For the Rich, the Best Bank is a Land Bank
In Kim Stanley Robinson’s book, New York 2140, the city is flooded from seawater rise, the poor are huddled in the intertidal zone, and the rich live in superscrapers uptown, their giant lofts and condos towering above the destruction. After a particularly juiced-up hurricane, the city’s poor are left homeless, living in Central Park. That is, they live there until they realize: most of the apartments uptown are sitting empty, their foreign owners using them as investment piggy banks. So they form a Householder’s Union and revolt.
Take out the flooding and the uprising and Robinson’s book could just as easily be titled New York 2018. All along the Central Park corridor and the Financial District, high-rise luxury condos are stabbing at the sky. The lean 432 Park Avenue tops out at 1,396 feet, making it the tallest residential building in the country, while the One57 building stands at 1005 feet. In the next few years, many more luxury skyscrapers will join them. Speculation on these condos has driving up housing prices by 30 percent in one year.
And in a city where rents are increasing at double the rates of income and homelessness is at its highest level since the Great Depression, one condo recently sold for a record-breaking $88 million.
But a recent Census Bureau inquiry found something even more sobering: 30 percent of all apartments in the area between 49th to 70th Streets from Fifth to Park are vacant at least ten months a year, and 30 percent of owners are foreigners. That means that the mind-numbingly expensive apartments aren’t even being used for living. They’re used, instead, as an investment, a secure place for the global mega-rich to deposit their money as their favorite old haunts—Switzerland and the Cayman Islands—have succumbed to at least some requirements for transparency. And thanks to a loophole in the Patriot Act, which monitors all formal financial institutions, real estate transactions are exempt from oversight. That has allowed a shadow-world of lawyers, brokers and financial advisors who cater to the planet’s 1 percent, forming LLCS and shell companies that give buyers total anonymity.
That means a Manhattan pied-a-terre is the perfect place for oligarchs to funnel their ill-got millions, avoid taxation or cover up scandal, or launder money. But on a more practical level, it means that Manhattan’s economy—and its housing—is both catered to and run by plutocrats who can’t be discovered, taxed, or held accountable. In the process, everyday New Yorkers suffer the consequences, seeing the constriction in housing supply lead to a glut of housing demand, allowing both realtors and landlords to charge obscene housing prices.
Of course, there are things that could be done to keep Manhattan from become one giant land bank. The advocacy group, Generation Rent, has proposed an idea keeps hypercapitalism intact but provides a second-tier welfare state for the rest of us. They propose creating a secondary housing market, where the government would invests billions in real estate and then sells the houses to residents at cost, then regulate the appreciation at a rate similar to a savings account. Critics argue that this does nothing to stop the proliferation of luxury apartments or foreign investment, and argue for a massive increase in affordable housing, taxes and penalties for foreign investors, and more transparency and oversight in the buying process. Of course, Robinson himself has sketched out another, if fictionalized, approach: a Householder’s Union that threatens a debtor’s strike unless the government turns over empty luxury apartments to the people. No matter what, though, New York’s affordable housing future depends on including the reality of luxury vacancies in its calculation of housing supply and demand.