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304 North Cardinal St.
Dorchester Center, MA 02124
Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
A headline in the Boston Globe screams: “Boston’s new luxury towers appear to house few local residents.” The headline is based on a report by the leftist Institute for Policy Studies, which claims that in twelve Boston condo buildings, “64 percent do not claim a residential exemption, a clear indication that the condo owners are not using their units as their primary residence.”* The report accordingly concludes that these buildings do not “address Boston’s acute affordable housing crisis.” This seems to be another version of the common “foreign buyers” argument: that new housing does not hold down rents, because it will all be bought up by rich foreigners who will let the units sit unoccupied forever. Although the report does not explicitly endorse restrictive zoning, it does urge the city to require new residential buildings to be carbon-neutral- a rule that might make residential construction more difficult. But this inference would be wrong. If you own a condominium, you have three choices: (1) to live in it; (2) to sit on it and lose money on your mortgage; or (3) to rent it out. Obviously, you make the most money through choice (3)- renting out the condo. So even a condo owner who does not choose option (1) has a strong incentive to adopt choice (3). Thus, it seems likely that at least some, if not all, of the condos will be rented out, thus increasing rather than decreasing regional housing supply, which in turn will have a positive effect on housing prices. *The residential exemption saves Boston homeowners up to $2500 per year on their tax bill. I would think that at least some owner-occupants are unaware of or forget to file for this exemption- but since I have no idea how common this is, I am reluctant […]
One common argument against building new market-rate housing is that there is an infinite supply of rich foreigners willing to soak up new supply. One obvious flaw in this argument is that housing prices do occasionally go down even in expensive places. But even leaving aside this reality, the “foreign buyers” argument is not logically provable, since there is no way of knowing whether there are more rich foreign buyers in San Francisco than in, say, Raleigh or Houston. Thus, the argument rests on the following chain of logic: 1) we know that there are rich foreigners taking over Expensive City X (but not Cheap City Y) because housing prices are high; (2) therefore, the rich foreigners are what keep housing prices high in City X. The argument makes sense only when you add the following premise: housing prices can only be high in the presence of huge numbers of rich foreigners. I really don’t see any reason to take this premise seriously.