Massive Hudson Yards real estate project opens in Manhattan
Hudson Yards, the $25 billion private real estate project on the Far West Side of mid-Manhattan, was officially opened on March 15. It has been hailed by its billionaire developers as a transformative venture that will bring at least 55,000 jobs, 4,000 apartments and a jolt of energy and enthusiasm to New York City as a whole.
The reality is far different. A study has documented that the project is drawing development from other neighborhoods without creating new growth. Only about 10 percent of the housing will be “affordable,” even by the usual flexible definition of that term. Hudson Yards will be in essence a kind of gated community for the very wealthy, yet another and even more extreme expression of the hypergentrification that has fueled historically unprecedented social polarization, nowhere more pronounced than in New York.
The development, the product of at least a decade of planning, will eventually consist of 16 tall buildings. It is made possible by a massive platform built over the old storage yards of the Long Island Rail Road. In terms of square footage, Hudson Yards will be the largest real estate development in the history of the US.
Among those structures already completed are four skyscrapers, transforming the city’s skyline on the Hudson River and nearly obscuring the iconic view of the Empire State Building, about one mile due east. Another prominent element that has been opened is a seven-story, 720,000-square-foot luxury shopping mall.
Aside from the mixed-use residential, commercial and office buildings, Hudson Yards also includes the Shed, a city-sponsored arts center that is the only part of the development not built with private funds. Another feature, temporarily called the Vessel while a permanent name is decided upon, is a 150-foot-high structure with 2,500 steps, erected at a cost of $200 million, and meant to serve as a kind of thematic sculpture and attraction for visitors and residents in the surrounding neighborhood of offices, shops and residences for the super-rich.
Plans for Hudson Yards began to take shape in the years after the 9/11 attacks in Lower Manhattan. The midtown area between 34th and 59th Streets had already overtaken the old financial district in size. By the middle of the first decade of the 21st century, however, there was growing concern within the ruling establishment about competition from London and other financial centers.
One of the few areas where expansion was possible in the already crowded business district was the Far West Side, the site of the old storage yards of the LIRR. The push for Hudson Yards accelerated after New York lost its bid for the 2012 Olympics, and thus the rationale for the plans for a new stadium on the Far West Side. Ground was broken for the project in 2012.
The completion of the first major stage of the project is emblematic of the vast shifts that have taken place amidst the capitalist globalization and financialization of recent decades. Everything about Hudson Yards symbolizes the Second US Gilded Age, which has left the First Gilded Age of more than a century ago in its dust. In the words of New York Times architecture critic Michael Kimmelman, the development is a combination office park-shopping mall and “quasi-gated community targeted at the 0.1 percent.”
The shopping mall is similar, only on a far bigger scale, to the one opened more than a decade ago in the Time Warner Center mixed-use towers, about a mile to the north.
Star architects, including Skidmore, Owings and Merrill and Diller Scofidio + Renfro, were hired by the billionaire developers, The Related Companies and Oxford Properties Group. For the forthcoming western side of the project the names include Frank Gehry, Santiago Calatrava and Robert A.M. Stern.
Hudson Yards follows “Billionaires Row” on West 57th Street and numerous other luxury and high-end towers in Manhattan in the northern tip of Brooklyn. The explosion of luxury real estate, resting on continuously escalating inequality, is symptomatic not of the health, but rather the sickness and decline of American capitalism. Hudson Yards is the culmination of a process that can be traced back at least four decades, to the near-bankruptcy of New York in 1975.
That crisis, bound up with the economic downturn that followed the oil price shock of 1973, was followed by a very different sort of recovery from the past. The ensuing social and economic policies, associated most prominently with the names of Reagan and Clinton in the White House and Ed Koch, Rudy Giuliani and Michael Bloomberg in New York’s City Hall, were part of a social counterrevolution, which continues today. Capitalist prosperity is now based on rampant speculation, combined with vicious assaults, sponsored by both parties and abetted by the trade unions, on all the gains made by the working class in the 20th century.
While there were occasional efforts to improve the city’s infrastructure, as in the modest improvements in New York’s transit system in the 1980s, these were seen as the cost of maintaining the city as a global business center.
The basic trajectory was to claw back the gains of the working class and to lower living standards for the majority of the population. The consequences of this are symbolized by Hudson Yards and its place in the city today.
Tax breaks and other public assistance for Hudson Yards have reached nearly $6 billion, twice the figure estimated as the enticements for Amazon to build its headquarters, in plans that it has now abandoned, in Queens. The extension of the No. 7 subway line to the neighborhood cost $2.4 billion, while the rest of the transit system was left to decay. The city also spent $1.2 billion for parks and open space.
