The other immigration problem (?)
In 2011, I listened as an economist predicted massive downward pressure on housing prices, because of Baby Boomers retiring and downsizing. He expected to see McMansions split up into apartments or multiple generations of families living together again. Good for my kids, I thought. Maybe they’ll be able to afford a house.
So far, Boomers have not found their housing nest egg cracked, and in some markets are seeing their houses become golden eggs.
In some markets, cultural forces stronger than the Boomers seem to be at work.
Cambridge has been an expensive place to live for as long as I’ve been in the Boston area. Walkable, but with a few good-sized shopping plazas, home to great and growing universities and a robust tech and biotech economy, people like the place and deal with its middling public schools. Real estate that’s expensive for what you get is normal in Cambridge.
The last few years have vaporized the normal market. Places now sell for cash, with incredible rapidity. Driving this splurge appears to be wealthy immigrants. As Boston magazine noted in China’s Town last October, China has more millionaires than any place but the U.S., and our real estate prices are cheap compared to a place like Beijing. The article says many come here on what are called EB-5 visas, which require an agreement to invest either $500,000 in rural areas or $1 million in urban areas to create new jobs (that, presumably, is on top of any real estate purchase). They want out of China, and want to make a good life for their families in the U.S. And they like certain parts of Boston a lot, including Cambridge. (Lack of interest in other Boston-area markets may explain a ‘schizophrenic’ area real estate economy.)
Over the long term such high-end immigration should boost local economy, creating new jobs and providing important sources of capital. Short term, it seems like a big part of the reason Boston real estate is so dear (though there also appears to be a development-stifling epidemic of NIMYBism, as this critique of Thomas Piketty’s Capital argues). For now, if you’re pitting the typical middle class mortgage holder against anyone with enough money to pay in cash, the cash offer is hard to turn down.
What does it mean for a community? Over time, it becomes a city where people have a lot of money or they live in subsidized housing.
Congress obviously doesn’t fret about a few urban real estate markets gone batty thanks to Chinese investors. Its immigration focus is on those poor people coming from south of the border.
But poor immigrants are not squeezing the middle class. In Boston, poorer immigrants have their own real estate issues in places like East Boston and in Boston’s Chinatown). It’s the wealthy immigrants who seem to be squeezing us (more than 60 percent of us are feeling squeezed). In Miami, where I was reporting recently, I saw an immense luxury retail and condo complex going up in what was previously a lower middle class neighborhood. Miami is booming, thanks to wealthy immigrants, largely from South America. It’s great to see development — construction cranes mean people think a place has a future. But where are the construction sites for the displaced middle class? Isn’t that still a market worth investment?