Disaster or Hyperbole

>>>>occasional 10-20% rent increases isn't going to work for most people in retirement

The people who got 20% rent increases conveniently forget to mention that the 25% discount they got during covid

>>>>I wouldn't assume that the winners will be the ones with lowest taxes. The capacity to build housing, infrastructure, and services is more important.

Do we have capacity to build infrastructure and housing? Miami certainly does.

>>>>occasional 10-20% rent increases isn't going to work for most people in retirement

The people who got 20% rent increases conveniently forget to mention that the 25% discount they got during covid

>>>>I wouldn't assume that the winners will be the ones with lowest taxes. The capacity to build housing, infrastructure, and services is more important.

Do we really still have the capacity to build infrastructure and housing? Miami certainly does.

@300 yes, I am also here for the melting pot and for concentrated expertise in nearly every area.

Though I would argue, reading interesting and qualified opinions on an internet board is the one activity that could be done from anywhere.

@richardberg - re "In most of the country, lack of English (or at least some Spanish) basically makes you indigent." EXACTLY. This is why my primary extracurricular these days is teaching immigrants English at the local library in Columbus.

In NYC every immigrant community has an entire ecosystem; in the rest of the country, not so much. So many tremendously skilled immigrants have no option but the big cities due to lack of English proficiency, and NYC benefits tremendously from this. I have noted this elsewhere on this forum - so many I know who lament what they view as NYC's welfare state and see immigrants as a drain on the system neglect to factor in how inexpensive many services are in NYC compared to the rest of the country because those services are staffed by immigrants who work for nothing compared to what raised-in-American workers are willing to work for.

and @krolik - the U.S. would have zero problem even if Americans were not reproducing at the replacement rate because of the desire of so many to immigrate here. If the country were to find itself aging without a sufficient supply of young workers to support the economy, all we would need to do is open the immigration valve.

Yeah, the fear of mirroring Japan's population pyramid is misplaced. Just in the last year, NYC got something like 100,000 able-bodied Venezuelans (If you can cross the Darien Gap, you can swing a hammer) -- all without having to spend a dime on their childrearing or education. It's going to cost us some money in the short term, yes, but could be a long-term bonanza if played right.

Put me in Hochul's seat, I'd declare some kind of emergency (housing? migrant? climate?) and create an in-state worker license, valid for any NY resident on any job site that receives state funding. "DARE" the Feds to shut it down.

Sounds insane until you realize that this is exactly what California did with medical marijuana licenses in the 90s. Fast forward 30 years, Congress still won't touch cannabis with a 10ft pole, yet it's effectively legal in 40+ states.

Yes, I mentioned it elsewhere, it is strange to me how high construction/renovation costs are in the city considering the influx of immigrants.

>> Just in the last year, NYC got something like 100,000 able-bodied Venezuelans (If you can cross the Darien Gap, you can swing a hammer) -- all without having to spend a dime on their childrearing or education.

RIchard, Have you seen any estimated cost for the following
1. First 1-12 months of shelter, support and other services for these immigrants who usually come with their families?
2. Educating a non-English spreaking child/ren they may bring along?
3. Medicaid ?

4. Other social services and long-term govt aid programs.

Remember, most of these immigrats will not contribute much to tax dollars if they are earning under $50k.

And NYC RE taxes will go up again.

RB>> As an illustration of the power of those extra couple years, here's a quick model: $100k salary upon graduation, 10% raise each year, 20% savings rate, 8% CAGR = $1,085,000 saved by age 37. That's on a single income, which is just about to cross the $400k mark for the first time.

I was wondering about how realistic a model this was to earn the proverbial “first million” with actual returns.

Under your model of 20% of pre-tax saved (so 28-33% of post-tax) across 2008-2023 on $100k => $400K of income, fully invested in SP, would end up with $1M (ignoring taxes on div & gains).

It was a pretty good time in the markets. Go back ~15 years, which had its ups (tech bubble) and downs (crash), and it’d take 25% of pre-tax income invested to get to the proverbial $1M 1993-2008. That’s 35%-42% of post-tax income, which is a pretty sizable savings rate.

Indeed, unfortunately.. remember they cannot even legally work for 6 months.

NYT quote - "This fiscal year, the mayor said, the city has estimated that it will spend about $5 billion on migrants, as much as the annual budgets of the Fire, Parks and Sanitation Departments combined."

https://www.nytimes.com/2023/08/09/nyregion/adams-nyc-migrants-cost.html#:~:text=What%20to%20Know-,Mayor%20Adams%20Says%20Migrant%20Influx%20Will%20Cost%20New%20York%20City,them%20and%20provide%20other%20services.

This is $5B/year on ~50k migrants => $100k/migrant?

Or else take the husband from the first couple featured in this article:

https://www.nytimes.com/2007/07/22/realestate/22cov.html

Graduated law school in 1996 at age 26, worked a fine career making partner in 2005, and bought at the end of 2006 / early 2007. The apt was $2.25M and needed a gut reno. Earnings were probably $100K at the start and $650K by the end of the 1996-2006 savings stretch. The savings spree would have taken 33% of pre-tax income, or 45-55% post-tax, fully invested in SP to end at the proverbial $1M. Which, I think, would have been used up fully between taxes on gains, down payment, and paying for the renovation. No cushion left in that nest egg, only what came from future earnings or (possibly) family.

