The following sentence in a T-P/Nola.com article about a conflict between Jax Brewery condo owners and a bar in the building caught my eye: “In addition to Earl and Jonathan Weber, there is only one other full-time resident living in the building, according to court documents.”
In other words, only three of the 25 units in the Jax Brewery building have full-time occupants. The remainder are presumably pieds-à-terre, apartments owned by wealthy out-of-state residents who may visit no more than a few weekends a year or investors who may rent them out on the illicit short term rental market.
In a front page article on Sunday, the New York Times reported that international politicians and businessmen, many of them with shady histories of environmental pollution and public corruption, were paying tens of millions for real estate in New York, often using shell corporations to conceal their ownership of expensive Gotham nests they rarely use.
While condominiums in New Orleans are not nearly so pricey, the article raises questions that New Orleans should be considering as out of state residents flock to buy vacation condos where they will spend only a few weeks a year.
According to the article, the nonprofit Fiscal Policy Institute questions whether absentee condo owners really have the positive effect on the local economy that is sometimes claimed: “They’re not spending at the dry cleaners, the grocers and all of that, so it deprives New York of all that local multiplier effect.”
Meanwhile, long-time residents, the folks who pay for the infrastructure and tax breaks to support these projects, are eventually priced out of the local market.
Some New York City Council Members are looking into taxing the wealthy owners to pay for the public services they use: “We are spending money to keep them safe and maintaining the infrastructure.” The Fiscal Policy Institute suggested a graduated tax on high-end condos.
The article noted another downside of being a popular destination, one New Orleanians are already seeing: escalating real estate prices on the high end that drive broader increases in housing costs farther down-market. Combined with the loss of housing to illegal short-term rentals, many long-time local residents can no longer find affordable housing in New Orleans.
City Hall needs to look more carefully at the costs associated with pied-à-terre housing.
- What is the long-term economic benefit from condos without permanent residents?
- Is the property tax on the condo sufficient to make up for the fact that the owner will be spending only a few days a year in town, contributing little to the local economy, and paying no Louisiana income taxes or local business taxes?
- How much more does a year-round resident contribute to the local economy compared to the jet-setter who flies in for Mardi Gras and Jazz Fest?
While affordable housing has the advantage of allowing long-time residents to stay in the city and provide support to local businesses and concomitant tax revenue, a condo that sits vacant much of the year not only displaces locals but shrinks the tax pool.
Condo projects get a big push from local real estate agents, from architects and builders, and from developers, all of whom make big contributions to local politicians and then take their profits and walk away. Meanwhile, long-time residents, the folks who pay for the infrastructure and tax breaks to support these projects, are eventually priced out of the local market and end up spending their money in Slidell, Marrero or Picayune.
The properties may be good investments for the speculators. But the benefits to the city are not as clear as some politicians would have you think.
New Orleans native Keith Hardie is an attorney active in community fights over regulatory and land-use issues.
This article overlooks the thousands of vacant houses all over Orleans Parish. Vacant houses have all of the same negative economic impacts, but also suppress neighborhood growth, negatively impact the property values of surrounding homes and invite crime. They are a far bigger threat to growth and stability in New Orleans than a few uninhabited condos in the Quarter. Any solution or penalties aimed at increasing economic impact should address both.
True. We looked for a place in the city but could find only a one usually rented to college students. Opted for the Northshore and a commute.
Those are far, far more complicated.
Vacant houses with $5000 trailers chained to structures on driveways are “catnip” to local police (especially the 7th District) and city tow truck drivers. No one needs to invite CRIME here. CRIME was born and raised here. CRIME is well-versed on how this city operates. CRIME is a resident (evil) living next to you and me. 02/11/2015 10:06 PM
CRIME loves “complications.” As a matter of fact, CRIME thrives on it. It’s like throwing water on gremlins after 10:00 PM, speaking of which it is now 10:09 PM. 02/11/2015 10:10 PM
it’s a free market, you cannot legislate who can and cannot purchase condo’s. Real estate is a great investment and the rich need to park their money somewhere. They are still paying property tax and upkeep, they may not be using local business as much.
While the rich park their investments in New Orleans the middle class are being priced out of the City proper.
Here’s a solution: tax rich people who own these ghost condos – after all they’re using them as profit-generating investments. Use the money to fund the conversion of these vacant homes into public housing. We need such interventions given our lopsided housing market prices out far too many New Orleanians. We live in America’s second most unequal city yet such inequality results from policy decisions that can be reversed.
The property tax paid by a $600,000 condo is significantly higher than the tax paid by a $150,000 shotgun.
