Friday, 22 April 2016

House Flipping in NYC Threatens the American Dream: Study

It's displacing residents in New York's last affordable neighbrhoods

House flipping may look fun on HGTV, but it's detrimental to the affordable neighborhoods of New York, a study by the Center for NYC Neighborhoods shows. The group analyzed the impact of real estate speculation on owners and tenants of small homes throughout all five boroughs.

Although the practice of house flipping declined after the 2008 crash, it's slowly been increasing since. Today, working-class neighborhoods in Brooklyn and Queens are especially vulnerable. As the study says, "In neighborhoods like East New York in Brooklyn and Jamaica in Queens, properties that working- and middle-class New Yorkers could once dream of owning are being bought by LLCs and resold, often in a span of a few months, for immense profits."

The data looks at one- to four-unit homes flipped in NYC between 2003 and 2015. In 2015, flipped properties produced a median resale profit of $215,000, or a 75 percent gross return on investment. In some cases, investors saw insane profits, 200 to 300 percent. Data also shows that flipping is happening most in Brooklyn in Queens, with the highest concentration in East New York. Other neighborhoods where this practice has become common include Bed-Stuy, Jamaica, St. Albans and Springfield Gardens.

Flips in Brooklyn bring higher profit margins than any other borough. According to the Center, "Four of the top five neighborhoods with the largest gross returns from flipping were located in Brooklyn. Cypress Hills led all neighborhoods in 2015 with a median gross return of 125%."

The drawbacks of this flipping craze are plentiful. Inflated housing prices lead to displacement and rapid gentrification -- properties that were once family-owned homes become instead income-generating investments for developers who typically divide them into apartments and charge high rents.

It's also jacking up the sales prices for houses, especially in Brooklyn. In 2015, the median prices of homes pre-flip were affordable to a family making around 95 percent of the Area Median Income. Post flip, the median prices were only "affordable" to a family making 163 percent of AMI. As Christie Peale, executive director of the Center for NYC Neighborhoods, said, "There’s a real rush to make money in our neighborhoods because you can get such a higher return here and what that’s doing is creating these false markets."


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