Immigration Crackdown Intertwines with Real Estate Dysfunction

The South Shore immigration raid that shook Chicago late last month wasn’t just about border politics. It was about real estate, including some buildings that have been falling apart for years while owners, lenders and the city point fingers.

As The Real Deal first reported, commercial property dysfunction served as a prelude to federal enforcement. The 130-unit complex at 7500 South South Shore Drive — where ICE and other federal agents charged in with ground forces, rappelled from helicopters and arrested 37 people — was already deep in foreclosure and buried in lawsuits.

The city had sued property owner Trinity Flood over chronic code violations. Flood sued the previous owner and its brokers. Wells Fargo had moved to foreclose on three of Flood’s South Side properties after she defaulted on a $27 million loan, going so far as to seek a court-appointed receiver to take over the properties.

Amid the rigamarole, the complex devolved into chaos: squatters, shootings and hallways so neglected inspectors stopped entering. The collapse became a petri dish for a federal operation.

Strength in Management, the firm hired last year to help stabilize the property, allegedly couldn’t get a handle on it; city lawyers wrote that the company had “lost control.” Tenants said the elevators were broken, security had been cut well before the feds arrived. Corey Oliver of Strength in Management declined to comment when reached by The Real Deal.

When feds step in

When local oversight evaporates, federal agencies step in. Their arrival in Chicago isn’t necessarily to fix real estate, but Trump’s troops are apparently looking to occupy a good bit of the stuff. And, like much of what’s buzzing around the city these days, there’s little clear about how that might happen or what it might look like.

U.S. Department of Homeland Security Secretary Kristi Noem said the agency is looking to buy more real estate in the Chicago area, but her representatives won’t say what kind or why. Asked by TRD whether the department needs new facilities to sustain its immigration crackdown, officials refused to elaborate, instead citing Noem’s vow to “double down” in Chicago.

The answers, or lack thereof, underscored a lack of transparency around the latest phase of immigration enforcement.

There is some overlap between housing instability and federal policing, and the dynamic isn’t unique to Chicago. Across the U.S., ICE raids have sent shockwaves through rental, labor and residential development markets.

In Los Angeles, homebuilders grew uncertain over labor markets amid immigration raids that threatened many construction workers in the region. Similarly, Miami’s construction sector has been hit repeatedly, with ICE detaining hundreds of workers across South Florida and Tallahassee. Builders warned that lost labor, combined with rising material costs, could slow the pace of residential and commercial projects for months, if not years.

And Texas landlord and tenant advocacy groups have struggled to respond to what they describe as “subpoena abuse,” highlighting the difficulty property owners face in navigating federal investigations.

Housing market chill

Grigory Pekarsky, head of Chicago residential brokerage Vesta Preferred, told TRD that the raids are producing a chill over the market, as some would-be buyers who have been looking for property in the area are ending their searches.

“There’s people dropping out, just simply because they’re getting a bad sense of what is actually going on in Chicago,” he said, noting that political rhetoric, even from the White House, amplifies fear. “Business is down at certain places, like restaurants. All of that is just negative for the overall sense and feel of the economy.”

Pekarsky emphasized the interplay between sentiment and markets. Showings are up, but offers are lagging. “Listings are just not getting anywhere near the showing traffic that you would think, even though it’s a great piece of real estate,” he said. “Or, through the showings that it does get, it doesn’t get the offer that you would think. You’re getting 30 tours with no offers. You should be getting at least two offers from that point.”