Sunday, June 07, 2009

Technicalities

An article sure to rile up every last hipster and 'look-I'm-poor (but-really-I'm-not)' poseur, about how Williamsburg's 20-something residents can no longer look to their parents for help with rent, is based on a mistaken premise: the article's title, "Parents Pulling the Plugs on Williamsburg Trust-Funders", gives a clue as to what that mistake might be. Aren't young adults with trust funds people who don't rely on their parents' whim past 18, whose 'family money' is their own? Now, these people may also be 'suffering' during the recession, but it's because their stocks aren't worth what they used to be, not because their parents have cut them off. Those relying on their parents might be the children of the rich, or they might be the offspring of the manipulative middle classes - parents with some money but not tons, who use whatever they can afford of their kids' rent money as a way to make sure their kids behave, into adulthood, according to their nutty rules, ala the notorious ex-Stanford mom.

But whatever. Screw those trustafarians! Keep it real! Yeah! Anyway. I am super impressed that the NYT reporter managed to get members of the Williamsbourgeoisie to admit that they are or were supported by their parents - I thought the first rule of living in that neighborhood was that you had to deny having family money, while living in such a way that you pretty much have to have some.

Note: This post almost made it to Cheapness Studies, but I'd rather wait and have a full post on faux-poverty chic up there another time.

13 comments:

Matt said...

Another thing that could have been distinguished: A really larger percentage (maybe a majority, but at least a very significant percentage) of first-time home buyers get significant help from their parents for down-payments, so that's nothing special about the people in the article. The amounts discussed are probably atypical, but getting help for buying a home for a younger person from his or her parents is normal, not some special Williamsburg thing. What is more unusual is someone's parents paying for them to live in an expensive place while the person in question plays at being an artist or musician or something. That too has a long history, of course, but is pretty much the province of the well-to-do. It would have made sense to keep these aspects separate.

Miss Self-Important said...

Something is clearly not working in this equation if the parents are subsidizing their kids in order to keep them on the straight and narrow, and the kids are Williamsburg hipsters.

Phoebe said...

Matt,

That's true.

MSI,

Also true, unless the parents dream of their children being creative artists or whatever. (The obvious TV reference here would be Saffy and Edina in AbFab.) For a certain type of parent who came of age in the 1960s or 1970s, the idea of Youth lived freely, of a requisite period of self-exploration, is the goal. Some parents will thus subsidize post-college finding-yourself travel - subsidizing Williamsburg rentals comes, I think, from the same place. Children from such homes 'rebel' when they become accountants.

PG said...

This is not legal advice, but my understanding is that not all trusts simply turn over their funds to the beneficiary upon the beneficiary's reaching the age of majority. For example, a trust set up by a grandparent for Hipster Joe might have Joe's parents as trustees for as long as they live. They therefore can determine whether to disburse the trust funds to the beneficiary.

Phoebe said...

PG,

That would change things a bit, assuming many trust-funds are up to parents for distribution, and that that's not the exception. But I'd imagine it still wouldn't change things in terms of this article, because the point of the story is that parents' own economic losses have impacted the kids they support - if the trusts are in the kids' names, presumably the parents can't just dip into them for themselves as needed.

kei said...

Re: the first comment above, thinking about it, it does seem right that most first-time home owners get help from their parents with down payments. But there still seems something out of place here, and it's not just the atypical amounts mentioned in this article. I think I find it strange that people in their 20's are buying property (in NYC, no less). I know people in their 30's and 40's from (living) parents getting help buying a home for the first time, but it seems excessive, or something that those of only a certain class can accomplish, to purchase a home in your 20's. And that seems "trustarian"-like or whatever, to me, which is specific to this article.

Like you Phoebe, I was also impressed that there were people admitting they were getting $1500+ checks from their parents to cover rent. But this article lost any credibility it had when it quoted that "Hipster Handbook." Has it come to this? Isn't there a better way to lash out against hipsters?

kei said...

Woops, I meant "trustafarian." What a word.

Phoebe said...

Kei,

I think it depends what the 20-somethings do - as a grad student, obviously, buying a home seems crazy. But for, say, a couple who both went straight from college to high-paid work, maybe buying is possible? So this would be people, as you say, of a certain class, in a place like NY, but somewhere else, making a steady income for five or so years and spending very little of it during that time might be enough. Of course, what do I know. Maybe parents are paying but people aren't, understandably, being open about it.

