Seems like a problem that only more not less government intervention will solve. Wealth tax and strict and sweeping rent control are good starts but laissez faire capitalism nearly always trumps housing as a basic human right.
28
Well, actually I think it's worse.
Capitalism leads to Brazil. Favelas legally owned by some plutocrat, but squatted by the poor.
In a highly unequal society only the rich in land. Eventually the poor don't even rent, they just squat.
Capitalism leads to Brazil. Favelas legally owned by some plutocrat, but squatted by the poor.
In a highly unequal society only the rich in land. Eventually the poor don't even rent, they just squat.
27
This is just one more effect of the concentration of wealth in the hands of fewer individuals. Of course they are going to capture control of necessities; this is how you build generational wealth, so that subsequent generations of your family can extract wealth from everyone else. There is a lot of money with no place to go, so it snaps up farmland, water rights, and housing. And we wonder why young people have a hard time getting started. Connect the dots.
138
Capitalism has nothing to do with it since the US has abandoned the capitalist system. Rather we are now operating under the econo-political system of corruptionism where all wealth is directed towards the top 1%. The prime for behind the escalating housing prices in Los Angeles, for example, is corruption. The city operates on a bribery-extortion basis. Any developer can bribe his way to have his property "up-zoned" so that he may construct whatever he wants. As a result, residential property are prices at the Development Value and not at the Living Space value.
16
As I understand it, the opposite is true: there is a spread of wealth to previously modest citizens of places like China, who then invest relatively small sums in consortiums that purchase real estate in, say, San Francisco.
7
Rick, that is capitalism.
4
The description of housing built, bought and never lived in is epidemic in suburbia, too.
Four years ago, the property next door to us was filled with an acre of trees and a 55 year old 1500 sq. ft. contemporary house that had a family living in it. They sold it for $650K.
Within a year, the lot was denuded of all the trees and an 8000 sq. ft. McMansion was built. It was put on the market for $2 mil.
It was bought within two weeks. Full ask price paid in cash. Foreign investors.
No one has moved in.
Four years ago, the property next door to us was filled with an acre of trees and a 55 year old 1500 sq. ft. contemporary house that had a family living in it. They sold it for $650K.
Within a year, the lot was denuded of all the trees and an 8000 sq. ft. McMansion was built. It was put on the market for $2 mil.
It was bought within two weeks. Full ask price paid in cash. Foreign investors.
No one has moved in.
178
In certain parts of the US, the government is requiring disclosure of the identities of the actual parties behind LLCs and LLPs when the purchase prices is above a certain amount. It varies according to locale. NYC is/was $3 Million and Miami was/is $1 Million.
The corrupt Garcetti Administration in Los Angeles, then started Small Lot Subdivisions [SLDs] -- a phase which leaves everyone wondering, "What's that?" SLDs are placing 5 to 8 tiny homes 3 stories on on R-1 lots with 3 inches between them and calling the "detached single family homes." This was the purchase price of each units falls below the reporting threshold to disclose the real identifies behind the LLCs and LLPs.
This practice is criminal as its sole intention is to evade the law as the buyers do not move into the units. They only invest. On the downside for Garcetti, the corruption is so rampant in Los Angeles that a Crash is inevitable. Russian oligarchs and narco-drug traffickers who are hiding their money in these SLDs will be very displeased to find out that Garcetti is running a scam on them. When their $1 Million SLD is worth only $250,000, they will hopefully do what mobsters do best.
The corrupt Garcetti Administration in Los Angeles, then started Small Lot Subdivisions [SLDs] -- a phase which leaves everyone wondering, "What's that?" SLDs are placing 5 to 8 tiny homes 3 stories on on R-1 lots with 3 inches between them and calling the "detached single family homes." This was the purchase price of each units falls below the reporting threshold to disclose the real identifies behind the LLCs and LLPs.
This practice is criminal as its sole intention is to evade the law as the buyers do not move into the units. They only invest. On the downside for Garcetti, the corruption is so rampant in Los Angeles that a Crash is inevitable. Russian oligarchs and narco-drug traffickers who are hiding their money in these SLDs will be very displeased to find out that Garcetti is running a scam on them. When their $1 Million SLD is worth only $250,000, they will hopefully do what mobsters do best.
12
Do you mean, burning the houses down and collecting the insurance on the full value?