The financial wisdom of directing one’s nest egg fully into housing circa 2007 aside, what does a board desiring 40% down and N years cushion expect? I get it if coop boards want only the (already) rich, but anyone asking why young professionals aren’t showing up should be directed towards a spreadsheet to model it and make it work. Or a ledger, if spreadsheets are foreign to their capabilities.

$2.25mm apartment needing reno is a fat place for a 35 year old. More appropriate after he was a partner for a few years.
Assuming Non working spouse.

I think he was 36 already by then, going on 37. Ancient!

Stuffy coop target age 40 for non-working spouse. Two professionals can do it at 35 easily. 1 Master of the universe will just buy shiny new condo anyway.

White brick 60/70's non-stuffy coop, lower age.

In general, due to transaction costs, it doesn't make sense to buy if you are expecting to upgrade due to expected significant earnings increase. Stuff coops don't want transients anyway despite making money in flip-tax - makes no economic sense for co-op.

Example of young Master of the Universe type of buyer.

https://streeteasy.com/building/1185-park-avenue-new_york/14g

> RIchard, Have you seen any estimated cost for the following

I'm sure it's a big number. NYS-administered services aren't known for their efficiency.

But in the context of our convo -- Manhattan population aging out of its childbearing years, especially in its RC/RS/NYCHA units -- the absolute figure isn't relevant. Point is, tending to a recent arrival starting today has to cost strictly less than the same services delivered from cradle to present. Probably way less. School alone is $38K * 15 years, not counting the kid's housing, healthcare, or negative contribution to the labor pool (pulling caregivers out of work).

So just collect more people who needs more services that they would pay taxes? Remember 38kx15 is funded by taxes paid by tax payers like you who are parents as well. Overall it is net zero. Your argument would be valid for a single immigrant who would pay taxes than services used by earning $100k or more or if we were to exchanging these immigrats for NYCHA residents.

You should look at Canadian immigration system. The system ensures that most people who come in can pay into the system.

So just collect more people who needs more services THAN they would pay taxes? Remember 38kx15 is funded by taxes paid by tax payers like you who are parents as well. Overall it is net zero. Your argument would be valid for a single immigrant who would pay MORE taxes than services used by earning $100k or more or if we were to exchanging these immigrats for NYCHA residents.

You should look at Canadian immigration system. The system ensures that most people who come in can pay into the system rather than NET taking from the system.

If anyone who is complaining about illegal immigrants pays household employment taxes on their housekeeper and their nanny, more power to you; if you don't, . . .. Virtually everyone I know who complains about the ostensible drain on the system seems to have no problem paying their household employees under the table.

"Income tax paid" is a terrible proxy for the value a prime-age worker brings to the state economy. They are the foundation of the society we're paying so dearly to enjoy.

To illustrate: $66B income taxes collected in FY23 / 9.7M civilian labor force = $7100 per worker. In order to pay "your share", you need to earn $110-150K depending on assumptions (filing status, whether paying city tax, etc), putting you squarely in the 4th quintile of income. Below you are 6.5M workers (+10M not in the labor force) who are supposedly a "net drain" by 300's metric. What do you think would happen to the state economy if 80% of its population disappeared?

>> I went out for a last minute drink with my neighbor who is in Commerical Real Estate. In one hour, I learnt a lot about what is happening in CRE and his views on how it may impact the rest of the economy.

What did he have to say about CRE?

@MCR - I'm too poor to have have any paid "help" lol.

Anyway, I think trying just to put factual numbers to an item that has become reflexively partisan and emotionally driven. One side is "build the wall" and the other side wants to act as though there is no crisis/cost. I simply think the process needs to be better managed and the feds (and state) should be stepping up.

Some estimates are that NYC received 10% of all migrants 2022-2023 who entered through the southern border, which we are then on the hook for the costs of services for.

We are now responsible for housing as many asylum seekers as we have homeless shelter beds, and the homeless shelters are already over-full with homeless who we are putting up in hotels. So now we are building tents in parks / converting summer recreation centers to emergency shelters / etc.

We are even doing what we complain the southern states did and trying to shift them out of town to hotels in nearby counties.

Also a good question is - besides the feds, where is the state & Hochul in any of this? Why is it NYC & Adams problem to solve?

New Yorkers should be upset that the burden and cost is falling fully on our shoulders when the costs are on the scale of 1/4 to 1/3 the entire MTA budget, per year.

It just contributes to a general feeling that - your taxes are going up, but your commute/kids schools/etc are all going to get worse because we are cutting all their budgets anyway.

Richard, Do you really need to add people to that category? I am not talking about eliminating existing people. Would you rather educate the existing kids or add more non -English speaking kids to that? Added people in that category will compete for limited resources which are total budget of the city. Hence city seeking Federal aid.

“Below you are 6.5M workers (+10M not in the labor force) who are supposedly a "net drain" by 300's metric. What do you think would happen to the state economy if 80% of its population disappeared?”

Steve, Good articulation of the issue. You forgot that the wait to see a doctor will get longer.

Nada, Generally negative. Some NYC building prices down 50 percent on an estimates basis if the occupancy is poor. I can share more off this board.

@Steve123 - I agree that one cannot put a number on the issue. The irony of the partisanship of the issue is that the traditional Republican party platform was the one that favored immigration while the traditional Democratic party platform was the build-a-wall platform. My old school traditional GOP cronies still view the issue the way I do; they just aren't allowed to say it out loud and quietly lament the spin Fox News et al put out to the masses. At the end of the day, they care more about protecting their own status than they do about truth. Plus they found a way to have it both ways. For anyone who is interested, read up on BITs (Bilateral Investment Treaties).

