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So many dark windows at night in our new luxury towers

WBUR alerts us to a new report that took a look at 1,805 pricey Boston condos and found "a large number of them are held under LLCs, trusts and shell corporations that obscure the real owners."

On the one hand, that's not necessarily a bad thing - all that tax money from people who don't live there helps pay for our schools, police, roads, etc. On the other hand, there's the potential for money laundering going on; not to mention the pressures the purchase prices put on our real-estate market.

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The Planet Money podcast Episode 703: How To Hide A Million Dollars In Plain Sight which was about this in NYC. It's less about the morals of it all and more about the sleuthing involved but was still interesting.

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One of the firstest thingies I ever learned from my MIT peeps is you NEVER put anything in your own name. That is for such suckers! Do you think LPH has her ownership stakes in her own name ?? NO WAYSIES !!!!

Potential for money laundering???? This sounds like Fox news. No evidence to support it. No one is better than ferreting out money being hid from us than women, so if Maura Healey and Karen Spilka haven't put the handcuffs on anyone (kinky!) you know there is no wrongdoing going on.

Everyone where I live knows you don't have to do illegal things with money, Daddy and his friends have made all the illegal things legal now. They buy the candidates, the candidates do their bidding and voila buildings go up and money gets made! WOO SOX !!!!! Totally legal, and we bought off Wooster & the professor so cheap compared to our ROI. Thanks for the money Mass minor league Sox fans !!!!

Capitalism and Democracy and lipstick in Massachusetts, love it or leave it !!!

#girlpower
#metoo
#votewomen
#LLC-LindaLovesCorporations

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Potential for money laundering???? This sounds like Fox news. No evidence to support it.

FTA:

The study points out that Boston is not among the cities monitored for illicit real estate dealings by the Financial Crimes Enforcement Network, or FinCEN, a Treasury Department program designed to combat money laundering.

How gratuitous of you.

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No one is better than ferreting out money being hid from us than women

I know this is satire, but I'll NEVER marry.

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We already knew that.

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You got an airline food joke while you're at it? Maybe something on the DMV?

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"Anyway, those grapes are sour."

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from obstructionist NIMBYs. In fact, next to zero solutions.

It's not your property. Want some buildings with lots of lit windows? Buy a piece of land, and erect some housing at our low, low construction costs, then rent or sell the units at the low, low market rate so that those windows will always be lit.

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This right here. This crowd constantly points out the problems in the housing market. And they're often right. But they offer zero solutions. Stopping all development is absolutely not a solution, it'd make it worse. Only building 'affordable' units is fine in theory but where will the money come from? Easy to point out problems, hard to come up with new solutions. Walsh isn't perfect at all but he's using the levers he has as a mayor. He can't reconfigure the US capitalist system himself.

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Tax on non-occupied homestead units.

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In fact if there is no owner occupant they pay a significantly higher property tax than homeowners living in their homes within city limits. Are you suggesting an ADDITIONAL tax if someone's property is not occupied? By themselves OR others (renters)? Who would police that? How much would THAT cost?

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-Are you suggesting an ADDITIONAL tax if someone's property is not occupied?
Yes, maybe burdensome but in a housing crisis you favor people not foreign investment capital.

-By themselves OR others (renters)?
Well I could say them, but they'll pass it onto others anyways. Either way, the market prices will adjust based on demand, and with less empty units, there will be more supply. Example: my former landlord raised rent, then no one would lease the unit, and now the rent is lower. Boom. Market forces.

-Who would police that?
The same people that currently police you paying taxes.

-How much would THAT cost?
Less than the proposed tax revenue. How much does it cost now to police people paying income or property tax?

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The city collects over $2 billion in property tax and the entire assessing office is a few dozen people.

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But, if you want me to go ahead and make such purchase, please direct me to the nearest money tree where I can magically make a real estate purchase of that size.

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more building means lower prices!!! I read that right here on this website every day!!!

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Many hundreds of thee units are owner occupied. Hundreds more are rented. Even if you have a few hundred units empty, there are still that many more people housed. These are people who have the money to buy anything, anywhere they want. Which means that by stacking them in luxury towers, we're keeping them out of the neighborhoods.

Will towers alone solve our housing shortage? No. Should we be penalizing absentee owners who aren't contributing to making things better? Probably, although we're getting their tax money for services they don't use already. Should we stop building in the hopes that these people will just go away and we can go back to 1980s pricing? Absolutely not.

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This is the same argument they used for building highways. More roadways, less traffic, More housing, more options and less affect on housing costs.

