Ghost condos haunt the New Orleans market — a dubious development

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Jed Horne

Full-time residents are a rarity in the Jax Brewery building.

Full-time residents are a rarity in the Jax Brewery building.

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.”

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.

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