Steve,
I am also waiting for people like Soros, Bill Gates, Zuckenberg to write a check of $1bn each to the city to take care of new illegal immigrants so that the city's budget doesn't have a big hole. NYC badly needs the money just for housing and food. I see some helping Maui but no such donations for NYC.

But Federal Govt abdicating its repsonsibilty so far for people it has allowed in and sticking NYC (others too) with financial burden? That part of politics I haven't been able to understand. I think Adams cries for help are getting louder and I am hoping Federal Govt will be forced to step in.

P.S. on putting a number to the issue: I do not pretend to know what the truth is here in terms of the net cost/benefit in dollar terms of the current state of immigration. I believe that all these issues are susceptible to vested interests putting money behind studies with a predetermined conclusion.

My problem is it’s a local cost for a National issue.

There surely will be long term benefits of more able bodied employable citizens for sure but they won’t necessarily stay within the 5 boroughs either.

So certain cost for uncertain reward on the local level.

>>>Nada, Generally negative. Some NYC building prices down 50 percent on an estimates basis if the occupancy is poor. I can share more off this board.

Also interested and would love to see comments on the state of CRE on this board.

Personally I am rooting for CRE to implode (but somehow without dragging down the banking system) and get restructured, and hoping that this would cause rents to come down and become once again affordable for small businesses. What’s the point of NYC if all you have on street corners are starbucks or chains like CVS pharmacy?

Clearly the solution is for NYC to have an emergency order allowing sheltering of migrants in vacant CRE. So obvious, it’s all right here in this thread!

On migrant issue replacing local kids/young people in the labor pool, consider what skills these people have vs. needs in the local economy.

Our unemployment rate is at least 50% higher than that at the national level, and when i checked few months ago, it was even double that among young hispanic and black males demographic.

We are not known for manufacturing or farming, and even trades seem to require many years to master and get licensed in. We don’t have many open low skill jobs here, and high skill jobs do require english, local licenses, etc. Asylum seekers won’t replace your doctors or lawyers, or even nurses, anytime soon. While NYC is better for asylum seekers than other spots in the country, i am not sure this quantity of asylum seekers at once is great for NYC.

https://dol.ny.gov/labor-statistics-new-york-city-region

>> Also interested and would love to see comments on the state of CRE on this board.

CRE seems first in a long line of assets whose valuations were set based on ZIRP-forever but now face mass revaluation. For obvious reasons, given occupancy rates. But how many assets still look like that? Residential RE, both single- and multi-family, are still priced based on ZIRP. Lots of other assets too. The modus operandi seems to be “lemme hang on as long as my loan terms and/or cash flow allow it” with a hope that ZIRP comes back.

I’ve read so many articles of the form “Buy a house now with a high mortgage rate, and refinance in a couple of years when rates are lower”. Not a single one contemplates the possibility that rates don’t go down (as forward rates imply) or *gasp* even go up. Same with articles from Fidelity’s of the world of the form “Don’t stay in cash etc., because once rates go down you will have missed out”. What makes you so sure?

A question everyone should be asking themselves is this. How many assets are you holding based on ZIRP-era pricing? Did your holdings make you a net beneficiary or net loser once rates went up in 2022?

Banks are surely net losers. Holding CRE, treasuries, agency debt, private mortgages, etc. But the hope there is continued complacency from depositors will cover the losses.

>>>Virtually everyone I know who complains about the ostensible drain on the system seems to have no problem paying their household employees under the table.

The one person I know employing a full time nanny is paying all taxes and providing a paid vacation. Most people i know “imported” a grandparent, sent kids to daycare, or have a non-working spouse. All these options don’t require any payroll taxes.

I have a housekeeper employed thru a 3rd party agency (so no taxes needed).

On the other hand, I know of a small business owner that told me he pays virtually no taxes (which probably also means he has medicaid), parks the car on the street in Brooklyn, and often complains that the “rich” (i think he means people like me and basically anyone who lives in Manhattan) should pay more…

>>> I’ve read so many articles of the form “Buy a house now with a high mortgage rate, and refinance in a couple of years when rates are lower”.

https://www.washingtonpost.com/business/2023/08/12/millennial-home-buyers/

Here is one more, discussing “marry the house, date the rate” advice from realtors.

Do you see national housing prices (outside of NYC and bubble markets like Austin) coming down due to higher for longer rates?

I have a degree of understanding for people paying undocumented workers off the books, but beyond that not so much, especially when they clearly have the means.

Last time we were looking for a housekeeper, we used a headhunter agency, so everyone they sent us for interviews clearly had a legal right to work here. One of the phone interview questions was “How much are your pay expectations, and how would you like to be paid?” The right answer to the second part is “Weekly via payroll, with a W2” or something like that. The worst answer was “Half via W2, have cash, so I get X benefits but not so much that I pay any tax”.

WTF? Just ask for more pay, I really don’t care. But “Yeah, I’d like to break the law, and I’d like you to help” is not exactly what I’m looking for in a person who will be in my home and have access to who know what.

I am reminded of my story of the employee asking for more pay, because they are male and making less than their spouse is a bad look, so “please violate discrimination laws to help me out with my antiquated views & mental issues”.