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There. Problem solved. Make it seriously expensive to own property that's going to gather cobwebs.

Or, if you want to frame it differently, bump the residential exemption up to 100% of the average price in the neighborhood, then quintuple the residential tax rate. You catch landlords and people who own absurdly expensive primary residences with that net, but I'm OK with taxing the everliving hell out of anyone who wants to treat housing as an investment vehicle rather than a human necessity.

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It's the homeowners exemption. You can think of it as a discount for owner-occupiers, or as an increase for non-owner-occupiers.

But property tax is about 1%, all-in. I can assure you that even doubling that wouldn't change the financial math behind parking $Millions into real estate in Boston. It would raise additional revenue (great!), but it wouldn't turn those lights on.

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The residential exemption is only $2400. On a million dollar property with a $10,500 tax bill, that's half a month's mortgage.

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I prefer an outright ban on foreign purchasing of US properties. It's not hard to figure out which properties are being purchased by foreign investors and their shell corporations, laziness keeps this from happening. People will flame this idea and call in "non-American" and I don't care. We have a greater need for housing now than we did several decades ago, salaries have been stagnant for far too long and many of our elected officials are neglecting our gross economic wealth gap. Concentrate on building housing for locals, not foreign interests.

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In theory the State/City can use the taxes on these developments (even if there are some undetected criminal activity involved) to fund other housing projects.

If you ban foreign investments, you basically ban cash flow into the US.

Builders build buildings that make money for them. I guess if they are forced to build only US projects with US money you might have a point.

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you could build a wall to keep out the hordes of foreign billionaires.

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they just slither right under them.

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If you're worried about money laundering, fine, ban foreign investment (Surely not legal but moving on)

However, putting up a huge tower which generates offset funding and general tax revenue in a location is pretty much THE most efficient way to generate money for the city vs. having those same million dollar properties strewn about the pond side part of JP and Moss Hill, let alone Beacon Hill, the Back Bay and the South End.

Now, I am not saying those historic, charming neighborhoods needs to be knocked down for Fenway system development but it's truly weird the fixation people have with what's happening on relatively small footprint sites downtown as if this moves the needle on general housing costs in the middle class* neighborhoods like Roslindale, HP, Dot, etc...

* I know middle class is doing a lot of work in this sentence but roll with it.

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People complaining about this type of thing are nowhere close to being able to afford the units in question. They generate tax dollars for services that aren't being used (guess what? no trash is being generated or hauled out of these abandoned units, but money to fund that trash collection is being collected), and the very construction of these units generates money for "affordable" housing, either by building affordable units in the towers themselves of kicking money into the city'd affordable housing fund.
Also, it's not as though they are stealing land to build totally abandoned towers. There ARE still other people living in these towers, likely more than were living on the same parcel of land before the developments went up.
Another point worth making is that building will benefit housing in the long run, no matter what. If the economy tanks again and construction/development comes to a halt or slows down, we'll be glad they were building when they had the chance and capital was flowing. Today's luxury condos are tomorrows shit holes. Just look at everything built in the 60s and 70s that's scattered around.
There are already mechanisms to tax/penalize people who buy investment properties, its called the resident exemption.
People ignore the fact that triple deckers, which were once the housing of the downtrodden, are now basically luxury housing. Cuz who the hell actually wants to live in a glorified 20 story dorm, and PAY extra for that. Idiots, that's who. Let them spend the cash burning a hole in their pockets. Nowadays one level of a triple decker can go for a million depending on the neighborhood. Units in large condo buildings (of the 100+ unit range) are "affordable" now. In the 50s small single family homes that litter DOT and Mattapan and Hyde Park (there is like ONE left in Southie, Day Blvd and L street: Kudos to THAT guy) were "affordable" and now the land they're built on is worth more than the house 10 times over.
More units of all types being built benefits the whole, so long as SOMETHING is being built.

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I agree. All they are building these days is luxury high rises, and many of these units get sold to foreign investors. In turn, this makes our unaffordable city even less affordable for the people who actually livehere.

I am not saying that they outright ban people from buying properties, but I don’t see why a cap can’t be put on the number of people doing so. After all, they limit numbers of people coming into the country on visas.

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Try going to your neighborhood association meetings. NEWRA is fighting tooth and nail against the harbor garage tower BUT also a proposed two story addition with two apartments on a three story building. No matter the proposal, the NIMBYs will come out with pitchforks.

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are residents too.

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Even with a residential exemption I think all property owners ought to pay at least a token amount of property tax annually. I think that would lead to better accountability with respect to taxation and spending; it's really, really easy to vote for things that don't cost you anything.