Companies that plan to relocate from other sites to Hudson Yards were granted tax breaks, including $25 million for the gigantic BlackRock hedge fund, with $5.98 trillion under management, $14 million for WarnerMedia, and numerous others. While an estimated 430 “affordable” apartments are included in Hudson Yards, about 63,000 residents of the city are homeless.
Hudson Yards bears some comparison with the 1970s project, promoted by New York power brokers like Robert Moses, for Westway, an underground multi-level highway to modernize the city’s West Side Highway, while above the highway would sit acres of parkland as well as commercial space, office and homes. Westway was stopped by popular opposition to spreading highways through cities, and to development favoring the wealthy. Liberal columnist Russell Baker warned, “The Hudson River would be sealed off by a towering wall of condominiums for the rich.”
One major difference between Hudson Yards and Westway is the role of private interests. The earlier project was to be largely financed by the federal government.
Another difference is that today, more than 30 years after Westway was finally abandoned, the interests of the super-rich are unchallenged by any level of government, and the steady growth of inequality is accepted by Democrats and Republicans alike.
The consequences are not attractive, as Kimmelman explains, “[Hudson Yards] offers 14 acres of public open space in return for privatizing the last precious underdeveloped parcel of significant size in Manhattan … With its focus on the buildings’ shiny envelopes, on the monotony of reflective blue glass and the sheen of polished wood, brass, leather, marble and stone, Hudson Yards glorifies a kind of surface spectacle—as if the peak ambitions of city life were consuming luxury goods and enjoying a smooth, seductive, mindless materialism.”
The empty and mindless ambitions of the ruling elite call to mind the famous phrase attributed to Louis XV in pre-revolutionary France: “Après-moi le déluge.”
More than five years ago current New York mayor Bill de Blasio, a self-styled progressive Democrat, was elected on the promise to fight inequality. Hudson Yards shows not only that de Blasio is a liar, but also that the unwillingness and inability of politicians like him to weaken the grip of the oligarchy on social and economic life reflects the fundamental nature of capitalism. What flows from this is the need, not for fruitless attempts to regulate or improve this decaying system, but to establish the political independence of the working class in the fight for socialism.
Home Sales Climbed Higher In July
Canadian home sale rose in July in broad gains as markets start to recover from the stress test tightening last year, though economists say global concerns raise some uncertainties for the future.
The Canadian Real Estate Association reported last week that home sales rose 12.6 per cent in July from a year earlier, and were up 3.5 per cent seasonally adjusted from June.
“Sales are starting to rebound in places where they dropped when the mortgage stress test took effect at the beginning of 2018, but activity there remains well below levels recorded prior to its introduction,” said CREA president Jason Stephen in the report.
“Sales activity is strong in New Brunswick where I do business, but it’s a very different story in B.C., Alberta and Saskatchewan. All real estate is local. Nobody knows that better than a professional [realtor], who is your best source for information and guidance when negotiating the sale or purchase of a home,” said Stephen.
The increase came as sales were up in markets like Moncton, B.C.’s Lower Mainland, Calgary, Edmonton, Greater Toronto Area, Hamilton−Burlington, Ottawa and Montreal. Sales were down in Regina, Saskatoon, and Windsor−Essex.
The broad rise in sales put them at their best level since the stress tests kicked on at the start of last year, said BMO chief economist Douglas Porter in a note.
“After a challenging 18 months, the Canadian housing market is showing widespread signs of, not just stabilizing, but firming again.”
The federal government updated mortgage qualification rules at the start of last year to require more would−be borrowers to prove they could manage if interest rates rose.
The national sales−to−new listings ratio tightened to 59.8 per cent last month from 57.6 per cent recorded in June to the upper end of what’s considered a balanced market, he said.
The rise in sales, which came as the number of newly listed homes edged back by 0.4 per cent in July, put some pressure on prices, said Porter.
“With sales regaining some momentum broadly, and the market tightening in many regions, it’s little surprise that prices are starting to turn the corner again.”
The national average price of a home sold in July was just under $499,000, up 3.9 per cent from the same month last year and a seasonally adjusted 2.6 per cent from June.
Double−digit price gains in several Ontario communities including Ottawa and Kitchener−Waterloo helped drive up the overall average, while cities in Western Canada generally saw prices drop.
Porter said global uncertainties are already driving borrowing costs lower, which could further boost the Canadian market, but if economic declines prove serious then interest rates will be secondary.
“The downside is that if “global uncertainties” morph into something much more serious for the domestic economy, interest rates will be playing a second fiddle.”
TD senior economist James Marple said the housing market looked robust for the month, supported by strong population growth, solid job growth and lower mortgage rates.
