A study recently published in Cityscape, “Housing Speculation, Affordable Investments, and Tenant Outcomes in New York City,” examines the association between housing speculation and tenant outcomes, including housing quality and eviction, in multifamily units in New York City. In the rental housing market, housing speculation takes two primary forms: (1) speculative sales, or purchasing higher-risk investment properties with the goal of selling them for a quick profit; and (2) speculative debt, or utilizing “cash-out” refinancing strategies to refinance a home loan for a larger amount than the previous loan, typically for the purpose of using equity to fund other investments. The paper finds that speculative sales and speculative debt increased most in neighborhoods that showed signs of gentrification, such as high poverty and growing populations with an increasing share of adults with college degrees. Further, speculative housing practices were associated with an increase in both housing maintenance violations and evictions.
The authors relied on data from the University Neighborhood Housing Program’s (UNHP) Building Indicator Project (BIP), which covers more than 70,000 multifamily properties with five or more units throughout New York City. The database includes property-level data on physical and financial distress indicators from 2003 to 2020, as well as data on sales and mortgages retrieved from the Automated City Register Information System (ACRIS). The researchers matched BIP data with community-level demographic data from the Census Bureau’s American Community Survey, building-level data collected by the Housing Data Coalition on evictions executed by New York City marshals, and records of tenant-reported housing maintenance violations that were investigated by the Department of Housing Preservation and Development (HPD). Finally, to understand how affordable housing solutions may alter the impacts of housing speculation, the researchers used data from the NYU Furman Center Subsidized Housing Information Project (SHIP) to identify whether private rental units were subsidized or unsubsidized.
Multifamily rental properties located in gentrifying neighborhoods with higher poverty and high percentages of residents of color were more likely than other multifamily rental properties to be resold at the greatest price increase. Specifically, multifamily rentals in areas that have higher poverty, higher Black and Latinx populations, a higher percentage of adults with college degrees, and a growing population experienced the most gains in value following resales. This finding held true even when accounting for housing market dynamics, including rising rents and hot-market periods where low supply and high demand increase housing prices. Similarly, more speculative debt was taken out on multifamily rental properties in areas with higher poverty and greater shares of Black and Latinx residents. For example, neighborhoods with a 40% poverty rate had a 30% higher probability of a multifamily rental unit taking on speculative debt than neighborhoods with a 20% poverty rate. These findings suggest that entities that engage in housing speculation in New York City seem to be targeting the lowest-income neighborhoods, which is particularly detrimental to communities that already struggle the most with high housing costs, a lack of quality affordable units, and housing instability.
Notably, the researchers found that speculative practices were associated with negative tenant outcomes, including poorer housing quality and eviction. Both speculative sale and speculative debt were predictive of increased housing maintenance violations, even when accounting for community-level demographics. For example, multifamily buildings with the highest increases in debt had about 0.8 more maintenance violations per unit per year than multifamily buildings that did not take on debt increases. Eviction rates per unit between 2017 and 2019 were almost two times higher in multifamily units that experienced a prior speculative sale or debt activity between 2014 and 2016 compared to properties without a speculative event. Even when controlling for several community-level and market-level factors, the researchers found that property owners that engaged in housing speculation evict at 1.5 times the rate of property owners with comparable buildings in comparable neighborhoods who did not engage in housing speculation.
Finally, the researchers found that affordable housing subsidies are associated with a reduction in maintenance violations and are less frequently associated with speculative sale or debt activities. Subsidized multifamily properties had fewer maintenance violations per unit compared to unsubsidized multifamily properties, with the presence of a subsidy being associated with 0.7 fewer violations per unit per year. Furthermore, between 2016 and 2017, speculative events occurred among only 1% of units with a subsidy compared to 3% of units without a subsidy.
The researchers conclude that wealth accumulation from housing speculation in New York City neighborhoods largely comes at the expense of lower-income communities of color. Tenants, predominantly low-income people of color, who live in properties generating the greatest wealth through speculation experience poorer housing quality and increased displacement. Based on their findings that housing subsidies were associated with fewer maintenance violations and less speculative activity, the researchers call for federal, state, and local investments into affordable housing solutions. They note specifically that greater funding is needed for the national Housing Trust Fund, and they support the concept of tenant, nonprofit, and/or community ownership of rental properties through mechanisms like community land trusts. The researchers also highlight the success of the “Tenant Opportunity to Purchase Act” (TOPA) and “Community Opportunity to Purchase Act” (COPA) policies as effective tools for preventing displacement when paired with sufficient financial and technical support.
Read the article at: https://bit.ly/4aadqAz