By refusing to pay property taxes, stuck-up landlords are fueling a nationwide housing crisis, experts say.
U.S. property laws allow landlords to hide their identities behind limited liability companies (LLCs), thus avoiding legal consequences if they allow their property to fall into disrepair, an expert told The Hill. .
Landlords take advantage of LLCs by simply refusing to pay property taxes and returning the land to the city. This reduces supply in areas of high demand.
Matthew Desmond, a professor of sociology at Princeton University, told the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday, “Research has shown that LLC ownership can be changed completely from real estate investment paybacks, tax waivers, and even real estate.” It’s tied to keeping them away from people,” he said.
“I asked one of the landlords I was with in Milwaukee, ‘What happened to this house I’ve been with for a long time?’ ’ And what she meant to say was, she stopped paying taxes on it and let it go to the tax foreclosure,” Desmond said.
“Tax foreclosure should not be part of your business strategy, but it is for some landlords who use LLCs,” he said.
Members of Congress have expressed concern over the rising rate of property ownership by professional investors.
Professional investors accounted for 28.1% of all single-family home purchases in February, a record high, according to property market data firm CoreLogic.
The company found that investors accounted for 14% of home purchases before the pandemic.
The tight housing supply has sent real estate prices skyrocketing, making owning a home out of reach for the average American.
Nationwide median home prices rose 13.4% year-over-year to $416,000 in June. According to the National Association of Realtors, this is an all-time high with data dating back to 1999.
Lawmakers from both parties said they were concerned that LLCs allow investors to circumvent transparency. Some people use US LLC law to launder ill-gotten gains that could otherwise be seized by foreign governments, legal experts said.
“I represent the richest and most famous people in the world, and I never buy property unless it’s in the name of an LLC, sometimes multiple LLCs.” Adam, New York-based real estate attorney Laitman Bailey told The Hill.
“In a nefarious way, people from different countries can buy property in another country or buy property in the United States.”
Bailey added: They can do that by using an LLC and people won’t be able to tell who they are. ”