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Welcome To The Oligarch Recovery: 82% Of US Construction Is Luxury Units
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Here is good news for the plutocrat who wants to try out Manhattan’s ritziest neighborhoods before taking the multimillion-dollar plunge. The market for super-high-end rentals is booming, with plenty of enticing options for tenants of every taste.
In all, 82 apartments renting for at least $50,000 a month were listed on StreetEasy during the first three months of the year, more than triple the number listed in the first quarter of 2008. At lower thresholds, luxury listings are also on the rise. Apartments renting for more than $25,000 a month made up 0.95 percent of total inventory in the first quarter of 2015, up from 0.46 percent in the first quarter of 2008…
Of 370,000 multifamily rental units completed from 2012 to 2014 in 54 U.S. metropolitan areas, 82% were in the luxury category, according to CoStar Group Inc., a real-estate research firm. The firm defines luxury buildings as those that command rents in the top 20% of the market. In some places, including Denver, Tampa, Baltimore and Phoenix, virtually all new apartment construction has been targeted to high-end renters. In Atlanta, about 95% of new apartments have been in the luxury category.
– From Bloomberg and the Wall Street Journal
The oligarch recovery marches forward with reckless enthusiasm, despite extremely disturbing underlying trends which are all but guaranteed to result in significant societal unrest in the years ahead. The U.S. economy, and indeed the global economy, is much more similar to pre-1789 France than any other historical period I can think of.
You have a handful of super wealthy people, completely disconnected from any sense of reality, running around telling governments what to do. All the same characters who created the global financial crisis remain in charge of the world’s most powerful institutions, and continue to benefit handsomely from its aftermath. While claiming to have “saved the global economy,” the only things they really saved were their own positions of power and wealth. The only thing that was saved, was the very thing that should have been completely discarded, the global status quo.
The results of the global bailouts and backstops are now clear for everyone to witness. The entire global economy is one gigantic ongoing crime scene. It’s an economy in which fraud is rewarded and never punished. An economy where the rich, powerful and connected concoct unimaginably lucrative crony deals knowing the law doesn’t apply to them. To hedge their corruption, they feed scraps to the poor, not out of altruism, but so that the growing underclasses have just enough not to rebel.
Today, I want to highlight two related articles to clearly demonstrate just how completely screwed up the U.S. economy really is. The first one is courtesy of Bloomberg, and focuses on my hometown of NYC. The best decision I ever made in my life was leaving that place, and it’s gotten much, much more narcissistic and financialized since I left (for the story of why I left, see: The Biggest Trade of My Life). The second article is from the Wall Street Journal, and it highlights the extremely troubling statistic that 82% of multifamily rental units completed from 2012 to 2014 in 54 U.S. metropolitan areas were luxury units.
First, from Bloomberg:
Here is good news for the plutocrat who wants to try out Manhattan’s ritziest neighborhoods before taking the multimillion-dollar plunge. The market for super-high-end rentals is booming, with plenty of enticing options for tenants of every taste.
In all, 82 apartments renting for at least $50,000 a month were listed on StreetEasy during the first three months of the year, more than triple the number listed in the first quarter of 2008. At lower thresholds, luxury listings are also on the rise. Apartments renting for more than $25,000 a month made up 0.95 percent of total inventory in the first quarter of 2015, up from 0.46 percent in the first quarter of 2008. Real estate agents and wealth managers say the increase in expensive rentals is partly an outgrowth of the luxury building boom sweeping through New York City and partly due to the shifting whims of a global elite that wants luxury digs without the hassle of a long-term commitment.
The hot market for super-luxury apartments has spurred new high-end projects. Spending on residential construction increased 73 percent in 2014 from the year before, according to the New York Building Congress, but the number of new units increased by only 11 percent. That means fewer resources for more-affordable housing. “The existence of a greater share of pricey buildings implies that the lower end isn’t growing as quickly,” said Alan Lightfeldt, data scientist at StreetEasy.
In some cases, it’s the very demand for luxury real estate that’s providing supply to the rental market. As the global elite hit on Manhattan condos as a store of wealth, buyers are more likely to become landlords. Last year, condo buyers were twice as likely to rent their apartments out within 60 days of buying them as they were in 2010, according to a Bloomberg story in February.
“The question might not be how rich do you have to be—it might be how foolish,” says Michael Goodman, chief executive of Wealthstream Advisors. “It’s like, why do you buy a $250,000 car? Not because it gets good gas mileage, but because you want to, and you can.”
While the above article points out that most of the construction in NYC targets the very wealthy, what about trends across the U.S. as a whole? For that, we turn to the WSJ:
Of 370,000 multifamily rental units completed from 2012 to 2014 in 54 U.S. metropolitan areas, 82% were in the luxury category, according to CoStar Group Inc., a real-estate research firm. The firm defines luxury buildings as those that command rents in the top 20% of the market. In some places, including Denver, Tampa, Baltimore and Phoenix, virtually all new apartment construction has been targeted to high-end renters. In Atlanta, about 95% of new apartments have been in the luxury category.
“I don’t believe there ever has been a time where we have produced so much luxury rental housing,” said Susan Wachter, professor of real estate at The Wharton School of the University of Pennsylvania. While these new buildings are priced for the affluent, many middle-class and young workers are straining to rent the units, in part because they have few others choices.
What’s more, rents in new apartment buildings are commanding a far bigger premium over older buildings than during past construction booms. According to MPF Research, a division of RealPage Inc., apartments completed a decade ago on average commanded rents that were 9% higher than older buildings. But new apartments delivered since 2010 have fetched a 21% premium over existing rental stock. In the Atlanta area, the premium for a new apartment is 39% compared with 2% a decade ago.
