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What Happens When Wall Street Buys Most of the Homes on Your Block

September 25, 2023 by Nicole Mason

By Ronda Kaysen and Ella Koeze

The New York Times:

Across the Bradfield Farms subdivision, 50 percent of the homes that sold in 2021 and 2022 were bought by large investors who paid in cash, as first-time buyers struggled to get a foothold.

Bradfield Farms, a community of about 1,000 houses on the outskirts of Charlotte, is no longer a place where a young, middle-income couple can easily buy a modest house for less than $200,000. Just a few years ago, it was.

Alvin Maisonet became the first person in his family to own a home — a two-story house with shade trees in the front yard in Bradfield Farms — on his 36th birthday.

For $148,500, Mr. Maisonet, a truck driver, now 44, and his wife, Patricia Maisonet, 43, a nurse, traded a frenzied life in Paterson, N.J., for generational wealth and tranquility. Joggers waved and said hello. The grassy backyard was bucolic; Ms. Maisonet envisioned a pool. “I felt like I was a princess in the middle of my castle,” she said.

Now, a newcomer is more likely to rent a house from a corporate landlord with a name like FirstKey Homes, Main Street Renewal, HomeRiver Group or Progress Residential.

Wall Street has come for the starter home.

First-time buyers, who overwhelmingly rely on mortgages, were often outmatched by cash buyers at the beginning of the coronavirus pandemic, when interest rates plummeted below 3 percent and home prices soared. Across the United States, more than a third of all sales in 2022 were in cash. Many of those houses went to families and individuals, but investors’ paying cash accounted for nearly 10 percent of home purchases that year, according to data from ATTOM, a property data analytics company. Investor activity was even higher in fast-growing Sun Belt cities like Charlotte, Atlanta and Phoenix.

Investors were largely uninterested in wealthier enclaves. Instead, they targeted middle-income neighborhoods, many with larger Black and Latino populations. Bradfield Farms fit the bill: It is in an area that, in 2020, was 35 percent Black and 11 percent Latino, according to census data. Residents include teachers, auto shop workers, receptionists, nurses and cabinetmakers.

Over two years, from 2021 to 2022, investors snapped up properties in Bradfield Farms at roughly three times the rate of the citywide average of 17 percent, according to a New York Times analysis of ATTOM’s data.

Homeowners were inundated with calls, text messages, letters and emails from people offering to buy their homes sight unseen. The buyers closed fast and used inscrutable names that ended in LLC. “Investors went hog-wild,” said Kelli Enos, a local real estate agent.

Large investors concentrated their purchases in middle- and working-class neighborhoods around the northern and eastern sides of the city.

In wealthier neighborhoods in south Charlotte, cash buyers were largely individuals, not corporations.

ash offers from investors are appealing. A homeowner does not have to stage the house, wait for an appraisal and inspection or watch a sale fall apart if the buyer can’t get a mortgage.

Even as investors have dialed back their purchases, buyers remain under pressure. Mortgage rates are at a 21-year high, home prices have continued to rise in Charlotte, and inventory is anemic. “Wall Street is definitely being blamed for home price increases and rent increases, whereas, in reality, home prices and rents would have gone up because these are fast-growing areas,” said Laurie Goodman, the founder of the Housing Finance Policy Center at the Urban Institute.

The single-family rental industry sees its efforts as providing a vital social benefit: People need homes to rent, and Wall Street has the deep pockets to help.

“Covid really drove demand for single-family rentals,” said David Howard, the chief executive of the National Rental Home Council. “As more people worked from home and schooled their kids from home, they needed more space. They wanted the front yard. They wanted a neighborhood with sidewalks and a little community center.”

A rental lowers the barrier of entry into a neighborhood. If you can’t afford a down payment, or don’t have strong enough credit for a mortgage, a “For Rent” sign changes the equation. More Black households move into white neighborhoods when the share of rentals grows, increasing diversity, a 2021 study found. “Rentals offer an opportunity to move into these better neighborhoods,” said Keith R. Ihlanfeldt, an economics professor at Florida State University and an author of the study.

But advocates of affordable housing argue that the proliferation of single-family rentals traps would-be buyers.

“It’s a thing of scale — they’re reaching near monopoly in some places,” said Madeline Bankson, a housing research coordinator at the nonprofit Private Equity Stakeholder Project. “They’re shutting people out of the home-buying process.”

For most Americans, their home is their largest investment and their primary source of generational wealth. Yet only 46 percent of Black households and 49 percent of Latino households own a home, both well below the national average of 66 percent.

“They say they can rent you the American dream, but I know hundreds of people who don’t want to rent — they want to own,” said Jessica Moreno, a community organizer at Action NC, a tenant organization in Charlotte.

The Renters

Tarchia Barber liked the rural feel of Bradfield Farms, with cul-de-sacs and shady streets surrounded by farmland and woods. “I’m a country girl,” she said, standing on her lawn one steamy afternoon, a “Home Sweet Home” sign on her walkway and bags of fresh mulch in the flower beds. When Ms. Barber moved into the house in December 2021, her neighbors left cookies, cards and flowers on her doorstep. When a neighbor cleaned her gutters unprompted, she thanked him with a cheesecake.

But her landlord, Progress Residential, has been slow to make repairs, Ms. Barber said. “My last landlord addressed problems within 24 hours,” she said. “He didn’t go through a property management company. He’d come and look at it in the day.”

By contrast, she has waited five or six days for a Progress technician to arrive after submitting work orders for repairs to a blocked dryer vent and a leaking shower. Nikki Sloup, a Progress Residential spokeswoman, said in an email that the company “responded to and completed all work orders,” sending out multiple technicians.

Read the rest of the article here: The New York Times:

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