Tag Archives: wealthy

“Eager to Move to the City, but Stranded in the Suburbs”

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The New York Times recently profiled a number of suburbanites who would prefer to live in the big city but can’t because of high housing prices:

Like many others in her sociological cohort these days — men and women whose children are grown and who want to trade those unused rooms in Tudor- and Victorian-style houses, as well as the steep suburban property taxes, for the city’s excitement and convenience — Ms. Fomerand finds herself stranded in the suburbs.

These empty-nesters have reaped the benefits of the suburbs: They sent their children to excellent public schools and raised them in safety and comfort, in backyards, playrooms and cul-de-sacs. And their houses have increased nicely in value. Now they would like to find apartments with doormen and elevators so they don’t have to climb stairs, shovel snow and schlep packages. They want a place where they can “age in place,” as the phrase goes. But they are finding that in the past 15 years, prices for such apartments in Manhattan and Brooklyn have risen far more than the values of their suburban homes, so much that they may never make it back to living in the city they always thought they would return to. Instead, they end up staying in their houses, or downsizing to smaller suburban homes or apartments.

To be sure, this is a problem largely felt by the comfortable: New Yorkers who have had the luck and income to live where they choose, who have had the luxury of planning and expecting a certain lifestyle when they grow older. These people could live less expensively in other cities, but often their family, friends and work are here, and they don’t want to leave the area.

“This is one of the most commonly discussed issues,” said Mark A. Nadler, director of Westchester sales for Berkshire Hathaway HomeServices. “People will say, ‘Yes, I’m moving to the city,’ but unless they’re wealthy, they end up resigning themselves to staying in the suburbs.”

Two quick thoughts in reaction to this piece.

  1. Those profiled in this story generally want to move to Manhattan or Brooklyn. Why don’t they consider moving to other parts of New York City? Underlying this could be continued ideas about what areas of New York City are desirable, safe, and more white. It is not really whether they can move to the city at all; it is more about whether they can move to the trendy neighborhoods in which they would prefer to live.
  2. There is only brief mention of affordable housing in a piece that is largely about housing prices. At the same time, this is kind of an odd note to hit; New York City prices are too high because a number of older suburbanites cannot find affordable housing in the city. If you want to talk about housing prices and affordable housing, why not highlight the less wealthy in the region who could truly benefit from such a move to the city (as opposed to doing so as a lifestyle choice)? Too often, stories about affordable housing highlight empty-nesters and downsizers (often alongside young professionals) – probably the sorts of people cities would love to have – rather than consistently examining the lives of lower-class residents.

Recovery best in wealthiest zip codes

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A new analysis looks at the recovery of the US economy by zip codes and finds that the wealthiest areas have rebounded the most:

The report found that for the bottom fifth of U.S. zip codes—which the researchers term “distressed”—the medium income only reaches 68 percent of the state-wide median and 27 percent of adults live in poverty. These communities saw employment decline by 6.7 percent during the recovery. Not the recession—the recovery. In the nation’s median and prosperous zip codes, the situation is much brighter. Employment in median zip codes rose by 2.3 percent, while in prosperous communities—the top fifth of U.S. zip codes—employment rose by an incredible 17.4 percent.

EIG’s analysis supports the notion that in the U.S. economic gains continue to be captured by those at the top. “The data outlines two different Americas from an economic standpoint,” said Steve Glickman, the co-founder and executive director of EIG. “The communities taking advantage of the knowledge economy are booming, but the areas where the industrial economy has traditionally held firmest have really suffered. These trends predate the Great Recession, but the recovery has continued to accelerate the fortunes of the most-prosperous areas and the downturn of the most distressed.”

Another piece of evidence to add to plenty of existing material: where people live has a large effect on their lives. And if the United States has persistent residential segregation – particularly by race but also by social class – then these differences by geography will continue to be pertinent.

Illegal wealth funneled through luxury urban housing?

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The higher end of the real estate market is booming in many American cities but it may involve tainted money:

It is the first time the federal government has required real estate companies to disclose names behind cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.

