If You Can Make It There, You’re Probably Rich Or Shady, Or Both

Jim Epstein contends that New York’s “affordable housing” mostly benefits the rich:

In May, New York City Mayor Bill de Blasio (D) unveiled a plan to build 80,000 new affordable housing units, “marshaling every corner of government and the private sector,” he boasted, “in an unprecedented response” to the city’s “crisis of affordability.” De Blasio, who ran on a promise to reduce inequality, is now enabling upper middle class New Yorkers to tap into these subsidies to serve their housing needs. In a city in which one in five households lives below the poverty line, spending limited government dollars so professionals earning six figures don’t have to leave their favored neighborhoods is obscene.

Take Manhattan’s 606 West 57th Street, a 1,025-unit building to be put up by developer TF Cornerstone. In exchange for setting aside 220 of those apartments for “lower income” tenants, the developer will get a local real estate tax exemption, tax-exempt financing, Low Income Housing Tax Credits (in which banks kick in equity in exchange for a tax rebate), and permission to build a larger building than the zoning Council code would otherwise allow. The kicker is that some of these “lower income” families are wealthy by most standards. The 220 affordable apartments will be split up among households of four earning no less than $50,300 and no more than $193,000 per year – or nearly four times New York City’s median household income, which was $50,895 in 2012.

Meanwhile, Michael Hudson, Ionuț Stănescu and Sam Adler-Bell report on questionable NYC real estate deals:

Since 2008, roughly 30 percent of condo sales in pricey Manhattan developments have been to buyers who listed an international address – most from China, Russia and Latin America—or bought in the name of a corporate entity, a maneuver often employed by foreign purchasers. Because many buyers go to great lengths to hide their interests in New York properties, it’s impossible to put a number on the proportion laundering ill-gotten gains. But according to money-laundering experts as well as court documents and secret offshore records reviewed by the International Consortium of Investigative Journalists, New York real estate has become a magnet for dirty money.

Andrew Rice elaborates:

[W]hile New York real estate has significant drawbacks as an asset – it’s illiquid and costly to manage – it has a major selling point in its relative opacity. With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account. And that makes the city an island haven for those who want to stash cash in an increasingly monitored global financial system. “With everything that is going on in Switzerland in terms of transparency, people are being forced to pay taxes on their capital that they used to hold there,” says Rodrigo Nino, the president of the Prodigy Network. “Real estate is a great alternative.”

Those on the New York end of the transaction often don’t know – or don’t care to find out – the exact derivation of foreign money involved in these transactions. “Sometimes they come in with wires,” says [broker] Luigi Rosabianca. “Sometimes they come in with suitcases.” Most of the time, the motivation behind this movement of cash, and buyers’ desire for privacy, is legitimate, but sometimes it’s not. … “It’s something that is never discussed, but it’s the elephant in the room,” says Rosabianca. “Real estate is a wonderful way to cleanse money.”