The Growing Role of L.L.C.s in the Housing Market

New York Times writer Emily Badger reported earlier this week that, “L.L.C.s shield property owners from personal liability while obscuring their identities. In some cases, so much anonymity also enables money laundering, and it can mean that tenants struggle to hold landlords accountable, that cities fail to fix blight and that researchers can’t answer basic questions about the housing market.

“As much as people may want to keep their financial dealings private, the housing market has long been an unusually transparent place.

“‘We basically have a property system where you’re supposed to be able to look up who owns what property,’ said Dan Immergluck, a professor at Georgia State University. ‘Our English system of property recording doesn’t really give you that privacy. People can look up what my property taxes are any time they want.'”

The Times article noted that, “L.L.C.s have eroded that expectation. There is little good national data tracking the rise of L.L.C.s. But in 2015, according to the Rental Housing Finance Survey from the Census Bureau and the Department of Housing and Urban Development, about 15 percent of all rental properties were owned by L.L.C.s, limited liability partnerships or limited partnerships. That represented one-third of all rental units, and that can include single-family houses or apartment buildings.

“Put another way: 92 percent of rental properties in America back in 1991 were held by individual owners whose names tenants could easily know. By 2015, that number had fallen to 74 percent, driven largely by the growth of L.L.C.s, although the market today includes other kinds of institutional investors as well.

In the single-family market, which includes investors who built rental empires after the housing crash and others who’ve used empty properties to store wealth, about 9 percent of home sales last year were to L.L.C.s, according to ATTOM Data Solutions, a real estate data company. That’s twice the share a decade ago. The rent-to-own company Vision Property Management, for example, has bought homes across 24 states through nearly two dozen L.L.C.s.”

Ms. Badger explained, “The downsides of all of this have become clear, at both high and low ends of the market. In expensive cities like New York and Miami, L.L.C.s have helped foreign investors launder money through luxury condo purchases. In poorer cities like Memphis and Milwaukee, they have enabled investors to walk away from vacant properties and tax bills.

“For renters, or tenants mired in rent-to-own contracts, these entities mean they often don’t know whom they’re dealing with — or who’s evicting them.

“These consequences worry even real estate lawyers who advise their clients to use L.L.C.s.”

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