In north county, housing prices are rising, which could actually be bad for residents.
Andrew Collins has rented his home in Florissant for years. But he suspected that was coming to an end when real estate brokerage firm Main Street Renewals bought his home last year.
Collins recently got word that he has to vacate the property because Main Street Renewals wants to renovate it. Right now, his rent is $770, but he says most of the rents in the area are around $1,500.
“I guarantee that’s what [Main Street Renewals] saw, and they think they can rent the house for $1,500 or $1,600,” Collins says.
Collins has been caught up in a growing problem in St. Louis’ north county, where rents and home values are increasing rapidly due to real estate brokerages, such as Main Street Renewals, buying up the housing stock to convert into rentals.
The neighborhoods look the same, but instead of being mostly owner-occupied homes, more people are tenants. This means rents are rising, home prices are rising, potential homebuyers are being forced to remain renters and equity from the homes is accruing to real estate investment firms instead of residents.
The issue has Glenn Burleigh, community engagement specialist for the Metropolitan St. Louis Equal Housing Opportunity Council, or EHOC, sounding the alarm.
“In some ZIP codes, these companies are buying 40 percent of the houses that come on the market,” Burleigh says.
And though those purchases drive up housing prices, the area could actually be losing equity, Burleigh explains.
If a neighborhood has 10,000 homes all worth $55,000 and 90 percent are owner-occupied, then that’s $495 million of equity for residents who live in that area. But let’s say that real estate brokerage firms buy up 40 percent of the homes and drive up home prices to $80,000 per home. Despite the increase in home prices, residents only hold $480 million worth of real estate — less than they did when the homes were worth $55,000. And $320 million worth of equity is in the hands of outsiders and real estate brokers.
“You no longer have a net gain in equity and wealth built by the residents of that given area,” Burleigh says. “These places become less of a place for residents to build wealth living there and more of a place for these companies to build assets and wealth from people living there.”
And that's a problem. “Homeownership is always the best way to go to build wealth,” says Patrick McLaughlin, a real estate agent in north county. “Home ownership will appreciate with inflation. If you just have cash laying around the bank you’re losing money.”
Real estate brokerages moving into certain neighborhoods is a national issue that began after the 2008 financial crash, when many homes were lost to foreclosure.
“Some companies began to realize that they were able to purchase single-family homes in large bulk numbers, convert them into rental units, and that it was profitable,” Burleigh says.
McLaughlin agrees. “This one agent I know is going to buy 500 houses for [a] corporation,” he says. “North county is the place they pick on the most because of the price range.”
The area inside I-170 was hardest hit by the ’08 crash. With housing prices low, companies came in to buy houses out of foreclosure to convert to rental units. At the time, mortgages were difficult to obtain without significant assets, so homeownership rates stayed stagnant. Particularly in Black neighborhoods, private homeownership didn’t recover the way it did in white neighborhoods.
Now, even with access to mortgage credit, homebuyers can’t compete because brokerages can pay cash and waive inspections for homes. Those are things that your average homebuyer can’t do, especially when they have a VA loan or other government support as a first-time homebuyer.
And because it is happening in predominantly African-American areas of north county, it’s making it harder for that community to build wealth.
“We’re recreating the cycle that happened in north city,” Burleigh says. “As the area becomes harder and harder to build wealth in, folks become less and less likely to move there, or more likely to move to some other area where they believe they’ll have a better chance to build wealth.”
Collins, the renter who has to leave his home, doesn’t want to leave his neighborhood, but he’s considering it. “I hope somebody does something about these rental companies coming in and forcing people out,” he says.