DUBLIN IS FACING a shortage of affordable housing along side a luxury real estate boom.
In global cities across the world, wealthy investors are buying up property and letting it sit vacant as a form of bank account. A luxury housing building boom is being fuelled by wealthy investors looking for diversified asset holdings. This is pushing up land and housing costs for everyone else.
A high percent of these housing units will sit empty or rarely occupied. In one luxury residential tower in my hometown of Boston, only 21% of the units are considered the occupant’s principal residence. Most serve as elegant piggy banks, destinations for wealthy investors from around the planet who are spiriting money out of their home countries and seeking stable markets to hold value.
Economic volatility
As global stock markets rise to precariously high levels, more and more wealth will exit into real estate as a hedge against a downturn in the securities marketplace. Similarly, as economic volatility grows in many countries and the quality of life deteriorates, wealth will flow to safe havens with First World amenities such as the US, Canada, and the UK.
Post-Brexit, Ireland will be an even more attractive destination for this wealth.
These wealthy elites, known in the investment world as “ultra-high net worth individuals” with wealth over $40 million, are in the richest 0.001%. They are part of a globe-trotting elite with residences and assets spread across multiple locales, borders and time zones.
A growing number of these owners mask their identity through shell corporations or opaque trusts, part of the global wealth-hiding apparatus. The property owning entity may be incorporated in Bermuda, controlled by a trust registered in Panama. The funds purchasing the property may come from a bank account in the Cayman Islands. But the fixed asset is now coming to Dublin.
Cities should ask for more
The real estate industry will tell us there is nothing we can do to protect our communities from this disruption, that we should count our blessings to have the rich repopulating our city centres. But in exchange for providing a stable piggy bank and environment to protect these assets, cities should ask for more than property tax payments.
Ireland should move with due haste to enact high-end real estate transfer taxes, requirements for the disclosure of beneficial ownership, and regulations to discourage the disruptive impact of vacant properties and absentee owned investors.
The city of Vancouver has increased taxes on unoccupied properties and the Province of British Columbia has just levied a tax on absentee owners. These policy actions were taken in response to dramatic increases in Chinese investors who were treating Vancouver area real estate as offshore piggy banks, with no intention of occupancy.
Affordable housing crisis
In San Francisco, voters in 2016 approved a high-end real estate transfer tax on residential and commercial properties sold for over $5 million. It is expected to generate $44 million a year, which has been allocated to fund free-tuition to city residents at San Francisco Community College and care for trees.
Other cities could levy such a tax and channel funds to more directly address the root causes of the affordable housing crisis. Activists in Boston and New York City are exploring steering revenue to programs to expand permanently affordable housing.
Ireland is struggling to find resources to invest in social housing. Taxing high end real estate transfers to fund social housing, a driver of the affordable housing crisis, could contribute resources to fix the problem.
Chuck Collins is the Boston based author of Born on Third Base and Is Inequality In America Irreversible? He is co-editor of Inequality.org and director of the Program on Inequality at the Institute for Policy Studies. He will be in conversation with Ruairí McKiernan at the Love and Courage podcast live event in Dublin on Thursday, July 12 at 7.30pm. The event is fully booked. It will be live streamed via loveandcourage.org.
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