Superrich have many homes, no roots
The extravagantly wealthy collect houses around the globe, but they're disconnected from the communities around them. Is this a problem?
This post comes from Marilyn Lewis of MSN Money.
How many homes does one person need? In the world of the "superrich," need doesn't enter into the answer. How many can a person collect, maybe?
This Wall Street Journal blog post, "The empty homes of the superrich," ponders why Oracle co-founder Larry Ellison bought a $43 million, 250-acre estate with a golf course near Palm Springs, Calif., that he doesn't live in. Ellison already had a perfectly good re-creation of a feudal Japanese palace in Woodside, Calif. He spent $200 million constructing it.
Plus, he picked up Beechwood, the Newport, R.I., summer "cottage" of the fabulously wealthy Astor family, in 2010 for $10.5 million. Never mind his properties in Malibu, Calif., and the fact that he owns most of the Hawaiian island of Lanai.
But, really, what's new here? Edith Wharton chronicled the vacations of the bored and pampered in the 19th century. Archaeology tell us that one-percenters in ancient Rome had summer palaces.
A recent report by the Financial Times implies (but does not document) that the sheer number of homes per family seems to be growing as the über-rich work at outdoing each other. The report, while short on substance, raises interesting questions.
Post continues below.
"An elite group of the world's 'stateless super-rich' is blossoming," says the article. These super-wealthy have ties to no country and lead "nomadic, season-driven lives."
This increasingly global lifestyle has led to the stateless super-rich buying a larger portion of the world's most expensive homes as they look to park their wealth in perceived havens. On average they own four to five properties, usually consisting of two in their country of principal residence, one in a "global city" such as London, Paris or New York, and a holiday home in a hot climate -- or one in the Alps.
High-end home collecting creates problems for other rich families and for their less fortunate neighbors, including an upsurge in mostly vacant mansions that aggravates upper-end housing shortages in some places, the article says. The boom in palace living dilutes the quality of community life as peripatetic owners disengage from the surrounding communities, spending less money and attention on local economies and problems.
FT interviewed Saskia Sassen, a Columbia University sociologist who studies the political, social and economic effects of globalization. She wrote "Cities in a World Economy."
"In my research I found that in several cities across the world, locals -- often high-income and old rich locals -- did not mince their words when saying that all of this was a loss to their neighbourhood and city," Sassen says. "This was especially the case in places where the impacts of this rebuilding of vast stretches of their cities were the most negative, for instance, raising local prices, pricing out locals and not paying taxes on income."
"Once, such wealth was a rarity, confined to a small group of people," says a CNBC report. It's still a pretty rarified world. But the list of hyper-rich is longer than you might imagine. Forbes' list of richest Americans includes 397 billionaires.
CNNMoney says the U.S. lags other nations in the proportion of households with more than $100 million. But America looms large in this Washington Post graphic comparing billionaires' net worth with their nation's gross domestic product.
FT describes the life:
"I have clients who wake up in the morning and say, 'Let's go to Venice for lunch.' If you've got that sort of money the world becomes a very small place. They tend to have a diminished sense of place, of where their roots are," a London property consultant says.
The FT article provoked a variety of responses. "Paul431" wrote:
I am fine with that. I am not fine with the nomadic life to avoid taxation. Governments cannot keep squeezing middle-income people. What is missing here is a global deal to share on a new taxation of the global super rich who currently exploit the loophole of getting the benefits of civilization paid by the middle class without paying their fair share.
"Bahama Yellow" sees no problem: "Locals have generally been quite pleased to develop new properties for this market, or sell their properties at higher prices, so it's a bit tendentious to complain now."
"Philip Verleger" says that Aspen, Colo., has both suffered and benefitted from the superrich:
The super rich pay significant property taxes on their homes and pay an additional surcharge to buy property. The monies have been used to build thousands of "affordable" housing units available only to those who have lived full time in Aspen for three years and intend to stay. The taxes have also paid for wonderful parks and a modern school system.
However, the town's character has been changed (some would say it has been destroyed).
What's your take? Does this behavior spell trouble? Or does FT just have a bad case of the green meanies?
More on MSN Money
Local prices are raised? Great! Sell your home and buy one elsewhere, investing the profit (which in the U.S. is likely to be tax-free).
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