Miami is less than four years removed from an epic real estate crash that wrecked the local economy, but it seems lately that new luxury condos are breaking ground every week. Most of the local economy is still in shambles. Unemployment remains high. The vast majority of local residents are still struggling. So for whom are all those luxury penthouses meant? Shady foreigners looking to drop ill-gotten cash on real estate, according to a report in the Nation.
"South Florida has always been a favorite destination for international visitors and political figures, whether it is for vacation or to purchase property along its sandy and sunny beaches," reads a May 2011 Treasury Department report cited by the Nation. "As such, Miami finds itself in the distinct position of being a reoccurring hot spot for funds pilfered by politically exposed persons (PEPs) and other criminal proceeds."
Among the cases mentioned by the Nation:
- A member of the Russian legislature who was forced to resign after it was found he owned $2 million worth of property he didn't disclose.
- Alvaro Lopez Tardon, an alleged Spanish drug lord, is facing trial for buying 14 condos in Miami in cash to launder more than $24 million in cocaine money.
- A score of Venezuelans who illegally funneled their cash into Miami real estate after the election of Hugo Chávez.
- The U.S. Government returning $2.7 million to Nicaragua after it was stolen by the country's president, Arnoldo Alemán, and partially invested in Miami real estate.
However, who exactly owns many high-end condos in Miami is difficult to track. Many are registered to business entities incorporated in Delaware or other offshore tax havens. Local politicians and business leaders in Florida are apparently fighting hard against laws that would require more sunlight in the shady area of foreign property ownership in America.
"There is a huge amount of dirty money flowing into Miami that's disguised as investment," Jack Blum, a Washington attorney specializing in money-laundering cases, tells the Nation. "The local business community sees any threat to that as a threat to the city's lifeblood."
The piece ends with this darkly funny account:
Jack Blum, the money-laundering investigator, recounted to me a work trip to Miami two years ago, when he was stunned to see condominiums going up in the poor Liberty City neighborhood. "I was in a cab and asked the driver what was going on," he said. "He didn't miss a beat -- he said, 'That's from money laundering.' When it's that obvious to cabdrivers, you know the situation is bad. But that's what the city's economy is built on, and it is a monumental challenge to fix it."
Sadly, this is nothing new. Miami's booms have always been built on criminal activity and money laundering. What the piece doesn't get into is the effect on Miami's lower and middle classes. Gentrification remains rampant. As developers carve out new areas to erect skyscrapers (Edgewater is only the latest hot spot), it causes rents to rise in the surrounding areas, spurring waves of gentrification and rent escalation elsewhere in a county that already has areas where income inequality is as bad as it is some parts of the Third World.
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But hey, at least developers are getting rich(er), and no local leaders -- business, real estate, political, or otherwise -- seem particularly eager to stop it.
[The Nation: Miami: Where Luxury Real Estate Meets Dirty Money]