
Anonymous shell companies buying American real estate - paulpauper
https://www.revealnews.org/article/unmasking-the-secret-landlords-buying-up-america/
======
threatofrain
> All-cash transactions have come to account for a quarter of all residential
> real estate purchases, “totaling hundreds of billions of dollars
> nationwide,” the Financial Crimes Enforcement Network – the financial crimes
> unit of the federal Treasury Department, also known as FinCEN – noted in a
> 2017 news release. Thanks to the Bank Secrecy Act, a 1970 anti-money-
> laundering law, the agency is able to learn who owns many of these
> properties. In high-cost cities such as New York, San Francisco, Los Angeles
> and Miami, it’s flagged over 30% of cash purchases as suspicious
> transactions. But FinCEN also cites this bill to hide this information from
> the public, leaving the American people increasingly in the dark about who
> owns their cities.

> For journalists, it requires undertaking a tremendous investigative effort
> to find the real owner of even one property, let alone millions.

------
scottlegrand2
Just charge a vacancy tax like Vancouver does.

[https://vancouver.ca/home-property-development/empty-
homes-t...](https://vancouver.ca/home-property-development/empty-homes-
tax.aspx)

~~~
grawprog
And then the owners can do what they did in Vancouver and rent the properties
out to students for a couple months before tax time, claim the lots aren't
vacant and avoid the tax, then jack up the rent so high they're forced to
move.

[https://www.bloomberg.com/news/features/2019-04-16/college-k...](https://www.bloomberg.com/news/features/2019-04-16/college-
kids-are-living-like-kings-in-vancouver-s-empty-mansions)

[https://www.theglobeandmail.com/real-estate/vancouver/in-
van...](https://www.theglobeandmail.com/real-estate/vancouver/in-vancouver-
empty-units-evade-new-tax-amid-fuzzy-definitions/article38309993/)

~~~
ninkendo
Couldn’t you just tax based on a percentage of the year a house sits vacant?

~~~
ethanbond
Even better, just aggressively tax owners based on the land value. This
requires them to either eat high costs for their speculation, or use it for
income-producing purposes (someplace to live or someplace to work).

~~~
sumedh
> just aggressively tax owners based on the land value.

What about old people who bought the house long time back when it was cheap
but dont have good source of income to pay the inflated tax?

~~~
wffurr
Then they can cash out, realize their gains, buy a modest bungalow, and live
out their golden years in style. Seems fine.

~~~
jrd259
That "modest bungalow" might be 50 kilometers away. These "old folks" lose
their entire local social network, and perhaps have to buy a car.

~~~
internet_user
a car that they might not even be able to drive.

I never understood why people consider equity to be essentially equivalent to
liquid money.

~~~
2arrs2ells
Because home equity is highly liquid. You can refinance your mortgage (and
take money out), or take out a reverse mortgage (which pays you monthly in
exchange for eventual ownership), or a home equity loan. Tons of ways to turn
your home equity into cash.

------
killjoywashere
This is not just a phenomenon of titans, there are plenty of mom-and-pop
operations too. I worked with someone who got in a fight in the office with
her father over the phone. He was pissed she wouldn't accept a $250,000
deposit into her US account from her uncle's account (his brother) in China.
The goal was to buy a house in the name of her cousin in LA.

~~~
flomo
Majority are likely small-time landlords, local investors, and etc, as it is
very easy to set up an LLC. Also, I wonder if HNers describe their startups as
"anonymous shell companies"?

~~~
anon87123
Honestly property ownership being default-public seems like a weird
anachronism. Why should anyone who has my address be able to tell if I own the
property?

I haven't looked into the exact details as I've never bought a house but from
what I can gather I'd want to wrap it in an LLC.