>> complains that the “rich” (i think he means people like me and basically anyone who lives in Manhattan) should pay more

My favorite is when wealthy people openly cheat on their taxes and then complain about really rich people cheating on their taxes. I know many really rich people, and as far as I can tell they don’t cheat. More tax cheat (percentage-wise) who are “merely” wealthy, as far as I can tell.

>> Do you see national housing prices (outside of NYC and bubble markets like Austin) coming down due to higher for longer rates?

I don’t know enough to really say with conviction. Probably coming down via a long sideways. What are the cap rates? Putting that aside, there’s an affordability problem with rates at ~7%.

>>>I know many really rich people, and as far as I can tell they don’t cheat. More tax cheat (percentage-wise) who are “merely” wealthy, as far as I can tell.

Add to your non-cheater list "professional couples" where both people are paid through W2. Not much room for any maneuvers.

A colleague was recently explaining that their family was "able to deduct depreciation of rental real estate against W2 income because spouse is a doctor and runs a small business".
Another colleague bought a multifamily townhouse in UES and is paying almost NO TAXES by deducting all the depreciation against W2 income because spouse is a "real estate professional".

>> Add to your non-cheater list "professional couples" where both people are paid through W2. Not much room for any maneuvers.

The main one I’m aware of is those claiming residency elsewhere (possibly legitimately) but then pretending they’re not a statutory NY/NYC resident despite spending 183+ days here.

Does that work? A colleague of mine commuting from ohio for 3 days a week at the office ended up having to pay nyc taxes… despite spouse and kids all living and going to school in ohio.

Also, the great Patrick Boyle weighs in on house prices (US does not look so bad):
https://youtu.be/oFD_C-uWUGY

If NYC CRE tanks, those Real Estate taxes are going to need to be collected.... Somewhere.

The high end office space like 1 Vanderbilt is going for nosebleed numbers for hedge funds, big law, etc. But I just don't see how anyone's going to pay anywhere near that for humdrum non-big-revenue producing functions relegated to "back office."

> If NYC CRE tanks, those Real Estate taxes are going to need to be collected.... Somewhere.

Of course. May i suggest BK townhouses?

Krolik, Those illegal immigrants we are taking in will fix NYC fiscal situation in a few years without any Federal help. They will add a lot to the tax revenues and incremental spending on services will be nothing. They are filling in empty hotels anyway which doesn't cost the tax payers anything. Hence no RE tax increase needed.

Just to back up MCR's point, if you've eaten in a restaurant or gotten take-out in the past six months, you've probably gotten some economic benefit from the new migrants.

Yes their kids cost $38K/year to educate, but they're generally good kids...and it's a little disingenuous of Adams to cry poor when, for example, he's swiping federal education money -- let's call that Biden recovery money, since that's where it came from -- from the kids and giving it to the cops. Take total police department spending, divide it by the number of uniformed police, and the number is north of $300K per.

Ali, Thank you for supporting my view above. Our family eats out twice a week factoring in deliveries (sorry no household help or nannies needed for us and we are leaving money on the table by not using illegal immigrants for that). $300 per week. $1200 per month. That $1200 would have easily gone upto $1300 if it weren't for the illegal immigrats. So that is $100 per month in my pocket. $1200 per year is huge relative to my real estate taxes and city income taxes.

Immigrants are generally good for the city and for the country. I am an immigrant and I like go think I am good. :-) but there could be too much of a good thing too fast.

Educating immigrant kids is the least of my worries - we have falling school enrollment in NYC and if someone can take the seats, great. ESL is typically offered instead of another subject to those who need it. It is not an extra cost, it replaces a period, does not add a new one.

The problem with immigrants is 1)rate of assimilation and processing of work permits vs city’s capacity to provide services before immigrants are standing on their own two feet 2) the skill set mismatch with job openings.

Unemployment among low skill labor in the city is a lot higher than that among white collar workers. So there is limited benefit from adding to this pool.

Furthermore, unskilled immigration is increasing inequality, as it keeps costs of unskilled labor down while causing more demand for skilled labor (doctors, lawyers). Skilled immigration would help balance it out. But everything also needs to be in proportion to how quickly the city can add jobs, housing, etc to accommodate new arrivals.

Steve posted above we spent 5bn on immigrants… no matter how you measure it, I doubt they have created 5bn of value in the same time period. It is a long term investment. In the short term, we don't have enough dollars to invest and need federal help.

Immigrants are generally good for the city and for the country. I am an immigrant and I like go think I am good. :-) but there could be too much of a good thing too fast.

Educating immigrant kids is the least of my worries - we have falling school enrollment in NYC and if someone can take the seats, great. ESL is typically offered instead of another subject to those who need it. It is not an extra cost, it replaces a period, does not add a new one.

The problem with immigrants is 1)rate of assimilation and processing of work permits vs city’s capacity to provide services before immigrants are standing on their own two feet 2) the skill set mismatch with job openings.

Unemployment among low skill labor in the city is a lot higher than that among white collar workers. So there is limited benefit from adding to this pool.

Furthermore, unskilled immigration is increasing inequality, as it keeps costs of unskilled labor down while causing more demand for skilled labor (doctors, lawyers). Skilled immigration would help balance it out. But everything also needs to be in proportion to how quickly the city can add jobs, housing, etc to accommodate new arrivals.

Steve posted above we spent 5bn on immigrants… no matter how you measure it, I doubt they have created 5bn of value in the same time period. It is a long term investment. In the short term, we don't have enough dollars to invest and need federal help.

