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- Joeff Davis
- EDUCATION CAMPAIGN: Occupy Our Homes Atlanta activists Shabnam Bashiri (right) and Kwabena Nkromo tell a homeowner about his new big-business neighbor.
Rental prices in Atlanta, both for homes and apartments, have remained high. It costs at least 40 percent more to rent than buy as of August 2012, according to the most conservative estimates from Trulia Inc. People's attitudes toward home ownership have also shifted. In 2011, only 66 percent of Americans thought homeownership was a safe investment, compared with 83 percent in 2003, according to a report by Morgan Stanley outlining investment opportunities in the shift to "a rentership society."
The companies betting on Atlanta's housing market expect that trend to continue, and so do some former Wall Street executives. Oliver Chang, former head of U.S. housing strategy at Morgan Stanley and co-author of 2011's "a rentership society" report, quit his job to help launch Sylvan Road Capital last August.
If Chang is right, the trend marks a paradigm shift in how homes are rented and the way people live, at least for the near future. Every former homeowner forced to vacate during the economic downturn is a potential renter. That, combined with the fact that less people are buying homes, creates a huge demand for rental properties.
The dynamic of renting from one of these firms varies by company. Many bill themselves as one-stop shops, overseeing purchases, renovations, management, and maintenance of the homes. Others choose to partner with property management teams and other companies. Sylvan Road prides itself on having smaller field offices in the communities where it owns homes, saying the local presence allows it to be accountable and accessible to tenants. Other firms oversee properties in as many as 20 metro counties from a central office.
But the concern exists that Atlanta may be too flush with rental properties, and that oversaturating some neighborhoods could negatively impact the communities over time. Couple the large number of homes being converted to rentals with the thousands of apartment units currently hitting the Atlanta market, and some advocates worry the attention from big business could undermine Atlanta's real estate recovery nearly as fast as it rebounds.
Occupy Our Homes Atlanta, the offshoot of 2011's Occupy movement that's focused on the foreclosure crisis and its aftershocks, has begun the arduous task of tracking a growing list of homes recently bought by large firms such as Blackstone and Colony American Homes. The group is working on a strategy it hopes will slow the number of homes being converted into rentals by these investment companies, starting with a door-to-door campaign to educate those with big business landlords.
"The major concern for us is Wall Street and the financial sector being involved with housing again," says Rob Call, a full-time activist with OOHA. "Sure, they're pushing up home prices, but the plan is to turn around and sell the homes in five years or so. It's intentionally creating a bubble."
"One of the big questions is whether the kind of stabilization in prices we're seeing, which in general is a good thing, is sustainable over time," says Dan Immergluck, a professor at Georgia Tech's School of City and Regional Planning and author of 2009's FORECLOSED: High-Risk Lending, Deregulation, and the Undermining of America's Mortgage Market.
"Another big question is what they do with properties that don't turn out to be profitable," Immergluck says. "If they see them as not profitable, they're less likely to keep them up, and they'll start minimizing investment in them, and then that could cause spillover problems."
Some communities could also be hampered by having too many renters, says John O'Callaghan, president of the Atlanta Neighborhood Development Partnership, a nonprofit that helps families deal with foreclosures and other housing issues.
"Having the right investors in neighborhoods to acquire, rehab, and repopulate homes can be a good thing, but if overdone you can start to do as much harm as good," O'Callaghan says. "If a neighborhood that had a good balance of home ownership and rental opportunities becomes over-concentrated in rentals, you could potentially see home values decline, and at that point investments may not be kept up in the neighborhood."
On the other hand, for some of the most blighted communities rattled with foreclosures, like Atlanta's Pittsburgh and Vine City neighborhoods, turning vacant homes into rentals could act as a stepping-stone to a more permanent and prosperous resident base, explains Immergluck.
"For the city, the bottom line is taking vacant and abandoned houses and putting people in them," says James Shelby, Commissioner of Atlanta's Department of Planning and Community Development. "Whether it's an investor or developer, as long as they're turning vacant properties to an occupied state that helps the city."
But LaShawn Hoffman, president of the Pittsburgh Community Improvement Association, isn't convinced. He says occupying vacant houses is only part of the issue, and that neighborhoods like Pittsburgh also need access to goods and services, such as grocery stores and retail outlets, to truly grow into thriving communities.
"I think there could be some value in purchasing dilapidated properties across the city of Atlanta to provide quality, affordable housing for moderate- to low-income families, but I don't think that would be a good strategy in my own neighborhood," Hoffman says. "We're already dealing with an almost 3-to-1 ratio of renters to homeowner-occupied residents, and we really have to start building the homeowner base in order to reach the level of revitalization we feel this neighborhood deserves."
A Grant Park resident, speaking on the condition of anonymity, says renting makes a lot of sense for him and his roommate, but he doubts they'll stay in their current home much longer. Last month, after their property was sold to a company owned by a large investment group, he says they were given a 90-day notice that their rent would nearly double. They could sign a new lease or move out.
"They've just set the fair market rent at $1,650 [a month], which is a considerable hike and doesn't really fit the market," the resident says about his three-bedroom house a few blocks from Zoo Atlanta. "Somewhere more around the $1,200 or $1,300 range seems to be what's going in our area. If we can negotiate what we feel is market value [we'll stay]."
If they do decide to move, he and his roommate certainly won't be at a loss for rental options.
"This wave is coming. Good can [come] out of it, but there are going to be unintended consequences and those consequences may very well be negative," says O'Callaghan. "We as local neighbors, local governments, and advocates need to determine how we can incentivize those that are doing it right and provide barriers to the activities of those that are doing it wrong."