While some developers worry that the current construction boom could eventually result in overbuilding at the high-end—which could put downward pressure on rents for all types of apartments—there is considerable angst among city officials and housing advocates worried that the middle class is getting squeezed.
What’s the middle class? But don’t worry, there’s hope…
Some cities, such as New York, are moving to require that new developments in some areas include more units for middle- and low-income families.
I suppose after deliberately handing out subsidies to oligarchs, the serfs could use a few scraps. Let’s not forget: Tax Breaks for Oligarchs – The $100 Million Manhattan Apartment with a Property Tax Rate of 0.017%
Mr. Randall, owner of privately-held South City Partners, said when he started 30 years ago “almost 100%” of what he built was low-rise, suburban buildings with rents of about $1,000 a month in today’s dollars. Now, even as his business has shifted almost entirely to urban projects like Inman Quarter, he fears the supply of new high-end building could be overdone.
As a hedge, he’s in the process of purchasing two sites in suburbs of Atlanta where he hopes to return to building apartments for about $1,200 a month on average. He said the challenges are steep because suburban communities often oppose multifamily projects and banks aren’t anxious to finance middle-market projects.
Ah the banks. The taxpayers bailed them out so that they could turn around and steal billions by criminally rigging the financial markets, yet they can’t be bothered to finance projects for the middle class.
The reason everything is being built for the wealthy, is because all the gains from the oligarch recovery have gone to the wealthy. This is no accident. It’s how the bailouts were designed, and how the status quo operates. Our socio-economic system since 2008 can be best described as serfdom, and nothing is going to change until people admit this, rather than hanging on to false hopes that they one day too will become an oligarch. It’s not gonna happen.
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Blue Horseshoe loves 520 Park Avenue.
Expect the Passport model to be applied down to the building level. Doormen become the most powerful people in the world, aside from wallet carriers.
I love this blog
$50,000 a month ain't much, a Mexican family would have no problem splitting that 1000 ways.
It sucks big time! Because you aint in it.
transitory
How else do you entice people .... to move up the housing chain .... and make room for people at the bottom to buy a starter home ?
PBS show "super skyscrapers" looks at some of these, this week the "One57" 1,000 foot residential building in Manhattan. OMG.
http://www.one57.com/
We've seen that a huge number of these are sold to foreigners who never even live there, just leave their $20m condos vacant, it's to hold the money safe in the US.
A welfare family of 6 (a woman assuming role of spouse [WARS] and 5 brats) .... would need more than 1,000 sq ft to get HUD Section 8 funding ?
Your link triggers VirusScans.
poor people generally dont have money to build homes.
I'm surprised they can afford this what with that high tax burden and having to carry the poor.
This article is basically true, however in order for a new multi family development to pencil due to costs, you have to get $1.50-2.00 PSF per month (depending on the market) to make the deal worthwhile. In urban and high rise developments, it is even more. It is almost impossible to build "affordable" due to costs, and government adds significantly to the cost of any development. Sad, but that is Fiscal Reality.
Serfdom since 2008?
Hmm. Isn't the party with the attitudes and policies that produced Detroit, Baltimore and Compton been running things since then?
NIMBY-friendly local regs and zoning have prevented low-end building and thus allowed those who already own a home to drive up the prices by restricting supply
Well, of course there's no houses being built for normal people. The last thing they want to do is encourage white people to breed and raise children that one day might start the firm that drives theirs out of business.
White folk are expected to live in one room with a cat, and like it. "Refugees" with litters of six or eight or ten will get the single family homes.
If you want to become an oligarch, one of the first steps is to BEAT YOUR SKULL ON THE BLARNEY STONE (literally, or metaphorically) & pray that the Schwartz be with you...
http://travelogue.travelvice.com/postfiles/2009-05-09_gender-issues-at-t...
laughable that Bloomberg news uses the word "plutocrat."
Luxury units are also the only ones economical to build because of high regulation. Take, for example, Los Angeles, which requires a certain number of parking spots for each apartment. Due to this regulation, only upscale apartments are built to amortize this added cost. Due to this, there is a shortage of affordable housing and universally higher rents.
Artificial crises, artificial crises everywhere.
The Goyim have been taken for a ride and don't deserve a house because they're too dumb and lazy to do anything about it. Enjoy the slide with some doritos and mountain Dew while cheering on your favorite sports negros!
60% of government spending is entitlement programs for the proletariat vermin horde, an amount which DWARFS ALL income by so-called elites and ALL spending by so-called elites
THEREFORE
USA is a proletariat vermin heaven
These word farts from Krieger are just carppy socialist class-warfare propaganda, worthless textual rubbish from a feeble vestigal mind.
LOL. As if.
The US govt gives TRILLIONS to banks and the MIC, while it gives just billions to the poor in junk food, junk care and crap.
But you would have us believe we are paying taxes mainly for the POOR?!
Your premise, "US govt gives TRILLIONS to banks and the MIC", is just proletariat envy+resentment-driven fantasy & populist mob sloganism - the US govt is not "giving" trillions to banks, ONLY to the proletariat entitlement-tit sucking vermin parasites - are you one of them ????
missing from this article: definition of "luxury".
Ok, this is turning into theme, but it's entirely applicable to what I see in my parts of the woods:
http://www.zerohedge.com/news/2015-05-21/40-existing-home-sales-or-above...
Jumps the Shark https://www.youtube.com/watch?v=t4ZGKI8vpcg