This story was originally published by Outlier Media.
Susan Newell remembers how her Detroit neighborhood emptied out seemingly overnight following the 2008 housing crash. Neighbors in Morningside, where she’s lived for more than 40 years, were forced out because they couldn’t pay their mortgage or tax bill. Absentee owners swooped in, bought houses for pennies on the dollar, then left them to rot. Newell said at one point, only 8 out of 20 homes on her block were occupied.
“It was like a tsunami without the water,” she said.
Since then, she’s worked with her remaining neighbors to try and hold negligent property owners accountable. They’ve had some success pressuring local owners to clean up their properties. But they often encounter others who hide their identities and are seemingly impossible to get in touch with.
“It can be very difficult to identify owners in some cases,” she said. “You have to go to a number of different websites to maybe find a name and address. With out-of-state investors, we just kept hitting dead ends.”
It’s incredibly easy for property owners to shield their identities. All you need is $50. That’s what it costs in Michigan to set up a limited liability company, or LLC. It’s perfectly legal and extremely common: A review of city parcel data suggests LLCs own more than 20% of properties in Detroit.
What Newell and many other Detroiters know too well is that the anonymity this structure affords makes it difficult to hold bad actors responsible when they neglect their properties, ignore blight tickets, skip tax payments or evict tenants. But there appears to be little appetite on the part of policymakers to require better transparency.
Some owners use dozens or hundreds of LLCs with someone else’s name on the paperwork to buy and sell real estate. Joshua Akers, a former assistant professor at the University of Michigan-Dearborn who studied speculation in Detroit, explained that it’s trivially easy to create a new LLC, and therefore, a new identity.
“You’re essentially considered a new person under the law,” he said.
Real estate attorneys, registering services or other LLCs can sign these documents on the owner’s behalf. They don’t even have to be real people, because the state isn’t checking.
“LARA does not have authority to require additional documentation, such as identity verification, to be submitted with (the paperwork),” said Abby Rubley, a spokesperson for the state’s Licensing and Regulatory Affairs Department.
Alex Hill, an adjunct professor at Wayne State University and the founder of mapping project Detroitography, says it’s “critical” to know who these owners are — and the extent of property speculation in the city.
“People want to be able to find out who’s causing the blight and decay on their streets that is scooping up all the public dollars for demolition, rather than other purposes,” Hill said.
Under the radar
LLCs make sense when multiple people have a stake in a business or, as the name suggests, to limit personal liability.
But property speculators in particular, many of whom dodge responsibility for upkeep or taxes, appear to favor the arrangement. And trying to discern the ownership of properties can be like Russian nesting dolls — with investors creating LLCs within LLCs and trading properties between those companies.
Take Nisus Real Estate LLC. The company claims on its website to be the “Detroit Rental Investment Hub,” offering high returns on real estate for international investors. It’s listed as the agent name for Domus Property Management LLC, which in turn is listed as the resident agent for 59 different LLCs that hold 164 Detroit properties.
The companies have accumulated at least 64 blight tickets since 2021, filed dozens of evictions and are currently delinquent on taxes for 13 properties.
But it’s impossible to know who’s behind Nisus using information in the public record. The company’s listed address is a UPS store in Birmingham. Messages left with a phone number and email address listed on the company’s website went unanswered.
Detroit’s regulations about who can buy and sell real estate are almost entirely nonexistent. The Mayor’s Office did respond to a request for comment about whether the lack of corporate transparency is a problem for the city.
The Wayne County Treasurer’s Office claims that owners who are delinquent on taxes or have unpaid blight violations cannot buy property at the annual tax foreclosure auction. However, it doesn’t enforce those rules.
Rubley said the only jurisdiction in the United States that currently requires companies to submit ownership information is Washington, D.C.
But a federal law may soon change business filing requirements. Congress passed the Corporate Transparency Act in 2021 to curb tax fraud and money laundering. It requires anyone with an ownership stake in an LLC to report their name and address by the end of the year if legal challenges don’t keep it from going into effect.
New York passed its own transparency law to enhance the federal act. It originally set out to create a public database of companies and their owners, but Gov. Kathy Hochul signed a watered-down version earlier this year, making the information confidential to everyone except the owner and law enforcement.
Connecting the dots
If speculators have impacted you or your neighborhood, we want to hear from you. Email reporter Aaron Mondry at [email protected], or give him a call at 313-403-7221.
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Akers and Hill have worked to catalog the extent of property speculation in Detroit through their Property Praxis project. Unmasking the owners behind companies is painstaking work, involving hundreds of hours combing through state licensing paperwork and other sources.
They estimate they’ve identified owners for about 90% of the companies holding property in Detroit. But many still slip through the cracks.
“If a property owner doesn’t want to be found, then it’s actually pretty easy,” Akers said. “There are many trails that die at P.O. Boxes in UPS stores in the Upper Peninsula.”
Akers and Hill have had to rely on lawsuits, city documents and even LinkedIn to piece together what sometimes amounts to an educated guess.
“The intention is to capture as many as we can, as best as we can,” Hill said. “And this gets us to our best possible data set given the limitations.”
The researchers took a break from the project in 2020, but Hill and another researcher restarted it earlier this year. He hopes to publish data through 2023 by the end of this year.
A tool like Property Praxis could be incredibly useful for the residents of Morningside, where speculative properties frequently change hands, according to Susan Newell.
“It’s like playing Whac-A-Mole,” she said. “The housing market is very fluid here, so it’s hard to know who the real problem owners are.”
This article first appeared on Outlier Media and is republished here under a Creative Commons license.