In terms of what is or isn't 'trustafarian', the article (whose headline, by the way, seems to have changed since I wrote this post, no longer referring to 'trusts') conflates a whole lot of different situations. There are people with trust funds that are at their disposal, whose parents are, for the purposes of this discussion, irrelevant. Then there are the people whose parents pay... but pay for what? The many commenters to the piece going on about how they never took "a nickel" from their parents, I mean, who pays when they and their parents go out to dinner? There's obviously a spectrum from, 'Here, have a loft, find yourself' to 'I'll pay for law school and your rent during that time because I want you going to law school' to the aforementioned paying for dinner-type situation. Some of the parents buying homes 'for' their kids were buying these places as investments and charging their kids rent - this would put the kids in nicer apts than they'd have had otherwise, but isn't exactly buying them their first homes. And then there's the difference between a 27-year-old making tons whose parents give some money to help with a down payment, and one who makes little but whose parents think for some strange reason their kid should own a home - both of these situations are class-specific, but if the kid's striving regardless of having grown up rich, there's less danger that help with the down-payment would be the thing that brings the kid to full-time pot-and-video-games slackerdom.

PG said...

kei,

I think one metric of whether someone is in the appropriate place in his/her life to buy is whether s/he can make the mortgage in a typical loan (i.e. down payment is no more than 20% of the total cost) as well as other expenses. If you buy a $700k property, then even if your parents make the 20% down payment, you'll still have to fork over $3000 a month for the mortgage, plus property taxes (another $3000 each year) plus any condo fees, etc. You have to make enough money to care about getting a mortgage deduction on your taxes, for this scenario to make more financial sense than continuing to rent. (And as the NYT article glancingly noted, some of these bubble-bought properties are now underwater, i.e. more is owed on the loan than the property currently is worth in a recession.)

Although of course if the property is actually in the parents' name anyway, this is all moot and the kid paying the mortgage is basically paying rent to his parents, as they accumulate the equity and get the tax benefits. My brother-in-law, for example, lives in a house that's actually in his parents' name, although he covers its costs and has done a lot to increase the property's value.

The word "trustafarian" has been around for a while -- I think I first saw it in the Bridget Jones Diary sequel (the book). It's a play on "Rastafarian," the idea being that instead of smoking pot as part of one's minority religious beliefs, one smokes pot because it's fun and one doesn't have a job with drug testing. Or as the NYT said in 1992: "Trustafarian: A young adult, usually white, definitely wealthy, who is inclined toward neo-hippie styles of clothes, Rastafarian hairstyles, world music and pot. Variations include the Telluride ski bum (Patagonia meets dreadlocks), and the London night crawler (Sloane Ranger meets grunge)."

kei said...

I'm pretty sure I'm imposing my own experiences and values onto this article. I know very little about the financial aspect of owning property, but it always seemed to me like a "long-term investment + settling down" scenario, like something you do when you are financially stable, married, foresee marriage in the near future, or foresee little babies in the near future. I know that people are starting to buy homes with friends, family, etc., at a relatively young age. Somehow that seems strange to me. I think I'm just "old-school" and more relevantly, ignorant.

I thought "trustafarian" used recently was not taken so literally, but used loosely, more or less synonymous with "hipster who is actually wealthy," where there is lots of wiggle room to interpret "hipster" and "wealthy" as one wishes. But then again, what do I know. My problem with "hipsters" runs so deep in me and is so visceral that I rarely have any idea how to rationally process information/articles about them.

Phoebe said...

Kei and PG,

Agreed that "trustafarian" is used to describe people who don't actually have trust funds, but whose artsy posing and family wealth give that impression. But the article - especially with it's original title - referred to honest-to-goodness trust-funds, and as far as I know, "trust fund" has not become a synonym for "money possessed by person under 30 that we suspect may not be the result of their own work."

PG said...

Phoebe,

Perhaps not the phrase "trust fund" by itself, but certainly many of its iterations have become such synonyms. I have heard "trust fund baby" used to refer to someone who lives off money that was not transferred in the specific legal form of a trust fund. My sisters and I share a small trust fund because it's a way for my parents to beat the estate tax (which, when they established the trust, hit estates at about $500k) and my dad hates the IRS like a good Reaganite should. But we don't have much access to the money because (a) any spending has to be approved by the trustee; and (b) it was all invested with a stockbroker who turns out to have literally gambled it away (so much for plans not to have to pay for my kids to go to college). Even though we're technically "trust fund babies," and someone who lives off money from her parents and an inheritance technically isn't, the phrase is much more likely to be applied to anyone whose lifestyle is far above her earned-at-work income.

Phoebe said...

PG,

I defer to your superior knowledge of things legal and economic.

In terms of "trust fund babies/brats", I'd always thought that it referred not to anyone with a trust (that can or can't be accessed), but to people a) with trusts (or, I am revising thanks to your comment, non-earned personal funds) they can access without anyone's permission, and b) with enough money in those accounts not to have to work.