Organization Sues Treasury Department to Reveal Shell Companies

Speaker 1: 00:00 Yesterday. We talked about how a lack of home construction is partly to blame for the housing shortage, but a large share of the buildings that are getting built are being bought by what are known as shell companies. That public radio program reveal has found that 30% of California's residential real estate purchases in major cities, including right here in San Diego, are being made by these companies in cash. So who exactly is buying up all the real estate senior reporter Aaron glance with reveal is here with more on how the show is suing to get the answer to that very question. Aaron, welcome. Speaker 2: 00:34 It's good to be with you. Speaker 1: 00:35 So why has it been so difficult to find out who is behind these shell companies? You'd think this information would be available via property records. Is that not the case? Speaker 2: 00:45 Well, this is historically. If you wanted to know who owned a house, you could go to the County courthouse and find out, right? You go to the County courthouse in San Francisco where I live. You look at the record from my house and you find out that I own it with my wife, open and shut, right? Same thing if it's a mom and pop landlord owned by human, uh, if you have a problem with the landlord, you call up the human who owns the building. Uh, but what we've seen, you know, since the housing bust is a massive increase in the number of homes that are bought, not by human beings, but by LLC, LLP and LP shell companies. And so there's a lot of rumors going around, you know, these homes are being bought up by, uh, international oligarchs from China or from Russia is one thing that people suspect or homes are being built, bought up as second homes for tech barons. Right. Or, uh, maybe they're being turned into Airbnbs or, um, you know, all the theories that abound, but it's really difficult to answer which of those is the most prevalent because we don't know who is behind, uh, many of these corporate shells. Speaker 1: 01:52 And so what are the legal arguments reveal is making in court to get this information public? Speaker 2: 01:59 Well, the treasury department knows who is behind many of these shell companies because the financial crimes unit of the treasury department is concerned about money laundering through real estate in San Diego and elsewhere. And so we filed a freedom of information act request to get the information that the treasury police have. Uh, when we did that, the treasury police said, um, we will not give you this information because of this law called the bank secrecy act. And what we're contending in our lawsuit is that under the freedom of information act, they have to provide this information and they can use the bank secrecy act to shield, you know, legitimately private information from the public. Like for example, the social security numbers that people have in their bank accounts or other personal financial information. But they can't a shield from us this information that we have historically had as a public, which is who owns the building next door. If all these units are Speaker 1: 03:00 being bought by these companies, how much of an impact is this having on the housing crisis? Speaker 2: 03:05 It's huge. Absolutely huge. You know, you have a debate in San Diego. Uh, do we have enough housing? Uh, do we have a housing shortage? Uh, do we need more housing? But it's not only about how much housing you have, it's also about who owns the housing. And when you have 3 million homes and more than 10 million apartment units across this country that are owned by shell companies, uh, then that has a major impact. If you want to go out and buy a house with a traditional mortgage, uh, by the time you go house shopping, that house has already been gobbled up by a speculator. Speaker 1: 03:42 And what about tenants? How are they affected by having a landlord that's a shell company as opposed to an individual? Speaker 2: 03:49 Yeah, you're looking at a disconnected landlord who has no relationship at all with their tenants. And so what you see is more and more responsibility being pushed off the landlord and onto the tenants. Uh, I've seen lease agreements that tens have signed with these shell companies that put them in charge of, uh, virtually all the maintenance, fixing the plumbing, fixing windows, uh, things of that nature. Uh, the rent increases tend to be much more frequent and much steeper, uh, because the landlord does not know the tenants and research from the federal reserve bank of Atlanta has found that corporate landlords are far more likely to mom and pop landlords to file eviction notices against their tenants. And in Atlanta, the fed found that those, um, those eviction notices tend to particularly hit African-Americans even when they are similarly, uh, financially situated to their white counterparts. Speaker 1: 04:46 Are you aware of specific properties here in San Diego that are owned by these LLCs? Speaker 2: 04:52 I mean, there are many homes all across San Diego that are owned by these LLC, uh, shell companies. Uh, there is a sittin in Oakland, which is near my office in San Francisco in Emeryville of this group, moms for housing. And they're sitting in on a property that is owned by an LLC called Catamount properties 2018 LLC, and it's vacant. So they're sitting in a, in a area, West Oakland where rents are going up, where housing for purchases virtually unavailable. And there's this house used to be owned by a family now owned by a shell company. Uh, that was sitting vacant and they took it over. Well, this same shell company owns dozens of homes in the San Diego area and also in San Bernardino County and also in Los Angeles County, uh, all over. And the same is true for some of our biggest corporate landlords, like invitation homes, uh, which was created by Blackstone, which was one of America's largest private equity firms. Speaker 2: 05:52 And this company, um, uh, Blackstone owns than 80,000 homes all across America. And so we have right now an unprecedented concentration of ownership in real estate, which is blocking families, uh, from living the American dream. And what we're trying to find out in our lawsuit is, you know, I listed some of these players, but who's behind those corporate names? Hmm. So what's the next step in this lawsuit? What we, uh, you know, when we filed our freedom of information act request last year, we were denied and then we appealed. We were denied again. Uh, then we filed a new freedom of information act request, and now we're suing. Uh, so now we're in court and we're waiting to see if, uh, now faced with a federal judge if the treasury department again tells us that we cannot have this basic information about who is buying up America's cities. And if they do, then ultimately it will be up to a judge to decide. I've been speaking with Erin gland, senior reporter at reveal. Aaron, thank you very much for joining us. Thank you.