The proportion of Philadelphia homes purchased by real estate investors in the last quarter is lower than that found in other major metropolitan areas in the country.
Some are happy to invest in the city’s aging housing stock, but there are concerns that it can promote gentrification and overwhelm potential working-class homebuyers.
“I don’t think anyone really understands the big picture,” said Ira Goldstein, policy director for the reinvestment fund, a community development organization.
“On the other hand, investors are … acquiring assets that may not be well maintained and returning them to service,” he said. “They may also serve the purpose of removing ownership from the humble, black-owned population.”
1,898 Philadelphia home investors purchased in the first three months of the year showed a 55% increase quarterly and an 116% year-on-year increase. study From the real estate website Redfin. An investor is defined as “any institution or company that buys residential real estate.” Virginia Beach, the runner-up, saw only a 68% year-on-year increase.
The increase in Philadelphia is due to Redfin’s discovery that investors’ home purchases slowed nationwide in the previous quarter. Fierce purchase In the middle of the COVID-19 pandemic.
Goldstein said the number of potential good investments in most major metropolitan areas is declining as home prices and interest rates continue to rise. Rents haven’t risen enough in most places to explain the additional costs investors are currently facing.
Philadelphia is an affordable region compared to neighboring metropolitan areas such as New York City and Washington DC. Philadelphia still has a relatively large number of homes in the $ 200,000 range, which is of value to many investors.
This trend is especially pronounced in the dense, traditional working-class black districts of northern and western Philadelphia.
“What you’re seeing is a bigger intrusion into the minority market,” Goldstein said. He added that about half of all residential real estate transactions in Philadelphia have involved investors in recent years, which is higher than the national average.
About two-thirds of transactions in black neighborhoods involve investors, but about 35% in the section of cities with a large number of white residents.
Redfin’s zip code-specific data, though not very strong, show that this trend will continue until 2022.
Zip code centered on Elmwood ParkSouthwestern Philadelphia, where more than 80% are black, 42% of home purchases so far this year have been made by investors.With zip code including Strawberry MansionNorth Philadelphia, where more than 90% are black, the number is 58%.
This is partly due to the fact that the condition of these neighboring homes is a sweet spot for investors, according to Goldstein. Due to postponed maintenance, these homes are relatively affordable, but they don’t rot to the point of being exorbitantly expensive to refurbish.
Goldstein said this trend was also “a manifestation of the inability of capital to flow into some of these (minority) markets.”
Investment companies and wealthy individual speculators can easily borrow money and often pay upfront for their home in cash, which most realtors prefer.
Potential homebuyers, especially working class people with roots in these areas, do not have such easy access to capital.this is Problems for generations This can be traced back to redlining and other discriminatory housing practices.
Even if a first-time homebuyer in Philadelphia with a modest income can get a mortgage, it is often discounted by investors.
According to Goldstein, these areas have the advantage of having new crops for recently refurbished rental properties. It would be even better if the landlord acted “conscientiously” and provided rent available to long-term residents in the neighborhood.
Nonetheless, these refurbished apartments can also attract newcomers to fuel gentrification. Goldstein says his chances of buying a home are reduced even if the long-time residents of the neighborhood aren’t kicked out. This is a problem.
“Housing ownership continues to be the only way for moderately-income people to actually start developing wealth and achieve wealth transfer between generations,” he said.
Goldstein believes this is also a public policy issue. Many Philadelphia politicians agree.
Promoting and protecting home ownership among residents of Philadelphia’s existing working class has recently become a hot topic in the city council.
The New budget This includes expanding residential land exemptions aimed at mitigating the increase in property taxes brought about by last year’s revaluation. Residents can now amortize $ 80,000 instead of the previous $ 45,000.
Also created a city council Neighborhood Conservation Initiative In 2020, we allocated $ 113 million to build affordable homes, $ 65 million to store affordable homes, and $ 58 million to help first-time homebuyers.
The body has also been established Philadelphia Public Financial Institution Earlier this year. Agents can undertake small business loans to entrepreneurs from communities with restricted access to credit. This makes it easier for people to borrow money from traditional lenders.
Although the program focuses on small businesses rather than home ownership, entrepreneurs can potentially use their loans to buy real estate and become landlords.