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If you don’t know who your landlord is, a new lawsuit could help.
The Center for Investigative Reporting has filed a lawsuit in federal court under the Freedom of Information Act to get access to records held by the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department. The records include information on the beneficial owners who purchased residential real estate between 2016 and 2019 in all-cash offers through LLCs and other corporate entities.
FinCEN collects this information as part of its obligations to administer the Bank Secrecy Act and uncover instances of money laundering, tax evasion and other criminal activities.
The Center for Investigative Reporting (CIR) said it had previously filed a FOIA request for these records. FinCEN denied the request in full, but also refused to acknowledge whether the records the CIR sought indeed existed citing the Bank Secrecy Act. The Center had already appealed the initial decision and lost, before requesting the documents again. The Center has not received a decision regarding this second request.
(The Treasury Department and FinCEN did not immediately return requests for comment.)
Corporate landlords are more likely to evict tenants
There is reason to believe that a growing corporate presence in the U.S. rental market could be having an adverse effect on tenants. A 2016 report from the Federal Reserve Bank of Atlanta found that large corporate landlords — which were defined as firms with more than 15 single-family rental homes — were 8% more likely than small landlords to file eviction notices.
Furthermore, the report found that some private-equity investors had significantly higher eviction rates, with some firms filing eviction notices on a third of their units in a year.
Separate research has shown that being evicted increases the risk of homelessness and long-term residential instability and can lead to a modest decrease in earnings.
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More and more rental properties are being bought by private, corporate investors
While mom-and-pop landlords still own a majority of the rental properties nationwide, the tides have shifted in the other direction in recent years.
“There has been an increase in purchases of residential properties by shell companies, which obfuscate the identities of residential real-estate owners, shielding important ownership information from public view,” the Center for Investigative Reporting noted in its lawsuit.
Institutional investors, which often operate as LLCs or LLPs, bought up a significant share of real estate across the country in the wake of the Great Recession, converting much of it into rental units.
The share of rental properties with easily-identified ownership has fallen to 74% in 2015 from 92% in 1991.
A 2017 analysis from the Harvard Joint Center for Housing Studies found that two-thirds of properties with 5 to 24 units were owned by non-individual investors in 2015, up from one third of these properties in 2001.
Furthermore, non-individual investors bought nearly half of all properties sold between 2013 and 2015.
Because these investors operate as LLCs and other forms of private corporate ownership, state laws in many parts of the country afford them a degree of anonymity. Many states don’t require these corporate vehicles to disclose their owners to regulators and, in some cases, the corporate body may be registered to the office of a lawyer or wealth-management firm rather than the actual owner.
Consequently, the share of rental properties with easily-identified ownership has fallen to 74% in 2015 from 92% in 1991, the Center for Investigative Reporting argued based on data from the U.S. Census Bureau.
Across the U.S., some advocates have sought to improve transparency. A new state law passed in New York in 2019 made the names of real-estate owners public through the state’s Freedom of Information Law. While it was initially believed the law would apply to any real-estate purchase made by an LLC in the state, state authorities subsequently said the law would only apply to one-to-four family homes in the state and not apartment buildings or condominiums following a review of the legislation by state tax officials.
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