Another blow for Birmingham residents

Marshall Malone
Marshall Malone

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 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 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.

Investors have increasingly bought into black neighborhoods

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.

City of Birmingham Redlining

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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Invite David to speak for free to your group about how we can have a more prosperous metro Birmingham. dsher@amsher.com.

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12 thoughts on “Another blow for Birmingham residents”

  1. Marshall, what an excellent overview of redlining impacts on multi generational wealth accumulation. These impacts were further enhanced by the Alabama Department of Transportation ‘s “curving” the Interstate System through Black neighborhoods where homeowners were targeted and families displaced under the guise of “slum clearance”. Many homeowners had to deal with no compensation from the budgeted “relocation assistance funds”, limited options for alternative housing due to “white only sales and mortgage lending”, and only options to relocate to areas with toxic and environmental hazards, flooding, lack of access to shopping, healthcare and transportation.

    Acknowledgement of these issues along with resolution planning going forward is an appropriate step.

    Jacque Clarke Bell

  2. There is widespread acceptance for the wrongs our country has cast upon African Americans. Yes, there were unquestioned atrocities. Let’s cut to the chase, how much longer before we can get beyond the past so the rehabilitation can be recognized. Congress has presented countless programs with arguably little progress. I’m not a sociologist but suggest three initiatives. 1. Address the fatherless problem. 2. Elevate grading standards. 3. Stop black on black on black crime.

      1. What exactly do you want “Black people” to do about the actions of Black people who commit crimes?

        I assume you are white. What is your responsibility to change Klan members? What are you personally doing to stop the Proud Boys or mass shootings by angry white men? What about all the toothless, white trash meth addicts in every corner of rural America? Since you are white and they are white…it must be your responsibility. Yes?

        You want to put a societal issue affecting everyone on the shoulders of people because they happen to be Black?

        Since blaming everybody else hasn’t worked for centuries, shall we try something else now?

        SMH… Alabama will always be Alabama. And yes, I am implying that a lot of you, deep down, have bigotry in your hearts. And it is holding those of you who are working to change things for good back. Look at the comment above. How are nasty attitudes like that working out for you?

  3. We should try to find a way to prohibit the buying of homes by people who will not live in them. We may also need to limit the appreciation of real estate value as Germany does. A house can hardly be both an investment and a place to live.

  4. Unfortunately Birmingham is not alone. My son lives in Hollywood, Florida and has been unable to buy a home at a reasonable price. Makes an offer and is quickly outbid. I don’t see how younger people are making it. I’m fortunately a paid up home owner at age 78.

  5. Thanks to Marshall for this very thoughtful and thought-provoking blog. The occurrence of investor ownership of residential properties is not limited to Birmingham. It is nationwide. Capitalism always directs wealth to the best or better investments. That’s the nature of our system. Right now, that’s residential real estate.

    My understanding is that we still have a significant number of cleared lots, owned by the Land Bank. If we can revive and expand down payment assistance programs, this could give working people a shot at home ownership. Then the City will have to do its job in making sure that revitalized neighborhoods are kept safe and that the schools are producing the best results possible.

  6. I have a black american friend who has lived and pastored in the South Titusville Area for many years (neighborhood just west of Glen Iris). He told me the issue is that many older home owners have offered the properties to children but there has been little interest by them to move back (or invest in) the home they grew up in. Maybe a missed opportunity for them.

    But absent this one personal anecdote, what do we know of the racial makeup up the investors? Are we sure they themselves are not people of color?

    1. That’s true. But who can blame them? Whites are criticized for “white flight” but when blacks do it, they’re praised. They don’t want to go back to those neighborhoods for a reason. So they overspend on an apartment in Hoover for the next 10 years wasting money creating zero wealth. So it’s a vicious cycle they can’t seem to grasp so it keeps the generational wealth down.

      To ChristopherATL, we do take a certain level of responsibility for the KKK, Proud Boys, meth heads, etc. I can proudly say we’ve stamped out most of it and we are fighting to stamp out the rest. The KKK is practically gone now and you never hear of KKK killings anymore. These groups no longer terrorize communities like they once did. But black ghettos are getting worse. So as a whole, yes we take responsibility and I’d say we’ve done a darn good job. When’s the last time you turned on the news and there was a KKK riot or killing? The level of “white trash” on “white trash” killings are remarkably low compared to black on black homicide.

  7. Education. Educate people, give them opportunities to create a decent life, to understand responsibilities as fathers, mothers and community members and the rest will disappear. Criminals and addicts are created by the context, not borne; and we are all responsible, white, black, brown or purple. It is time to use “we” as favorite pronoun.

  8. My idea in the incubation stage is to purchase houses, renovate them and give them away to families that may never own a home. God wants us to own houses and land, Deut 1:8, Behold I have set the land before you, go in and take possession of the land which the Lord swore to your father’s, to Abraham, to Issac, and to Jacob, to give to them and to their defendants after them.
    This is a spiritual matter trying to be resolved by the world system and it is impossible. Pray with me for directions from Holy Spirit. We need our bank accounts opened up to support this. No on wants to give, just receive. Let’s put God’s stamp on it. Be blessed.

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