NEWARK, NJ — There’s a disheartening new trend developing in Newark. And it may be a big reason why the cost of renting a home is rising in New Jersey’s largest city, a new study says.
Earlier this week, the Rutgers Center on Law, Inequality and Metropolitan Equity (CLiME) released a report that highlighted a startling statistic: nearly half of Newark’s residential property is owned by corporations. It’s the highest rate in the nation, researchers said.
“What has happened in other cities is happening in Newark, but on a scale unmatched anywhere in the country,” the report states.
According to researchers, between 2017 and 2020, about 2,500 homes were sold to institutional buyers – more than 47 percent of the city’s buildings with one-to-four units. That’s a threefold increase in investor purchases since 2010, when less than 20 percent of all residential sales were to institutional buyers.
Here’s how it’s happening, the study said:
“Corporate buyers often purchase large batches of single-family homes in one neighborhood and lease them, paying investors with money collected from rents. The practice is part of a nationwide trend that began when limited liability companies, often backed by large-scale equity investment, became active in residential real estate after the foreclosure crisis in 2010.”
Troubling? You bet, researchers said. Against the law? That’s another story, they added; CLiME found no illegal conduct in its Newark analysis. “Real estate investing is constitutionally protected activity,’’ the report noted.
But that doesn’t mean it’s not harmful, researchers emphasized. When nearly every other home in a city is owned by a corporation whose bottom line is profit – not community-building – it can lead to “rapidly rising rents,” “lower homeownership rates” and “housing instability” for low- and moderate-income residents.
It can also disproportionately hurt communities of color, researchers said, including mostly Black neighborhoods such as Newark’s South and West Wards, where nearly three-quarters of all institutional purchases in the city are taking place.
Investors have been targeting five neighborhoods above all others, researchers said: Weequahic, Upper Clinton Hill, West Side Park, Fairmount and Vailsburg.
Three of the largest investor buyers are real estate companies which appear to be operating as “new large-scale corporate landlords”, researchers said. These are Adar Capital, Lexington Property Group and Harness Homes Group.
However, many of the properties were bought by “completely anonymous investors,” researchers said. This lack of transparency among buyers can make it much harder for residents to keep track of who actually owns the building they live in.
“If we’re going to be a company town, we should at least know which company,” said David Troutt, a Rutgers law professor and founding director of CLiME.
Read the full study and learn more about its methodology here.
COMBATING A ‘DANGEROUS TREND’
Newark officials say they’re aware of the problem, and that they haven’t been sitting on their hands waiting for a solution.
According to a statement from the office of Mayor Ras Baraka, here are some of the ways the city has tried to increase affordable housing and home ownership in Newark over the past few years:
And the city isn’t done yet, officials say.
On Wednesday, two days after the release of the report, Mayor Ras Baraka praised the Rutgers study and announced that his administration will be launching a package of measures that will help to get local homes back into the hands of people – not corporations.
They include:
“In cities and even suburbs across America, institutional investors are eroding the American dream of homeownership as they convert owner-occupied homes into corporately owned rental units,” Baraka said.
“In Newark, where we have worked hard for years to expand homeownership, we will do everything possible to combat this dangerous trend,” Baraka continued.
Troutt credited city officials for taking positive steps to fix the problem, especially considering that corporations have made a tough task even harder.
According to Troutt, corporate buyers have thwarted Newark’s goal of increasing home ownership because they can outbid the city’s community development corporations, which purchase properties to sell to first-time buyers and to keep rents lower.
“Traditionally, Americans believed homeownership to be the individual path to collective security,” Troutt added. “Corporate buying up of the residential market forecloses all of that.”
Send local news tips and correction requests to eric.kiefer@patch.com
Sign up for Patch email newsletters. Learn more about posting announcements or events to your local Patch site. Don’t forget to visit the Patch Newark Facebook page.
Sign up for free local newsletters and alerts for the
Newark, NJ Patch
Patch.com is the nationwide leader in hyperlocal news.
Visit Patch.com to find your town today.