The Face of the Oligarch Recovery – Luxury Skyscrapers Stay Empty as NYC Homeless Population Hits Record High

Screen Shot 2015-02-02 at 11.20.14 AMNowhere is the fraudulent and criminal “oligarch recovery” more on display than in my hometown of New York City. Despite benefitting more than any other community from an enormous taxpayer bailout of the industry that destroyed the economy, financial services, the vast majority of the wealth has been allocated to a handful of oligarchs.

To make matters even worse, American public policy, if you can even call it that, has been to encourage overseas oligarchs to park billions of dollars in U.S. real estate that largely sits uninhabited. Manhattan is a perfect example of this unproductive behavior and misallocation of capital. I covered this theme last year in the piece, Introducing Ghost Skyscrapers – NYC Real Estate Goes Full Retard, where it was noted that:

The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.

New York City has never been known for its affordability, but a new crop of mega-luxury buildings in Manhattan are redefining sky-high prices. One 57 is the 1,000-foot high building looming over Central Park where an apartment has closed for as much as $90 million.

Jonathan Miller appraises the units at One 57. He said if you were to walk by at night the skyscraper would be largely dark because a majority of the units’ owners are international and don’t live here. They are using the apartments strictly as investments.

So as Manhattan builds eight figure luxury apartment units merely to serve as bank accounts for international oligarchs, New York City’s homeless population soars to a new record high. It’s the ultimate manifestation of how criminal and crony this so-called “recovery” has been.

From the New York Daily News:

The homeless population has risen to an all-time high, forcing the de Blasio administration to house desperate families in decrepit tenements red-flagged by the city’s own inspectors as hazardous.

Since he arrived at City Hall pledging to turn things around, Mayor de Blasio has struggled to confront a long-intractable problem that has only gotten worse.

By mid-December, the homeless census reached a record 59,068 — nearly the population of Utica, city records show. The Coalition for the Homeless says it peaked even higher at 60,352.

The homeless count, according to the city and the coalition, includes 25,000 children. And it represents a 10% jump from the 53,615 in shelters on de Blasio’s Inauguration Day.

So the S&P 500 and New York City homelessness increased 10% over the same timeframe. USA! USA!

To reduce these distressing numbers, the city has tried to move families into scarce permanent housing, but has been forced to continue using much-criticized apartments known as “cluster sites.”

As a candidate, de Blasio vowed to end the use of clusters, which were often cited for outrageous code violations such as collapsed ceilings, lead paint, vermin and busted boilers.

Despite the mayor’s wishes, the city actually increased the number of cluster units in 2014 by nearly 8% — from 2,918 to 3,143. The 225-unit jump was far less than the 1,150 cluster units Bloomberg added in his last two years, but critics were hoping for a total turnaround.

Buildings leased by the biggest providers — including the Bushwick Economic Development Corp., Acacia Network and Camba Inc. — have accumulated hundreds of open-code violations, records show. None of the groups returned calls seeking comment.

All of these nonprofits rake in millions of dollars from the city, state and feds each year. Meanwhile, many regularly place families in units with bugs, peeling paint, collapsed plaster and spotty heat, records show.

The building is now managed by Acacia, which has $318 million in active contracts with the Department of Homeless Services.

As usual, someone’s getting paid.

Taylor has clearly rejected the tactics of Bloomberg, who saw the homeless census rise from 30,000 to 50,000 during his 12-year tenure.

But change has come slowly, hampered by delays in getting state funds, landlords demanding higher subsidies and a slow start moving tenants into NYCHA apartments.

“New York City continues to face pronounced economic inequality,” Taylor said in response to queries by The News. “The reality of this income inequality manifests itself in the city’s shelter system.”

Now here’s the chart of homelessness in NYC.

Screen Shot 2015-02-02 at 11.25.18 AM

Notice how it has relentlessly pushed higher ever since the beginning of the so-called economic recovery. Imagine what will happen when the next cyclical downturn begins, possibly as soon as later this year?