The initiative is part of a broader federal effort to increase the focus on money laundering in real estate. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales that involve shell companies like limited liability companies, often known as L.L.C.s; partnerships; and other entities…

Officials said the new government efforts were inspired in part by a series last year in The New York Times that examined the rising use of shell companies as foreign buyers increasingly sought safe havens for their money in the United States. The investigation found that real estate professionals, especially in the luxury market, often do not know much about buyers. Until now, none of them have been legally required to.

The use of shell companies in real estate is legal, and L.L.C.s have a range of uses unrelated to secrecy. But a top Treasury official, Jennifer Shasky Calvery, said her agency had seen instances in which multimillion-dollar homes were being used as safe deposit boxes for ill-gotten gains, in transactions made more opaque by the use of anonymous shell companies.

It would be fascinating to hear what local officials, developers, and real estate professionals have to say about this in private. I imagine few would be willing to appear to publicly condone illegal uses of money, yet such a move could threaten status and profits. If there are indeed numerous cases of this, does this taint particular developments or cities? Or is the wave of luxury building simply too strong (and advantageous) to be derailed by a few negative instances?

Shadowy McMansion owners

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A letter to the editor in the New York Times suggests McMansions owned by shell companies are a big problem:

Your article on shell companies and real estate highlights a phenomenon not unique to ultra-wealthy areas of Los Angeles. Real estate purchases using the cover of limited liability companies are a significant issue in the San Gabriel Valley in eastern Los Angeles County, where McMansions owned by L.L.C.s sit empty as middle-class home buyers are priced out, unable to compete against those flush with foreign money from unknown and undisclosed sources.

New York, San Francisco, London and Vancouver are also experiencing this influx. In the United States, real estate brokers and agents are not required to comply with customer due diligence and know your customer mandates that banks and many non-bank institutions must follow.

This kind of argument makes McMansions seem even worse then they are typically depicted: they are owned by shadowy wealthy people who don’t care about the normal resident who just needs somewhere to live. The problem with this letter is that it doesn’t provide good data on how many homes actually fall into this category. Wealthy, culturally significant cities like the ones listed above – LA, NYC, San Francisco, London, Vancouver – do attract foreign investors (particularly Chinese investors recently in Vancouver and the LA area) but major cities tend to like this: it keeps new capital flowing into local coffers and it fuels the high-end construction industry (see Miami or London or New York).

In contrast, it is pretty clear that most major American cities don’t really want to talk about affordable housing and/or aren’t willing to do much about it. Affordable housing is needed in many major cities, particularly those along the coasts. Part of the reason McMansions exist in the first place is that Americans were willing to move further out from the city to buy a bigger house (and this has to with state policies and residential preferences to avoid urban life and non-whites). The resources that it takes to construct McMansions in the suburbs could be harnessed to build smaller urban units or at least denser suburban units (see these recent ideas to use the materials from McMansions or to subdivide McMansions into multiple units) but few governments want to mess with the single-family home market and few builders or developers want to limit their profits.

Are the Kardashian/Wests selling a mansion or a McMansion?

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Save up all your Black Friday funds to purchase this large home – which may be a mansion or McMansion.

By now, Kim Kardashian and Kanye West have surely settled in at their tasteful Hidden Hills mansion, not far from Kris Jenner’s place, so it makes sense that they’re moving toward unloading the tacky Bel Air Crest estate that they’ve been renovating since they purchased it in 2013 (hopefully to make it less tacky). TMZ hears that the couple are readying to put the Tuscan-inspired McMansion on the market within the next few days, and that the house will be asking “more than $20 million.” Kim and Kanye paid $9 million, and reportedly dropped $2 million on renovations.

Shortly after buying the house, the British press reported that the couple’s deep renovations included things like a fridge covered in Swarovski crystals, a million-dollar security system, and four gold-plated toilets. We’ll have to wait for the listing photos to see whether those items ever made it into the house. Last September, perhaps fed up with trying to turn the estate into their dream home, Kim and Kanye reportedly whisper-listed the half-finished house for $11 million.

Lots of pictures follow.