Yes, being priced out of the city center ( FQ – CBD – Marigny ) but there is plenty of affordable housing in mid city, gentilly, fountaiblue, carrolton etc. So yes priced out of the city center but not orleans parish.
Why are the affluent given advantages inaccessible to those of lower means who actually need assistance? The millage rate on both of these hypothetical properties is the same meaning someone on a fixed income or facing declining wages would pay larger portion of their income in property taxes than the advantaged power-elite who own these luxury commodities and have captured the majority of our post-recession growth. The author of this article rightly suggests a graduated condo tax which would be progressive in nature. Meaning the rate of taxation increases as the value of the luxury commodity appreciates in value. In comparison those residing in poorer areas would see lower millage rates. Progressive taxation is the solution to inequality.
If you look at the record in New Orleans and other cities it’s omnipresent that subsidies – federal, state, and local – predominantly go towards underwriting luxury downtown developments as opposed to projects in failed markets where those suffering concentrated poverty reside. This obviously results from government captured by monied interests who bring teams of lawyers, lobbyists, planners, and consultants to justify the current unequal system. The only solution for poor areas remains waiting for gentrification which amounts to displacement of those who cannot participate in our uneven housing market. We could do better with a more fairer redistributive economic system seen in other more equal yet productive nations.
I think a greater concern that the article only alluded to is the possibility part-timer residents influencing city ordinances such as noise, zoning, etc.
Should the highest land with lowest flooding risk be allocated towards the leisure class who are well-hedged against losses or those who cannot financially endure the catastrophic outcome of another levee breach?
The middle class in this city are already drowning, and it is not flood water that is doing it. 02/15/2015 6:40 PM
Ghost condos are becoming a problem in London: http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-ghost-town-lights-go-out-as-foreign-owners-desert-london-homes
Why would converting vacant housing into public housing be any better as both pay ZERO property taxes due to the homestead exemption since the property value is so low? Did you know that 65% of Orleans Parish properties pay ZERO property taxes?
You can talk all about the lopsided housing market all you want, but the New Orleans Housing Market will always be lopsided since New Orleans has essentially no good jobs to pay even for below average housing. Second, New Orleans is not really the most un-equal city in America. It’s one of the most irresponsible cities in America. (FYI, The Big Easy was never meant to be a compliment.)
In other words, Affordability means nothing without Responsibility.
The middle class will always be priced out since there are no good jobs in New Orleans in the first place.
Leisure class? Please show me the “working class” of the Big Easy, Orleans Parish?
The leisure class at least pays quite a bit of property taxes where the typical resident in Orleans Parish pays zero property taxes. If you give the high ground to the working class, will they pay property taxes? No they will not. And moreover, will they pay the higher costs of FLOOD INSURANCE? No they will not. FYI, Flood Insurance just went up this year, again.
Second, If you give all this high ground to your so called middle class, working class, lower class, where will the money come from to pay for police, fire, teachers, schools, streets, lights, levees, you name it?
If they cannot endure a catastrophic event like a hurricane, they should move to Houston and get a good job like the many others who left and got to see how the world really works with good jobs, good schools, you name it.
But if the owner of that $150,000 shotgun lives here and contributes to the economy, isn’t that far more valuable than the $9,000 in property tax paid by an absentee owner?
Did I miss a couple of posts!? Oh, Geeze Louise – get back on yo’ kneez z z – cuz I think we is still in New Orlean-z-z-z. 02/28/2015 11:41 PM
Ben, I see your point, but think it’s a question of balance. When only 3 of 25 units in a building are being lived in — and this building is not unique — that’s a problem for the city. When I bought my downtown condo in 1996, 13 of 14 owners — 20 people — lived there. When I sold it in 2010, only two of us were there full time. Multiply that throughout the city and think of the collective hit that represents to the local economy. (I’m not suggesting we stuff them with more visitors. Residents contribute to the entire economy, not just the food and entertainment sectors.)
There have been a lot of changes in New Orleans from 1996 to 2010, which also makes me wonder how pivotal the Katrina catastrophe was (condos – local inhabitants versus “ghosts,” for example). Look at the public schools in this city. The OPSB – local control – was already on its way out, but Katrina really impacted the educational scene (sealed its fate) and ushered in the largest charter operator infusion in the country. It does not appear that New Orleans is balanced in “anything” that goes on here. 03/01/2015 12:42 PM
I think that you got it backwards. The local economy cannot support many more white collar workers and a lot of industry has relocated to higher ground, further away from the hurricane belt. The out-of-towners who make New Orleans a 2nd home are adding plenty to the economy and have helped to rebuild the city. They bring their mardi gras beads and jazzfest pictures and stories back to their hometowns, and help to keep the tourists coming.