The Erosion of Wealth in Atlanta: The Impact of Business Owners

If you’re looking for a single-family home in Atlanta, you’ve encountered competition from other buyers, and a significant number of those buyers are businesses, not other people. A new study by Georgia Tech researchers attempts to measure the wealth Atlanta residents have lost over the past decade, sidelined by big real estate investors. Researchers Brian An and Nicholas Polimeni spoke with GPB’s Peter Biello.

Pierre Biello: So Wall Street investors really took advantage of the Great Recession of 2008 and 2009. They started buying properties when property values ​​were at their lowest. And your study is the first to actually look at the impact of all their purchases and then their sales. And you looked at three points of reference: the purchase, the holding of the property then the sale. We’ll start with you, Nicolas. Why these three?

MARKET STATUS: The June issues of Atlanta Intown and Reporter newspapers dig deeper into the local real estate market. Click here to read the PDF.

Nicolas Polimeni: Our goal was to identify the unique advantages businesses had in the marketplace and their impact on the wealth of local communities. So, these three activities undertaken by corporate owners – buying, renting, and then selling – are the three activities in which they can extract wealth from communities. Specifically, I want to point out that we looked at the difference between what a company paid and the fair market value of that house. And we did that because we wanted to identify, again, the unique advantage that businesses have. As a result, we’ve found that businesses tend to pay less than individuals when purchasing from other individuals.

Pierre Biello: Partly because they have more purchasing power. RIGHT? They can pay cash, they can buy in bulk, that sort of thing?

Nicolas Polimeni: Yes. Specifically, we found that businesses actually paid about 37% less than individual buyers for the same property. And that’s in comparison, again, to fair market value. So, are these companies getting better deals than the average, typical buyer? And we found that they are. And then once they acquire those homes, they rent them out, which could also prevent people from buying into their home equity, if many homes in the neighborhood are rental homes, instead of be traded on the market or held by individuals. And finally, when these companies sell their securities, they also tend to sell them for more than their fair market value.

Pierre Biello: And the number you ended up with was $1.25 billion in wealth, right?

Nicolas Polimeni: Yes. This covers all of the Atlanta neighborhoods we studied, 95. These are Neighborhood Statistical Areas as defined by the city.

Pierre Biello: Brian, why focus specifically on these neighborhoods?

Brian An: Many studies have looked at the metro Atlanta area and the extent to which these large companies have engaged in purchasing single-family homes. Many look at broader trends, regional trends. But we, as individuals and residents, live in neighborhoods. So we really wanted to focus on neighborhood level analysis. And we also looked at low-income neighborhoods versus high-income neighborhoods and majority-minority neighborhoods versus majority-non-Hispanic white neighborhoods — and how well we see the differences between these different types of neighborhoods.

Pierre Biello: And one of the amazing things that you found in this study is that more than half of the wealth that wasn’t realized by Atlantans came from majority non-white communities. Is it true, Nicholas?

Nicolas Polimeni: Yes. And that’s a pretty important finding because even though about 50% of Atlanta is black in terms of population, that’s not necessarily true given the wealth of those communities. Unfortunately, due to historical patterns, many majority-black communities tend to have lower property values. And yet we still see that much of Atlanta’s total wealth still comes from these neighborhoods, although they hold a smaller share of that overall wealth.

Pierre Biello: So, Brian, if that wealth could have stayed in Atlanta, what would it have done for the people of Atlanta that it couldn’t do because it went into the pockets of property owners? business out of state?

Brian An: We can imagine many different outcomes. First, more minority residents would have moved into homeownership, we can say. Number 2, home is not just home. Once you get a place to live, you can enjoy job stability. You may have more opportunities in terms of further studies. So, you know, there are multiple ripple effects.

Nicolas Polimeni: So for the neighborhood that suffered the greatest share of loss – and by that we mean in relation to the overall wealth of the neighborhood, which was calculated from the income generated by families in that neighborhood – Bush Mountain was the neighborhood which had the largest share of equity. loss in relation to their income. And for this neighborhood, in 2019 – the worst year for them – they lost almost $4,000 in wealth per family. Of course, this is no longer an exact measurement. They don’t lose that from their income, do they? No one takes that out of their income. But in reality, $4,000 per family in this community was somehow extracted from the overall wealth of this community, whether through purchase, rental, or sale by corporations. And to put that into perspective, the average family income in Bush Mountain is only about $40,000 a year. Thus, in 2019, this loss represented almost 10% of their income.

Pierre Biello: In this study, you discussed the effects of the corporatization of landowners as another step in the systemic way in which wealth is extracted from Black communities. You compared this to redlining and discriminatory policies that previously prevented black families from homeownership. And you also write that in addition to finding a way to fix this in the future, one should look back to find ways to undo the damage done in the past. Brian, what would that look like?

Brian An: We really need to think about the cumulative impact that has been had on these neighborhoods over the last ten years, and no one is talking about it. And we can quantify those community impacts, the damage to communities when we have the necessary data. So I think policymakers and elected officials really need to think about which neighborhoods have borne the brunt of this negative damage and to what extent, so that they can think about areas where they can prioritize their resources for preservation and l acquisition of affordable housing and creation of community wealth. And it’s also – it’s an ongoing trend, right? The business owners’ activities continue to this day. We therefore really need to think about the mechanisms that could make them responsible for their rental activity.

This story comes to Rough Draft Atlanta through a reporting partnership with GPB News, a nonprofit newsroom covering the state of Georgia.