I’ve discussed a number of these mansion/McMansion claims over the years. This particular house provides another strong example. On the mansion side, you have a large home, a wealthy location, numerous luxury goods inside, and famous owners (average people might live in McMansions but not famous people). On the McMansion side, it features the Mediterranean style common in many McMansions, it was a fixer-upper (if an expensive one), and using this term provides permission to criticize the home (it is tacky compared to their real mansion).

Although I presented two sides above, this isn’t much of an argument: given the size and expense of this house, it is clearly a mansion.

NYT on wealthy suburbanites moving back to the city

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Who is buying those expensive downtown condos in places like New York or Chicago? One article suggests it is wealthy suburbanites:

Like Dr. Fader, who lives in Bryn Mawr, west of Philadelphia, most of these new high-end buyers are coming from the suburbs, developers say. This is a group that loves its mansions and large homes but is finally, not so reluctantly, trading them in for high-end city adventure.

“Things just lined up in the last few years,” said Patrick L. Phillips, the global chief executive of the Urban Land Institute, a research organization in Washington. “The peak of the baby boom is right around 60 and these wealthy folks have a lot of embedded equity in their homes. They have the wherewithal to move into something with space in the city.”

And cities have prepared for people with money, at least in their downtowns, Mr. Phillips said. They have concentrated theaters, arenas, upscale shopping and refurbished or new parks and museums there.

Two questions come to mind:

  1. Just how many people are doing this? How many people could afford such a move? The key here is that these people are already living in expensive suburbs and have all sorts of housing options.
  2. What happens to other parts of the city where there is less money to be made for developers and builders? Cities like to trumpet new buildings in their downtowns and the growth of cultural and entertainment options. But, these are not necessarily available to everyone.

Uptick in $100+ million residential properties with several more in LA

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The luxury residential market continues to see higher and higher prices:

“There’s a shortage of trophy properties that are available for sale in this pocket of Los Angeles,” Barry Watts, president of Domvs London, said in a telephone interview. “You’ve got high-net-worth people who want to own multiple homes across the world, and Los Angeles offers something different. If you want to drive your convertible car 12 months a year, it’s a city where you can do that.

Homes priced at more than $100 million are becoming increasingly common as billionaires, seeking places to put cash, shatter sales records from Los Angeles to London. Around the world, five properties sold for $100 million or more last year, and at least 23 others have nine-figure asking prices, according to Christie’s International Real Estate.

In the Los Angeles area, the Bel Air homes add to multiple trophy mansions being built, including several on a speculative basis, or without a buyer in place. In December, video-game designer Markus Persson bought an eight-bedroom, 15-bath spec mansion in Beverly Hills for $70 million. The developer of a four-house compound being built in Bel Air hopes to sell it for $500 million…

The Bel Air project that spec developer and film producer Nile Niami wants to sell for $500 million will have a 74,000-square-foot main residence, three smaller houses, a 30-car garage and a “Monaco-style casino.” The most expensive home ever sold worldwide with a confirmed price was a London penthouse purchased in 2011 for $221 million, according to Christie’s.

After a certain point, it doesn’t seem to really matter what is in the unit or how it is built. Instead, two other things matter. Where exactly it is located – typically among other expensive and limited properties. A place where the wealthy can sort of gather together (in their separate compounds) near a cultural and economic center. Second, how much of a status symbol it is because of its high price. How does it compare to other luxury properties? Such an expensive home is a trophy to have until others push past the price point.

Successful people want to own tiny cabins

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The oversized house may be less appealing to the wealthy compared to owning a small cabin:

McMansions used to be one supersize symbol of the American dream, but these days many of our country’s most celebrated businesspeople see success more diminutively: in the form of a cabin. Preferably one on the smaller side, made of recycled wood, as technology-free as possible. Ironically, many of the cabin’s great champions are tech giants.

One such champion is Zach Klein, co-founder of Vimeo, whose Cabin Porn Tumblr blog garnered enough followers to warrant a book of the same name, one The New York Times has been musing over.

“The cabin and the shack are ideal launchpads for remarkable lives but lately they’ve become homes to aspire to—particularly for overburdened types whose acquisitive binging has made them want to purge,” the Times noted.

