Wall Street firms and corporate investors are purchasing large numbers of homes and regular home buyers are finding it difficult to compete, according to data from Redfin, a real estate brokerage that publishes data on the housing market.
This is drastically affecting Black home buyers. Investors are targeting Black neighborhoods where they are buying homes in bulk and then hiking rents by 40 percent, according to a new congressional report.
The homeownership rate for Black Americans is at 43.4 percent — lower than in 2010 when it was 44.2 percent — and nearly 30 percentage points less than white homeownership (72.1 percent), according to the National Association of Realtors.
In a memo dated June 23 from the Congressional Subcommittee on Oversight & Investigations” on a June 28 hearing entitled, “Where Have All the Houses Gone? Private Equity, Single-Family Rentals, and America’s Neighborhoods.”
Among the witnesses who were to testify were Jim Baker, executive director, Private Equity Shareholder Project; Shad Bogany, real estate agent, Better Homes, and Gardens; Sofia Lopez, deputy campaign director of Housing, Action Center on Race and the Economy; Elora Lee Raymond, assistant professor, Georgia Institute of Technology; and Jenny Schuetz, senior Fellow, Brookings Institute.
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According to the memo, following the 2008 financial crisis and subsequent home foreclosure crisis, corporate ownership of single family residence (SFR) homes increased “significantly,” growing 3 percent annually since 2010. The third quarter of 2021 experienced the fastest year-over-year increase in 16 years.
This increase was spurred on due to several factors, including ample supply of for-sale homes available particularly due to foreclosures, tight credit for individual homebuyers, and the introduction of federal policies meant to shore up the housing market.
“Before the financial crisis began in 2008, investors owned about 10 million SFR homes and the market was dominated by smaller investors who owned 10 or fewer homes. As late as 2011, no single investor in the U.S. owned more than 1,000 homes,” the memo noted. But this spiked between 2013 and 2017, and investors scoured manly Black communities for homes.
Just in the third quarter of 2021 institutional investors purchased 42.8 percent of homes for sale in the Atlanta metro area. Atlanta is 49.79 percent Black or African American.
The memo cited a 2018 study that found “that increases in institutional investments in SFR homes in Atlanta from 2010–2015 were concentrated in older, inner-county neighborhoods and were correlated with greater concentration of Asian, Latinx, and Black residents.” The same was the cases for other parts of the country that had large Black populations as well.
“A 2017 case study of Los Angeles County found that middle-income neighborhoods with higher percentages of Black residents and lower home values were disproportionately affected by increased investor participation in the SFR housing market,” the memo stated. And Detroit, which is more than 80 percent Black residents, was one of the top 10 cities where investors bought the highest shares of homes, according to Redfin.
In 2021, outside investors purchased bulk houses in metropolitan areas across the country at an alarming rate, an analysis by The Washington Post found. The analysis stated that 30 percent of home sales in majority-Black neighborhoods were bought by investors, compared with 12 percent in other ZIP codes.
“There is a massive racial homeownership gap in this country, which is a serious problem because owning a home is a key to building intergenerational wealth and reducing racial inequality overall,” said Sen. Robert Menendez, a New Jersey Democrat, according to The Post.
Photo:This June 15, 2009 photo shows the block in the Bedford-Stuyvesant neighborhood of Brooklyn, New York, where much of Spike Lee’s 1989 movie “Do The Right Thing” was filmed. (AP Photo/Seth Wenig)