From the article, given the area it's in, it doesn't sound like it would necessarily host low-income or middle-class families. Call me cynical, but I see those condos being someone's third or fourth home and being empty half the time.
> it doesn't sound like it would necessarily host low-income or middle-class families
So what? An increase in housing supply results in lower prices for everyone. If the "rich" are buying a condo in location A, that means they're likely not buying that condo in location B. That means the price has to be lowered since now A and B are competing. If A and B are competing for rich people, that means less "rich people" demand in location C.
In a place like Sunnyvale, houses are exceeding $1.5 million for essentially starter homes. If there were a larger supply in, say, Palo Alto, that would mean less demand in Sunnyvale, which means more people could afford to live there even if they couldn't afford Palo Alto. There just aren't enough places for sale in the area, so even if someone wanted to buy at the higher-end, the supply is constricted which means they have a lot of money to spend elsewhere. Increasing high-end housing in Palo Alto necessarily decreases demand in lower cost neighborhoods in the area. In short, building more housing for "rich" people frees up more housing for everyone.
In short, building more housing for "rich" people frees up more housing for everyone.
This is not true. Building too much housing for rich people simply results in a lot of empty housing. See for example, Manhattan or Vancouver, which have hundreds of empty condos that could be occupied by locals but are instead owned by wealthy foreigners who leave the units vacant.
By and large, rich people invest in real estate because, in most urban areas, it is an increasingly scarce, and therefore increasingly valuable asset. It's a good investment.
The solution is not to give up and stop building real estate, making it an even more attractive investment. The solution is to build so much real estate that we tip the balance, and make real estate unattractive to speculative investors.
The solution is to build so much real estate that we tip the balance, and make real estate unattractive to speculative investors.
The market can stay irrational for a long time. China has spent hundreds of billions on empty housing in planned cities the past few years, and they're still going due to speculative investor demand.
Let's face it: the evidence shows that the easiest and most cost effective way to deal with this problem is market-informed regulation.
Wealthy foreigners is orthogonal. There are policy solutions that can target it directly. For example, property taxes on units left vacant should be higher.
So... Wealthy foreigners buy in Brooklyn or Williamsburg... Raising the prices in places there.
I'd say - just kill all "rent stabilization" in sub-100th st on Manhattan and move all social housing out. Sell the land to the millionaires and put up sales taxes for non-residents elsewhere in NYC to 50%. Let the millionaires fight it out in Manhattan... they already do that today!
Raising the sales tax to 50% for non-residents wouldn't accomplish anything since the problem is that the non-residents aren't residing in NY.
Sales tax doesn't apply to real property sales, so presumably you meant to suggest a real estate tax that would only apply to non-residents...which could be trivially avoided by hiring a token caretaker to pay utility bills, turn on the lights, etc., to make the property look occupied (which is what Chinese investors have been doing since Vancouver introduced the vacant property tax.)
Even if the housing is not luxury condos for the rich, as long as real estate is appreciating, the economic incentive is for rich people to buy them and leave them empty, like a bar of gold sitting in a vault.
This is happening a little bit in my working class neighborhood. House goes on the market. It’s listed as sold, family moves out, nobody moves in. Likely some millionaire’s 8th empty investment house.
> So what? An increase in housing supply results in lower prices for everyone. If the "rich" are buying a condo in location A, that means they're likely not buying that condo in location B. That means the price has to be lowered since now A and B are competing. If A and B are competing for rich people, that means less "rich people" demand in location C.
This kind of intuition rarely work in real life though. People migration flows and the housing market isn't a A+B=C type of problem.
How many (mostly) empty places do you know of in Sunnyvale or Palo Alto? I know of many in NYC, e.g. this dentist from out of state who has an apartment in the UES. The markets are different at the middle and high end. (By the way, I do remember the days when Bay Area housing was quite cheaper than NYC...)
This kind of "trickle down" in NYC real estate exists, sure, but it doesn't spread very far. You could make more difference for "regular" folks if e.g. you added mixed-income restrictions on the new property, but by default the market doesn't work that way.
> You could make more difference for "regular" folks if e.g. you added mixed-income restrictions on the new property, but by default the market doesn't work that way.
Research [1] shows that these types of restrictions lead to the exact opposite: A shrinking supply of affordable housing and rapidly rising property prices.
+100000 - New York and Federal government fails to address the massive difference of income value between places. An annual income of 50k in Houston is equal to 100k in NYC... That also leads to lower middle class being subsidized heavily by the rest of the middle class. Which leads me to the ultimately retarded 80/20 rule in "affordable" housing in NYC.
Who pays the difference between that $1200 600ft2 apartment occupied by a single New York "artist" and the market price of the rent for the same apartment occupied by a working family of two?
That middle class in NYC needs 2x more money to have as much as middle class in Houston...