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The residential property tax exemption merely reduces the owner-occupant's taxes. They still pay a healthy amount.

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"bump the residential exemption up to 100% of the average price in the neighborhood, then quintuple the residential tax rate" means that many would indeed pay zero property tax.

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The property tax "exemption" for residents is actually a rebate, and not for the full amount paid.

I'm a home owner now, but even when I was a renter I was aware that part of the money I was sending my landlord was going to property taxes, so even then I felt that I had "skin in the game".

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Basically any time anyone has decided to investigate high-end real estate purchases in high-end markets (London, Manhattan, Miami, etc) this is exactly what they've found. It's fairly obvious this has become the preferred vehicle for money laundering and tax evasion by the global wealthy.

The Feds could obviously crack down on this if they wanted to, but as with most white-collar crime, we've mostly gotten apathy. Marco Rubio (because Miami) is pushing the issue, though I'd be shocked if it goes anywhere, given that shady all-cash real estate purchases are a major cash cow for you-know-who.

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They mentioned this on the radio yesterday and the Feds track purchases in places like NY and Miami pretty closely - so they do find problems there. They haven't focused on Boston - yet.

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I applaud Sen. Rubio for working to get the Federal government to pay more attention to this. But if we don't think state and local governments should be involved in enforcement of federal immigration laws, why do we think they should be involved in enforcing federal tax laws -- or even the tax/finance laws of other countries?

Do I care if Russian oligarchs are hiding money from the Russian government? Perhaps that's a benefit if it gives Putin less money to spend on poisoning ex-spies or influencing foreign elections or cyber-warfare. There's certainly a benefit to me if they're paying local property taxes without a residential exemption and consuming virtually zero city services.

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The thing about that 'report' that is very misleading is that it equates ownership of a condo via LLC with it likely being vacant. Those two things have nothing to do with one another. Lots of people use LLCs to own property due to the legal advantages for liability and tax purposes. That doesn't mean the unit isn't being rented out or not even lived in by the owner. If you hold property in an LLC, you cannot get a residential exemption from the City - that's a choice that people make.

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Thanks to the preposterous new tax law - if you rent it out and make money under an LLC - you get a 20% tax exemption on that income right off the top. Mostly just "because" and also because they Bob Corker one of maybe 2 swing votes on the issue, owns millions of dollars in real estate organized as (you guessed it) LLCs.

We are being run by a kleptocracy - and not just in the White House.

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Other than some pictures of building with few lights on, I haven't seen any study or evidence that these building are, literally, sitting empty. Rather, the studies seem to show that the units are not owner occupied based on the lack of residential exemption, or that they are owned by trusts, which could be for a variety of tax planning, or illicit, reasons. If the buildings are truly sitting empty then there is cause for concern, as the units are either pure "cash parking" that has effectively taken a unit of housing off the market, or they are second/third/corporate homes that are used very infrequently, which may not be the best use of real estate in this housing market/crisis where hotels would be a perfectly fine alternative for an occasional visit to Boston. Likewise, any illicit ownership of the units would be concerning for obvious reasons, and the Treasury should add Boston to the list of cities on which it is conducting its investigation. In Miami, this effort appears to have caused some reduction in the price of luxury property. However, the mere fact that many units in a building are not owner occupied, so long as they are occupied by renters, really should not be all that troubling. Renters are residents too. The recent changes to the short-term rental laws are a positive step in chilling the turning of condos into hotels, which should either bring more of them back onto the long term rental market, or will have a chilling effect on pure investment purchases. I would add into the mix additional requirements that more college undergrads be required to live in on-campus housing for all 4-years of study to remove the distortion that high rent overcrowded student housing in Alston for example, or condos purchased for undergrads at the Ritz, have on the market.

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all that tax money from people who don't live there helps pay for our schools, police, roads, etc.

Where's the money, Lebowski Marty? Certainly not in 100-year old school buildings that couldn't open windows last week when it was 90 degrees inside. Or school busses that run on time.

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The money's not in decrepit Boston Latin School, which according to Boston Magazine is now the forty-sixth best public high school inside 495.

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oh look, the fine print says they (meaning Boston Mag I guess) decided to weight class size and student teacher ratio as important. Guess where the Boston exam schools rank the worst? In those two areas.

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For kids who actually need extra attention from teachers in order to learn and thrive in school. The Boston exam schools get better-than-average students precisely because of the gating factor of the exam and those students excel because they are already pretty damn smart, not necessarily because of the quality of the education they get.

If you threw middle-of-the-road BPS students into BLS you'd probably end up with middle-of-the-road results.

