What Do Tom Brady And A Kazakh Banking Mogul Have To Do With The Affordable Housing Crisis?

Out of five condos sold last year in the ultra-luxury Time Warner Center, seen here at right, four were bought by a shell company that conceals its owner’s identity. CREDIT: AP
Out of five condos sold last year in the ultra-luxury Time Warner Center, seen here at right, four were bought by a shell company that conceals its owner’s identity. CREDIT: AP

British authorities are forcing a Kazakh banker mired in an embezzlement trial to sell his seven-bedroom mansion on London’s Billionaire’s Row, Bloomberg reports, after going through a lot of trouble to establish that the house actually belongs to him. The story is an example of a rising global phenomenon of hyperwealthy people skirting records laws and using real estate to conceal — and possibly even launder — vast wealth.

A court ultimately determined that the nearly $22 million mansion was the property of a billionaire financier named Mukhtar Ablyazov. Ablyazov is accused of embezzling $6 billion from one of the largest banks in Kazakhstan when he was in charge of the company. It was initially difficult to link the Billionaire’s Row manse to the embezzlement case “because the property was bought through a network of offshore companies that hid his identity,” Bloombeg reports, and law enforcement officials in Britain say such arrangements are an increasingly popular way to launder large sums of ill-gotten money.


It took a quirk of fate and tax collecting to get the U.K. scrutinizing shadowy real estate transactions such as Ablyazov’s. A recent tax law had imposed a massive fee — over $220,000 per transaction, at current exchange rates — on luxury real estate transactions by companies wishing to keep their owner’s name off official documents. Budget officials expected the law to bring in about 20 million pounds in revenue, and when actual returns came in closer to 100 million pounds, authorities realized that demand for confidentiality in the ownership of hyper-expensive homes was far higher than thought. For someone with large sums of cash that can’t be declared officially or spent openly because it came from criminal activity, the chance to funnel tens of millions of dollars into legitimacy through a real estate transaction is very attractive.

Shell purchases and willful ignorance from real estate professionals turns transparency of ownership, once a defining value of property law and still a primary purpose for real estate records, into a bad joke. Buyers with the means to afford housing like this and the desire to keep their ownership out of the public eye also tend to pay for their $20 million homes in cash, avoiding mortgage paperwork that would facilitate public understanding of who is buying what.

As cities like London have become more and more unaffordable for anyone outside the highest income brackets, authorities have begun scrutinizing elite’s use role of high-end real estate as a vehicle for transactions in other financial hubs as well. Ablyazov’s story is one example of a much larger phenomenon whereby international elites use complex corporate networks to obscure their interest in ultra-luxurious real estate holdings. Shell companies can make it very difficult to figure out who actually owns, lives in, or benefits from the rising price of a given piece of fancy living space, as the New York Times learned recently when it tried to uncover the actual ownership of condos in just one Manhattan high-rise called the Time Warner Center. The resulting investigation took over a year and touched on multiple criminal and civil legal cases.

The newspaper had to scrutinize 200 separate corporate entities in over 20 countries just to establish which individuals were actually controlling the building’s 192 condos. Tenants range from entertainment celebrities like Tom Brady and Gisele Bundchen to Russian powerbrokers under investigation by international authorities and captains of industry whose companies are blamed for ecological disasters in the developing world.


Few ever put their own names on a deed or purchase, with four out of every five Time Warner Center condos that changed hands in 2014 being bought by a shell company. Citywide, more than half of all residential properties that sold for over $5 million in 2014 were bought by shell companies.

These opaque high-dollar real estate transactions are a major source of riches for the lawyers, accountants, brokers, and builders who comprise the real estate industry, and who stand to become far richer from dealing with ex-Soviet oligarchs and shady south Asian building magnates than they would from addressing more pressing societal needs. And if the business community is more interested in helping hyperwealthy people clean their cash than in restoring affordable housing options for working people, that interest is likely to influence the lawmakers who rely on the industry for campaign money.

Cities in general are already becoming enclaves for the wealthy, with median rents growing far faster than median incomes and working families finding it increasingly difficult to get suitable housing for an affordable price.

Someone making an average wage and an average lease in the greater London area sees about 45 percent of her income go to rent, according to figures released last summer by rental market analyst and insurer HomeLet. That’s well above the one-third rent-to-income ratio that most economists and the U.S. government define as “affordable,” but New Yorkers might be happy to swap situations with their Brit counterparts. The median rent on a market-rate apartment in New York City is now 58.4 percent of the median income in the city, according to a new analysis from online real estate firm StreetEasy that suggests the rental affordability crisis is worse than official statistics portray.