Real Estate Wealth Taxes as a Anti-Gentrification Tool

New Orleans   Recently I listened to an interview with a prominent local developer on WAMF in New Orleans as he was asked about gentrification.  He tried to walk the line between his self-interest and progressive values.  He was against displacement on one hand, but he opposed inclusionary zoning that would require developers to create affordable units in their properties.  He claimed it would sacrifice three units for every one that it created without mentioning that most of the three units built would be for high-end customers.  He opposed a tax on developments that would fund affordable housing or homeless programs.  He claimed the city and state had no money, so the real solution to gentrification had to be federal.

In some ways his argument was breathtaking in its chutzpah.  He was claiming to believe that gentrification was in some ways a pejorative term for a natural process, while opposing displacement, protecting his self-interest, and at the same time presenting himself as an advocate of a national remedy.  Unsaid was the fact that given our Developer-in-Chief president and the current situation in Congress and HUD, the chance of a federal remedy is much less than that odds Vegas would give a snowball in hell.

Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies, in a commentary in YesMagazine made a much stronger, more realistic case for local action, saying:

Municipalities should move with due haste to enact high-end real estate transfer taxes, requirements for the disclosure of beneficial ownership, and regulations aimed at the disruptive impact absentee-owner-investors are having on our cities.

Collins doesn’t claim this will stop gentrification but makes the case that it will discourage “rapacious global capital” from exacerbating displacement and artificially increasing ownership and rental prices by discouraging the kind of offshore wealth capital “parking” that has been so destructive in Vancouver and London.  As an example, he cites the situation in San Francisco, another favor of “ultra-high net worth individuals” with over $30 million in assets, where voters passed a high-end real estate transfer tax on residential and commercial properties with $5 million price tags and higher.  According to Collins, the tax…

“…the tax expected to generate $44 million a year, which has been allocated to fund free tuition for residents at San Francisco Community College and help pay for the city’s tree maintenance program.”

That’s not the same as building affordable housing, but it’s moving in the right direction.  Furthermore, there’s no reason it could not leverage other funds to construct affordable housing or provide city-based rent subsidies.

We can’t wait for Washington.  We have to act now, and whether a real estate tax on $5 million or $1 million or whatever, if such a tax builds local equity by creating affordable housing or other programs that fight displacement, it’s worth a fight.

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Street Level Provides a Different View of Atlanta Gentrification

houses across the street in SW, one an abandoned Vision Property Management home, the other a newly gentrified home

Atlanta   Visiting families involved with contract for deed agreements with big companies like Harbour Portfolio Advisers, Vision Property Management, and SG Capital in Atlanta turns out to be a much, much different experience than similar doors I’ve hit in recent months in Pittsburgh, Akron, Youngstown, and Detroit. The song is still basically the same, but the verses are different.

Yes, the contracts are “as is” with the burden of repairs, taxes, insurance, and everything else in the usual package on the buyer without any of the guarantees or protections of conventional home buying, but in Atlanta at least the “as is” is more than we have found elsewhere. There were roofs to fix, some with trees still protruding through, and sewer lines to wrangle and HVAC problems common in the South, but fewer homes where families were “camping” in homes stripped bare of wiring, plumbing and the works. In the outer reaches of Fulton County, my team had visited with families with home prices in the $20s and low $30s, but in southwest Atlanta where I spent most of my time yesterday the numbers tended to be high $30s and up to $50 and $60,000. Other teams in DeKalb and Clayton County were spread out with a wide range of prices.

barb wire protecting a vision house

Southwest Atlanta was a surprise to me. I’d been on the doors in Atlanta before, but when I started adding up the dates as I navigated BatchGeo from home to home on my visit list, it had been in the twenty to twenty-five year range. I used to tease people in New Orleans who moved to the suburbs of Jefferson Parish that if they were going to do that, they might as well live in Atlanta. On the doors though I found myself in the city, not 8 miles from the Capitol, in hills green with trees and huge quarter-acre home lots, where I sometimes thought I was in the country. I also found blocks where five or six houses might be abandoned, boarded, and collapsing, and a couple of blocks over areas that were knocking on the door and opening it to gentrification. For the first time I was talking to contract buyers who were debating whether or not to try and figure out a way to sell their houses after the four or five years they had been in Vision or Harbour properties because appraisals had doubled and tripled the valuations, and in the words of one, he might be able to do better farther out in the country.

a Harbour house

In one area, I was within walking distance of a MARTA stop, the Belt Line, a huge urban renewal project on an old rail line, and a big park. One Vision house I hit was abandoned across the street from a home so recently redone that the squares of newly laid lawn were still visible from the planting. Dumpsters were dotted here and there.

I hit one Vision property on my list that looked abandoned on its hillside double lot. As I was parking a man was opening a padlock on the door, but he turned out not to be the owner. He was a burgeoning landlord who had just closed on the house. He had bought it from New Western Investment which had bought a package of homes from Vision. He was originally from Rwanda but in the country for many decades and had just gone into real estate full time over the last year with 20 properties now. His plan was fix and flip. He pointed down the hill to the neighborhood I had just left, as already having gone past the tipping point of his price range from gentrification pressure, but he was betting on this area to be next.

The census track says this area is 89% African-American and has stayed that way even as home evaluations have leaped forward by several factors in recent years. I was navigating streets named after Martin Luther King, Jr. and Ralph Abernathy, the Atlanta-based SCLC civil rights icons.

No matter what the color, the gentrification class is the same. Families our teams were seeing in the far reaches of Fulton, DeKalb, and Clayton had roots on the blocks I was walking now, but the time even under a rent-to-own contract that they could imagine owning a house here was fading fast.

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