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-   -   Big corporations are buying up homes and “eroding the American dream of homeownership (https://skyscraperpage.com/forum/showthread.php?t=253562)

hauntedheadnc Jan 24, 2023 10:58 AM

Big corporations are buying up homes and “eroding the American dream of homeownership
 
Big corporations are buying up homes and “eroding the American dream of homeownership”
“Investors bought 24 percent of all single-family houses sold nationwide last year," according to new report
By Bob Hennelly

Quote:

...Across the country, anonymous LLCs are buying up single family homes at such an alarming rate that housing activists are warning the trend is increasingly putting home ownership out of the reach of first-time buyers particularly in communities of color.

"Investors bought 24 percent of all single-family houses sold nationwide last year, up from 15 percent to 16 percent annually going back to 2012," according to a Stateline analysis of data provided by CoreLogic, a California-based data analytics firm. "That share dipped only slightly in the first five months of 2022 to 22 percent."

***

In Newark, New Jersey's most populous city, researchers at the Rutgers Center on Law, Inequality and Metropolitan Equity (CLiME) documented that between 2017 and 2020, such purchases accounted for 47 percent of all home closings, more than twice the current national rate.

"This is a threefold increase in investor purchases since 2010, when less than 20 percent of all residential sales were to institutional buyers," according to CLiME's report. "Who Owns Newark-Transferring Wealth from Newark Homeowners to Corporate Buyers. "These trends are part of a national pattern. Limited liability companies, often backed by largescale equity investment, became active in residential real estate during the Great Recession and foreclosure crisis."

CLiME's analysis continues. "Yet these trends demonstrate the strong probability of rapidly rising rents, lower homeownership rates, a diminished Black middle class, market challenges to building affordable homes, even more housing instability for low- and moderate-income Newarkers and displacement. What has happened in other cities and neighborhoods has been happening in Newark—but on a scale unmatched anywhere in the country."

***

"In cities and even suburbs across America, LLCs are eroding the American dream of homeownership as they convert owner-occupied homes into corporately owned rental units," Mayor Baraka said. "In Newark, where we have worked hard to expand homeownership, we have created a strategy to do everything possible to fight this dangerous trend. The CLiME report is proof that Newark must enact and enforce stronger and more equitable laws, regulations, and policies to ensure that all residents share in the growth of our city."

This latest initiative follows up a 2022 municipal ordinance designed to pierce the corporate veil of secrecy that shrouds limited liability companies (LLCs) that are gobbling up Newark's limited housing stock by compelling they register as a responsible agent in the State of New Jersey.

"Our report shows that the national trend of investor buying of one-to-four-unit homes in predominantly Black neighborhoods is acute in Newark where almost half of all real estate sales were made by institutional buyers," Dr. Troutt said in the City Hall press release. "This trend grew out of the foreclosure crisis that wiped out significant middle-class wealth in Newark. Mayor Baraka's actions are important steps toward maintaining affordability of rents and homeownership, discouraging speculation and demanding transparency of ownership."

The stakes are high.

"Sadly, this reality continues a long pattern of economic threat to predominantly Black and increasingly Latino neighborhoods in a state whose communities are among the most segregated in the country," Dr. Troutt's seminal report states. "From racial exclusion to predatory lending, from foreclosure to the extraction of rents, Newark's experience demonstrates what can happen when local economies ignore equity…These trends demonstrate the strong probability of rapidly rising rents, lower homeownership rates, a diminished Black middle class, market challenges to building affordable homes, and even more housing instability for low- and moderate-income Newarkers and displacement."

The gap between White and Black homeownership rates is wider now than it was in 1960, when housing discrimination was rampant and legal, U.S. Census Bureau data shows. In 2022, 74.6 percent of White households owned their homes, compared with 45.3 percent of Black households — a gap of more than 29 points.

In 1960, the White homeownership rate was 65 percent, and the Black rate was 38 percent, a 27-point gap.
Source.

hauntedheadnc Jan 24, 2023 11:01 AM

And how is this shaking out elsewhere?

For renters, Asheville area market the worst in NC, 5th worst in the US, study says

Quote:

ASHEVILLE - John Murtiashaw had a decent deal for an apartment. His small North Asheville unit had one bedroom and one bath. There was no central air conditioning or dishwasher and some of the other units sometimes had mice problems.

But the property managers were responsive about problems. And the owner raised the rent gradually, said Murtiashaw, 36, the sales manager for an outdoor apparel company specializing in Alpaca fiber.

"Every year he added $25 to the monthly rent. So, that's how I got to $820," he said.