$5B is substantially the entire NYPD budget, so I'm not sure what cuts to the police budget are going to assist in paying $5B/year in asylum seeker costs.

Also a lot of "we need to be diverting police funding towards education" activists seem to miss that.. literally that's already how the budget works.

NYPD is $5B, DOE is $38B.

Apparently some people who live in richer hoods than me and don't take the subways as much feel safe enough to want NYPD cuts despite crime rates being worse than 4/8/12 years ago.

I don't have kids, should I advocate for defunding DOE? (I don't).

Steve, Do we really need to pay in form of real estate taxes for police in crime and drug prone area like Bronx? San Fran is working out so well.

I think the COVID era both in NYC & SF showed that the idea of "high crime" and "low crime" areas within a given city are amorphous.

To me what caught a lot of people by surprise was not just that say that "crime" or "violent crime" or whatever category was up XX% city-wide, but that areas that seemed to have been "tamed" from the bad old days (LES) no longer were. Surprising number of armed robberies & shootings persisting in LES vs say the 2015-2019 era.

Basically some newly affluent areas (so exclude say UWS/UES here) where the last 5-10 years have shown near-zero violent crime (to the point that we all felt like it didn't exist) were suddenly seeing pretty regular reports of violent crime and the "vibes" reflected that.

Ali,
"if you've eaten in a restaurant or gotten take-out in the past six months"you've contributed to human trafficking and organized crime. It's hysterical people point to the sex business when hospitality is really the driving factor.

>>> Just to back up MCR's point, if you've eaten in a restaurant or gotten take-out in the past six months, you've probably gotten some economic benefit from the new migrants.

What benefit? I recently ordered one bowl of Chipotle for $30 on uber eats… paid a service fee, delivery fee, tip, and the food itself was marked up vs what you pay in a restaurant. Just really hard to see the savings considering this order would have been a lot cheaper 2-3 years ago. My guess is the migrants don’t have work permits yet.

Re: migrants
If it wasn’t clear, i think its embarrassing how its currently being handled, regardless of what level is paying.

My point is that this is not a trivial amount of money the city can just find under the sofa cushions / as some small fraction of some other department budget. As another benchmark, the annual cost here is equal to the entire CUNY budget. It’s hard to make this entirely the cities problem and for us not to have big financial repercussions.

Cross checking some of the city/media/etc listed “charities helping migrants” against CharityNavigator ratings and a few that came through ok, for those that do want to help more.
https://www.charitynavigator.org/ein/113561651
https://www.charitynavigator.org/ein/462463951

A surprising number of the listed charities in this area have no website, no rating, or a poor rating..

There are also lots of jobs in government for all those who think their government is incompetent. I was critical of aspects of government so I rolled up my sleeves and got in there. I recommend the same course of action for anyone who is really interested in being part of any solution.

I just found out that my NY state legislator sponsors all sorts of rent stabilization and rent control bills along with some NIMBY green agenda. LOL

I'm in complete agreement that immigration is a Federal problem that deserves Federal money. Just being realistic: so long as the rules require 60 Senators to agree on something, I am unlikely to see meaningful action in my lifetime. State officials don't wield a sovereign currency, greatly limiting their options relative to the Feds, but they do hold strong enough political majorities to do *something* that makes lemonade of the situation. My thesis boils down to: states that do something will outperform states that do nothing.

It will cost serious money in the near term, yes, but having the extra working-age population get settled & trained for the long term is worth the investment. (If only pols could sell debt at last year's rates!) NYC's status as an immigrant hub throughout the late 19th century is a direct cause of our world-leading prosperity & infrastructure from that period into the first half of the 20th century. You can trace a similar connection between the restrictions of the 1930s and the socioeconomic stagnation that began in the following decades.

> Do you really need to add people to that category?

People in that income category are the ones who will build the Gateway and the SAS, who will dig us out of the housing crunch, who will take care of all the aging Manhattanites currently hoarding wealth and/or rent stabilization. Spanish is practically a requirement for the first two, and not much of barrier to the latter.

> My favorite is when wealthy people openly cheat on their taxes and then complain about really rich people cheating on their taxes. I know many really rich people, and as far as I can tell they don’t cheat. More tax cheat (percentage-wise) who are “merely” wealthy, as far as I can tell.

Mass affluent people cheat by deducting the FMV of a few sqft as the "home office" of a money-losing hobby.

Truly wealthy people cheat by lobbying for specialized tax breaks entirely unmoored from public policy.

They are not the same. I have no problem calling the latter more odious even if 100% legal.

> There are also lots of jobs in government for all those who think their government is incompetent. I was critical of aspects of government so I rolled up my sleeves and got in there.

Commendable! This is a topic where I have sharp criticism for my friends on the left. Once upon a time it was considered honorable for someone who'd reached financial independence to "retire" into public service. Some of our best leaders came via this route. Nowadays, nominating an ex-GS partner to oversee a financial regulator or a top BigLaw litigator to a key AAG role is likely to backfire politically, no matter their expertise.

It's not that I don't understand the nature of foxes and henhouses. It's that the causality is backward. We should have much, much stronger rules prohibiting the door from revolving in the other direction (ex-gov officials landing cushy consulting/executive roles), as that's where there is strong incentive to corrupt current-day government operations in hopes of future payback.

