By Chuck Collins
Special to the Gazette
If you stand in Jamaica Plain and look downtown, you will see a new building rising next to the Prudential Center.
This is One Dalton Place, Boston’s newest and tallest residential luxury tower, rising 61 stories, with an average condo price of $6 million. The penthouse is on the market for a cool $40 million. For context, $40 million is nearly 700 times the annual median income in the city of Boston. While this building will provide jobs and future tax revenue, there are many reasons to be alarmed, even from Jamaica Plain.
Thousands of new luxury units are currently being constructed in Boston, joining several thousand that were constructed in the last decade. Most are rising in the Back Bay, Seaport, Chinatown, East Boston and the Fenway. A decade from now, the city’s skyline will be transformed but so will our demographics.
Boston’s luxury housing boom will make Boston a more unequal city, worsen our racial wealth divide, lead to the construction of unnecessary fossil fuel infrastructure, and crack open the door for corporate crime and money laundering.
Who is buying Boston? A huge influx of luxury condominium buyers are the wealthiest people on the planet looking to park their wealth in Boston-based “wealth storage units.” In our new study (bit.ly/2MfRIQN) we examine 12 luxury condo towers in Boston, with 1,805 units at an average price of over $3 million. Over 35 percent of these units are owned by limited liability companies (LLCs) or trusts that mask the real owners and beneficiaries. Almost 40 percent of the LLCs owning Boston luxury properties have organized themselves in the state of Delaware, the premiere secrecy jurisdiction in the United States. Of these 1,805 luxury units, 64 percent do not claim a residential exemption, a clear indication that the condo owners are not using their units as their primary residence.
A More Unequal City. Suffolk County is the most unequal county in Massachusetts, which is the nation’s sixth most unequal state in terms of the gap between the wealthiest 1 percent and everyone else. And Boston’s racial wealth divide will only worsen if current trends continue. One marker of those trends: In 2015, not one single home mortgage loan was issued for African-American and Latino families in the Seaport District and the Fenway, two Boston neighborhoods with thousands of new luxury housing units coming on line.
Luxury construction drives up the cost of land in central neighborhoods, with a ripple impact on the cost of housing throughout the city. Affluent, but not superrich, households in Boston find themselves pushed to outer neighborhoods like Jamaica Plain, increasing competition for scarce affordable and moderately priced housing.
Bringing more millionaires and billionaires to Boston will exacerbate an already grotesque inequality of income, wealth, and opportunity. New residents of these buildings will likely be wealthy white U.S. nationals and international buyers from European and Asian countries in the global 1 percent, compounding the extreme racial wealth divide that already exists in Boston.
More Fossil Fuel Infrastructure? Luxury projects such as One Dalton Place press for the construction of a new fossil fuel energy infrastructure at a time when Boston should be moving aggressively to transition toward 100 percent renewable energy in order to meet our clean energy commitments. The city should require all future luxury properties should be state of the art “net zero carbon emissions” green construction, not requiring any additional fossil fuel inputs.
Hidden Wealth and Crime. These towers play an accessory role in a global wealth system that’s hiding wealth and masking ownership. With European countries now insisting on greater levels of corporate transparency, illicit cash is now cascading into the United States. Many analysts believe the U.S. is the now world’s second-biggest tax haven and secrecy jurisdiction after Switzerland.
In response to this tends, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has increased scrutiny over real estate markets in Miami, New York, and parts of California, Texas, and Hawaii. But Boston doesn’t appear on the FinCEN network watchdog list, a status that may make Boston more attractive for secret cash.
Boston should to do more to protect its non-wealthy residents and capture some of this global wealth to fund city services and affordable housing. In exchange for providing a safe haven to global capital, Boston should tax real estate transactions on properties selling for over $2.5 million and dedicate revenue from that taxing to the city’s affordable housing linkage fund.
Boston could discourage high-end vacant properties by taxing buildings that sit empty for more than six months a year. We can learn from other jurisdictions such as Vancouver and Washington, DC, that have created incentives for building owners to house people, not wealth.
Boston should require property owners, as part of recording deeds, to disclose the actual human being who owns the property. Boston real estate should pass the “library card test.” Getting a Boston Public Library card — a task that requires full disclosure of identity and a real address — should not be harder than creating a shell company and using illicit funds to purchase a luxury condo in Boston.
Now is the moment for a rigorous debate about whether the luxury building boom helps or harms Bostonians. We should question the assumption that the benefits of these luxury towers will trickle down to reduce inequality and expand affordable housing. The burden of proof falls on the city and policymakers to show there is no harm.
Chuck Collins is co-author of the report “Towering Excess.” He is a senior scholar at the Institute for Policy Studies and lives in Jamaica Plain.