Also FWIW the Sean Hannity example in the article seems like a weird strawman
conflating consumer protection laws with "name and shame" accountability. If
it's wrong to evict someone for XYZ reason, that should be protected by the
law, not by fear of being "named" as the landlord. [TBC I am no fan of Sean
Hannity.]

~~~
flomo
> Honestly property ownership being default-public seems like a weird
> anachronism

Land registry is a necessary function of local government. But this is one of
those things which was historically only available within a government office,
and now can be found in a second on the internet.

Personally I would be perfectly okay if my local government required
disclosure of the personal ownership of LLC property owners. But I have no
idea if that's constitutional or legal under federal laws.

~~~
ryacko
>But this is one of those things that was historically only available within a
government office

If you want to know where a person lived pre-internet, you looked them up in a
phone book, which is substantially less privacy preserving than looking up the
owner of a house.

Well, post-internet, 2FA has been leaked to advertisers.

~~~
flomo
I was typing something in response, but I think the best advice is advocating
mental health services. Sorry if that violates the rules.

~~~
ryacko
Don't worry, Trump tweets assist in my mental stability.

------
Trias11
Why does it matter if owner is known or not known?

Person or entity wants to keep invested in real estate to protect assets
against market fluctuations and frivolous lawsuits and it turns that real
estate is a great investment.

Why is that wrong?

As long as person/entity complies with all laws (including whatever - empty
housing tax?) - it shouldn't matter.

FinCEN _has the right to know_ and it does, but it hides this info from public
because probably some prominent political figures are in play here.

~~~
jb_s
It's not wrong for an individual to choose an investment vehicle that aligns
to their overall strategy.

However in an overall social sense, I do think that residential property
investment in itself is wrong because I view housing as a utility and a basic
necessity along the lines of water, healthcare, fire/police services and
internet.

The issue is actually a simple trade off - whether it's more important to
ensure people can own their own homes, or that people are allowed to use real
estate as an investment.

I don't blame individual investors for this, but I do support the idea of
introducing laws to limit property speculation. Bear in mind that I'm from
Australia, where property investment has become a cancer that has drawn money
away from productive assets (like startups) and into property, which is
relatively speaking non-productive rent-seeking (outside of its effect on the
construction and design industries). There's no net output from acquiring debt
to buy a house so that you can do nothing but sit on it and flip it three
years later for profit.

~~~
ethanbond
You should check out Georgism/Land Value Tax if you’re not already familiar
with it. This comment is spot on.

~~~
Ericson2314
Amend to that. Pity it is not better known. "homeownership" is such a rotten
ideology in the US and has led to so many problems.

~~~
balfirevic
I'm very sympathetic to Georgism, but you all seem to have taken a wrong turn
somewhere and ended up in a discussion about the real estate ownership
anonymity.

~~~
rjsw
Georgism won't work very well if you can't work out who owns the land or if it
is owned by offshort corporations.

~~~
balfirevic
Of course it will. You just need to charge the land value tax to the owning
entity. The same is true now for any taxes, fees or fines regarding that
property.

If those are not paid, government can seize and auction-off the property.

~~~
Ericson2314
Yes anonymous ownership and Georgism aren't strictly mutually exclusive, but
the path that led us here is a decidedly incompatible ideology of land just
being another asset.

------
tomc1985
There really should be limits on who can buy residential property and how much
of it one can own. Maybe property taxes that ratchet up exponentially the more
residential property under one's ownership. Large anonymous property firms
owning peoples' _homes_ simply shouldn't exist.

~~~
sien
This has been done in Sweden.