1
When we buy goods from China, we import goods and export dollars. Eventually the Chinese need to spend their dollars. They have gotten tired of spending their dollars on US treasury bonds, which fund the US deficit. They want/need to buy something else. We don't produce a lot of goods in the US, so that something else is going to be real estate and US companies. This is why the balance of trade, US manufacturing and the US budget and its related deficit matter.
Don't blame the oligarchs for not wanting IOUs in the form of treasury bonds, blame the policies that encourage them to want hard assets.
Don't blame the oligarchs for not wanting IOUs in the form of treasury bonds, blame the policies that encourage them to want hard assets.
21
Like those Indians who sold Manhattan for trinkets... that was a cautionary tale and we're ignoring it. Thanks for connecting the dots.
8
> We don't produce a lot of goods in the US,
This is false. Our manufacturing output is higher than it's ever been. We just don't need that many workers, since robots build most of it.
This is false. Our manufacturing output is higher than it's ever been. We just don't need that many workers, since robots build most of it.
13
Treasury bills do nothing for the deficit. They do, however, do something to the debt.
Those are two very different things.
Those are two very different things.
1
If ordinary citizens cannot afford city centers, maybe start zoning high density business and housing away from the city center, for example there is a need for another high density area away from Manhattan that can develop into a big city. None of these expensive urban areas were created over night. Our previous generations built these places over a long time. It's time we develop other newer urban areas. The growth of suburban sprawl is more detrimental to society rather than high density residential and commercial development.
12
That's what is happening in downtown Brooklyn and Long Island City in Queens. Huge new condo and rental buildings have been going up. But, that does nothing to mitigate the impact of seeing the nearly empty One47 tower from the window a LIC home.
All that this development in Queens and Brooklyn has really done is make the commute into Manhattan, even just one stop from LIC, unbearable with overcrowded subway cars bursting at the seams during the commute times.
All that this development in Queens and Brooklyn has really done is make the commute into Manhattan, even just one stop from LIC, unbearable with overcrowded subway cars bursting at the seams during the commute times.
2
I understand that the Vancouver tax on foreign owners is refundable if they actually move in.
The idea of an excess property tax that is deductible from income tax is interesting but doesn't help in cities without income tax.
The idea of an excess property tax that is deductible from income tax is interesting but doesn't help in cities without income tax.
13
There is a way out of people taking housing stock out of the market. Require that every dwelling unit is occupied at least 10 months every year. Even if houses get purchased by out of towners who pay nosebleed prices, they would have to rent it out to keep the place occupied. This would depress rents and thus benefit the locals
The real problem is not that owners are out of town, the problem is that houses stay empty
The real problem is not that owners are out of town, the problem is that houses stay empty
88
but that would end sales in the Hamptons, Tahoe, Nantucket, Aspen, Vail, etc.. the entire second and third home industry would collapse. Nobody would be legally allowed to own a second home.
5
@ richguy: the shortage of affordable housing here is so bad that it has drastically increased the number of people who are homeless--people who work full-time but have to live in their cars. While so many are homeless, I'm not going to weep for people who might not be able to own second and third homes.
21
I'm not a socialist.
A good summary of real estate problems which are visibly expressing the growing wealth divide through gobbling up properties in desirable areas, and pushing those with lower incomes out.
11
You can be pushed out with an income that is far from low.
6
define "pushed out." People in Manhattan feel "pushed out" to Brooklyn and people in Brooklyn feel "pushed out" to New Jersey. But "pushed out" sort of implies entitlement to live where one wants to live. Money is the only entitlement. Either you can afford an area or you can't. Last I checked, we live in a capitalist society.
A tax of some kind to discourage behaviors could work. Don't call it a 'foreigners tax' or anything of the like. Rather, call it the 'Owner-non usage tax,' this way you take the stigma out of any immigration/foreigner debate currently happening in the world and it just focuses on the owner and whether they live in the domicile or not. now how you would prove that one does not live there is another story. (maybe the same way snowbirds have to prove tax residency?)
30
I would call it the Ghost City Tax. Americans should worry less about ghost cities in China and look in its own backyard.
11
The (additional) bad news is that many of these luxury apartments are money laundering opportunities for international criminals.
The good news is that our president is taking a cut. https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-t...
The good news is that our president is taking a cut. https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-t...
104
As long as we allow private property laws and encourage people to own stuff they don't need, the ones with most money will buy stuff and make it out of reach of the public. If we keep trying to make money from homes or any physical thing even though anything physical will decay over time, there will be a supply issue. People in those expensive cities can retire as millionaires if they sell their houses to rich people who wants to pay. Those existing homeowners are offering them for highest bidder so of courses the prices will increase. If we don't try to profit from housing, it's not going to be a problem. But we can't blame foreign money if we are also profiting from that.
