Moderated by Rick Badie
Atlanta’s become a hot market for investors who buy foreclosed homes. Today, a Georgia Tech professor shares research he’s conducted on the trend. Meanwhile, an advocate for Robins Air Force Base writes about the economic impact of defense cuts that have led to furloughs at the installation, the largest employer in Middle Georgia.
Foreclosed homes turn to rentals
By Dan Immergluck
In the last five years, Atlanta has seen a surge in investors buying foreclosed homes. At first, these people — most of them mom-and-pop investors — scooped up foreclosed homes in lower-income city neighborhoods.
As the foreclosure crisis shifted to moderate-income suburbs, investors moved in. Meanwhile, prospective home buyers found it difficult to get credit and compete with investors, who often paid cash.
Were investors fixing homes up and then reselling them to responsible homeowners? Certainly, given the dearth of new homeowners in some neighborhoods, increased rental housing was a necessary alternative to prevent increased vacancy.
Earlier this year, I authored a study that looked at Fulton County home sales. Lenders started unloading foreclosed homes — especially low-value (under $30,000) ones — in large numbers in 2008.
In Fulton, the number of foreclosed homes sold by lenders increased from about 2,900 in 2005 to more than 7,700 by 2008. By early 2009, almost half were selling for under $30,000, with many south and west of the city of Atlanta. More than two-thirds of these dwellings were sold to investors, while homes in high-income neighborhoods were usually sold to homeowners. Unfortunately, many lower-value homes remain vacant.
Some investors hoped to flip properties — to re-sell them quickly at a profit — but failed. Others aimed to rent them out, but failed. Some investors have rented out properties successfully. However, even responsible investors in lower-income neighborhoods face major challenges given the glut of vacant homes. Without a more aggressive code enforcement program. it will be difficult for these areas to recover.
A key tool enabling investors to rent homes has been the federal Housing Choice Voucher program, which helps low-income families afford rental housing. It is administered by the Atlanta Housing Authority (AHA). Its relatively high standards for landlords and a heavy demand for vouchers provide investors with an incentive to provide quality housing in exchange for stable rental income.
Federal voucher homes experience lower turnover, which allows investors to earn a reasonable return on their investment. In some weaker rental markets within Atlanta, without vouchers, it can be difficult to earn reliable rental income after renovating a property.
Recently, several large investment firms began purchasing foreclosed homes in the area. These investors have generally avoided lower-income areas neighborhoods,and focused more on moderate-income suburban neighborhoods, especially in places like Gwinnett and Cobb counties. These investors are likely to pay from $75,000 to $175,000 for homes, with the intent of renting them out to families shut out of the mortgage market.
While these larger investors have supported a short-term rebound of prices in areas where they are buying, it will be important that they maintain and reinvest in homes to sustain values. They also need to work closely with communities where they have a significant presence to show that they are committed to maintaining their properties and supporting the community more broadly.
Dan Immergluck is a Georgia Tech professor of city and regional planning.
Furloughs impact Middle Georgia
By Robert McMahon
For more than two years, our nation has watched as elected officials in Washington failed to reach a “grand bargain” and resolve our nation’s most significant threat to national security — our federal budget crisis and national debt. For more than 650,000 Department of Defense civilian employees, the realities of that failure hit home last week. They began to take the first of 11 mandatory days of furlough.
In Middle Georgia, that equates to nearly 15,000 civilian employees at Robins Air Force Base taking a 20 percent pay cut between July 8 and Sept. 30.
All Georgians should take away two points from this situation:
• The impact of sequestration and furloughs goes beyond the direct impact on civilian employees.
• Georgia will continue to feel the impact of these reductions for years.
Although the impact on civilian employees is dramatic, that impact also touches Georgia communities that are home to our military installations. While larger metropolitan areas like such as Atlanta can weather the impacts, seven defense communities across Georgia have economies disproportionately driven by the military installations they host.
Middle Georgia is highly dependent on the $2.9 billion economic impact of Robins Air Force Base. Furloughing nearly 15,000 employees for 11 days within a 90-day window will cost the area approximately $50 million. Every car dealer, restaurant, movie theater and church will feel the impact of that lost revenue. As the saying goes, when our base sneezes, everyone in Middle Georgia catches a cold.
The current budget environment will also likely continue through the remainder of the decade. Our state must prepare for this reality. Budget cuts and sequestration will strip nearly a trillion dollars from the defense budget over a 10-year period, impacting every military installation and their surrounding communities in Georgia.
Whether we experience another round of base realignment and closure or continue on the road of “Death by a Thousand Cuts,” our Department of Defense will get smaller. Georgia will be impacted.
The good news: Georgia lawmakers have reacted to this impending landscape and are working to protect the $20 billion in economic benefit our military installations generate for the state. Gov. Nathan Deal’s Strategic Defense Initiative is a step in the right direction and his administration is working to identify challenges and opportunities for the state’s defense economy.
But there is more that can and should be done.
One of the great distinguishing traits of our nation is that we are always there to help our friends and neighbors in peril. To that end, Georgians must rally to assist those adversely affected by sequestration and work toward creating a more resilient future, regardless of defense cuts. As well, we must take heed and shore up our support for the $20 billion impact our military installations generate for our state.
Today’s realities demand our prompt response.
Retired Gen. Robert “Bob” McMahon is president and CEO of the 21st Century Partnership.