The results are disastrous :

[https://www.spglobal.com/marketintelligence/en/news-
insights...](https://www.spglobal.com/marketintelligence/en/news-
insights/trending/bf9u6czrfvmwslicy1parq2)

[https://www.reuters.com/article/sweden-economy-
housing/swede...](https://www.reuters.com/article/sweden-economy-
housing/sweden-grapples-with-housing-market-reform-as-risks-mount-
idUSL8N28L43A)

Stockholm, a fairly small city by global standards (~1.5M in the central area)
is extremely hard to get a place to rent. It has been for 20 years.

~~~
dehrmann
The CEO of Spotify (based in Stockholm) told the government the housing
shortage is a problem for their growth. I'm not sure which policies are to
blame, but Stockholm's not an example of good housing policy.

[https://qz.com/661319/sweden-must-change-quickly-spotify-
thr...](https://qz.com/661319/sweden-must-change-quickly-spotify-threatens-to-
leave-the-country/)

------
bkohlmann
There’s no doubt these laws can be used to maximize gains by nefarious
individuals.

At the same time, the ability to hold a property as an LLC, thus limiting
overall liability to the property value alone in the case of a lawsuit,
incentivizes more individual investors to purchase rental real estate. In many
instances these assets help facilitate retirement savings that are more stable
than market securities.

I’m all for transparency - and it’s likely the increase in LLCs could be
attributable to more savvy, legitimate investors rather than only attracting
wrongdoers.

~~~
stanferder
> ...limiting overall liability to the property value alone

LLCs don't limit liability resulting from negligence, malpractice, or other
personal wrongdoing, which may be germane in a lawsuit over something besides
unpaid debts.

[https://www.nolo.com/legal-encyclopedia/limited-liability-
pr...](https://www.nolo.com/legal-encyclopedia/limited-liability-protection-
llcs-a-50-state-guide.html)

------
stanferder
Wouldn't it make more sense to simply fine the LLCs for their misdeeds, and
confiscate the properties if the fines go unpaid?

It is already kinda deranged that one's name and other details become public
records in many states as soon as you buy property or start a company.

EDIT: Surprising number of downvotes in a forum that often focuses on privacy
concerns!

~~~
barbecue_sauce
Some people value privacy but not complete unaccountable anonymity.

~~~
tossAfterUsing
Seems entirely possible for the local government to hold the LLC accountable
for following local rules without having to know who's behind the LLC

The meta-conversation going on within these threads is more to the point of
folks suggesting hard-to-implement laws about who can own what, and how much
of a thing they can own, and what sort of penalties exist to control the way
that the population of owners can develop.

All that secondary stuff seems too chaotic to control... better to just -

a> allow for the LLC to do what it was designed for: protect the owner from
liability beyond the cost of the house

and, b> let the municipality fine the LLC according to whatever rules exist
about whether it's morally reprehensible to remove a renter for failing to pay
a fine

~~~
FireBeyond
The issue is that without knowing who owns the LLC, then you can use a
different LLC for each property and skirt rules around taxes and other
restrictions on multiple property ownership.

~~~
tossAfterUsing
Maybe i don't understand... what restrictions exist on multiple property
ownership?

------
m1sta_
All real estate should have named human owners. That ownership should come
with the equivalent of fiduciary duty.

------
tuesday20
Is it hard to enact laws to prevent this? I remember reading some German towns
buying properties from shitty landlording companies to control housing
situation getting out of hand.

I am a first time buyer and I am finding it hard to buy, despite making six
figures a year

~~~
grogenaut
Where do you live?

------
cosmodisk
All this crap is essentially supported by a handful of countries: USA,UK( with
all its dependant islands pretending to be innocent), Luxembourg, Switzerland,
Netherlands and a few others. The rest of the world,including these countries
themselves pay astronomical price for this. It's fascinating to drive down
Park Lane in London and see empty building opon empty building in one of the
most expensive streets on the planet.

~~~
fyfy18
Actually this sort of thing has been going on for hundreds of years in most
European countries. In my city over half of the old town is owned by the
Catholic church. This includes over 30 churches, but there are also many more
adjacent buildings that are much larger in area.

