Comeback Town: Another blow for Birmingham residents

David Sher’s ComebackTown to give voice to the people of Birmingham & Alabama.

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Today’s guest columnist is Marshall Malone.

When people discuss issues in the City of Birmingham, they may mention crime, education, or population loss.

However, there’s one issue most people may not be aware.

Corporations and out-of-towners are buying personal residences in Birmingham at an alarming rate.

Some real estate sources say over 20% of Birmingham home purchases are investors hoping to turn a profit in the rental market or by flipping (buying, fixing it up, then selling at a premium).

Over 60% of homes, according to census numbers, in the city limits are rental properties, making Birmingham a virtual RENT CITY.

This means 20% fewer owner-occupiers than in the 1970′s (according to census data). Fewer owner-occupiers means fewer local stakeholders, leaving the condition of our streets over to companies that can often be as far away as California or the Middle East.

This seller’s market impacts everyone. Birmingham home values shot up 18% in 2021, and 12% in 2020, which far exceeds any sustainable level we have ever seen.

With mortgage interest rates and home prices going up, most first time home buyers are delaying their home purchase for a better time.

This impacts all demographics, but neighborhoods that have been shaped by redlining are especially vulnerable to investors seeking maximized profits. Investors buy up the homes on the street, offering cash, and driving up the prices of all the other homes in the neighborhood.

This breaks the backs of lower to middle class buyers who are trying to use federal loan programs like VA or FHA backed mortgages, which simply cannot compete with the money they are up against.

It’s another kick to the gut to those who have struggled to plant their own flag in the very communities where they were raised.

African Americans struggle to build generational wealth

Home ownership is the most important investment towards building generational wealth in America, and efforts by Black Americans have been hindered by powerful forces over the centuries; almost 250 years of slavery, followed by mismanagement of the Freedman’s Savings Bank (which left 61,144 depositors with losses of nearly $3 million in 1874), the massacre of “Black Wall Street, in 1921, followed by Jim Crow Era “Black Codes.”

Then the GI Bill, which loaned to whites and not blacks. Followed by the New Deal, which Fair Labor Standards Act’s exemption of domestic agricultural and service occupations kept wages low among black Americans who often worked these jobs. All of these prevented people of color from purchasing homes.

And then there was Redlining; banks drew boundaries around cities where they refused loans and insurance to someone because they live in an area deemed to be a poor financial risk. These neighborhoods were primarily black and brown communities.

Wealth Gap

The Federal Reserve reports that the median net worth for homeowners in 2019 was $255,000 compared to $6,300 for renters. The lack of home ownership drives the wealth gap between white and black populations.

Most 18-34 year olds of any demographic have little wealth, but that gap rises quickly with age. The average 65-74 year old accumulates to $302,500 in median white wealth and $46,890 in median black wealth. Much of this is due to generational wealth that comes with home ownership.

The disparity in white wealth and black households was over $330 billion, with 60% coming from inheritances, according to a 2021 McKinsey report. Forbes magazine reports, “The Federal Reserve Board’s 2019 Survey of Consumer Finances found that white families had the highest median and mean wealth.

Seller’s Market

With too few homes listed, homes are selling in days, not weeks. Sellers weigh through multiple offers, often more than 3 per listing. With multiple people competing for each home, only the best-heeled buyers are able to make the cut, often bringing cash offers to the table. This leaves many first time home buyers in the lurch, and those with little generational wealth are lost in the shuffle.

FHA or VA backed loans can’t compete because they often require more challenging inspections, and can often take up to 6 weeks to close. Sellers are incentivized to choose the highest and best offer, and cash is almost always king.

Creative Solutions

Little has been done to correct the problems created by redlining, though the practice is no longer legal. How do we reverse the damage?

Habitat for Humanity details a few solutions by Increasing opportunities for black ownership, investing in distressed, racially segregated communities, and stopping the perpetuation of segregation.

The Bessemer Redevelopment Corporation, founded by Brian Giattina, is an outstanding example of what happens when someone resolves to make a difference. They are on a mission to redevelop the Northside Community with new and renovated housing.

But we need to know the cause in order to propose a solution. It is also a call to citizens, investors, and the government. If the heart of Birmingham wants to change, our minds will resolve itself to understand and be resolute.

Marshall Malone is a 3rd generation REALTOR® and real estate investor at ARC Realty in Birmingham. He has started 4 businesses in technology and the tea industry. All 3 of his brothers have been REALTORs®. Marshall has 3 grown children. He also has 2 toddlers with his wife, Leslie . They love to fly airplanes and go on adventures with their kids.

David Sher is the founder and publisher of ComebackTown. He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).

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