By Albert Lin
Ferguson’s housing market may be a contributing factor in the racial tension that erupted following the shooting of Michael Brown.
The New York Times reports that in Ferguson and other nearby suburbs of St. Louis, out-of-town investment firms are increasingly buying up distressed real estate and renting it to low-income residents. Since Ferguson’s population is about two-thirds Black, it follows that many of those tenants are Black as well.
According to RealtyTrac, which monitors sales and foreclosures, the average house sales price in Ferguson was $45,032 last year, up 58 percent from 2011—but still only about half the price of the average home in 2006, when the market peaked.
The financial crisis has had a disproportionate impact on Ferguson, where 50 percent of the city’s houses are under water—i.e., the owner owes more on his or her mortgage than the property is worth. Nationally, the rate is only 17 percent.
Investment firms flush with cash have taken advantage of the opportunity, accounting for one quarter of home sales in the area, according to RealtyTrac.
On the one hand, that means fewer abandoned properties. But housing advocates wonder if out-of-town landlords will upgrade the homes—many of which are more than 50 years old—and what their long-term intentions are. Chris Krehmeyer, President and CEO of Beyond Housing, told the Times that he is concerned that these firms will just let the properties continue to age and deteriorate. Ultimately, if firms become dissatisfied with the return on their investment, they could choose to just abandon the properties.
Edward Renwick, CEO of Raineth Housing, says that his Los Angeles–based firm and its investors plan to be around for a long time. “We’ve designed this so everyone will be happy if we own these homes forever,” he said.
Raineth is one of the bigger players in the area, having bought 72 houses in Ferguson since 2011, about 5 percent of all the single-family houses sold in that time. On a wider scale, Raineth owns 445 properties in six cities in suburban St. Louis. Renwick’s brother-in-law, Detang Chen, a partner in the firm, attended Washington University in St. Louis and was behind the firm’s decision to invest in the area.
In Ferguson, 461 families are receiving federal subsidies, about 8 percent of the Section 8 vouchers issued by the Housing Authority of St. Louis County. That has scared off some of the larger institutional investors, which see better opportunities elsewhere. Renwick says that Raineth—which also owns houses in Kansas City, Mo., and Cincinnati—made up to 40 percent of its properties available to tenants who qualify for Section 8 assistance, which restricts the rent a landlord can charge.
Still, Susan Rollins, Executive Director of the Housing Authority of St. Louis County, said she would put Raineth in the “bottom third” of landlords who accept subsidies when it comes to basic repairs and renovations. Moreover, the Times says that tenants and other housing officials gave Raineth “mixed grades” as a landlord.
Renwick says this is the first complaint he’s heard from the Housing Authority, and notes that last year it issued subsidies for 90 Raineth tenants. He also points out that it can be difficult to renovate a property when it is occupied. “We strive to treat our tenants well,” Renwick said.