That seemed reasonable, considering the painfully high rents around the city. Then in September, a new owner bought the apartment building at 37 Skyview Place for $1.1 million, according to property records. Tenants were told rents would go up drastically. Murtiashaw's was jumping nearly 70% to $1,375. Those who didn't want to pay had one month to move out. Dylan Glagow, listed as a member of the Asheville limited liability company that owns the building, could not be reached for comment.

The rent increase − which Murtiashaw called "predatory" and that he said didn't include any updates or fixes, including to an unstable fire escape covered with yellow caution tape − is a common feeling for Asheville area renters, according to a recent study.

Metrics analyzed by the California-based apartment search company RentCafe, such as vacancies and number of competing renters, showed the Asheville area was the state's worst market in 2022 for renters and the fifth-worst in the country. Asheville was behind only Fayetteville, Arkansas; Miami-Dade County, Florida; Lehigh Valley, Pennsylvania; and Lafayette, Indiana.

***

To measure how bad the markets were for renters, RentCafe used these metrics to calculate a "Rental Competitivity Index":

-The number of days rentals remained vacant.

-The percentage of apartments occupied by renters.

-The number of prospective renters competing for an apartment.

-The percentage of renters who renewed their leases.

-The share of new apartments completed.

The five-county area had a "sky-high" occupancy rate of 97.4%, with more than 70% of renters deciding to renew their lease and no less than 23 renters competing for the same vacant unit. Apartments for rent filled in just three weeks on average.

Many renters, particularly those in or near Asheville, say the situation is worse than that.

***

Tourism, too, can make the rental market worse for those looking for housing, with properties often worth more as short-term vacation rentals − sometimes called "Airbnbs" after the popular online platform.

Sara Mendoza-Heath, 26, and other tenants, including Pete Arthur, 71, said they were given little time to leave their Weaverville rentals after new owners decided to tap into the tourist market.

"The told us they were going to give us a month's notice to move out so they could turn the two duplexes (four units altogether) into Airbnbs," Mendoza-Heath said.

Arthur, who works as a grocery store cashier, said he was paying $700 for a two-bedroom, one-and-a-half bathroom unit, while other renters were paying more than $1,000. He now rents a trailer for $700 from a friend in Leicester. The sudden change, he said, was jarring.

"I got kicked out after 16 years."

Harvard and Bryant LLC bought the duplexes for $500,000 in 2020, property records show. Asheville Wealth Advisor Joe Kiely, who is listed as a manager for the LLC, did not respond to a message seeking comment.

jmecklenborg Jan 24, 2023 5:23 PM

A silver lining to all of this is that many vacant homes and small multi-families are being renovated. Where I live, someone started a blog around 2008 that listed the homes that the city demolished each month. They stopped posting around 2016.

Wigs Jan 24, 2023 6:09 PM

Quote:

Originally Posted by jmecklenborg (Post 9847526)
A silver lining to all of this is that many vacant homes and small multi-families are being renovated. Where I live, someone started a blog around 2008 that listed the homes that the city demolished each month. They stopped posting around 2016.

How is that a silver lining over the long term if home ownership rates decline and your city becomes a city of renters instead of owners? The decay process just starts again but this time the rents are much much higher :shrug:

Kngkyle Jan 24, 2023 6:22 PM

Good. The "American Dream" of owning a large suburban single family home where you have to drive everywhere is idiotic and should die.

iheartthed Jan 24, 2023 6:52 PM

Quote:

Originally Posted by Wigs (Post 9847582)
How is that a silver lining over the long term if home ownership rates decline and your city becomes a city of renters instead of owners?

Because high percentage of renters correlates with long term stability for urban cores.

Kngkyle Jan 24, 2023 7:03 PM

Quote:

Originally Posted by iheartthed (Post 9847654)
Because high percentage of renters correlates with long term stability for urban cores.

It's also a reversion to the mean... homeownership rates were much lower prior to the post-WW2 suburban building boom / federal subsidization of SFH ownership.

There are also larger macro and generational trends that are changing the calculus on homeownership for many.

iheartthed Jan 24, 2023 7:10 PM

Quote:

Originally Posted by Kngkyle (Post 9847674)
It's also a reversion to the mean... homeownership rates were much lower prior to the post-WW2 suburban building boom / federal subsidization of SFH ownership.

Yeah, because federal home ownership programs were biased to detached single-family housing. When cities ran out of land to develop new single-family homes they went into decline.

Chef Jan 24, 2023 8:15 PM

Quote:

Originally Posted by Kngkyle (Post 9847604)
Good. The "American Dream" of owning a large suburban single family home where you have to drive everywhere is idiotic and should die.