5
The price differential between the coasts and the rest of country has basically been an albatross around the neck of the economy. It acts as a huge negative against mobility. And, given what is stated in this article, the problem is going to get worse.
14
Larry L: thank you for mentioning that. There have been many articles lately about "inequality" as well as many posts and comments about how low-income displaced American workers (coalminers, etc.) should just "up and move to the big blue cities where there are jobs"....completely tone deaf to the reason such workers do not and CANNOT do so....they cannot afford the thousands in monthly rents in such cities.
When I was a young woman, just out of college....the whole USA seemed open to me, and I dreamed of living in NYC, California, and many other exciting places. It was POSSIBLE 40 years ago to have that dream and really do it. Today, it's like a bad joke. As an adult, whole large sections of the country are off-limits to me, because the housing prices so dramatically exceed anything I could ever afford -- even a studio apartment in NYC costs more than my entire pre-tax income!
When I was a young woman, just out of college....the whole USA seemed open to me, and I dreamed of living in NYC, California, and many other exciting places. It was POSSIBLE 40 years ago to have that dream and really do it. Today, it's like a bad joke. As an adult, whole large sections of the country are off-limits to me, because the housing prices so dramatically exceed anything I could ever afford -- even a studio apartment in NYC costs more than my entire pre-tax income!
36
Governments have failed or looked the other way at this phenomenon because it brings immediate cash into the area while the negative effects are in the longer term. Some simple things governments could do include absolutely requiring the full name and principal address of the owner. No lawyers, sham corporation or offshore company ownership permitted to purchase a residence. Second, if this is not the principal residence, the purchases pays an additional tax on the house. Third, if the residence is rented out or owner-occupied for at least 6 month, an empty house level is assessed for the house.
29
Governments took too long to catch on. Now, the phenomenon is so interwoven with local land owners already invested and wealthy from the soaring prices, that these rich locals stand to lose too much for the local govts to stop what's going on, and possibly crashing the market. Would the rich locals stand for that? I spotted this problem in Vancouver last year with real estate prices shocking me, and noticing a regional park's parking lot populated by ridiculously expensive exotic sports cars. I thought, what's going on here? The space between houses seemed to be a mere couple of feet. Too many signs that things were way out of whack. A house that would cost a million+ at home would cost fourteen million+ there. What officials would have the guts to put a stop to the source of all this extravagant living?
13
One thing that bothers me is that the abuses of the real estate system are only being brought to light by the media. )The Globe and Mail in the case of shadow flipping in Vancouver. )
Our governments are asleep at the switch.
Thank goodness we have some effective journalists.
Our governments are asleep at the switch.
Thank goodness we have some effective journalists.
77
Government has no place in this figment of the left wing imagination. Property rights need to be absolute. If I myself or collectively with others by design or happenstance should come to own a majority, for instance, of the Upper West Side or Hunts Point for that matter, so be it. To quote Bobby Axelrod "Where has our freedom gone when the government can tell us what we can and cannot buy?". That applies to all of us.
6
So is it ok for me to put a single-wide in a high-price neighborhood? Oh I forgot, we have zoning laws that tell us how we can use property that we own. The precedent is set; property rules require certain considerations for our neighbors and neighborhoods. They are not absolute, so we might as well discuss where the boundaries should move as situations change.
18
No more elitist, pro-corporate words have ever been spoken.
5
Here in Arcadia Ca, we have people buying houses,condo, or renting apartments, who then place their kids and then go back overseas. The kids are left with minimal supervision, and a relative to look in every now and again. In my complex, three brothers were left alone, and the other 2 bullied the youngest so much, he pulled a knife and tried to kill himself. The police were called and the young man survived. His father came and moved all the belongings from the unit-later we learned he rented a condo about a mile away, and parked the 2 older boys there. To this day, the "owner" still calls Singapore home.
28
The situation in little Asheville is of a smaller scale but similar concern; People who do not intend to live here are buying up homes to use as vacation rentals. I don't think the locals care what country these property buyers come from, we just don't want to swap our long-term neighbours for vacationers who have no investment in keeping the peace. Nor do we need to lose any more affordable housing to the expanding short-term rental market. One IS allowed to rent rooms or a basement apartment in one's home on a short-term basis, as long as the owner also resides there—which makes them similar to the B and Bs that have worked well in residential neighbourhoods for a long time. City Council has come down on the side of protecting both the residential neighbourhoods and the long-term rental housing needs of the locals—the fine at present is $500 a day for stepping outside what is allowable. But there is still controversy, with many citizens, and some council members, feeling that folks ought to be able to use their property to provide income without local government interference.