“This can only be described as a solid month for the Canadian housing market…with most markets in balanced territory or better, the immediate downside risk to home prices have diminished considerably.”
He said there is some uncertainty as to where rates will go, since domestically the economy looks strong while there are considerable international challenges as global economic growth looks even softer than previously thought.
Why you need to be on top of real estate Tax rules
Advisors have been urged to brush up on their real estate tax knowledge, with the CRA throwing more auditors at the issue.
Mariska Loeppky, director, tax and estate planning for IG Wealth Management, believes investors are often making innocent errors because of the relatively new adminstrative change to reporting your principal residence exemption disposition.
From the 2016 tax year, residents are required to report basic information, like date of acquisition, proceeds of disposition and description of the property, on income tax and benefit returns, when they sell their principal residence residence.
An example, explained Loeppky, could be when someone owns land and a few years later builds a house on it. She added: “You can’t claim a principal residence exemption for that property while it’s just land until you live in that home.
“So, when you go and report that disposition, you probably think, ‘that’s always been my house or I have always lived in that house’. But really, you owned that property for a few years before you could claim it as your principal residence.
“People don’t understand how that calculation works, and how that exemption works. Another example is that people are flipping properties and they’ve taken the position that they can claim their principal residence exemption.
“But the CRA says, ‘hey, you’ve actually sold quite a few homes in the last little while so you are in the business of flipping homes’. They would treat that as business income, not a capital gain.”
Some advisors, she added, have been caught out by clients gifting properties at less than the fair market value. You are, in fact, deemed to disposition the property at fair market value rather than gift it to avoid tax or probate fees upon death. Renting is another example and represents a change of use for the property, which should be reported to the CRA.
Loeppky said: “Advisors must make sure they know what the reporting obligations are. If you are in doubt, hire a professional accountant to help you with your tax return. Most of the tax preparers that I see packages from, they’re asking the questions: did you sell your home? Did you start renting it out?
“These could have tax implications. Just knowing that, while the principal residence exemption is there to protect you, you have to report it and there are significant penalties for not doing so. If you forget to disclose that you sold your home on your tax return, it’s a penalty of $100 a month, up to a maximum of $8,000.
“Even though you’ve got a tax free transaction, or what you think is a tax free transaction, not reporting it in theory could land you with an $8,000 penalty, which is pretty steep.”
There is also the issue of foreign property, with Canadians required to report their worldwide income, which includes gains on these sales. The CRA will likely find out where the proceeds are – and they need to be disclosed – whether they are sitting in a foreign bank account or a Canadian one.
She said: “There’s lots of ways for the CRA to find out that you sold something, so it’s a case of knowing that a transaction has to be reported. Renting out a foreign property also has to be reported on your Canadian return – and then knowing that you can claim a foreign tax credit to offset the double tax that you paid to the other country. These are things you need to navigate.”
Buying property from a non-resident raises the requirement of holding 25% of the proceeds unless there is documentation from the seller that this has been waived. If it’s not, it’s up to the non-resident to file a tax return to get some of that back.
Loeppky added: “Advisors should be aware of the rules when it comes to real estate transactions and knowing the principal residence exemption, how it works, and when you can claim it. It’s also about helping the client realize that you need to take advantage of that principal residence exemption to the best of their ability.
“Normally, they’d want to shelter that gain so helping clients make that determination is really important when they have a choice between two different properties that they could claim as a principal residence exemption.”
Appeal court withdraws real estate decision
Justice Richard Lococo’s decision in the Superior Court case, Hilson v. 1336365 Alberta Ltd., 2018 ONSC 1836, was appealed. But, a May 27 judgment on the appeal was released “in error,” the court now says.
After considering written submissions, Associate Chief Justice Alexandra Hoy and Justices Kathryn Feldman and Grant Huscroft wrote on Aug. 13 that a previously released May 27 decision” is not a judgment of the court” and “is of no force or effect.”
“One of the members of the panel that heard the appeal, Justice [Grant] Huscroft, was not provided with either the draft judgment for review or the final judgment for signature. The judgment was signed, in error, by another justice who was not a member of the panel that heard the appeal,” the judges wrote in Hilson v. 1336365 Alberta Ltd., 2019 ONCA 653, released Aug. 13.
Hoy, Feldman and Huscroft rejected a proposal that Huscroft review the May 27 judgment “and either assent to or dissent from a judgment that he had no role in making.”
“The panel of judges that rendered judgment was not the same panel that heard the appeal…. This cannot now be corrected,” they wrote. “The decision-making process has been compromised and this panel cannot render a judgment.”
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