Investor-owned housing emerging as key issue for metro Atlanta officials

Cobb County Chairwoman Lisa Cupid delivers the State of the County Address on Thursday, March 31, 2022, in Marietta, Ga. Branden Camp/For The Atlanta Journal-Constitution

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Cobb County Chairwoman Lisa Cupid delivers the State of the County Address on Thursday, March 31, 2022, in Marietta, Ga. Branden Camp/For The Atlanta Journal-Constitution

Private equity firms and other large investment groups are gobbling up single-family neighborhoods across Atlanta’s suburbs — and so far, there’s no clear solution in sight for local officials.

Those were the bleak takeaways from Wednesday’s Atlanta Regional Housing Forum, where affordable housing advocates and local officials across the metro area heard from experts on the forces that have made Atlanta’s housing affordability challenges among the worst in the country.

Here, home prices have risen 25% over the last year, compared to a 20% jump nationally, according to a presentation from the Atlanta Federal Reserve. By another measure — owners’ equivalent rent, or the amount a homeowner could charge a theoretical tenant — housing costs rose 10%, or twice the national average.

And while there are many factors at play, including low supply and skyrocketing demand in the pandemic-disrupted economy, one speaks more to Atlanta’s market than any other: the rise of investor interest in single-family homes.

A study by real estate firm Redfin found that 33% of home sales in the fourth quarter of 2021 were bought by investment groups rather than individuals, making Atlanta the No. 1 metro area in the country for investor purchases.

Meanwhile, local officials in Cobb County and College Park said they have seen more developers entering “build to rent” agreements in which they build an entire subdivision with an agreement to sell the homes to an investment firm for rent.

“They’re squeezing out those who hope to become homebuyers,” Bill Bolling, the moderator for the event, said of large investment groups.

But it’s not just prospective homebuyers that should be concerned. As investors snap up more and more homes, these firms often use their market power to aggressively increase rent and raise fees on tenants to bolster their profits, said Desiree Fields, an assistant professor at the University of California Berkeley, who studies urban housing markets.

Things could get worse for individual buyers before they get better. To tamp down inflation, the national Federal Reserve Board is raising interest rates, making it more expensive to take out a mortgage. That gives another advantage to deep-pocketed investors able to pay in cash.

Investor activity is especially pronounced in the suburbs surrounding Atlanta. And African American neighborhoods are targeted more than white ones, exacerbating existing racial gaps in homeownership.

In Cobb County, for instance, 40% of the home sales in the majority Black 30106 zip code in South Cobb were bought by large investors, the highest in the county in 2021, according to a Washington Post map. Just 4% of home sales in the 30339 zip code, a largely white area that includes Vinings, were bought by investors.

Brian An, an assistant professor at Georgia Tech, found that large investor activity in a neighborhood was linked to a 3.5% decline in homeownership rates, but the connection disappeared when looking at predominantly white areas. In African American neighborhoods, he found as much as a 10% decline in homeownership rates.

Local officials at Wednesday’s meeting said they hope to use their land use and zoning powers to limit the spread of “build to rent” development, but some fear that their tools to do so could be taken away.

State lawmakers have already blocked cities from establishing a landlord registry, and a proposed bill this year, backed by real estate groups that favor unrestricted property rights, would have barred city governments using land use and zoning powers to regulate rental properties.

Local politics, too, represent a barrier to action.

Cobb Chairwoman Lisa Cupid said parts of her county have become an easy target for investors because even discussing housing policy in the northwest Atlanta suburbs has proven politically fraught. This spring, wide swaths of unincorporated Cobb campaigned on local control of land use and opposition to Cupid’s support of affordable housing in failed bids to form three new cities.

“We’ve become increasingly more victimized by these tactics because we’re just not prepared to begin to address it,” Cupid said. But, she added, with the three cityhood movements being rejected at the ballot box in May, “that emboldens me to know that we can have conversations around tough topics without people thinking that they need to secede.”