Corporations driving up home prices in Atlantic City, other distressed places in NJ

Corporations and institutions are buying up residential real estate in New Jersey, driving housing prices higher and limiting choices for families in some of the most distressed cities, including Atlantic City, according to a state report.

At 20.7%, Atlantic City has New Jersey's fourth highest percentage of one- to four-unit residential housing owned by such entities, the report found.

"Buying New Jersey: The Rise of Institutional Ownership of Residential Properties" was released in October and showed the trend is more common in South Jersey than North Jersey.

Only Mantoloking (26%), Trenton (23.4%) and Deal (22.1%) have higher percentages of corporate-owned housing than Atlantic City.

The trend is working against the goal of the city and state, outlined in the 2018 report by special counsel Jim Johnson, to increase owner-occupied housing in Atlantic City as a way to improve quality of life, civic involvement and effective government. 

The city has been under state control since 2016, and the Johnson report provided a blueprint for what is needed to return to self-governance.

The city's poverty rate is 35.5%, and only about 28% of homes there are owner occupied, according to the U.S. Census Bureau's 2017-21 data.

Statewide, the owner-occupied housing rate from 2017-21 was about 64%, according to the Census Bureau.

Companies buy the properties as an investment that provides rental income, said Angela Desch of Coldwell Banker Argus in Ventnor and president of the Atlantic City and County Board of Realtors.

The trend is popular in shore communities as well as urban areas with high populations of Black residents and millennials, who tend to be renters, the report states.

But prices go up with institutional involvement.

The study found for every 1% increase in the share of institutionally owned properties, five‐year sales prices grew by $7,891.

DCA Chief Data Officer Christopher Wheeler said Atlantic City stands out from other places for the high number of condominium units that are institutionally owned.

"We will use it (the study) to understand the environment out there. It helps inform the work of the department. We do a lot of work with expanding homeownership through  various housing programs," Wheeler said.

Another factor for Atlantic City and any shore community is the market for seasonal short-term rentals, through Airbnb and others, he said.

Residential properties were identified as owned by corporations or institutions if owners' names included descriptors such as LLC, Inc., Incorporated, Trust, Development, Group, Company, Corporation, Partners, Capital, Holding, Property, Properties, Investment, Rental, Real Estate, Association, Venture, Realty and Homes, the study said.

Desch said sometimes a group of friends will form an LLC to buy a shore home, share its use and rent it out as well.

"If you purchase as an LLC, the liability as an investor is relieved from you personally," Desch said. "When you are looking at numbers labeled as institutional and corporate you have got to dig a little deeper. A lot could be just family LLCs and smaller."

She has also seen people doing 1031 tax deferral exchanges, or selling investment or business properties elsewhere and buying here to avoid tax ramifications.

Most of the institutional and corporate owners so far have relatively small portfolios in New Jersey.

Almost 60% of residences owned by such entities were in portfolios including five or fewer New Jersey properties, according to the study.

And 77% were owned by entities that controlled 20 or fewer properties.

The statewide average of one- to four-unit residential properties owned by corporations or institutions is 5.9%, with South Jersey the region with the highest percentage at 6.3%.

Other South Jersey cities in the top 10 include Salem (19.1%) and Bridgeton (17.6%).

It's a nationwide trend.

A 2022 report by the National Association of Realtors found that institutional buyers accounted for 15% of residential purchases in 2021, based on deed records data.

It also found that institutional buyer purchases accounted for a higher share of the market in 2021 compared to 2020 in 84% of states and the District of Columbia.

"Specifically, in areas with a higher share of institutional buyers than the national average, there are twice as many Black households as areas with a lower share of institutional buyers," the national study found.

The state report said the biggest shifts to institutional ownership are happening in urban communities within distressed neighborhoods.

"The areas where many of these homebuyers live are also the ones losing the most available housing stock and also seeing larger home price increases as a result," the study said. "This presents unique challenges for lower‐income homebuyers, as the housing stock accessible to them in their home communities is steadily shrinking."

To ensure individuals have a range of affordable options, the state report recommends municipalities sell municipally owned, vacant and abandoned residential and mixed use properties to community nonprofits and urban homesteaders.

It also suggests the state explore ways to incentivize municipalities to do the same.

"This could involve a grant program with an affordable housing deed‐restriction requirement at the foreclosure stage, an awareness campaign around current tools available under existing law to achieve these goals, utilizing existing state grant programs to community non‐profits to support the conveyance of these properties, or other measures," the report said.

There are several such programs helping first-time homebuyers in Atlantic City with down payments and more, through the city, neighborhood community development corporations, the Atlantic County Improvement Authority and more.

Desch said she can understand the concerns about pricing lower-income people out of the housing market, or limiting the number of homes they have to choose from because of increased competition.

"The state recognizes that and tries to keep it affordable through loan incentives and grant incentives," Desch said. "It's important that continue, so homeowners who will keep it as a primary residence are in the forefront in some of the areas."