> A question everyone should be asking themselves is this. How many assets are you holding based on ZIRP-era pricing? Did your holdings make you a net beneficiary or net loser once rates went up in 2022?

Fixed mortgage: beneficiary. Apartment: loser. On balance, this is fine. We need housing prices to come down -- WAY down -- if we want typical working families to put down roots here.

@richardberg - amen re the repugnance of the revolving door. I would say "you have no idea," but I suspect you actually do. FedSoc excels in this area.

>> Truly wealthy people cheat by lobbying for specialized tax breaks entirely unmoored from public policy.

I know a lots of truly wealthy people at varying levels. I don’t know of a single one lobbying for anything tax-related. Lots of making use of whatever policies are on the books. E.g., no taxes on unrealized capital gains, charitable deduction, etc.

The merely wealthy take advantage of all that and more. Mortgage interest deduction, 529, 401k, etc. Or the step-up in basis for the first $10M of an untaxed estate. I understand the policy purpose of

>> Truly wealthy people cheat by lobbying for specialized tax breaks entirely unmoored from public policy.

I know a lots of truly wealthy people at varying levels. I don’t know of a single one lobbying for anything tax-related. Lots of making use of whatever policies are on the books. E.g., no taxes on unrealized capital gains, charitable deduction, etc.

The merely wealthy take advantage of all that and more. Mortgage interest deduction, 529, 401k, etc. Or the step-up in basis of an untaxed estate. What is the public policy purpose behind that one?

@nada - I am with richardberg on this one. The carried-interest taxed as capital gain rather than ordinary income is the ultimate tax break that the truly wealthy lobby quite forcefully to protect.

I guess I’m not chummy with any truly wealthy private equity or VC types!

fair enough - maybe the PE and VC are just the "merely wealthy" compared to the hedge fund types. :)

>> I know a lots of truly wealthy people at varying levels. I don’t know of a single one lobbying for anything tax-related

How would you know if they lobbied …by supporting election campaign of the right candidate who has an understanding… ? They don’t need anything new passed, just preserve the existing breaks for cap gains, carried interest, real estate or charity related breaks, etc

@richardberg agreed on real estate needing to come down. Especially commercial. There are plenty of affordable residential areas in NYC. But businesses that depend on foot traffic cannot locate in queens and cannot afford rent in Manhattan.

> I don’t know of a single one lobbying for anything tax-related

You don't have to be the root cause to benefit from & passively accept a privilege.

> Especially commercial. There are plenty of affordable residential areas in NYC.

All of the above. People here are fond of saying that NY real estate has gone sidewise the last decade. But in 2013 you could rent a studio in a distant boro (or a bedroom in upper Manhattan) for $600. Today the floor is more like $1400.

>> You don't have to be the root cause to benefit from & passively accept a privilege.

I don’t think anybody is passively accepting anything. This is taxes. People of all wealth levels actively seek to minimize taxes and maximize benefits.

It’s like the shaming of Harvard grad students making use of SNAP benefits. They have a legal right to it. If you don’t like it, follow MCR’s advice and change it. Or else, accept it like the thousands of other policies you don’t like. But don’t go justifying SNAP fraud over it.

>> fair enough - maybe the PE and VC are just the "merely wealthy" compared to the hedge fund types. :)

I recall some congressional hearing a decade ago where they called on 4 prominent hedge fund managers. They got to carried interest taxation and asked each if they’d support or object to changing it.

The first 3 quickly say “support” or “no objection”. Then they get to Ken Griffin, and he gives some nuanced view earnestly giving his viewpoint on good policy. Something to the effect of “I would support it, but it should be kept simple rather than having 723 carve-outs for X, Y, and Z.” They start grilling him to the effect of “You mean X should be treated the same as billionaires…”, and he politely tries to explain his view about keeping it simple rather than riddled with loopholes for X, Y, and Z that everyone will inevitably try to squeeze god know what through.

This goes on for a few minutes, with lawmakers trying to grandstand evermore over each other. Eventually Griffin gives up — “Screw this, this barely affects me. I don’t care. Do whatever you want.”

The biggest loopholes for the truly wealthy are often the byproduct of lawmakers crafting increasingly convoluted carve outs for “deserving” constituencies.

For example, look up the history of GRATs. These kinda make estate tax optional with adequate planning. Basically, in the 1990’s Congress changed laws to close certain loopholes in the estate tax laws. But of course they carved out X, Y, and Z. After a good long study of the resulting law, some clever estate planner (lawyer?) realized the convolutions had unintentionally created an even bigger loophole. So he started doing it for clients. The IRS sued over it and lost in tax court. That mistake took the loophole from a grey area (which many will avoid) to codified rules to be followed, with assured legality, as set out by the court’s ruling.

As a more recent example, look no further than the loophole on SALT for pass-through income. Congress had no intention for (say) partners in a NYC law firm to effectively get a ~5% reduction in the 37% marginal Federal tax rates that the less well-paid associates don’t get. Was this the result of nefarious actors lobbying for anything? Definitely not: I’m confident Republicans were not seeking to create a loophole around SALT for anyone, rich people in high-tax states least of all. It was just the result of a hastily assembled law full of carve outs to quickly garner sufficient support without appropriate scrutiny. State legislatures returned the favor by implementing PTET.

Never attribute to malice that which is adequately explained by stupidity.