Most are derelict or unoccupied, and in very expensive areas if you were to
buy. Properties are not owned directly by the Catholic church, but by local
parishes or diocese, i.e. subsidiary corporations that are controlled by them.
This is no different than the situation in Vancouver, except the church
doesn't need to pay any taxes :D

------
cityzen
America in 2020: If I use a VPN I have to prove to google I'm not a robot...
but using a shell company to buy up real estate? Definitely no picking out all
of the buses in a bunch of pictures.

~~~
dehrmann
Disney used shell companies to buy up land for Disney World in the 60's. They
did it so buyers couldn't find out it was Disney and demand more money.

[https://www.latimes.com/business/la-fi-disney-shell-
companie...](https://www.latimes.com/business/la-fi-disney-shell-
companies-20160408-story.html)

------
H8crilA
US net international investment position is at -$11T:
[https://fred.stlouisfed.org/series/IIPUSNETIQ](https://fred.stlouisfed.org/series/IIPUSNETIQ)

That's ~50% of GDP.

Worrying about a few homes here and there is quite pointless against this
backdrop.

------
nickthemagicman
It reminds me of Moldova after the fall of the Soviet Union: oligarchs running
wild, stashing their gains in buildings,” James Wright, an attorney and former
Treasury Department bank examiner, told me. He now helps foreign governments
combat money laundering. “Back then, you’d walk down the street, and people
would say, ‘That building is a washing machine.’ Everyone knew it. Today,
America is not that different.”

Are we that different from the Soviet Union?

~~~
xenospn
Less sarcastic, but overall not that different.

------
ycombonator
Look at Boston SeaPort. 80% of high end condos are empty and sold for a few
years now. My guess is high networth foreigners- from Venezuela, China, Russia
are “parking” their cash in these assets.

~~~
hanley
I can't imagine anyone actually wanting to live in the Seaport, and certainly
not for the price that those new units are being rented/sold for.

------
aussieguy1234
This is one more way corrupt government officials around the world can launder
their stolen money

------
foogazi
What problem are we trying to fix here? So much faux outrage

------
generalpass
It's another bogeyman red herring. The issue is very straightforward: central
planning fails.

Nearly all critical infrastructure in the form of homes (zoning), roads,
water, and electricity and related services are centrally planned.

It is almost impossible to do anything outside of a municipality, which didn't
used to be the case.

Without this central planning failure it would be impossible to "take
advantage" of any market, as home builders would just build homes until the
"launderers" run out of cash.

~~~
empath75
Have you ever been to a developing country? They work they way you suggest.
People just run electricity and water wherever they can and throw up houses
anywhere.

Turns out it’s not actually an improvement though.

~~~
aianus
Nonsense, I've lived in several and it was great.

$500/mo rent and much better quality of life than a similar $4000/mo place in
SF.

~~~
empath75
Yeah living in the developing world is great when you’re there telecommuting
and have an american or uk passport and can just leave whenever you feel like
it.

------
willart4food
Incendiary titles, written by ignorant writers, looking to impress
politicians, and rattling the cage in order to gain eyeballs.

There are many reasons NOT to own a piece of Real Estate under an individual
name, under a trust (for estate purpose) comes to mind and it's now very cheap
to do and the public in general is more educated on it; so that alone accouts
for a large chunch of declining in % of homes owned by individuals.

Then there are the Real Estate investors/entrepreneur landlord and flippers;
who for liability purposes use LLCs.

And yes LLC need not to disclose the name of their unitholders (shareholders).
So what? That is not a problem.

Yes money laundering is an issue, but picking the fact that LLC (and
Corporation) are not required to disclose the name of their shareholder is not
an issue. In some part of the world, those are called "Anonymous Society",
sounds cool, but it ain't inherently bad or malicious.

Can we have better writing and reporting instead of these emotionaly-driven
pieces?

~~~
Thorrez
>And yes LLC need not to disclose the name of their unitholders
(shareholders). So what? That is not a problem.

Why isn't it a problem?

> Tenants can’t figure out to whom to complain when something goes wrong.
> Local officials don’t know whom to hold responsible for code violations and
> neighborhood blight.

That seems like a problem to me.

