Oligarchs are losing millions on their luxury tower condos

NY Post

 Don’t believe the brochures. A Billionaire’s Row apartment can be a terrible investment.
 
“One of the things that I struggle to wrap my head around is why people continue to park money in high-end New York real estate when it’s not a very lucrative asset class,” said Grant Long, senior economist at StreetEasy, a New York listing platform.
“You just have to assume someone like 
Ken Griffin [who recently dropped a record-breaking $250 million on an apartment at 220 Central Park South] isn’t very interested in seeing his money back. An apartment like that isn’t liquid.”
 
Roughly 16,000 apartments were bought and resold in New York from 2014 through 2018. Of those, 1,295 homes — 7.7 percent — sold at an outright loss.

 But a whopping 39 percent of the 66 luxury condos that were bought and resold in Midtown during this time lost money, according to a StreetEasy analysis of city Department of Finance records. In fact, across all neighborhoods, the city’s priciest properties saw losses.
  And the addresses read like a who’s who of prestige properties, including 15 Central Park West, 432 Park (North America’s tallest residential tower), the Time Warner Center and One57 (which boasted New York City’s first $100 million home sale).
 
“In New York, real estate behaves like a luxury good,” Long said. “It’s like fancy cars and expensive handbags. It’s purchased to make a statement. But it’s also highly cyclical and subject to whims.”

Obscene.

This is going to come off nauseating considering the source and apologies to every reader of this blog and the rest of humanity, but talk about money in the wrong hands. 

Should pieds-à-terre be taxed more?

From Brick Underground:

The number of apartments being used as pieds-à-terre and short-term vacation rentals in New York City has spiked by over 20,000 in the last three years, and such apartments now make up 2.1 percent of all housing in New York City, according to census data recently released by the city.

The number of apartments listed on the most recent Housing and Vacancy Survey as vacant because of "seasonal, recreational, or occasional use" is now 74,945. This is the highest since the Regional Plan Association started keeping track in 1991 and, as the group's director of community planning Moses Gates notes, more than enough to house the city's entire homeless population. A Department of Housing Preservation and Development spokesman says that the agency can't parse from the data how many of these 75,000 apartments are being rented out on sites like Airbnb versus how many are being used as pieds-à-terre, and indeed there may be some overlap. Still, it's clear that the gain of 69,000 newly built apartments since 2014 is dampened by the simultaneous removal from of nearly a third of that number of apartments the sales and traditional rental markets.

Gates argues that the numbers show the urgent need for the city to create a pied-à-terre tax, so that wealthy people have incentives to sell their apartments or rent them to full-time tenants rather than keeping them empty or occasionally renting them to tourists.

"You're taking housing off the market during a housing emergency," he says. "That should be good enough" for the city to take action. Pied-à-terre owners, he adds, are "not paying city income taxes, but you're using city services to protect your tax investment."

Nobody's home

From Curbed:

Last week, the New York Times asked "Why the Doorman is Lonely," in an article referencing new figures about New York City's oft-referenced excess of un-lived-in apartments. The upshot is that nearly one quarter of New York City apartments aren't used as primary residences, but are pieds-à-terre, or investment properties rented out to tenants.

So, nothing too surprising, but something else in the piece kind of throws off the narrative that these co-ops and condos are primarily left empty by jet-setting millionaires. According to Jonathan J. Miller, the president of the appraisal firm Miller Samuel, "the vast majority of pieds-à-terre are middle class... owned by people who have a studio in the city and a home in the suburbs, or maybe it was their first apartment that they chose to keep and rent it out."

I suggest reading that Times article because it has some pretty interesting info about how people evade property tax.

No one's home at the Pied a Terres

From the NY Times:

The question of who, if anyone, lives in the multimillion-dollar condominiums being built across Manhattan grows more intriguing with every new tower crane that hoists glass slabs and concrete blocks hundreds of feet into the sky.

New Yorkers want to know: Who are these people who hide behind limited liability companies while shelling out a fortune for a condominium — who see the apartment as an investment or even just a vanity play, and who are too busy sunning in St. Bart’s or skiing in Gstaad to actually show up and shop at the local market or pay for tickets to a Broadway show?

Many well-heeled New Yorkers are frustrated that while a large share of their income goes to taxes of all kinds, their non-New Yorker neighbors down the street pay a comparatively minuscule amount in property taxes. And an evening stroll through Midtown is starting to feel like the Wild West after the gold rush, with buildings like the Plaza — officially the Plaza Pied a Terre Hotel Condominiums — sitting mostly dark. It wouldn’t surprise some of us to see tumbleweed blow by the Apple cube on Fifth Avenue.

As it turns out, this is not just hyperbole.

In a three-block stretch of Midtown, from East 56th Street to East 59th Street, between Fifth Avenue and Park Avenue, 57 percent, or 285 of 496 apartments, including co-ops and condos, are vacant at least 10 months a year. From East 59th Street to East 63rd Street, 628 of 1,261 homes, or almost 50 percent, are vacant the majority of the time, according to data from the Census Bureau’s 2012 American Community Survey.

“My district has some of the most expensive land values in the world — I’m ground zero for the issue of foreign buyers,” said State Senator Liz Krueger, whose district includes Midtown. “I met with a developer who is building one of those billionaire buildings on 57th Street and he told me, ‘Don’t worry, you won’t need any more services, because the buyers won’t be sending their kids to school here, there won’t be traffic.’ ”

The developer told her that the buyers basically would never be here, Ms. Krueger said. “He said it like this was a positive thing,” she added. “You can’t make this stuff up.”

Well as far as providing services, that is a positive thing. As far as keeping cost of living reasonable, it's not.

Pied-a-terre tax may be on the menu

From Crains:

If Mayor Bill de Blasio pursues the Fiscal Policy Institute’s recommendation for higher taxes on ultraluxury apartments owned by foreigners, he’ll need Albany to do it. And Sen. Brad Hoylman has just the bill.

On Monday, the institute recommended raising taxes on apartments worth more than $5 million owned by noncity residents. An annual surcharge of 0.5% to 4% would raise $665 million a year for the city. The left-leaning think tank says wealthy foreign buyers, often shielded by limited-liability corporations, have been buying up property in Manhattan as vacation homes but pay no income taxes and low property taxes thanks to exemptions and the city’s outdated tax code. It points to a report by the Independent Budget Office that found that in some of the newer residential developments in Manhattan, the portion of pieds-à-terre could approach 50%.

Mr. de Blasio, who earlier this year failed to persuade Gov. Andrew Cuomo to allow him to raise taxes on wealthy city residents to pay for universal prekindergarten, says he is reviewing the proposal. But if Democrats win control of the state Senate in November, the issue could require his attention when the state legislative session begins in January.
Mr. Hoylman, a Manhattan Democrat, plans to introduce a bill Tuesday that would essentially accomplish what the think tank recommended.

Ultrarich property owners from beyond New York "aren't paying income taxes, and are utilizing city services, everything from our infrastructure to our police force, and aren't contributing," said Mr. Hoylman, who noted that several such properties, including 15 Central Park West and several high-rises on 57th Street, are in his district.

"A lot of these individuals are using New York as a tax haven," he added.

The bill would "bring New York in line" with other global cities that have similar surcharges, he said, citing London as one. "This isn't viewed as punitive."