The explosion of corporate buyers purchasing homes and turning them for rental profit has been of increasing concern over the last several years. Cash rich investors, some of whom remain anonymous, are at the heart of a housing shortage that has squeezed interested home buyers out of the market. The predicament has affected nearly every pocket of the country, but in places like Newark, New Jersey, the Garden state’s largest city with a majority Black population, the numbers are alarming.

According to a new study released by Rutgers University, from 2017-2020, anonymous corporate buyers purchased almost half of the city's residential housing stock, the highest rate of this type of real estate practice in the nation. “These trends demonstrate the strong probability of rapidly rising rents, lower homeownership rates, a diminished Black middle class, market challenges to building affordable homes, and even more housing instability for low- and moderate-income Newarkers and displacement,’’ according to the report. 

David Troutt, a Rutgers law professor and founding director of CLiME, The Rutgers Law School Center for Law, Inequality and Metropolitan Equity, tells EBONY that the study, Who Owns Newark? Transferring Wealth from Newark Homeowners to Corporate Buyers, was prompted by members of the Newark community who raised concerns over being priced out of properties by anonymous investors. “It was hindering their ability to build affordable housing, especially for homeownership,” says Troutt. The study’s lead author asserts that those concerns were the first inkling that something was going on in Newark neighborhoods. From there, CLiMe put two and two together, linking a somewhat anecdotal phenomenon to increased press reports about investor buying across the country. 

“Those studies are troubling, particularly for Black people,” Troutt explains. “What they clearly show is deliberate targeting of Black, middle class neighborhoods, for single family rentals and other passive income stream opportunities for large scale investors. And so we wanted to see the extent to which Newark reflected these trends. And we wanted to continue our work on housing issues in Newark, and wealth inequality to determine just what is going on.”

Historically, Black Americans have faced higher hurdles in reaching home ownership. Predatory lending, low approval rates from banks and other inequitable practices have already thwarted minorities for years. "This 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. “Newark’s experience demonstrates what can happen when local economies ignore equity.’’  

Housing affordability in Newark was already a troubling issue for its residents. Nearly 80 percent of Newarkers rent—a considerably high rate. And many of these renters are effectively underwater or rent burdened. Troutt says that many of these renters are paying more than 30 percent of their income in housing costs. And a significant number of people are paying more than half of their income. “So we know that people are at risk of displacement,” says Troutt. “We know that COVID made a lot of this worse.”  

Against that backdrop, it’s become increasingly more obvious that there is a lot of housing instability for Newark residents, and that it is most pronounced in the predominantly Black wards. Newark Mayor Ras Baraka, as a matter of policy, wants to increase the production of affordable housing, for rent, and also wants to develop more programs to build back homeownership after the foreclosure crisis. Troutt notes that these two policy concerns are becoming more challenging with the investor trend quietly percolating beneath the surface and impacting housing markets. “Investor buying will exacerbate the affordability crisis,” Troutt insists. “By relentlessly pushing prices rents upward, it will exacerbate the home buying and homeownership crisis by buying up supply and pushing prices out of reach.”

The study does have a few solutions. They include involvement from government on the local level to regulate housing markets on behalf of both renters and homeowners. It also recommends imposing fees for landlord registration and using those fees to put them into an affordable housing trust fund that the city can use to build more affordable housing. There is also a need for policy innovation, says Troutt, who offers up creative investment models. “This is a relatively new animal,” he admits. “And not a lot of cities have been successful yet in figuring out how to legally address it since very little of what's going on is illegal.