Outside investors are buying up foreclosed properties in Oakland, Calif., at a rate that not only has Oakland residents uneasy, but has also raised national concerns about an unchecked transfer of wealth taking place in the country’s most distressed, disenfranchised communities.
Private investors nabbed 42 percent of more than 10,000 foreclosed properties in Oakland between 2007 and 2011, according to research released by the Oakland-based nonprofit Urban Strategies Council. Most of these properties, often acquired through cash transactions at either trustee sale auctions or directly from banks, are located in lower-income neighborhoods of color in the city that still feel the effects of predatory lending practices.
Such a rapid increase in investor activity has already resulted in higher rents and presents the potential for poor property maintenance and vacancies, says Urban Strategies housing and economic development coordinator Steve King, who adds that “increased competition from investor-speculators has effectively shut out many otherwise qualified residents from the opportunity to become homeowners.”
King argues that “owner-occupants should be prioritized over corporate interests in the disposition of distressed property portfolios.”
How can we stem this tide? NHI senior fellow Alan Mallach suggests municipalities can take steps including compulsory landlord licensing programs and charging a one-time rental conversion fee when an investor buys a once-owner-occupied property. He also emphasizes the importance of incentivizing responsible landlords. (See The Great American Fire Sale.)
Oakland is already hard at work getting bank owners to improve their maintenance of vacant properties, as we’ll report on in the next issue of Shelterforce. Perhaps the next step will be taking action to influence who buys them.