Who Owns Newark? City Fights Back Against Corporate Home Buying Spree

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.

• See related article: NJ Has One Of America's Worst Racial Wealth Gaps, Study Says

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:

• "Doubling the Live Newark Program to help residents become first-time homebuyers." Read More: Newark Trying To Boost Housing Market With No-Interest Loans
• "Implemented the Neighborhood Development Program, which turns city-owned land into residential and affordable housing." Read More: Newark Vs. Gentrification: We Can't Become Brooklyn, Mayor Says
• "Allocated a $20 million investment to create housing affordable to residents at a $34,000 income level." Read More: Newark Trying To Add Housing For Low-Income Families
• "Using Land Bank properties to create Section 8 homeownership opportunities." Read More: Newark Families Get Keys To Their 1st Homes: 'My Dream Came True'
• "Created the NJ Forty Acres and a Mule Fund (NJ FAM Fund) that will invest $100 million into real estate development and small business development for Black and Latinx partners." Read More: Newark Makes Bold, $100M Pledge To Black, Latinx Business Owners

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:

• Will urge the governor, state legislators, and the municipal council to create a coordinated state and local policy to address the effects of large-scale corporate ownership of private homes.
• Will submit legislation to the municipal council to make it unlawful to solicit offers without residents’ permission (e.g., through mail, knocking on doors, phone calls).
• Will submit legislation to the municipal council to bring more transparency to limited liability companies (LLCs) who are purchasing private properties to keep them accountable.
• Will submit legislation to the municipal council covering properties not under rent control to impose fees on renting and landlord registrations for property owners and landlords that increase rents above five percent year over year. These fees will be directed to the Affordable Housing Trust Fund and used to fund the creation of new affordable rental and homeownership opportunities for Newark residents.
• Add a deed restriction to all city-owned and Land Bank properties, which will require the properties to be affordable.
• Will convene a meeting in the coming month with investors, developers of color, and community development corporations to develop further strategies on how Newark can work to invest in under-invested and disinvested communities.
• The administration will review all recommendations proposed in the CLiME report and develop an action plan to ensure community development takes place in all five of Newark’s wards.

“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.

• See related article: Cost Of Renting A Home Is Skyrocketing In Newark Metro Area: Study

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.”

• See related article: Long-Awaited Newark Apartments Will Be 100% Affordable Housing
• See related article: Newark 'Land Bank' Hopes To Boost Homeownership, Beat Blight
• See related article: Newark Will Create 6,600 Affordable Homes In 5 Years, Mayor Pledges

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