This law is one of a package of measures in the City’s strategy to fight the effects of the purchase of owner-occupied homes by large-scale investors. The COVID-19 pandemic accelerated this decade-long national trend in residential real estate which results in rapidly rising rents, decreased homeownership, reduced availability of affordable housing, renter displacement, and less stable communities.
Mayor Baraka noted that the ordinance is a recommendation of “Who Owns Newark,” a research report authored by David D. Troutt, Distinguished Professor of Law, Director of the Rutgers Center on Law, Inequality and Metropolitan Equity (CLiME) and a member of the City’s Equitable Growth Advisory Commission. The report provided data and recommendations that are informing the City’s response as the city works with the Equitable Growth Advisory Commission to address issues raised by “Who Owns Newark.”
“In cities and even suburbs across America, LLCs are eroding the American dream of homeownership as they convert owner-occupied homes into corporately owned rental units,” Mayor Baraka said. “In Newark, where we have worked hard to expand homeownership, we have created a strategy to do everything possible to fight this dangerous trend. The CLiME report is proof that Newark must enact and enforce stronger and more equitable laws, regulations, and policies to ensure that all residents share in the growth of our city.”
The ordinance passed yesterday is the second piece of Mayor Baraka’s strategy to fight the purchase of owner-occupied homes by institutional investors that has been approved by the Municipal Council. In 2022, the Council passed an ordinance to bring more transparency and accountability to limited liability companies (LLCs) who are purchasing private properties in Newark. They must now register a responsible agent in the State of New Jersey to handle all legal matters and can no longer hide behind their LLC status to remain anonymous and unreachable.
“Our report shows that the national trend of investor buying of one-to-four unit homes in predominantly Black neighborhoods is acute in Newark where almost half of all real estate sales were made by institutional buyers,” said Dr. Troutt. “This trend grew out of the foreclosure crisis that wiped out significant middle-class wealth in Newark. Mayor Baraka’s actions are important steps toward maintaining affordability of rents and homeownership, discouraging speculation and demanding transparency of ownership.”
“As a developer of affordable housing in Newark, the Urban League of Essex County looks forward to participating in the City’s plans to assure that Newark residents are not pushed out of the opportunity to own homes by the purchases of institutional investors,” said Vivian Cox Fraser, President and CEO Urban League of Essex County.
“The Equitable Growth Advisory Commission is focused on working with Mayor Baraka to address the rampant speculator property acquisition in our neighborhoods. An innovative, best practices approach has been developed for Newark to address and encourage residential home ownership rather than wholesale speculative buying for profit,” said Deborah Smith Gregory, Co-Chair of the Equitable Growth Advisory Commission.
In February, an ordinance will be introduced in the Municipal Council covering properties not under rent control. It will impose fees on renting and landlord registrations for those property owners and landlords that increase rents above five percent year over year. These fees will be used to fund the creation of new affordable rental and homeownership opportunities for Newark residents.
And, in the coming months, the City will also announce the details of “Investing in Newark Communities,” a major initiative developed by the City, the Equitable Growth Advisory Commission, and a large group of community stakeholders. This initiative will include:
- An Acquisition Fund to buy homes on the private market and sell to Newarkers (that LLCs would have purchased).
- A fund to build and renovate homes with Newark Minority/Women-owned Business Enterprise (MWBE) contractors and sell them at affordable prices to Newarkers who will also receive low interest mortgages.
- Financial and homeownership counseling to homebuyers.
Since 2014, Newark’s initiatives and programs have focused on closing the racial wealth gap that is being exacerbated by the conversion of owner-occupied homes into corporate rentals.
Among the work the City has done to provide affordable housing and home ownership are:
- Doubling the Live Newark Program to help residents become first-time homebuyers.
- Implementing the Neighborhood Development Program, which turns city-owned land into residential and affordable housing.
- Allocating a $20 million investment to create housing affordable to residents at a $34,000 income level.
- Using Land Bank properties to create Section 8 homeownership opportunities.
- Creating the New Jersey 40 Acres and a Mule Fund (NJ FAM Fund) that will invest $100 million into real estate development and small business development for Black and Latinx partners.
To view the ordinance, click here.