> If New York becomes a wasteland of empty apartments
> held by overseas billionaires
No chance of this happening. NYC has over 3 million housing units. There are many fewer overseas billionaires, fortunately.
I own and occupy a 2-bd 2-bath condo in NYC. It's in Central Harlem and I love it here. I have no thought of moving and am not worried that Russian oligarchs are going to turn the city into an empty wasteland.
Real estate prices in Manhattan are heavily influenced by neighborhood naturally and, on the very high end, signature amenities such as wrap-around terraces and views of Central Park. But we're talking about 10,000 ultra-high-end units out of 3 million across the 5 boroughs.
In my Manhattan neighborhood, even new condos in full-service concierge buildings are vastly more affordable than the small slice of luxury units described in this article. The price per sq ft in Harlem is one-third of what NY Mag is talking about.
I say, let the billionaires blow their dough on my town. Their market is small and finite; long-term consequences are small. Meanwhile, the rest of us, a vast number in comparison, as a result will see our home values appreciate a little faster over the long run, probably.
As an NYS (but not NYC resident), I find the following quote the most offensive part of the entire article:
>In New York, by contrast, buyers of new construction often qualify for a tax abatement. At One57, currently the city’s most expensive new address, the tax break amounts to around 94 percent. A Times analysis estimated that its priciest penthouse, which is reportedly in contract for more than $90 million, would initially be billed less than $1,500 a month.
So basically, the foreign absentee buyers of these luxury buildings are able to avoid paying property taxes on most of the assessed value, forcing the "regular" residents or landlords to pay more than they would otherwise have to if these apartments were taxed at the same rate.
- The subway is crumbling with no tangible realistic plan to fix it.
- Housing crisis is getting worse. New York is consistently at the top, or near the top of the "losing residents to other cities" list. NYPost recently reported on "The Exodus of New York's middle class"
- With some of the highest taxes in the country, Cuomo recently stated NY lost 2.3 billion in tax revenue, with NYC alone losing 1 billion of that, and now there is a looming showdown on the state budget coming up. Area corporations are seeking relocation to cheaper tax areas. As they say, "Every day is tax day in NYC"
> Looking back, state lawmakers who passed the bill resetting property taxes for New York couldn't have dreamed of a skyscraper boom almost 35 years later.
Really? New York politicians didn't realize that skyscrapers and luxury condos were a thing in the 1980s?
This article lays out all the tax code shortcomings and writes it off as expensive condo sales being a new and unique phenomenon in NYC, which is bizarre.
Here's a simpler explanation – these laws are working exactly as designed.
Nobody lives in these condos for the most part. They are money laundering/tax shelter vehicles for the uber-rich, especially foreigners. The same phenomenon is common in south florida.
A lot of the content of the article is FUD. There is no relationship between income and property tax levy -- it's based on the adjusted value of the property. In the case of an apartment building, the value is easily computed as a factor of the revenue generated. Obviously, the process in NY is prone to corruption, as the leaders of both houses of the state legislature under Federal investigation for related issues. There are lots of stakeholders here with different interests -- unions want construction jobs, lawyers get to bill for title and other work, etc.
What has changed during the last 15 years is the importance of property tax in NYC. Unlike the rest of the state, other revenue sources were more prominent. Now, in addition to high sales tax, city income tax, special transit payroll tax, and other costs associated with NYC, you get high property taxes too.
I live in Manhattan and this article is complete bullshit and riddled with errors. For example, he's claiming that rents are down 30-50%, which isn't remotely true.
I'm not going to bother wasting my time on a point-to-point refutation on all the ways it's wrong, but suffice it to say it is completely wrong. Yes, the city is suffering, but not remotely to the degree portrayed here.
The article seems written to to obscure this, but local income taxes on those earning more than $10 million a year contribute 5% of the city's tax base, not 25%. It's 25% of local income tax collections, but the city collects other forms of tax.
From the numbers on households earning $500k, it looks like local income taxes are around 20% of city tax collections.
I would assume that the city has sources of revenue other than taxes. If so the contribution of the 10M+ households to the city budget would be less than 5%.
Overall I don't think the overall thesis of the article - that NYC will be in crisis if all the ultra rich move away - is supported by the (few) facts contained in it.
Not to mention the absurd premise that 100% of the ultra rich would move out of NYC if the policy proposal being attacked in article comes to pass.
Bloomberg has made Manhattan unfordable except for those who pay the long term capital gains rate on regular earnings and those who stole money out of the ground in their home country and are looking for a good place to stash it out of reach of local authorities.
And it's not for a lack of space because there is tons of vacant commercial real estate in the city. Any time my company does a demo at a bank, we see rows and rows of empty desks.
In short, Bloomberg has favored unneeded commercial development and high end oligarch dwellings over supply that the even the top 3% of wage earners can afford.
You can buy a $100MM Penthouse at One West 57th and pay the same taxes as a $2MM apartment due to dubiously applied 421-A tax abatements.
> EDIT: Not to mention that it's hard to see how increased rents lead to more revenue for the city. The state may be able to bring in more corporate tax income, but a more valuable property means that property owners can also claim more in depreciation etc.
Higher rent means higher property valuation, which means increased property taxes. In Manhattan (and other places like Florida), there is also a tax on all commercial rents that would grow. I don't think Long Island has one though, so just the property tax growth.
Regarding gentrification, Economist has a great article on the unsung benefits and highlights some studies showing displacement is not as widely perceived. People's opinion changes when you call it "revitalization", "redevelopment", or even just "development".
> If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there.
Already happening in some places. The average rent of a 1BR in Manhattan leveled off a couple years ago, roughly equal to the average 1BR in Brooklyn. All but the most successful young professionals have fled the city for the boroughs; the artists fled ahead of them, so all the fun night life that used to make NYC so exciting is already out in Queens (for a while it was in Brooklyn, but I think a lot has been pushed out there already, too).
NYC, now, is a lot more dead by comparison. It's still fun for tourists, and the place to be for the sort of evening life that is either more expensive (fine dining) or less capable of flight to the outer boroughs (museums), but if you're a local...
Headline says Billionaires. Article uses numbers from tax payers that make more than half a million. Classic NYPost.
No billionaire of anyone with any sort of income near those people will benefit their local economy. They will use all sort of tax and financial gymnastics to avoid paying local taxes.
The article talks about people who call NYC their "second home". That's too accurate! Because they make sure their primary residence is Florida to avoid paying NYC and NYS taxes yet park their cars in streets of NYC and enjoy all of (even more of) benefits of being a NYC resident
> it's totally worth noting that NYC does a much better job than most cities at permitting the construction of new luxury units
NYC builds fewer units per resident than any city in the US except probably SF. It just looks impressive because each new building adds a mark to the most visible part of the skyline, but when you consider the volume of units across NYC it's really, really low.
Prices aren't at SF level, but they are still getting unreasonably high.
Here's the WSJ article he was referring to: https://archive.is/QjPNf
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