But when single family homes become rentals the same structures and the same urban design still exists, it is just that the wealth generated from them goes to investors rather than individuals. Becoming a nation of renters erodes the middle class and exacerbates wealth inequality. Nothing about this phenomenon changes the built structure of the country, just the wealth distribution.

hauntedheadnc Jan 24, 2023 8:18 PM

Quote:

Originally Posted by Chef (Post 9847745)
But when single family homes become rentals the same structures and the same urban design still exists, it is just that the wealth generated from them goes to investors rather than individuals. Becoming a nation of renters erodes the middle class and exacerbates wealth inequality. Nothing about this phenomenon changes the built structure of the country, just the wealth distribution.

This, plus the fact that urban condos and townhouses are also being swept up by investors and Airbnb operators. In Asheville there are entire downtown apartment buildings and townhouse rows that were built expressly to be used as short-term rentals and not actual housing.

jmecklenborg Jan 24, 2023 8:44 PM

Quote:

Originally Posted by Wigs (Post 9847582)
How is that a silver lining over the long term if home ownership rates decline and your city becomes a city of renters instead of owners? The decay process just starts again but this time the rents are much much higher :shrug:

People don't seem to understand that the US built far too much housing for decades - that's how we ended up with large sections of cities in decline.

I fear that if the banks loosen up and start lending for spec SFH and condo construction again, it'll mostly be in the suburbs, and the resurgence that nearly all large and small US cities have experienced over the past 10 years will fade.

Kngkyle Jan 24, 2023 8:51 PM

Quote:

Originally Posted by Chef (Post 9847745)
But when single family homes become rentals the same structures and the same urban design still exists, it is just that the wealth generated from them goes to investors rather than individuals. Becoming a nation of renters erodes the middle class and exacerbates wealth inequality. Nothing about this phenomenon changes the built structure of the country, just the wealth distribution.

I know many wealthy millennials who have no interest in buying a home/condo even though they easily could. This notion that renting is always bad and owning is always good is just not true. How many people got totally wiped out and lost their homes in 2008-2009? Over incentivizing home ownership was a cause of that crash in the first place.

Just because home ownership has historically been a good way to build wealth doesn't mean it's the only way, or that it's going to continue to be as good as it has historically been. Additionally, the family structure has changed significantly with less kids and more flexible work arrangements that can change the rent vs. own decision making process.

Trae Jan 24, 2023 9:28 PM

Quote:

Originally Posted by Kngkyle (Post 9847795)
I know many wealthy millennials who have no interest in buying a home/condo even though they easily could. This notion that renting is always bad and owning is always good is just not true. How many people got totally wiped out and lost their homes in 2008-2009? Over incentivizing home ownership was a cause of that crash in the first place.

Just because home ownership has historically been a good way to build wealth doesn't mean it's the only way, or that it's going to continue to be as good as it has historically been. Additionally, the family structure has changed significantly with less kids and more flexible work arrangements that can change the rent vs. own decision making process.

This sounds like the whole "you will own nothing and be happy" saying. Why not at homes? Using your logic, why own anything?

The people who got wiped out in 2007-2009 were the ones who were duped by banks/home builders into signing for homes when they couldn't afford it. This time around, more homeowners could afford and those who couldnt sat out. Completely different situations.

There is a reason why big corps are buying up land and property. If it wasnt a good way to built and maintain wealth then they wouldnt be doing it. the millenials around me I know started buying condos and homes years ago. the ones that haven't would like to if they find a significant other, or have their parents' home waiting for them as inheritance that they plan on renting out.

jmecklenborg Jan 24, 2023 9:31 PM

Quote:

Originally Posted by Kngkyle (Post 9847795)
How many people got totally wiped out and lost their homes in 2008-2009? Over incentivizing home ownership was a cause of that crash in the first place.


Bill Clinton set the stage for the 08-09 crash in his push to increase low income/minority ownership. There were other factors as well (especially all of the spec vacation condo construction), but the people pushing improved low income/minority home ownership are too young to remember that what it took to make it possible led to the biggest economic crisis in almost 100 years.

Meanwhile, since Clinton left office 23 years ago, the US has continued to attract tons of immigrants from South and East Asia who not only quickly became home owners but also landlords. So the face of the mysterious evil landlord has changed in the United States.

iheartthed Jan 24, 2023 9:33 PM

Quote:

Originally Posted by Kngkyle (Post 9847795)
Just because home ownership has historically been a good way to build wealth doesn't mean it's the only way, or that it's going to continue to be as good as it has historically been. Additionally, the family structure has changed significantly with less kids and more flexible work arrangements that can change the rent vs. own decision making process.

I don't even think home ownership has historically been a good way to build wealth. 401k programs are probably a more effective tool for that purpose.

