Last week, Urban Strategies Council, a smart and savvy nonprofit in Oakland, Calif., caused a bit of a local stir with a report looking at who's been buying up foreclosed properties in their city -- a town that's been seriously hit by the foreclosure crisis. What they found is almost certainly not limited to Oakland, and should be cause for discussion nationwide.
In a nutshell, Urban Strategies reported that widespread foreclosures are producing a massive change in the ownership of entire communities:
Our analysis reveals that -- as of October 2011 -- investors had acquired 42 percent of all properties that went through foreclosure since 2007 in Oakland. Of these properties acquired by investors, 93 percent are located in the low-income flatland neighborhoods of the city. Further, only ten out of the top 30 most active investors are located in Oakland.
The picture the report paints is disturbing, with outside investors suddenly wielding disproportionate influence in what have traditionally been the city's most disenfranchised neighborhoods. These neighborhoods are mostly inhabited by people of color, the communities hit hardest by foreclosures in recent years. Now, a relative handful of investment firms (one out-of-town company alone has bought up over 300 properties) are swooping in and paying cash, crowding out individual buyers. As a Bay Citizen's story put it:
Many of these investors are turning the homes into rental properties and charging rent that is significantly higher than the monthly mortgage payments many families would have to make if they purchased the homes.
"They are massive landlords in neighborhoods that historically have had high rates of homeownership, and very few people are aware of the investor activity that's taking place under their feet," said Steve King, the organization's housing and economic development coordinator.
The city is seeing a massive transfer of wealth from individual homeowners to a handful of companies. And right now there aren't a lot of standards governing how these companies do business. It's not too much to suggest that it might be good for the community to have standards regarding maintenance and upkeep, for example, in order to preserve the stability of neighborhoods.
And if we really want to salvage something good out of this situation, how about an effort to ensure that upkeep and rehab work for these investor-owned properties goes to diverse small businesses located in these struggling communities?
Finally, let's not forget that this is happening because of a housing crisis. There is a crying need for affordable housing, for both ownership and rental. If investors are going to be buying up homes in bulk, a significant percentage should be set aside for affordable housing.
While I can't say for sure that this is happening all over the U.S., there is no reason to believe Oakland is an anomaly. There are certainly plenty of places where mass foreclosures are likely to smell like profits to potential investors.
What we are learning is that the foreclosure crisis is affecting and even remaking communities in ways that no one had envisioned or prepared for. This is something that citizens and their elected officials need to start discussing and figuring out how to address.
It's been said that every crisis is an opportunity, and what's happening to foreclosed homes sure looks like a crisis. Let's make it an opportunity to protect neighborhoods, aid local businesses and provide affordable home ownership and rental opportunities for those struggling to keep a decent roof over their heads.