Dirty money and the Miami real estate market

by Deborah Goonan, Independent American Communities


Miami is a world epicenter for luxury condominiums. Recent investigations by the Miami Herald, in conjunction with the International Consortium of Investigative Journalists (ICIJ) have led to a massive investigation of money laundering through cash purchases of condos valued at $1 million or more.

Check out this Miami Herald article, and the illustration below, that explains how international criminals and corrupt leaders are able to hide their ill-gotten gains in real estate.

How secret offshore money helps fuel Miami’s luxury real-estate boom

Read more here: http://www.miamiherald.com/news/business/real-estate-news/article69248462.html#storylink=cpy


How offshore companies buy Miami condos (courtesy Miami Herald)


Of course, we need to create a system of accountability. Let’s face it. The only way these shady real estate deals can work is if all of the smaller players enable those deals. Clearly, too many real estate agents and developers are more than happy to take millions of dollars in cash, no questions asked. Legitimacy does not matter to those collecting enormous profits from real estate transactions – so what if the money was obtained through illicit drug trafficking, human trafficking, war crimes, or tax evasion?

And note that the City of Miami has not launched its own investigation. After all, it has been massive foreign investment in real estate that has lifted Miami out the depths of recession, and has created today’s influx of tax revenue.

However, now that the Panama Papers leak is starting to get some attention from mainstream media, we are finally beginning to see some public backlash against deep-seated corruption.

But let’s connect the dots. Look at the culture of corruption that the HOA industry has enabled over the last 3 to 4 decades. Is it a coincidence that South Florida’s condo associations are currently under investigation for fraudulent elections? It stands to reason that when more than half of real estate sales are cash transactions, and many of those to unknown buyers, you are going to end up with some shady characters on condo (or HOA) boards. It’s a safe bet that anyone prone to hiding money in offshore LLCs probably has no use for fair elections, let alone transparency.

And even if a condo board’s members are not international criminals, per se, Miami’s underlying culture appears to accept corruption as normal. The effects of corruption have become rampant in an unchecked, unregulated housing market proliferated by Association Governed Residential Communities.

Don’t you wonder how much of this influx of dubiously acquired offshore money is used to create shell-company-financed management companies? Or construction companies? Or finance companies that handle HOA collections or lending for major repairs and renovations?

The consensus is that dirty money is propping up South Florida’s real estate industry, pushing prices to record high levels. Regular people cannot afford to own a home, and many cannot even afford the rent in Miami either. But what can be done about it?

Yes, the U.S. Treasury is tracking sales of $1 million and up. But what about all the shady deals for properties below $1 million? What makes a cash deal for $999,000 any less suspicious than the sale for $1 million? I think it’s a safe bet that buyers are arranging for sale transactions just under the $1 million threshold to avoid scrutiny. Or maybe international criminals have just decided to buy real estate in another state.

And what about tracking activity of “bulk buyers,” real estate investment corporations buying up multiple units and then taking control of Association Boards, for the purposes of terminating or redeveloping aging multifamily structures and exploiting distressed condo associations? Is dirty money behind this activity as well?

Time will tell if U.S. and worldwide investigations will be able to end such massive corruption. Will the awakening of ordinary, hardworking people, combined with justifiable outrage and political pressure, lead to positive change in the real estate industry and in local governance standards?




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