Real estate in America is increasingly coming under anonymous ownership due to purchasing by limited liability companies (LLCs), limited liability partnerships (LLPs), limited partnerships and other shell companies. Investors have long used LLCs and LLPs to purchase and manage rental properties. In the aftermath of the 2008 housing crisis, however, investors have poured into the residential housing market. The number of residential rental properties owned by individuals and families has fallen from 92% in 1991 to 74% in 2015. This means that researchers and journalists more frequently encounter an alarming lack of transparency surrounding real estate ownership, particularly with cash transactions where there is no mortgage involved. All-cash transactions now account for 25% of all real estate purchases, totaling hundreds of billions of dollars across the country.
When LLCs and LLPs act as owners or purchases, researchers are limited in what they can learn about the people behind the corporate vehicle, relying on connection analysis performed using deed transfers and corporate registrations, which can quickly lead to a dead end. It turns out that these cash real estate transactions have caught the attention of government regulators with the Financial Crimes Enforcement Network (FinCEN) within the Treasury Department, which has flagged over 30% of cash purchases in high-cost cities as suspicious transactions. However, unlike the database FinCEN maintains of enforcement actions taken against financial institutions, the agency has not made the data it holds regarding LCC and LLP ownership of real estate publicly available. This recent article in Reveal News documents the news organization’s efforts to uncover these records, which were ultimately unsuccessful. For more on the challenges faced when researching LLCs and LLPs and pending legislation that might alleviate them, see our blog post here.