Sometimes the “loopholes” are fully intentional. I got interested in a specific one, trying to understand whether it was intended or not. So I read the historical record of a bill where they were provisioning for situation X, but with a bunch of complicated rules trying to corral its usage. But then that corralling was removed in the final law, fully understanding what it meant. If Congress intentionally considers and allows a usage, is that really even a loophole?

Congress could have excluded SNAP benefits for grad students or overweight people or people who have never paid “enough” taxes yet or whomever else your preferences/biases wants to shame as “undeserving”. But they didn’t. You don’t like it, take that up with Congress, not the people acting within the laws they set out.

re: SALT cap
Its going to be interesting in the next election cycle or two
My understanding is the SALT cap law basically auto-expires, so they will need some amount of bipartisanship to either renew the cap or set a new cap.

So much as it has been politically impossible for the Dems to pass a law revoking the cap early, I suspect it will be quite difficult to pass a new cap, provided GOP isn't in full control in 2024-2025 cycle.

It's a lot easier to let the thing quietly expire.

Yes, I believe it is set to expire in 2025, along with reduced federal tax rates. The real fun comes when the debt & interest load hit the wall just it’s no longer possible to kick the can down the road on SS underfunding and payment reductions.

> People here are fond of saying that NY real estate has gone sidewise the last decade. But in 2013 you could rent a studio in a distant boro (or a bedroom in upper Manhattan) for $600. Today the floor is more like $1400.

This forum and the main media are too focused on the core Manhattan area when talking about the real estate.

The apartment I bought in 2013 and sold in 2022, the price was sold doubled my purchase price. Many apartments in the Queens neighborhood (Jackson Heights) enjoyed similar price increase during the last 10 years, primarily due to the increase of the rent form the last 10 years.

However, I didn't enjoy much from the profit for selling the apartment as I also purchased a bigger apartment in 2021. If I could turn back the time, I should have purchased the bigger apartment in 2013 in the first place, LOL.

Right, somewhere in the last 10-15 years (post GFC run-up), we've had a great convergence of pricing across neighborhoods towards prime-Manhattan-esque levels.

I'm not so sure there's a lot of reasonably desirable neighborhoods with space left to run on pricing now.

We have some friends who made a killing flipping in Queens over the last 10 years or so, but now I look at its pricing vs N BK or even Manhattan and hard to imagine theres any juice left to squeeze.

I mean I still see crazy stuff like developers putting $2M asking price on sub-1000 sq ft 2bed/2baths in LIC and wonder who their dealer is.

In all fairness, this website was/is very Manhattan-oriented. The addition of the rest of NYC over time has been, and still is, very specific. Even today, there are only 33 rental listings in Staten Island compared to 8.8K in Manhattan. 275 vs 7K for sales. The Bronx is a bit better but largely similar.

So while your observation about the focuses of this forum is accurate, doesn’t it make sense? If no one interested in Staten Island would visit this website for their RE needs (with all due respect to Krolik’s roots), why would the discussion here focus on it?

>I mean I still see crazy stuff like developers putting $2M asking price on sub-1000 sq ft 2bed/2baths in LIC and wonder who their dealer is.

LIC is very different from other parts of Queens. LIC should seceded to Manhattan and not be considered part of Queens, LOL.

I don't like the apartments in LIC . Even if its price was similar to other Queens neighborhood, it would not be my choice to live in. LIC too crowded, too noisy, and the kitchen in the living room design and low ceiling.

However, many other people enjoyed LIC so there is a huge demand, perfect location (three subway lines with one stop to Middle town and one subway line to Brooklyn), beautiful river view, brand new apartments and the open floor design and balcony.

> So while your observation about the focuses of this forum is accurate, doesn’t it make sense? If no one interested in Staten Island would visit this website for their RE needs (with all due respect to Krolik’s roots), why would the discussion here focus on it?

Of course, it makes sense. The core Manhattan is always the center of NYC, the same way LIC is the center of Queens, that is where the money is and streeteasy caters to.

My guess is that the Staten Island people most have single family houses and probably use zillow for their real estate needs?

Sorry if someone answered this as Im skimming the thread and not reading everything.
This thread is a bullet train of posts.
So many of you write very thoughtful responses and they deserve full attention and if someone asked/answered this question I do apologize.

@MCR
On your high maintenance apartments and reducing the minimum deposit to 20%, I think ultimately the lending bank is going to dictate how minimum a deposit can be.

Banks loathe being in the real estate business in the sense of ending up "owning property" and when faced with a delinquency just want their principal, fees , and interest and say goodbye.

I dont think a 20% down property with high maintenance (where owed back maintenance takes precedent over the first mortgage) will not be enough for a bank .

That 20% gets eaten up quite fast from a banks perspective, particularly in NYC and not likely enough cushion to feel comfortable.
Though I guess putting up additional assets as collateral would alleviate a banker's apprehension.
But once people start doing things like that, they end up at greater risk as they start over leveraging everything.

@ truthskr10
Valid point but already taken into account by banks. On a condo, you can put only 10% down (if primary residence), but on a coop they require 20% for the exact reason you brought up.

@truthskr10 - Thanks. It will be interesting to see how our experiment goes. I am personally curious to see whether banks will allow 80% financing given the coop's underlying mortgage of 10% already. The whole experiment will give additional information one way or the other.

@nada - Are you of the mindset that legality sets your own morality? Is there nothing that you feel is legal yet not in line with your own morals? Would you have defended slave owners back in the day on the grounds that it was legal? I am not jumping on you about the SNAP comment with respect to that issue; it is just that your comment raised the larger question for me, and I always find it interesting to hear your thoughts.

