When the (Empty) Apartment Next Door Is Owned by an Oligarch

• Worrisome things happen when one person’s asset is another’s shelter.
• house prices rise faster than wages, until a good job no longer pays for access to nearby housing.
• If foreign buyers are looking for assets and not residences, a lot of that housing may sit empty. Neighborhoods begin to lose their neighbors, and local restaurants and shops lose their customer base.
• More than one in 10 purchases in Manhattan now includes [an out-of-town] buyer (the “out-of-town” designation here doesn’t distinguish between domestic investors and Russian oligarchs, but the effects are the same in the modeling,and the authors think of the problem as one of foreign money).
• assume a worst-case scenario–all of these out-of-town purchases sit vacant–rents and home prices in the city rise, wages tick up thanks to new construction jobs, commute times for workers grow longer, and center city neighborhoods become less diverse as the wealthy move in. All else equal, they conclude, the rise in out-of-town buyers from levels seen a decade ago pushes home prices up in New York by about 1.1 percent.
• Vancouver instituted a 15 percent tax on home purchases by foreign nationals last year to discourage them, and Toronto has done the same. But that approach could miss money traveling through extended families, local middlement or opaque corporations determined to hide a buyer’s identity. And such a tax–if it’s aimed at curbing properties that are purely investments and not residences–requires exceptions for legal immigrants who intend to work and make their homes in the city.
• Rhys Kesselman […] has proposed an intriguing alternative: 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 own 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).