Behind houses sold by well-coiffed brokers on shows like the popular reality TV series Million Dollar Listing is a much more complicated story: the rise of house flipping throughout New York City that can push affordable homeownership out of reach of most families.
A new BuzzFeed News investigation published last December explores the rise of speculative home investment in New York and the history of the homes that are bought cheaply and then quickly resold for enormous profits.
While home flipping may enrich a few people and attract wealthier residents to some neighborhoods, the Center’s research shows that flipping has led to considerable increases in home prices and a decline in the number of affordable homes available to middle- and working-class families in communities where they have lived for years.
“It’s a land grab,” Catherine Isobe, an attorney at Brooklyn Legal Services, a Center partner organization, told BuzzFeed News. “It’s a big wealth transfer from people of color who scraped and saved to get these houses when no one wanted to live in these houses, to the white people that now want to move in.”
The BuzzFeed article builds on the Center’s research on flipping activity across the city. Not only is home flipping concentrated in areas that were formerly redlined or that have undergone chronic disinvestment, but investors are also increasingly sourcing their homes from households in foreclosure. Between 2014 and 2016, more than 5,800 homes throughout the city were “flipped,” or bought and sold within a year. Half of these were in some state of foreclosure. Many of these homes were put on the market through short sales.
The Obama administration had encouraged lenders to authorize short sales following the 2008 foreclosure crisis in an effort to settle bad debt and to provide buyers with access to homes that might otherwise stay vacant throughout New York’s lengthy foreclosure process. But short sales weren’t intended to be a boon for investors. “Short sales are not a way for people to get a bargain,” said Rose Marie Cantanno, the associate director of foreclosure prevention at the New York Legal Assistance Group, another of the Center’s network partner organizations.
Investors have nevertheless identified homes in foreclosure as opportunities to make a killing financially, sometimes paying 30% to 40% less than the value of comparable properties in the neighborhood. The investors then turn around and resell the homes for much more. According to BuzzFeed News, some homes are bought for a median price of $305,000, then sold for a median price of $1.5 million.
BuzzFeed News also found evidence that investors sometimes pressure homeowners in distress into selling — by legal or potentially illegal means. For instance, according to a review of court documents, BuzzFeed News found 12 cases “where homeowners alleged to have been deceived by the group,” according to the article. The group has been linked to hundreds of home sales throughout Brooklyn, Queens, and the Bronx.
For neighborhoods, an increase in home flipping means that gentrification pressures intensify, and can lead to displacement from neighborhoods like East New York. Often, this also means the loss of affordable rental housing in neighborhoods: Owners of 1-4-unit family homes throughout New York often keep rents below market rates.
The activity of home flippers poses a direct threat to thriving, affordable communities in New York City. However, measures like the proposed Flip Tax bill, introduced into the New York State Assembly and Senate in 2017, could deter this kind of speculative investment by taxing sales that occur in rapid succession at higher rates than those that follow long periods of ownership. The bill, which the Center supports, modifies the existing Real Estate Property Tax, and includes exemptions for average homeowners who have to sell shortly after buying.
Cease and desist zones, currently in parts of Queens and the Bronx, can also help mitigate the homeowner harassment that often accompanies flipping activity. Once a cease and desist zone has been established by New York Department of State, homeowners can opt-in to receive protections from unwanted solicitations.
Homeowners who may be at risk of missing mortgage payments or going into foreclosure can also contact the Center directly to get connected to free, nonprofit help throughout the five boroughs.