After a series of reports about dubious (often foreign) cash being stashed in luxury American properties, the feds are responding.
Last year, the New York Times ran an investigative series called Towers of Secrecy looking at how shadowy money was being laundered through shell companies used to buy up swaths of high-end domestic real estate. Basically, it's historically been pretty easy to sink cash into luxury condos and other properties in cities like New York—regardless of where that money might have come from.
On Wednesday, the Treasury Department responded, announcing it would begin tracking people who purchase luxury properties with shell companies and cash in the US, beginning with Miami and Manhattan, as the Times reports. (New York magazine previously did its own reporting on foreigners stashing money in NYC real estate.)
Now the title companies in these two markets will have to keep the government abreast of the actual individuals making all-cash purchases over $3 million in Manhattan and $1 million in Miami, handing over names and copies of driver's licenses or passports.
"We are concerned about the possibility that dirty money is being put into luxury real estate," Jennifer Shasky Calvery, a top Treasury Department official, told the paper. "We think some of the bigger risk is around the least transparent transactions."
The changes will no doubt affect the housing industry as well—about a quarter of last year's $100 billion of real-estate purchases in Florida came from international buyers, and 74 percent of those were all cash, for example. And if the government finds evidence of widespread criminality, this program could be expanded nationwide.
"It's painting the high-end segment as having overall treachery, and that's unfortunate," a chief executive at the appraiser Miller Samuel told the Chicago Tribune. "It's certainly not helpful to the high end of the market because it adds another level of complication to a transaction."
New York's Time Warner Center. Photo via Flickr user Brad Clinesmith