Things will become uncontrollable fast. Hence: NYPD Launches Plan to Deal with Protests – Arm Police with Long Rifles, Machines Guns and Extra Protective Gear.

Oh, and just in case you thought I was exaggerating earlier when I said that funneling all the wealth to oligarchs is actual public policy, see these excerpts from the following article from CNBC:

The penthouse at One57, which offers panoramic views from 1,000 feet above 57th Street, recently sold for a record-setting $100.5 million.

But it is not the price that has grabbed the attention of housing advocates, policy analysts, developers and city officials. Rather, it is one of peculiarities of New York real estate: a billionaire’s lair that comes with an incentive that cuts this year’s property tax bill by 95 percent, or an estimated $360,000.

At a City Council hearing last week, critics derided the 421-a program as an expensive boondoggle, a giveaway to developers building luxury housing in a city where the poor and the middle class often find themselves priced out of the market.

At a City Council hearing last week, critics derided the 421-a program as an expensive boondoggle, a giveaway to developers building luxury housing in a city where the poor and the middle class often find themselves priced out of the market.

The entire U.S. economy has become an expensive boondoggle.

According to city records, about 150,000 apartments got the 421-a tax exemptions in the fiscal year 2013, at a cost of $1.06 billion in forgiven taxes. The tax abatement, which starts with a steep, 95 percent discount on property taxes, slowly decreases over time until the tax hits full rate.

But only 12,748 of the 150,000 apartments were earmarked for low- and moderate-income tenants, making it a costly way of creating more affordable housing, according to the Association for Neighborhood and Housing Development, an advocacy group. “This program should be ended because it’s a relic that gives away billions in tax dollars and gets almost nothing in return,” said Benjamin Dulchin, executive director of the advocacy group. “But if it can’t be ended, then it must be fixed with a bottom-line level of public benefit that delivers enough housing that is truly affordable and located in the local community.”

Critics today, including members of the de Blasio administration and some developers, say that the current program often stimulates luxury housing more than affordable units.

Yet people still wonder why inequality is exploding? The oligarchs are in 100% in control, and their errand boys and girls at the Federal Reserve and Washington D.C. are managing the economy on their behalf. It’s entirely intentional.

For related articles, see:

Welcome to the Oligarch Recovery – Majority of Public School Students are in Poverty for First Time in 50 Years 

As the Middle Class Evaporates, Global Oligarchs Plan Their Escape from the Impoverished Pleb Masses 

Welcome to the Recovery – U.S. Child Homelessness Hits Record as Poverty in Mass. is Highest Since 1960

Teachers’ Retirement Funds are Piling into Manhattan Real Estate at Record High Prices

New York Times Admits Wages Haven’t Grown in 15 Years, Worst Since Great Depression

In Liberty,
Michael Krieger

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2 Comments

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  1. mike, i whole heartedly agree.
    i live on 57th and 9th since 1993.

    in the past few years a mega sky scraper was built on 57th and 7th and now the tallest building in new york city measured by roof height (not antenna/spire height) is a residnetial billionaire tower going up on 57th and park.

    it’s absurd. these towers are a sign of degenerate financing.

    the real estate bubble in oakland, ca, where a good friend of mine lives, is even worse.

    small ranch homes in average neighborhoods are selling for over 750k, in the middle of sprawling neighborhoods. it’s insane.

    when you buy a house you are buying a leveraged asset , you are buying a mortgage.

    there is nothing to do about this anymore. no way to fix or change the system. you can drop out , or buy in, but what other choices do you have?

  2. In the 70-ties we had the same problem in Amsterdam until the ‘Kraker’ movement came around.

    Like a lot of big cities around the globe Amsterdam always had and still has an housing shortage.

    People illegally moved into houses who were empty purely because of speculation reasons.

    Believe it or not but ‘Kraken’ became legal.

    Very sane Dutch judges ruled that if an house stays empty longer than a year and you move in after an year and put a bed and table inside (as proof you are really living there) you then can start a legal process with a big change that you will win that process and can stay in that apartment as legal renter.

    So release the ‘Kraken’!

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