The New York Times series, published last week, about foreign money at the Time Warner Center has raised a lot of eyebrows. Does this foreign money, frequently emanating, according to The Times, from sources which are perhaps corrupt, deserve a home in the condominiums of New York City, or Miami, or San Francisco? It’s a great question but not one which allows an easy answer. All the issues which surround it are complex.
First and foremost there is the issue of privacy. In addition to Russian and Indian privateers, many condominium purchasers are Americans who prefer corporate ownership for reasons of either privacy or estate planning. And certainly there are also any number of Americans of dubious reputation who have purchased condominiums or townhouses in New York over the years; it is not a distinction which belongs to foreigners alone.
We have historically permitted a fairly free flow of capital both to and from our country. Is that a bad idea? I personally don’t think so, and it does seem like an abrogation of civil liberty to require that the individuals purchasing condominiums be named. While one of the purchasers described in the article may have defiled his environment and sickened people with toxic run-off, don’t we have plenty of those people in our own country? Where does one draw the privacy line? I would venture to propose that the chains of ownership might be regulated such that buyers with a criminal history in their country of origin be barred from owning property in the United States. But beyond that? I don’t believe it’s correct. It’s an invasion of privacy.
Second there are the intertwined issues of value and marketability. The market for resident New Yorkers is by and large quite separate from that for foreign buyers or flight capital. The majority of New Yorkers still buy co-ops, not condominiums. The co-op market charts a course independent from that for condominiums, since the restrictions imposed by the co-op Board process tend to rule foreigners out of that market. So co-op prices are considerably lower than those for condominiums and accelerate or decline in a whole different trajectory. Foreign money really only has a distant effect on the properties purchased by the majority of New Yorkers in Manhattan; in the other boroughs there is to date a minimal amount of foreign capital going towards ANY sort of property. So the argument that these foreign purchasers skew the market for all New Yorkers is not strictly accurate.
For condominiums in those parts of the city which tend to attract foreigner investment, is it really to the advantage of either the city or the seller to curtail who can buy these units? The city benefits from ongoing tax revenue, the seller from appreciation. I don’t see the argument to be made in favor of taking those benefits away.
Wealth disparity in our country is a huge and growing problem, and certainly the advent of foreign billionaires to buy our housing neither simplifies nor ameliorates that issue. That said, the activities in their home countries of buyers of our real estate cannot be our concern unless we plan to revamp our entire system to penalize American company owners who lay off thousands of workers in an attempt to increase profitability, or energy companies belching greenhouse gases into the atmosphere, or the descendants of the robber barons who profited so exorbitantly from the industrialization of our country at the end of the last century. There are far worse abuses of our capitalist system than home buying by rich Russians or Chinese (neither of which group is having an easy time getting money out of their countries these days anyway.) I admire the tenacity and cleverness the Times reporters used to pierce those corporate veils, and I hope that now those qualities will be devoted to uncovering more pressing and serious abuses.