Big corporations are buying up homes and “eroding the American dream of homeownership

[hauntedheadnc]

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

...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]

And how is this shaking out elsewhere?

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

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]

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]

Originally Posted by jmecklenborg

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

[Kngkyle]

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

[Chef]

Originally Posted by Kngkyle

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]

Originally Posted by Chef

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.

[Kngkyle]

Originally Posted by Chef

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.

[iheartthed]

Originally Posted by Wigs

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]

Originally Posted by iheartthed

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]

Originally Posted by Kngkyle

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.

[jmecklenborg]

Originally Posted by Wigs

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

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.

[Wigs]

Originally Posted by jmecklenborg

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.

Gotta love it when a homeowner and owner of investment properties tells renters that Corporate mass ownership of housing for overpriced rentals is a good thing!

2023 is wild.

I highly doubt Steely, chris08876, JManc, and many others would love to still be renting, like millions of us in Ontario, Canada for whom home ownership is out of reach for the foreseeable future, and rents have skyrocketed!

Want to build your own house? Can you afford an $800k-1M+ CAD mortgage? (Only a paltry $600k-750k USD)

[TWAK]

Originally Posted by Wigs

Gotta love it when a homeowner and owner of investment properties tells renters that Corporate mass ownership of housing for overpriced rentals is a good thing!

"Owning a home and rental properties is far worse than renting an apartment or being denied the ability to even own a home!"

2023 is wild.

I highly doubt Steely, chris08876, JManc, and many others would love to still be renting, like millions of us in Ontario, Canada for whom home ownership is out of reach for the foreseeable future, and rents have skyrocketed!

Want to build your own house? Can you afford an $800k-1M+ CAD mortgage? (Only a paltry $600k-750k USD)

It's good to get a Canadian perspective on this since what's going on in Canada is far worse and more widespread. Do you guys know who exactly is behind it and is the government doing anything about it? I saw that Canada still has ARMs....what the flying efff? Those tanked the US economy!

[Kngkyle]

The people that say owning a home is a great investment are the same ones that take offense to someone owning an investment home. Those evil "outside" investors!

[Trae]

Originally Posted by Kngkyle

The people that say owning a home is a great investment are the same ones that take offense to someone owning an investment home. Those evil "outside" investors!

there is clear difference between one family owning a single home, and an investor owning 100 and upmarking rent by 10% annually. there should be caps on investors owning property, especially foreign ones. thats the only way to fix the ownership issue outside of wages increasing with inflation and promoting better savings habits earlier on in schools, so they can buy homes or whatever else they want later.

[Kngkyle]

Originally Posted by Trae

there is clear difference between one family owning a single home, and an investor owning 100 and upmarking rent by 10% annually. there should be caps on investors owning property, especially foreign ones. thats the only way to fix the ownership issue outside of wages increasing with inflation and promoting better savings habits earlier on in schools, so they can buy homes or whatever else they want later.

So make it illegal for the family that owns the property to sell it to an investor? How is that fair to the family that wants to sell their home for top dollar? Just throw property rights out the window because you can't afford to buy a home in the neighborhood you want?

[Chef]

Originally Posted by Kngkyle

So make it illegal for the family that owns the property to sell it to an investor? How is that fair to the family that wants to sell their home for top dollar? Just throw property rights out the window because you can't afford to buy a home in the neighborhood you want?

Zoning already erodes property rights. As it is we already have tons of laws regulating economic behavior where the right of an individual to maximize profits is curbed to protect the greater interest of society as a whole. Most people aren't libertarian purists when it comes to economic and financial laws. We give up pieces of our freedom so that we can live in a functional society.

Laws preventing Wall Street from becoming America's landlord are probably something most people could be sold on if they think it would be good for the community writ large.

[Kngkyle]

Originally Posted by Chef

Zoning already erodes property rights. As it is we already have tons of laws regulating economic behavior where the right of an individual to maximize profits is curbed to protect the greater interest of society as a whole. Most people aren't libertarian purists when it comes to economic and financial laws. We give up pieces of our freedom so that we can live in a functional society.

Laws preventing Wall Street from becoming America's landlord are probably something most people could be sold on if they think it would be good for the community writ large.

Yep, and that zoning is arguably one of the leading drivers for the lack of new low to middle income housing. Through overly onerous zoning we've made it all but illegal to build anything but luxury housing in many places.

[TWAK]

Originally Posted by Trae

there is clear difference between one family owning a single home, and an investor owning 100 and upmarking rent by 10% annually. there should be caps on investors owning property, especially foreign ones. thats the only way to fix the ownership issue outside of wages increasing with inflation and promoting better savings habits earlier on in schools, so they can buy homes or whatever else they want later.

There definitely should be a cap (or ban) for investors and a ban for foreign entities owning US property. These non-citizens are denying Americans the right to own property and even exploiting them through rent.
If US investors want to own or have shares in apartments or buildings, that seems fine. Owning individual homes or properties? Hell naw.