44
This article doesn't consider the market response to apparent demand for so-called "housing" units that in fact no one will live in but that appear to be desirable mainly as places to park money. How much new construction has been targeted specifically at this segment of demand? Is there a profile of developers to target this segment?
74
These developers go directly to China to market their un-built properties.
All high end real estate, especially on the West Coast, is advertised online and accompanied by videos in Chinese. No doubt who they're targeting.
All high end real estate, especially on the West Coast, is advertised online and accompanied by videos in Chinese. No doubt who they're targeting.
24
Jared Kushner's sister went to China to try to get Chinese investor for a property they are building in New Jersey. That was big news not that long ago.
As for information on these developments targeting the super rich, the Times did a great series of articles on this very topic, as mentioned by Third.Coast in a previous comment. Here is the link:
https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-...
It's a very interesting read.
As for information on these developments targeting the super rich, the Times did a great series of articles on this very topic, as mentioned by Third.Coast in a previous comment. Here is the link:
https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-...
It's a very interesting read.
2
Just one more sign of growing inequality and break down of communities. I've witnessed this myself in the past several years while in B.C., London, Scotland and L.A. and wondered when I would read an article about it. However, it's also true that Americans participate in this erosion of community by buying homes in Mexico, Costa Rica and other countries that they use only half the year. It also happens domestically. I know someone with a home in AZ that they use only one week out of each year but they don't want to rent it out. When in Maine, residents of coastal towns told me few homes have long time natives but belong to residents of Boston or NYC. I'm not complaining about people having second homes, but it does create the dilemma of a loss of community stability. And a two hour commute is nothing these days for those priced out of markets. Some rent a budget motel room Mon- TH nights and return home on the weekends after a 4+ hr commute, with a high proportion of earnings going towards gas and car maintenance. I'm looking forward to reading more articles that might propose solutions to these workers' nightmares due to real estate conundrums created by both foreign and domestic investors, here and abroad
64
People who buy vacation homes -- and actually use them -- are not the issue. If the homes mentioned were LIVED IN, even part of the year....it would not be a problem.
Vacationers and retirees contribute significantly to the local economies. Foreign investors who buy property sight unseen, and leave it empty 12 months of the year, DO NOT contribute at all.
Vacationers and retirees contribute significantly to the local economies. Foreign investors who buy property sight unseen, and leave it empty 12 months of the year, DO NOT contribute at all.
17
Cape Cod is similar to Maine. 3 out of 4 houses where I live are empty 9 months of the year. It's near to impossible to find a rental home anymore here.
8
[[I've witnessed this myself in the past several years and wondered when I would read an article about it.]]
https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-...
https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-...
3
"a property surtax tilted toward high-end homes that would be deductible against the owner’s income tax. Local residents paying income taxes would effectively owe no surtax. Out-of-town investors, foreign or domestic, who don’t work in the local economy would be hardest hit (with some concessions for resident retirees)."
This is the best solution I have come across so far to this problem.
This is the best solution I have come across so far to this problem.
204
How is this ever going to be controlled within the economic system we have in place?
9
One thing's for sure. Donald Trump is the last person who would do anything to stop this from happening.
161
In most cases it's best handled on the state and local level, not by the Feds. So who cares about Trump?
3
This problem grew during the Obama administration. Let's not be fools or blind devotees. Obama wasn't about to do anything that affected the uberrich negatively, nor is Trump.
2
Actually, Obama tried to do something about it but the very powerful real estate and construction lobbies pushed back super hard making it nearly impossible for the Federal government to do anything about it.
But, the Feds are monitoring the very high end housing markets in Miami, NYC and LA to study the impact on all this foreign cash. Whether or not the current administration does anything with this information remains to be seen.
And the only reason this became a bigger issue during the Obama years is because places like Russia, Brazil and China saw an increase in both wealth and political uncertainty during his presidency. His administration did nothing to exacerbate this problem.
But, the Feds are monitoring the very high end housing markets in Miami, NYC and LA to study the impact on all this foreign cash. Whether or not the current administration does anything with this information remains to be seen.
