I remember there was a great deal made in the press a few years back about a famous Indian movie star spending several million dollars on his wedding in a poor city that he grew up in. He was criticised for his 'wastefulness'. However, a follow up report on the event a few months later pointed out that his one wedding actually was massively beneficial for the entire city's economy. Catering and hire companies made several year's profits in one day, and were able to hire more people and take them off the streets.
Similarly, we may criticise the extravagant marble entrance stairway in a startup founder's mansion, but that stairway may have probably put the stonemason's kids through college or helped to extend that dying artform for another generation.
If they have an empty house, they still contribute to the local government's activities via land tax or rates bills, and they probably also employe local cleaners, garden maintainers etc. Far better than just snorting it all away in cocaine and other heavy drugs.
But when they buy cocaine they still contribute to the income of local dealers and the activities of gangs. Their money may well put a gang leader's kids through college. And drug lords can have huge weddings as well.
It seems to me like you as well fail to see the downstream consequences of that spending.
I do agree that building a house and letting it sit empty is usually slightly better than spending the money on drugs, but that can easily reverse itself depending on the specific building materials and drugs in question.
More importantly, there are not just two alternatives. Why spend money on a house you don't need and pat yourself on the back for helping the people you paid, when you could have used the money much more efficiently to directly improve people's lives?
The fact is - no matter how it happens, that money sloshing around is good for the economy. I guess the worst thing they could do is to convert it to bank notes or gold bars and bury it somewhere.
P.S.: I'd love to have a big house, and don't jusge people who can afford it that do. Luxury is fun, but in this case its wasteful non the less.
I guess some of the worst investment advice ever was repeated to us as kids - viz Scrooge McDuck swimming in his vault full of money, or pirates constantly burying their loot... :)