Can a Great City Overdose on Billionaires?

Sam Pizzigati

New York has a new mayor who wants to remake his deeply unequal city into much more than a playground for the super rich. The experts who track global wealth trends don’t think he’s going to succeed.

A new report from Knight Frank, a global property consultancy firm, is predicting that by the year 2024 New York will replace London as the mega-wealthy’s top go-to urban destination.

That turn of events would certainly please Michael Bloomberg, the billionaire predecessor of New York’s new mayor Bill de Blasio. The more billionaires New York attracts, Bloomberg pronounced last year before leaving office, the better.

“We want the richest people to come here and patronize our stores and live here and bring their businesses here and pay their taxes here,” Bloomberg opined. “And that does create a greater income disparity, but that’s also where the tax base comes from to fix the school systems, which will eventually help those people who are struggling get up the ladder.”

Current London mayor Boris Johnson feels the same way. His London hosts more millionaire fortunes than any other city on earth, and Johnson desperately wants to hang on to that distinction. The super rich, he said last November, deserve “our humble and hearty thanks.”

If the rich didn’t “employ eau de cologne-dabbers,” he added, ordinary families “might otherwise find themselves without a breadwinner.”

Billionaires, Boris Johnson and Michael Bloomberg believe, bring cities cash, cachet, and culture. Mayors should cater to them. But not every observer of our urban scene agrees. Cities that lay out the welcome mat for the super rich, these skeptics posit, are dooming their non-rich to chronic aggravation.

Any city “in thrall to money and greed,” as one eminent British newspaper editorialized earlier this month, is inviting “nightmarish consequences” that range from wildly inflated housing costs to municipal corruption.

These consequences show up most clearly in London. The city has become a “honeypot for global capital,” says architect Peter Murray.

In 2012 alone, London gulped down $8.3 billion in new luxury home investment. And the demand for luxury accommodations in the city seems unrelenting. A mere four-bedroom apartment in one of London’s new luxury towers is now listing for nearly $32.5 million.

Bidding wars for properties like this are driving up housing prices throughout London. The Financial Times reports that a quarter of the city’s neighborhoods have become unaffordable even for income-earners who make it into Britain’s most affluent 5 percent.

Workers who service the city’s wealthy invaders have things, predictably, much worse. Many have had to go so far outside London to find affordable housing that they’re now commuting two hours each way to get to work in the city.

New York’s luxury housing market may right now be running more red-hot than London’s. Ten Manhattan housing units last year sold for over $25 million. In 2013’s last quarter, the typical Manhattan condo unit went for $1.3 million.

But the global ultra rich don’t just drive prices up. In the cities they invade, they suck the vitality out. These rich don’t actually live in the lush condos they buy. They only visit them. Billionaires on average, the Swiss bank UBS reported last year, own four homes. They spend their year skipping from one luxury property to another. In London, entire neighborhoods can seem deserted.

And in this London of the super rich the super creative — those who do so much to give urban spaces their cultural vitality — have no place. Developers recently converted one old London factory that had been home to 400 artist studios into luxury apartments. Artists, says the director of a local charity that helps artists find suitable space, are getting “priced out.”

In New York, the squeeze on the non-rich goes well beyond housing. On the one hand, notes economist Catherine Rampell, an influx of free-spending wealthy consumers does tend to raise wages a bit for workers like waiters and manicurists. On the other, eligibility standards for child-care subsidies and other federal safety net programs often don’t take local cost of living into effect.

The result? Workers can end up disqualified for support programs they depend on. These workers typically leave the city, says Rampell, for “cheaper places with a worse quality of life” — and longer trips back and forth to work every day. The New York area now sports the nation’s longest commutes.

But what about Michael Bloomberg’s claim that the taxes the rich pay into city coffers offset any negatives from the inequality their presence creates?

That claim might hold some water if the rich were pulling their tax weight. In New York, they aren’t. In 2010, the city’s top 1 percent — taxpayers with at least $493,579 in income — grabbed over a third of the city’s income, 33.8 percent to be exact, but accounted for only a quarter, 25.2 percent, of city tax revenue.

New York’s current real estate tax, points out tax analyst Martin Braun, “uses a methodology that undervalues condominiums on Park Avenue, Central Park West, and other enclaves of the wealthy.”

The extent of the undervaluing can get almost comical. Former Citigroup chair Sanford Weill collected $88 million when he sold his condo overlooking Central Park. The city had the condo valued at $2.8 million.

Newly installed New York mayor Bill de Blasio has set out to raise the taxes rich New Yorkers pay. But he’s getting intense pushback from New York’s city and state powerbrokers. They’re arguing that any tax hike would have the super rich departing New York in droves.

Maybe New York should let them go.


Sam Pizzigati edits Too Much, the Institute for Policy Studies online weekly on excess and inequality. His latest book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class (Seven Stories Press).

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