On Thursday night, the U.S. Supreme Court threw out a federal eviction moratorium, leaving millions of Americans at risk of being thrown out of their homes just as the COVID pandemic once again intensifies.
In Los Angeles, tenants are still protected by a state and local moratorium, but it is set to expire in September. The city has been a focal point of the housing crisis sweeping the country. After real estate moguls spent millions to defeat a rent control ballot measure a few years ago, there has been a spike in homelessness at the same time gentrification threatens to displace entire communities.
Earlier this summer, that latter problem came into stark relief in South Central Los Angeles, when a faulty detonation of illegal fireworks by the police bomb squad laid waste to part of the neighborhood. That’s when real estate speculators rushed to buy up damaged properties — but it wasn’t the first time the area had been targeted by developers in recent years.
“Even before the incident, we’d been attacked by speculators around the neighborhood,” Martha Sanchez, secretary of the South Central Neighborhood Council (SCNC), told me.
While the menace of real estate speculators taking advantage of the blast has abated somewhat, SCNC members say the threat the opportunists pose to the neighborhood as a whole remains, an example of the pressures affecting the rapidly gentrifying area and displacing longtime residents.
South Central, a neighborhood known officially as South Los Angeles, is emblematic of a trend unfolding all over the country. Tight housing stock, a hot real estate market and the prospect of big landlord profits are creating a crisis in cities across the country — a perfect storm forcing out lower-income residents from their homes as gentrifiers and developers offer property owners deals to offload their homes.
Gentrification damages neighborhoods by forcing out poor residents with higher rents and home values. Areas previously seen as undesirable are the main targets of the process, which disproportionately affects Black and brown people, according to a 2020 study by Stanford Sociology Professor Jackelyn Hwang and Federal Reserve Bank of Philadelphia advisor Lei Ding.
“As neighborhoods gentrify, when poor people can no longer remain in their neighborhoods and move, there are fewer affordable neighborhoods,” Hwang told Stanford in December. “Our findings suggest that, for the Black community, there are additional constraints when they move, leading them to move to a shrinking set of affordable yet disadvantaged neighborhoods within the city.”
Resident displacement from gentrification in Los Angeles in particular has come with a host of other factors including air quality, access to transit, and challenges from climate change. And with rent projected to rise another 2 percent this year in the area, the crunch is on.
Ads and flyers are everywhere in the neighborhood, and have been for quite some time, Sanchez told me.
“For the last five years, I’ve seen a lot of companies posting on every single [telephone] poll in our community: ‘we can give you cash for your home regardless of conditions,’” Sanchez said. “Those sharks are buying every single piece of property in our community.”
“The Way Things Typically Play Out Is Gentrification”
The U.S. housing market is in the midst of a boom driven by two main factors, Bespoke Investment Group strategist George Pearkes told me. According to Pearkes, who wrote about the Federal Reserve's attempts to handle the housing market in a recent essay for Business Insider, those two influences are low mortgage interest rates and a shortage of housing stock due to underwhelming construction efforts after the 2007-2008 financial crisis.
These circumstances have pushed investors and speculators to set their sights on previously less desirable lower-income areas. And that leads to the exacerbation of class and racial tensions.
“If you’ve got this shortfall of supply, especially close to big cities, buyers are going to look at areas, which have existing housing stock but might have been unappealing for other reasons historically,” Pearkes said. “Because those areas tend to be currently populated by Latinx or Black residents, and white buyers have more money for down payments or higher incomes for monthly payments, the way things typically play out is gentrification, facilitated by house flippers who come in, buy from existing residents, upgrade a property, and sell on to new entrants at high margins.”
The problems presented by the exploding housing market are being seen nationwide, from Ouray, Colorado — I reported in June on how local businesses there are having trouble staffing due to high rental prices — to Great Barrington, Massachusetts, where residents have complained for years about the unaffordability of apartments in the rapidly growing vacation town.
"You Don’t Really Have Power And That’s The Whole Problem"
In neighborhoods like South Central, one of the few remaining Los Angeles neighborhoods where people can find homes under a million dollars, property owners are facing pressure from real estate speculators, Sanchez said. That puts strain on the neighborhood’s residents, the majority of whom are renters and live in multi-generational family homes.
California housing advocate Shanti Singh, communications and legislative director of the California tenant rights coalition Tenants Together, told me that the housing conflicts that drive the gentrification divide have a long history.
“It’s the same binary that historically redlined communities of color face everywhere: Gentrification means ‘investment’ in your community, but it also means expulsion from it, and disinvestment from your community means neglect and marginalization,” Singh said. “Either way, you don’t really have power and that’s the whole problem.”
“Developers want to build after landowners and speculators have already rendered a neighborhood ‘desirable,’” Singh added. “And of course that’s bound up inextricably with race and class and moving the geographic color line.”
Predatory Housing Companies
Some people in the city are trying to change how the housing crisis is affecting Angelenos. Paul Lanctot of the Los Angeles Tenants’ Union told me that his group has been pushing to help renters who are mistreated by landlords push for their rights, but it’s an uphill battle. The fight is only getting harder as predatory real estate companies buy up more and more housing stock.
One study by UCLA researchers found 67 percent of the city’s residential housing stock is owned by limited liability corporations, which are used as investment vehicles. Other studies show an increase in the amount of South Los Angeles housing owned by institutional investors - a trend that tends to correlate with higher property prices and lower vacancy rates.
Making the problem worse is that many families have had to adopt multigenerational living arrangements that they aren't likely to be able to replicate in new housing options.
“In this area, you have a lot of tenants that have multigenerational families living there, eight people in like a three bedroom or a four bedroom,” Lanctot said. “And the rent is two thousand dollars or less. But right now you can’t find a two bedroom for that price.”
“Gentrification Is Really Going Crazy”
In South Central, as Ron Gochez, the council’s vice president, told me, the pressures on lower-income residents from speculators can be overwhelming. For those renting, the fear of losing their homes creates an unstable and worrying atmosphere. For homeowners, the need to sell the properties encourages them to find reasons to displace tenants, so they can sell the property more easily.
This creates a tension familiar to anyone who’s lived through the gentrification of their hometown or home neighborhood. Properties spike in price and the owners are left to figure out how to sell at the highest level possible.
“Gentrification is really going crazy,” Gochez told me. “We’re about three miles away from downtown; the proximity to downtown has driven the value of the homes around here way up.”
That has led to aggressive speculation tactics, Sanchez told me, with developers blanketing the neighborhood with business cards and flyers, calling residents relentlessly, and generally being pushy. Sanchez said she gets why — the neighborhood's proximity to the rest of the city means residents "can be everywhere in ten minutes" — but that doesn't mean the methods are justified.
To Gochez, the ongoing push to gentrify the area and kick out the residents is “despicable, but it’s a sign of the times.” A community where over 70 percent of residents are renters and at the mercy of predatory landlords is ripe for exploitation, he told me.
“In this community,” he said, “a high percentage of the people who live here are undocumented [and] really do not know their rights [regarding] housing rights and housing laws.”
And because of that, Gochez explained, people “easily get taken advantage of.”
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