Think of these simple spaces as an architectural panacea. “Driven mad by status anxiety? Addled by technology? Bankrupted by consumerism? Then shrink your footprint. Go minimalist. Get free,” the Times said.

Sounds like trading one status symbol for another: moving from the image of wealth and grandiosity with the large McMansion to an interest in getting away from it all. Of course, the small cabin is simply another luxury for the wealthy who can escape to it when they please and then return to their other expensive housing. Instead of spending money to show that one can afford the wasteful use (conspicuous consumption), now it is more desirable to forgo the luxuries of a house for a short time to show that one can. And we could ask: what kind of world do we live in where people have to regularly spend large amounts of money to escape from their everyday lives?

Wealthier kids go to nearby schools; poorer kids travel further

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Living in a poorer neighborhood means the resident children travel further to go to school:

Julia Burdick-Will found it was actually children in affluent neighborhoods who stayed close to home for school. In lower-income neighborhoods, kids in search of better options dispersed to dozens of other schools, often commuting alone for miles.

In Chicago neighborhoods with a median household income of more than $75,000, most students attended one of two or three schools. But when the neighborhood median income dropped to less than $25,000, students dispersed to an average of 13 different schools…

In affluent neighborhoods almost no one traveled 4 miles to school; the average commute was about 1.7 miles. But in disadvantaged neighborhoods, the average commute for children was 2.7 miles, with 25 percent of the kids traveling more than 4 miles. Ten percent of the low-income kids traveled more than 6 miles…
In low-income neighborhoods the problem isn’t just access, Burdick-Will said, but the potential social costs of traveling far across the city every day, possibly alone—costs that don’t apply to similarly achieving students in higher income neighborhoods.

An interesting paradox. Typically, wealth means mobility: they can seek out opportunities far and near, move to new locations when need by, afford the transportation costs. We imagine poorer residents stuck in neighborhoods with little opportunity to leave – and evidence from Robert Sampson in Great American City suggests even when afforded the opportunity to leave, many poor residents turn to similar poor locations.

Yet, public schools are one of the more local institutions in the United States. People move to neighborhoods and communities for the quality of their schools. The majority of property taxes go to local schools. Local school board officials are often elected and want to shape their local institutions. Community events are often held in these schools. They are a source of pride if the schools do well, a source of concern if they are not doing well.

Given that, it makes sense that Burdick-Will would suggest it is a burden for kids to go further for school. And that burden is on top of the other obstacles children in poorer neighborhoods face.

Farmers markets nearly dead in 1971; exploding in number today

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A study looking at what motivates shopping at a farmers market includes figures on the number of farmers markets over time:

Farming is back, long after Jane Pyle, in true Population Bomb thinking of 1971, said farmers markets were “doomed by a changing society” in an editorial for The Geographical Review. At the time, there were about 340 farmers markets left in the United States and many were “populated by resellers, not farmers, and were on the verge of collapse,” Pyle wrote.

Yet like Ehrlich’s Population Bomb, Pyle could not have been more wrong…The number of farmers markets listed in the USDA National Farmers Markets increased from 3,706 in 2004 to 8,268 in 2014.

That is quite an increase. What is behind it?

“A growing number of communities have attempted to gain control of their own economies by encouraging civic engagement that supports investing in locally owned businesses instead of outside companies,” states the study.

But that requires wealthy elites. Local food markets (i.e., farmers markets, food co-ops, etc.) are far more likely to be located in cities and counties with higher income levels.

Here is my interpretation of the findings: as farming has become an industry with large corporations and selling food products has become dominated by big box stores (Walmart now has about 25% market share among grocery stores), the farmers market gives those with the resources an opportunity to retain control of where their money goes. Americans tend to like local control and this gives grocery buyers the ability to see more directly where their money goes (directly to producers, closer to where the purchasers actually like).

Wealthier communities are also likely to see farmers markets as desirable economic contributors. The markets don’t require that much space – they can even put underutilized parking lots to use – and don’t create trouble in terms of pollution or noise. The markets can attract higher-income residents who will then associate the nicer shopping option with a higher quality community as well as possibly spend more money elsewhere in the community. As an illustration of this, look where the 150+ farmers markets in the Chicago region are located.