I don't think there's anything wrong with wanting to own your own home, but I think people should chill out with the propaganda about it being a tool for wealth generation. At the macro level, it's not really good for that.

Chef Jan 24, 2023 9:36 PM

Quote:

Originally Posted by Kngkyle (Post 9847795)
I know many wealthy millennials who have no interest in buying a home/condo even though they easily could. This notion that renting is always bad and owning is always good is just not true. How many people got totally wiped out and lost their homes in 2008-2009? Over incentivizing home ownership was a cause of that crash in the first place.

Just because home ownership has historically been a good way to build wealth doesn't mean it's the only way, or that it's going to continue to be as good as it has historically been. Additionally, the family structure has changed significantly with less kids and more flexible work arrangements that can change the rent vs. own decision making process.

You are talking in abstractions. Specifically, in Minneapolis where I live, outside investors have been buying up homes in the hood causing them to triple or quadruple in price since the great recession. These are houses that sold for five figures in the mid '00s than now sell for $250k to $300k. These used to be starter homes for the working class. I would have liked to be able to buy one of these homes but probably will never be able to now.

These neighborhoods haven't gentrified. They haven't improved. The prices haven't been bid up by the people in the neighborhoods having more money, or by individuals with more money moving in. It has been driven entirely by investors seeing landlording as a money making opportunity, and the cheap credit to make it possible. When people talk about the wealthy and Wall Street sucking wealth out of poor and working class communities, this is how it is done.

Homeowning isn't the best route to wealth creation, the IRA and the 401K are probably the best tools regular people have for that, but it is a good route to prevent wealth depletion. As a homeowner your housing budget leads to ownership over an asset, while as a renter it just pays for someone else's asset.

jmecklenborg Jan 24, 2023 9:41 PM

Quote:

Originally Posted by iheartthed (Post 9847844)
I don't even think home ownership has historically been a good way to build wealth. 401k programs are probably a more effective tool for that purpose.

You have to rent out spare bedrooms if you want to actually make money from an owner-occupied SFH, and most people don't do that unless they really need the money. I rented one or two bedrooms in the house I own for a period of 7 years with a few 2-3 month pauses between tenants, who were typically coworkers.

JManc Jan 24, 2023 9:45 PM

Quote:

Originally Posted by iheartthed (Post 9847844)
I don't even think home ownership has historically been a good way to build wealth. 401k programs are probably a more effective tool for that purpose.

I don't think there's anything wrong with wanting to own your own home, but I think people should chill out with the propaganda about it being a tool for wealth generation. At the macro level, it's not really good for that.

Quote:

Originally Posted by Chef (Post 9847850)

Homeowning isn't the best route to wealth creation, the IRA and the 401K are probably the best tools regular people have for that, but it is a good route to prevent wealth depletion. As a homeowner your housing budget leads to ownership over an asset, while as a renter it just pays for someone else's asset.

IF you can afford to put enough into a 401k to build wealth over time. Most people probably don't max their contributions (or have employer matching) but still have to pay to live somewhere so wealth/ equity likely comes from their home primarily.

Quote:

Originally Posted by hauntedheadnc (Post 9847748)
This, plus the fact that urban condos and townhouses are also being swept up by investors and Airbnb operators. In Asheville there are entire downtown apartment buildings and townhouse rows that were built expressly to be used as short-term rentals and not actual housing.

I blame the city of Asheville for this. They could have nipped that in the bud but the revenue from rising property values and short-term rental taxes are probably worth it for them rather than accessibility. New Orleans clamped down on this.

iheartthed Jan 24, 2023 9:46 PM

Quote:

Originally Posted by Trae (Post 9847840)
The people who got wiped out in 2007-2009 were the ones who were duped by banks/home builders into signing for homes when they couldn't afford it. This time around, more homeowners could afford and those who couldnt sat out. Completely different situations.

No, that's not the only thing that happened. It completely distorted the housing market. Even people who were not buying homes with ARMs were paying inflated prices and found themselves underwater with their traditional mortgages once the bottom fell out. There were also people that refinanced the homes they owned before the bubble, and also found themselves affected. And, to a point that jmecklenborg was making above, it fueled a construction boom that sucked people out of cities in some slower growing metros.

iheartthed Jan 24, 2023 9:48 PM

Quote:

Originally Posted by JManc (Post 9847864)
IF you can afford to put enough into a 401k to build wealth over time. Most people probably don't max their contributions (or have employer matching) but still have to pay to live somewhere so wealth/ equity likely comes from their home primarily.

If someone can't afford to contribute to their 401k then they probably shouldn't own a house. Everybody should be contributing to their 401k before they go looking to buy a house.


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