And the only reason this became a bigger issue during the Obama years is because places like Russia, Brazil and China saw an increase in both wealth and political uncertainty during his presidency. His administration did nothing to exacerbate this problem.
Been happening in London as well for some time. I see it as stealing from the population of the city and country concerned. In the past a tenant or house owner could put down roots, now these people are transient, invisible, and have no interest in the local area. This is bound to do damage over time.
96
I've often hear these same complaints ("transient" "no interest in the local area") aimed at renters, even long-term renters. I don't know if it's snobbishness, or denial of the fact that not everyone wants to be a homeowner. I've rented the same apartment for many years, yet am still often viewed as a drifter or unreliable when attempting to participate in community events.
There is nothing immoral about renting.
There is nothing immoral about renting.
12
they buy the homes to shelter/hide money from taxes, paying cash which forestalls other buyers, and they qualify for a visa just because they bought property. Not good policy.
179
Although we get lots of complaints (Vancouver BC) about foreign ownership, we don't hear many about home ownership in countries by foreigners from North America. Many people in our communities own vacation or retirement homes in Mexico, Central America, the Caribbean, etc., driving those prices out of reach of locals.
It's a different story when it's done by you rather than to you.
It's a different story when it's done by you rather than to you.
261
Those locations are explicitly deemed to be resort areas. Big cities in North America are not supposed to operate as such. They are also usually areas that aren't very dense, and thus housing supply is elastic, and prices are not actually pushed up all that much. In any event, if resort areas want to restrict foreign ownership, then they should. In any case, the people who are hurt by these dynamics in North American cities are not the ones who own the vacation homes - so there's contradiction in seeing it as problematic.
19
A lot of these Americans are also retirees who LIVE in the homes they buy. The situation isn't comparable. Thst is why the article explicitly noted exceptions for retirees.
12
Resort areas depend on vacationers and retirees. It's their primary source of income. Vacationers and retirees also rent out or invite guests to stay bringing more wealth to the local community. Very different situation.
14
There's a related problem for affected cities: luxury apartments for short term corporate housing. Kendall Square in Cambridge Massachusetts is a key example of this. Hundreds of very expensive rentals have been built, but there are almost no residents. Urban planning becomes a challenge: should cities build schools in these neighborhoods? What about grocery stores?
49
Kendall SQ is strange. It's home to most of the biotech companies in the USA. It's near MIT, Beacon Hill, and Harvard SQ, but it's also a non-place. You got Legal Seafood and lots of parking. Chances are, anybody who gets successful in biotech will buy a home in Weston or Sudbury and raise his or her kids out there.
4
The article says that foreign money has been responsible for a 1.1% increase in house prices in New York over a decade. That's nothing compared to the 5-10% price growth per year these areas experience for other reasons. In most of the country where there is less foreign investment, the effect of foreign money is essentially zero. I share the concern about high housing costs, but blaming foreigners is a distraction (and one with xenophobic undertones) from the true causes of overpriced homes such as tight zoning laws and loose financing.
6
That's an outlier study. A better study is by Alex Chinco and Christopher Mayer in the Review of Financial Studies. It estimated that for each percent share of the market made up of out-of-town speculators, that housing prices rose 1.9 percent in the following year. That would suggest a significant impact for foreign money, or out-of-town speculators, in markets like New York or Vancouver.
18
Well, one of the reasons home prices increase in some of the second tier markets is because people are leaving the high cost cities in search of a more affordable life, while also inadvertently causing housing prices to increase in their new location as they bring the large windfall from selling their home that must be reinvested into a new home or face capital gains taxes.
I saw it years ago when I lived in Denver. Thousands of people from Texas and California were moving there causing the suburban sprawl that has eaten the prairie. Home builders were building as fast as they could but it wasn't fast enough so the general housing market saw considerable increases across the board.
The Californians especially would arrive in CO with suitcases stuffed with cash from selling their CA homes for huge gains and have to plow that cash back into a home so the developers would build bigger and bigger homes to absorb that cash.
People are commuting from Allentown, PA to NYC every day for work because they cannot afford to live in NYC or the closer in suburbs, even with decent paying jobs. So, these people drive up the cost of homes in Allentown making it harder for people who work locally to afford a home so they move farther away from Allentown and commute to there.
Foreign money may not be the only reason but it plays a big enough part to be studied, and to cause concern.
I saw it years ago when I lived in Denver. Thousands of people from Texas and California were moving there causing the suburban sprawl that has eaten the prairie. Home builders were building as fast as they could but it wasn't fast enough so the general housing market saw considerable increases across the board.
