New Rutgers-Newark Housing Report Finds Alarming Increase in Corporations Buying Newark Homes

“The neighbors, we have been talking about it. We’re all getting the phone calls,” she said. “We block the phone call, but they find another algorithm to get through and call again.”

The issue Smith-Gregory and her neighbors face on a daily basis has become part of a larger trend Newark residents have experienced in recent years, which is a push from corporate buyers, backed by investors, to buy homes to rent out and pay investors through money from rent collection.

In fact, nearly half of Newark’s single-family homes (homes between one and four units) between 2017 and 2020 were sold to institutional buyers, according to a report released this week by the Newark-based Rutgers Law School Center on Law, Inequality and Metropolitan Equity.

“In Newark, we’re seeing investor-buying at an even greater scale more than any other city we could find,” David Troutt, CLiME director and co-author of the report,“Who Owns Newark? Transferring Wealth from Newark Homeowners to Corporate Buyers," told TAPinto Newark.

Part of this trend can be directly linked to the foreclosure crisis in 2008 that impacted significant middle-class wealth in certain Newark neighborhoods. These areas soon became targets of investors seeking passive returns from rents. Outside companies snatching up these properties could then influence neighborhood housing markets to primarily benefit their investors.

“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,” the 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.’”

If left unchecked, city officials and residents fear the city could see a significant decrease in homeownership by Newark residents, push current residents out of the city as a result of dramatic rent increases, reduce availability of affordable housing, spur renter displacement, and exacerbate instability in communities.

“The report is not a surprise. We’ve known for a while that we’ve been preyed upon,” Smith-Gregory said. “What this report did is to confirm the anecdotes that we as residents are seeing.”

The issue at hand has been seen in Newark and nationwide, according to the report. Investors are draining the inventory of houses that might otherwise be obtainable for working- and middle-class residents in cities such as Atlanta, where large investors accounted for 22% of home purchases. Large investors also accounted for 22% of home purchases in Charlotte and 20% in Phoenix, according to the report.

In Newark, institutional investors are rapidly buying up one- to four-unit buildings in the South and West wards, both predominantly Black neighborhoods in the city. These wards, the report said, accounted for about three-quarters of all institutional purchases in Newark. 

"Between 2017 and 2020Q1, there were nearly 2,000 residential property transactions to institutional investors in the South Ward, and more than 1,900 in the West Ward," according to the report.

Certain Newark neighborhoods have been heavily targeted. They include the Weequahic, Upper Clinton Hill, West Side Park, Fairmount and Vailsburg neighborhoods, according to the report.

Although properties in Newark are being acquired by corporate entities at an alarming rate, Troutt noted his team at CLiME found no illegal activity in the transactions.

The threats to Newarkers and government policy goals, however, are still at stake.

“These folks are anticipating being able to get the kind of rents that they previously could not get in the city of Newark, which means they’re beginning to invest in purchase-and-buy properties here,” Newark Mayor Ras Baraka said.

“On one hand, it signals that people are interested in Newark’s growth and future. On the other hand, they are taking full advantage of that by purchasing all of the properties they can get their hands on through foreclosure and soliciting people through private sales," he said.

Upon release of the report, Baraka outlined the city’s goals to mitigate the issues highlighted by CLiME while ensuring Newark residents are still a part of the city’s growth and revitalization.

Parts of Baraka’s plan call for tightening up laws to prevent illegal solicitation practices; imposing a fee on renting and landlord registrations for property owners and landlords that increase rents above 5% year-over-year; adding a deed restriction to all city-owned property, which will require a right of first refusal for non-profit affordable housing developers; and to convene a meeting with investors, developers of color, and community development corporations to develop further strategies on how Newark can ante up investment in neglected neighborhoods.

Other initiatives the city has previously implemented in recent years could help address the issue as well, according to the mayor.

In 2021, the city launched its Land Bank program, allowing the city to obtain vacant, abandoned and neglected properties for productive reuse purposes. The city also implemented a Neighborhood Development Program, which turns city-owned land into residential and affordable housing. The mayor last year announced a commitment to increasing access to affordable housing as well, with plans to build 3,000 new homes by 2026 and to create or preserve at least 6,000 affordable housing units of low-income residents.

Alongside implementing policies and legislation to address the issue, Baraka knows battles in the courtroom are likely to ensue with corporate entities pushing back against what they believe is their Constitutional right to invest in real estate.

“I’m sure that some of these folks are going to challenge some of the things that we are putting into place here, which is going to force a state or court remedy,” he said.

The mayor seemed up to the challenge.

“We look forward to that because this is the only way that we can get the resolution that we need,” he said.

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published this page in News and Politics 2022-05-05 03:17:07 -0700