Knowing quite a few very wealthy people throughout my life, I’ve been privy to many of the concerns they have in their day to day living. Generally problems revolve around which hotels to stay in when traveling, where the best place to get sushi is, and what the hell to do with the insane amounts of money they’ve accumulated over the years. They fret over whether to buy stocks and shares or hand money over to a financial advisor. Do you invest in high growth start ups, or put it into bricks and mortar for a more conservative approach? The opportunities are endless and the choices can get as overwhelming as a Starbucks menu.
For pretty much everyone else on the planet, the list of concerns goes something like this: after paying rent, health insurance, grocery bills, credit card debt and utilities, can I still afford to go out to the movies?
In a Bloomberg interview with Larry Fink, the CEO of the phenomenally wealthy asset management firm BlackRock, Fink outlined the means by which the ultra rich store their wealth these days (remember, it’s a very important issue!):
Gold has lost its luster and there’s other mechanisms in which you can store wealth that are inflation-adjusted…The two greatest stores of wealth internationally today is contemporary art….. and I don’t mean that as a joke, I mean that as a serious asset class… and two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, in London.
Hamilton Nolan’s summary of this nugget of wisdom from one of America’s most influential elite perfectly encapsulates how severely screwed up our economic system has become:
What Fink—a man who would know!—said, to be clear, is that New York apartments and fantastically expensive works of art are replacing gold as the assets of choice in which to park vast amounts of wealth. You may need an apartment as something basic for your survival; but a tiny sliver of extremely wealthy humans around the world need apartments, many of which sit empty most of the year, to use as a physical bank account, and their need supersedes yours.
The notion that millions of people can be subjected to crippling housing situations where rent is either astronomically high, conditions are appalling, or housing simply isn’t available so that the ultra wealthy can get a good return on their fortune is one of the greatest tragedies of modern capitalism. House prices in the area where I grew up in London reflect this insanity. No one I know who is my age can afford to live in the neighborhood their families are from as bankers have flooded the area, buying up properties not only for themselves, but to rent out to younger bankers who can afford the rapidly rising rent, or simply to keep as a long term investment. These bankers have other homes they don’t live in in towns or villages outside of London, creating numerous housing problems for local residents. As George Monbiot writes:
If you travel to Worth Matravers – the chocolate-box village in Dorset in which 60% of the houses are owned by ghosts(1) – you will not find hordes of homeless people camping on the pavements in cardboard boxes. The market does not work like that. Young people from the village, unable to buy locally, have moved away, and contributed to the housing pressure somewhere else. The impacts of the ghost market might be invisible to the purchasers, but this does not mean they aren’t real.
In 2012, 1.6 million people had a second home in England and Wales. In 2013/2014, almost 130,000 households in the same regions applied for to their local authority for homelessness assistance. The number of people without stable housing is likely much higher than the official figures suggest, with thousands of people sleeping rough across the UK and others who couch surf or stay with relatives because they cannot afford to house themselves.
With 1.6 million homes that are empty much of the year and hundreds of thousands of homeless people, something is terribly, terribly wrong. This isn’t to lay the blame on those wealthy enough to own a second home, but rather the system that creates it. As wealth is continually sucked upwards, the rich will buy more homes creating even greater housing pressure for the rest of us. The only way to prevent this from happening is to create a hefty tax for those who choose to buy a second property and not live in it. That tax revenue can then be used to provide more affordable housing for everyone else, who can then contribute to the economy without going bankrupt. Because as long as the tax system benefits multi property ownership, the housing crisis will persist.
Also, it is entirely possible to enjoy the benefits of having a nice second home without actually owning one. It’s called Airbnb.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.