>>My guess is that the Staten Island people most have single family houses and probably use zillow for their real estate needs?

Yes, even if you wanted to use streeteasy for staten island apartments, it’s not the best tool. Another reason so few properties for rent are showing up is that Staten Island has the highest home ownership rate of all boroughs @70%. And it is the least populated borough with less than 500k population.

By the way, what app is good in Queens? At some point I was looking there, and thought StreetEasy wasn’t as great in Queens as it was in Manhattan.

> By the way, what app is good in Queens? At some point I was looking there, and thought StreetEasy wasn’t as great in Queens as it was in Manhattan.

Queens is a very heterogeneous, the specific app depends on the specific neighborhood.

streeteasy and zillow are probably only the public web sites that have the most number of apartments (for rent or for sale) available.

However, there are a lot of rental apartments that were not listed on public web sites, so one has to ask the local brokers directly.

>>However, there are a lot of rental apartments that were not listed on public web sites, so one has to ask the local brokers directly.

Does not sound efficient at all.

>> Streeteasy and zillow are probably only the public web sites that have the most number of apartments (for rent or for sale) available

What about houses? If I were to live in Queens, I would want a house :-)

>> Does not sound efficient at all.

The efficiency is the least of the local broker's concern. The most important thing is to protect their own interest.

Even for the sale listing, it's better to talk to the local broker directly.

I bought apartments in Queens twice, the broker for the 1st apartment was famous known not to do co-brokering., the broker for the second apartment was OK with co-brokering, but definitely preferred the buyer without a buyer agent. I also asked Keith if he can be my buyer-agent for the second apartment. After he checked out with the listing and talked to the listing agent and told me that I should go alone, LOL.

>>What about houses? If I were to live in Queens, I would want a house :-)
The statement on the apartments is also applied to Queens. However, there are not many houses available in western queens (especially within walking distance to subway). You may see a lot of houses in western Queens, but most of the people are living in the apartments.

The math is simple. e.g., a street are all houses on two sides with only one simple six story apartment building at the street corner. The building may have 60-120 apartments, several times than the number of houses on the whole street.

The statement on the apartments is also applied to Queens

should be

The statement on the apartments is also applied to houses.

The neighboring and more recent building by the same developer is at 50 Riverside

>> Are you of the mindset that legality sets your own morality? Is there nothing that you feel is legal yet not in line with your own morals? Would you have defended slave owners back in the day on the grounds that it was legal?

The law can certainly be immoral. Sometimes it deserves outright disobedience. But let’s not pretend you’re Harriet Tubman by cheating on your taxes, just because the private equity & VC lobby continues to retain capital gains treatment on carried interest. Nor that you are a patriot by invading the Capitol to prevent the swearing in of a democratically elected president you don’t like.

Is capital gains on carried interest immoral? I dunno, if capital gains for labor is immoral, doesn’t that make capital gains for equity- and options-based compensation immoral? And founders’ shares, should capital gains on those be immoral too? While we’re at it, let’s add capital gains on home improvements as immoral too, given the personal labor it takes to make them happen.

Taxes are, within bounds, a system for making the budget add up. If you look at how the sausage is made, you quickly conclude that it’s a bunch of stuff mashed together, some of which makes no sense. You win some, you lose some. Is it fair or moral that I gotta pay for shelter with after-tax dollars while the rest of youse landed gentry here don’t? Are you all cheats for opposing the Inonada Imputed Rent Tax Bill, whereby the effective rent of your housing will be considered ordinary income?

Enough with the hysterics, I say.

What do you think?

What is legal is the collective's determination of what is moral; sometimes what is legal does not align with what I personally feel is moral. I cannot think of any instances where I felt the law was compelling me to do something against my personal morals such that I felt civil disobedience was in order; however, I can think of instances where the law allows me to do something that I don't do because I don't feel it is "right." In other words, there are some legal benefits that I forego because I feel they are inconsistent with my morals.

@MCR - i think its dangerous to assume too high an overlap of moral & legal. There are plenty of things that people think collectively are immoral, but we don’t try to pass laws against anymore, because we have for example separation of church & state. There’s a higher & sometimes different bar for something to be illegal other than it simply being immoral.

I would agree there’s plenty I consider immoral and abstain from regardless of it being legal.

What are some examples of legal but immoral behavior you two abstain from?

The sort of stuff I can think of are:

- waste food
- scream racial slurs at people
- get a dog without committing 1+ hours of my day, every day for 10 years, focused on its happiness
- etc.

These don’t align with my morals, but I accept that they may for others.

I cannot think of much in the tax code that misaligns with my morals. It’s a bunch of rules for the govt to collect money. Some of it is there to purportedly reward / deter behavior, a bunch of it is just random. I certainly engage in behavior on the basis of tax, often in the way it intends to reward. Tax deferral to encourage retirement? Sign me up. Charitable deductions? Yeah, I’m fine with the govt allowing me to redirect a fraction of my money that goes to the public good in the manner of my choosing. Donate the item with the lowest basis / highest capital gain? Why not. If this were a moral issue, what am I to do — donate one that’s sitting on capital loss??? Besides, it’s just allowing a redirecting of money going to a public good. That said, I have no interest in being “cute” in my dealings with the tax code. Hence, the studying of tax bill history to ensure a usage was fully contemplated during drafting of a bill.