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CORRUPTION AND ORGANIZED CRIME AND ITS NEFARIOUS RESULT IN OVERPRICED HOUSING MARKETS

Updated: Feb 3


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APA full citation: Filho, C. I. (2024, September 10). Corruption and Organized Crime and its Nefarious Result in Overpriced Housing Markets. EBS I&D Centre. https://www.ebscentre.org/society/





Introduction


Housing markets are essential components of national economies, often serving as indicators of financial health and societal well-being. However, in many regions worldwide, housing prices have spiralled beyond affordability for the average citizen. These inflated prices can be attributed to several economic factors, such as limited supply and increased demand, but a less-discussed aspect is the link between overpriced housing markets, corruption, and organized crime. This article examines how these illegal activities contribute to and benefit from inflated housing prices, revealing a darker side of the housing crisis.


The Housing Affordability Crisis


Many urban centres across the world are grappling with skyrocketing housing prices. Cities like London, New York, Sydney, and Hong Kong have seen exponential increases in property values, often far outpacing income growth. Housing markets are supposed to function on basic principles of supply and demand; however, the current price inflation in many areas is disproportionate to economic growth or population increases. Beyond typical economic forces, corruption and organized crime play significant roles in artificially inflating housing prices.


Money Laundering Through Real Estate


One of the clearest links between overpriced housing markets and organized crime is money laundering through real estate. Criminal organizations, seeking to legitimize large sums of illicit money, often turn to real estate markets because they provide an easy and relatively safe way to "clean" money. Buying property using criminal proceeds allows these organizations to hide the illicit origins of their wealth.


In many cases, luxury real estate markets are particularly vulnerable to money laundering. 


Properties worth millions of dollars can be bought with little scrutiny, as anti-money laundering (AML) regulations in real estate are often less stringent than in other sectors, such as banking. These purchases, usually in cash or through offshore shell companies, inflate housing prices because they artificially increase demand for high-end properties, driving up the prices not just for luxury homes but also for mid-range and affordable properties as market dynamics adjust.


The Role of Corruption


Corruption exacerbates the issue of overpriced housing markets. Corrupt officials may turn a blind eye to illicit real estate transactions or even facilitate them. In many countries, developers, real estate agents, and local authorities collaborate to bypass regulations that would normally prevent housing speculation or ensure affordable housing options.


For instance, in some developing countries, real estate developers bribe local officials to obtain permits to build luxury projects on land originally zoned for affordable housing or public use. This results in a skewed supply of high-end properties and an undersupply of affordable housing. Corruption at this level perpetuates an environment in which prices are artificially inflated by decisions made in favor of profit over public interest.


In certain cases, political figures themselves invest in real estate markets as part of their personal wealth-building strategy. By fostering an environment of inflated housing prices, they directly benefit from corruption and the market's artificial price surges.


Organised Crime's Stake in Real Estate


Organised crime syndicates, especially those involved in drug trafficking, arms dealing, and human trafficking, frequently use real estate as a means to launder their profits. This has a knock-on effect on housing prices. Criminal groups purchase large amounts of real estate, particularly in high-demand urban areas, and either leave these properties vacant or sell them at inflated prices. This drives up market prices overall, reducing the availability of affordable housing for law-abiding citizens.


In some regions, organised crime infiltrates construction and real estate development sectors. Criminal organisations may control parts of the building industry, engaging in bribery, extortion, or racketeering to manipulate housing markets. For example, in Italy, the Mafia has long been involved in construction projects, influencing the cost and availability of housing by monopolising certain projects or controlling the supply chain for building materials. Similar activities have been observed in Eastern European countries, where organized crime groups manipulate real estate markets to serve their interests.


The Impact on Society


The influence of corruption and organized crime on housing markets extends beyond economics—it affects society at large. As housing prices climb, gentrification occurs, displacing lower-income residents from their communities. In extreme cases, cities may see entire neighbourhoods hollowed out, with properties owned by absentee landlords who are more concerned with hiding illicit wealth than maintaining liveable homes.


This creates social tension, as access to affordable housing becomes increasingly limited, and the divide between the wealthy and the rest of the population widens. As cities become more expensive, essential workers, such as teachers, healthcare professionals, and first responders, struggle to live in the areas they serve, exacerbating inequality.


Combating the Issue


Addressing the link between overpriced housing markets, corruption, and organized crime requires a multi-faceted approach. Governments must implement stricter AML regulations for real estate transactions, particularly in high-end markets. This includes greater transparency around property ownership, including measures to disclose the true beneficiaries of offshore companies involved in real estate purchases.


Additionally, law enforcement agencies must cooperate internationally to track illicit financial flows and hold both criminal organizations and corrupt officials accountable. Policies that promote affordable housing, such as zoning regulations and taxes on vacant properties, can also help curb speculative real estate practices that contribute to housing price inflation.


Conclusion


The relationship between overpriced housing markets, corruption, and organized crime is complex but undeniable. Criminal organisations exploit the real estate sector to launder money, while corrupt officials may enable or even profit from inflated housing prices. The result is a housing market that increasingly excludes ordinary citizens, perpetuates inequality, and undermines social cohesion. To restore fairness and affordability to housing markets, governments and law enforcement agencies must work together to eliminate the illicit forces driving price inflation.


Carlos I. Filho


Relevant online resources:



References:


International Consortium of Investigative Journalists (ICIJ). (2021, July 16). 'A Kleptocrat's dream': US real estate a safe haven for billions in dirty money, report says. ICIJ. https://www.icij.org

Transparency International. (2020, December 18). Doors wide open: Corruption and real estate in Australia, Canada, the United Kingdom, and the United States. Transparency.org. https://www.transparency.org

Realtor.com. (2025, January). Feds crack down on money laundering through real estate. Realtor.com. https://www.realtor.com

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