Home Foreclosure How landlords are fueling the housing crisis by avoiding taxes

How landlords are fueling the housing crisis by avoiding taxes

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Experts say dishonest landlords are fueling the national housing crisis by refusing to pay property taxes – instead, they allow low- and middle-income homes to be foreclosed, taking homes out of the market. market and reducing supply.

Property laws in the United States allow owners to protect their identities behind limited liability companies (LLCs) that allow them to avoid legal consequences by letting properties fall into disrepair, experts told The Hill.

Landlords profit from LLCs by simply refusing to pay property taxes and returning their properties to the city, which decreases supply in areas of high demand.

The research has “linked LLC ownership to real estate divestment, tax forfeiture, and even forfeiture of properties altogether,” Matthew Desmond, a professor of sociology at Princeton University, told the commission on Tuesday. Senate for Banking, Housing and Urban Affairs.

“One of the landlords I spent time with in Milwaukee, I asked him, ‘What happened to that house that I spent a lot of time with?’ And she said, ‘I just took it back to town.’ And what she meant was she just stopped paying taxes on it and let it go into tax garnishment,” Desmond said.

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Lawmakers on both sides of the aisle have expressed concern over the rise in home ownership by professional investors.
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“Tax foreclosure shouldn’t be part of a business strategy, but for some owners who use LLCs, it is,” he said.

Members of Congress have expressed concern over rising rates of homeownership by professional investors – a trend that has contributed to soaring rents.

In February, professional investors made 28.1% of all single-family home purchases, a record high, according to real estate market data firm CoreLogic.

Before the pandemic, investors accounted for 14% of home purchases, the firm found.

The tight housing supply has pushed up real estate prices, making home ownership less affordable for the average American.

The national median home price jumped 13.4% in June from a year earlier to $416,000. That’s an all-time high based on data dating back to 1999, the National Association of Realtors said.

Experts say investors are taking advantage of LLC laws to seize properties, allowing them to avoid taxes.
Experts say investors are taking advantage of LLC laws to seize properties, allowing them to avoid taxes.
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Lawmakers on both sides have said they are concerned that LLCs allow investors to avoid transparency. Some are using LLC laws in the United States to launder ill-gotten gains that could otherwise be seized by foreign governments, a legal expert has said.

“I represent the richest people in the world and some of the most famous people in the world, and they won’t buy a property unless it’s in the name of an LLC, sometimes multiple LLCs, and they are doing in order to keep that anonymity, so people don’t know who is buying the property,” Adam Leitman Bailey, a New York-based real estate attorney, told The Hill.

“In a nefarious way, it allows people from different countries to buy property in another country, to buy property in America.”

Bailey added: “Let’s say they’re trying to hide money. They can do it using an LLC, and people won’t know who they are.