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Do you think there isn't a 'gating factor' to living in Dover-Sherborn? Concord-Carlise? Weston? This also discounts of course the extent to which extra tutoring outside of schools is rampant in the tonier suburbs. Perhaps you've heard fo Russian Math?

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It's what Boston parents who want their kids to test into BLS make them take since they're seven, right?

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Just the forty-sixth best.

Other metrics BosMag considered included:

  • AP proficiency, where BLS came in 31st;
  • Graduation rate, where BLS came in 40th; and
  • Percent attending college, where BLS came in 26th;
  • Educator evaluations, where BLS came in 93rd.

None of those are important either, right?

The good news is that BLS students, who are in part selected by their performance on standardized tests, performed well on standardized tests.

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It's a bad thing is terms of choking off the housing supply and driving up the housing costs for those that want and need to live in the city and must compete with people paying top dollar for a unit they don't live in or rent out.

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Are you telling me that these small footprint towers would be in the price range of the average buyer?!?!? These have no impact on the average residential market other than siphoning out high-end buyers that used to compete for rowhouses in Beacon Hill and Back Bay.

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These projects aren't why so little middle-class housing gets built in Boston in spite of the need for it. Very few middle-class housing units get built because the cost of construction in Boston is sky-high (and even higher in the downtown core) and there's no conceivable way to make a profit by selling or renting at prices or rents which are affordable to the middle of the market. When it costs about half a million per unit to build affordable housing in Mattapan Square on land that the developer is getting for free from the City, how do you think more middle-class housing gets built here?

Not everyone that buys in luxury developments is doing so to park cash; there are many people who do live in those fancy towers. And those folks would otherwise be competing to rent or buy in the existing housing stock.

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Whether the owner of a property lives there or they are renting to a tenant, that makes no difference to me. The important thing is that SOMEONE is living there. If there is any way to incentivize owners to ensure that their units are occupied, I would be in favor of that. Perhaps a tax on unoccupied units?

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The reason all these things are going up as "value stores" is that it's the lowest-risk value store with something resembling liquidity right now. Time was that various financial instruments filled that role.

Between a decade of near-zero or below zero (ie in Japan) interest rates, Wall Street consolidation, and back-door money printing by way of near-trillion-dollar deficits here, combined with Chinese currency "collapse" and Eurozone instability, assets denominated in currency aren't as safe a bet as they were before the crash. Both at the low end of "rich" that might be inclined to keep some of their wealth as cash in the bank and at the higher end of rich. So it's either shiny rocks or shiny skyscrapers. If you ban the skyscrapers, it'll be shiny something else that'll piss off someone else.

Incidentally, shiny skyscrapers are better than shiny rocks. The construction and operation of skyscrapers employs people and spreads the wealth around a whole heck of a lot more than shiny rocks sitting in a vault somewhere do.

That's why it's not a local problem. The non local solution would entail incentives for investment. It'd be good for all concerned if those LLCs invested in shiny factories or revenue-generating infrastructure projects than shiny skyscrapers. The way to encourage that is lower taxes on business and manufacturing, deregulation, and tariff and non-tariff encouragement for investment here. It worked for the Chinese. They have shiny skyscrapers and shiny factories.

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My condo is on the market....fine by me if some LLC pays top dollar for it as well as a regular person.

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All those absentee moneybags are paying property taxes without utilizing any of the city services - free money for the city, pretty much.

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So let's say for the sake of argument a foreign investor buys a $2M condo downtown, new construction.

Back of envelope estimates, for unoccupied.
Property tax ~= 1% = $20,000/yr.
Condo fees [guess!] = $500/mo = $6,000/yr.
Wear and tear = $0/yr.
Total: $26,000 year in cost.

Back of envelope estimates, for occupied.
Property tax ~= 1% = $20,000/yr.
Condo fees [guess!] = $500/mo = $6,000/yr.
Wear and tear = $2000/yr.
Rent: $3000/mo = $36,000/yr.
Total: $8,000 year in profit.

Adjusting for taxes is difficult for foreign investors. Rent is low to allow for real estate and property management services.

That's a difference of $34,000 a year. Why would you leave that on the table? If these condos are being used as investment vehicles, why would the investor forego $100,000 every three years for *zero effort*?

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How do we know they are not Airbnbs?

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https://www.bostonglobe.com/metro/2017/02/19/thousands-did-not-qualify-f...

Over the past six years, thousands of people in Boston who claimed the residential exemption on their property taxes did not qualify for those savings — in some cases, thousands of dollars annually — city records show.

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