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

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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."

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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."

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"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.