The Californians especially would arrive in CO with suitcases stuffed with cash from selling their CA homes for huge gains and have to plow that cash back into a home so the developers would build bigger and bigger homes to absorb that cash.
People are commuting from Allentown, PA to NYC every day for work because they cannot afford to live in NYC or the closer in suburbs, even with decent paying jobs. So, these people drive up the cost of homes in Allentown making it harder for people who work locally to afford a home so they move farther away from Allentown and commute to there.
Foreign money may not be the only reason but it plays a big enough part to be studied, and to cause concern.
2
if the buyers of homes in these high price cities are foreign, then the problem is with foreigners who feel the need to invest in our housing stock. Often they do it for creating a safe haven in modern, developed countries, such as the USA, Australia, England and Canada that contrasts with the uncertainty of the governments of their own countries. So it is only partially speculation. Look at the list of the countries mentioned in the article, China, Brazil, and Russia and each has a long history of unstable ( Brazil ) or repressive ( China and Russia ) governments.
33
That is exactly what it is, you can hardly find a Brazilian of means that doesn't own property in Florida, Southern coastal California, NYC, or the greater Boston Area as a safe guard for their wealth and occasional vacation designation.
-A Brazilian.
-A Brazilian.
37
That still doesn't mean the house should be allowed to sit perpetually empty. Electrical grids, water mains, restaurants, hair salons, and other local businesses can't function for remaining residents if there aren't enough residents to cover the cost. What good is buying a house if eventually that's all it becomes—with no water, no power, no internet providers, no businesses—within city limits, or in a suberb.
14
What I assume is happening here is that private banks are diverting UHNW wealth to asset classes that are not covered by KYC and new OECD regulations - namely, residential real estate. The purpose: to hide and preserve wealth. Until regulations cover real estate, there is no reason why this won't continue.
64
We have anchor babies and we have anchor property. A lot of money illegally obtained pours in. Politicians are happy. More properties, valued more mean higher revenues. The downsides are many. You empty cities and towns of the middle class, creating two kinds of neighborhoods, the rich and the very poor, including the homeless.
Many foreigners, as in Vancouver, buy property, fake investments in order to get a legal foot in, then sends a child to attend university. Also very often, elderly parents are sent to get healthcare here.
We lose: the possibility to acquire a home, find an affordable rent, work closer to home, access services nearby.
Many foreigners, as in Vancouver, buy property, fake investments in order to get a legal foot in, then sends a child to attend university. Also very often, elderly parents are sent to get healthcare here.
We lose: the possibility to acquire a home, find an affordable rent, work closer to home, access services nearby.
142
Could you please translate this into English?
15
What you mean is recent government KYC regulations on bank and brokerage reporting that do not apply, or are not enforced, to real estate brokers
7
Interesting too that this article appears concurrently with one on extreme commuters, those with 2 plus hour commutes(each way). The influx of foreign or even domestic wealth that is being used to invest in real estate also forces people to live further from work and engage in longer commutes. Sometimes I wonder what will happen to places such as NYC when the ordinary people, teachers, nurses, police, sanitation workers, bus drivers and waiters can no longer afford to live anywhere that has a reasonable commute time. When all who live there are Uber wealthy and many homes are empty investment properties?
I know that here in VT there are many areas where homes are only occupied seasonally. A certain amount of this is ok. When it's too large a percentage it has negative implications in that these vacation home buyers often can afford to pay more for properties than the locals, dependant on local salaries can. As well, the non resident buyers tend to not be involved in local affairs. They don't volunteer in town nor add much to the fabric of community connectedness. I'm sure the same is true for the non resident buyers of homes in NYC, Miami and Vancouver.
I know that here in VT there are many areas where homes are only occupied seasonally. A certain amount of this is ok. When it's too large a percentage it has negative implications in that these vacation home buyers often can afford to pay more for properties than the locals, dependant on local salaries can. As well, the non resident buyers tend to not be involved in local affairs. They don't volunteer in town nor add much to the fabric of community connectedness. I'm sure the same is true for the non resident buyers of homes in NYC, Miami and Vancouver.
106
You WONDER what will happen when that occurs? Do you realize it has already occurred and for years now? The median rents (let alone home sales) are now greater than the TOTAL pre-tax income of almost all middle and working class residents of greater metropolitan NYC, SF, LA, etc. There are many tens of thousands of units in NYC that sit completely empty -- all year -- not a seasonal vacation property. An empty shell.
13