A fire damaged house in Minneapolis in a neighbourhood near the downtown which has experienced population growth. Since this picture was taken in 2015, the house has been renovated and reoccupied.
The Urban Institute has just released Who Owns The Twin Cities
, which analyzes residential ownership patterns in Minnesota’s Twin Cities (Minneapolis and St. Paul). These communities have the largest black-white ownership gap in the U.S. The researchers sought to understand what has contributed to the gap.
The study looks at the whole housing market (ownership and rental), which provides a comprehensive view of who owns what, and what has happened to property value over time. For example
- The stock with the most gain in value is housing in predominantly black neighbourhoods. However, despite this gain, the stock still has a lower value than houses in predominantly white neighbourhoods.
- Corporate investor/buyers have been purchasing rental housing in neighbourhoods that have a majority black population. The value of this stock has grown substantially, compared to ownership housing in all neighbourhoods (white majority and black marjority).
- Corporate inverstor/buyers have also been purchasing detached homes and operating them as rental housing. This practice is far more common in neighbourhoods where the majority of residents are black, than in ones where white owners are in the majority.
The authors recommend actions at the local, state and national level to change the identified patterns. These include actions to limit the impact of corporate buyers and to support and increase black home ownership (pp. 35 through 37).
The research provides a good methodology for understanding racial inequities in a local housing market and may be useful for other researchers. The methodology is also useful for planning targetted programs to protect affordable private rental accommodation as well as to help renters who are facing the biggest affordability challenges.
Why does this matter?
Why does research about ownership appear in a blog that is mainly interested in homelessness and people who are precariously housed? Here are some thoughts:
- This research looks at changes in ownership in the years following the 2008 mortgage crisis. This crisis made some homeowners homeless and others become renters. As more renters poured on to the market, it put upward pressure on rents. The crisis was also an opportunity for investors to scoop up foreclosed homes. The rents for foreclosed homes are typically higher than the former owner’s mortgage payments. Tenants, even those living in the homes they used to own, are now paying more for their housing than they were as owners. The net effect of this shift in the housing market is more renters, including more renters who are struggling to hang on to their housing.
- The research looks at neighbourhoods that had been in decline and then experienced a turnaround in house values. This pattern is associated with gentrification. Within these neighbourhoods, the research tracked the rents of older multi-unit buildings (apartments and ‘plexes’) that historically had had low rents (naturally occuring affordable housing). It also looked at changes in ownership in these buildings. The purchasers were typically large institutional investors from outside the community. The changes in ownership are linked to substantial rises in rent, rendering existing tenancies more precarious.
- The research demonstrates that a significant number of purchases by institutional out-of-state investors were underwritten by Fannie Mae, a Government Sponsored Enterprise that was set up to help individual households access home ownership. This demonstrates how an insitutional system is making housing harder to hang on to, especially for people with very low and no incomes.
- The research offers plausible explanations for people who are black, indigenous and latinex being disproportionately represented among people who are homeless and people at risk of losing their housing.
- Although Minneapolis and St. Paul were the focus of the research, the patterns uncovered might well be present in other communities. The report presents a sound methodology for exploring these issues.
Read more at the Urban Institute: Who Owns The Twin Cities?