Who really lives in all those awful luxury skyscrapers going up all over the US? Increasingly: No one. Now the government is going after the shady, secret deals that are gobbling up the most expensive real estate in most big cities—and destroying the housing market.
According to the New York Times, the Treasury Department will launch an initiative to identify what are called “shell companies”—the corporate entities that purchase large swaths of real estate in the US, usually with all-cash deals. Most of these companies are simply investors who are looking for a place to stash their money. Now these types of purchases are coming under fire as shell companies are also buying up cheaper properties that could be bought by people living and working in those cities, which is adding to the housing crunch.
An investigation by the New York Times last year focused on finding the real owners of properties purchased for over $5 million. In Los Angeles and San Francisco, for example, more than half of these types of residences were bought by shell companies.
Starting with two of the country’s most egregious offenders, Manhattan and Miami, the US will begin identifying and documenting (publicly, I imagine) the owners of real estate purchased through shell companies and all-cash purchases. For the federal government it’s less about how these owners are affecting housing markets, and more about the possibility that they might be able to nail a few criminals. The same NYT report from last year was able to track shell companies that purchased units at the Time Warner Center in Manhattan back to owners who were the subjects of international investigations.
This seems like the right thing to do—with housing being such an issue for much of the country, cities shouldn’t be overrun with absentee owners. But with so many cities in the midst of building booms that are specifically catering to these luxury buyers, this news might scare some investors away. Which may leave quite a few vacancies in all those supertalls going up in Midtown Manhattan.
Follow the author at @awalkerinLA