The Rise of the New Land Lords 

After gobbling up foreclosed homes in Oakland and other communities, wealthy corporate investors are now creating what Wall Street calls the "rentership society."

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In a recent presentation to investors, Starwood-Waypoint representatives said they expect home prices to rise by 33 percent in Oakland between now and 2017, and that in Vallejo and Fairfield home prices might rise as much as 82 percent.

The ownership histories of thousands of Oakland homes tell the story of how big investors are chasing high yields and capital gains by turning East Bay foreclosures into rentals. The house at 1750 104th Avenue in deep East Oakland, a modest single-story cottage built around the middle of the last century, was priced below $100,000 for decades. Then the roaring 2000s hit and its price shot up to $300,000, then $400,000. When Jose and Maria Juaregui purchased the home in 2004, the couple bought it for $410,000, according to assessor's records.

When the economy crashed in 2008, the price of the house sank with it. Underwater, the Juareguis lost their house to Bel Marin Keys, LLC, one of the hundreds of limited liability companies set up by speculators to play Oakland's volatile housing market. Bel Marin Keys paid $115,000 for the Juareguis' home, a discount of 70 percent. Then Bel Marin Keys flipped the house, selling it to Craige, LLC for $225,000. Craige, LLC is a subsidiary that Waypoint has used to buy homes in Alameda and Contra Costa counties.

There are thousands of houses in Oakland that have this same basic history. There's the small cream-colored bungalow at 6428 Foothill Boulevard, bought for $465,000 in 2006, and foreclosed on in late 2007. This home was eventually purchased by a San Mateo company called Oak Hill Investors, LLC for a stunningly low $60,000 in May of 2009. Oak Hill then sold the house to Waypoint for $190,000, according to county records.

Or take 1229 82nd Avenue, bought by Guillermina Hernandez in 2005 for $370,000. The British mega-bank Barclays foreclosed on the loan in February of 2009 and a flipper from Fremont bought the property for a mere $55,000 six months later. Waypoint acquired this home last year for $115,000.

If one reads the deeds of Oakland's real estate transactions over the past few years, another pattern emerges in the foreclosure-to-rental pipeline. Many of the buyers at the height of the real estate bubble had Latino and Asian surnames. Many were African Americans. They sank their life's savings into down payments, and their mortgages were often of the subprime variety with variable interest rates and other gimmicks. When the bottom fell out of the market, their savings vanished, and their communities, neighborhoods like Allendale and Maxwell Park, got hammered.

"Maxwell Park was historically a bastion of African-American homeownership," Margaretta Lin told me in her office recently. Lin is the director of strategic initiatives for Oakland's Department of Housing and Community Development, a role that requires her to think big about how to prevent displacement and create an affordable, housing-secure city. Although Lin has focused much of her attention on how to slow and reverse the tide of foreclosures in Oakland, she has also initiated programs to ensure banks and investors do not harm the city's fragile neighborhoods. For example, Oakland now requires housing investors to register with the city so that their activities are better monitored by community groups and government, and the city is proactively fining banks that allow foreclosed properties to become blighted. The city has inspected 234 properties and collected $765,000 in fees and penalties from banks over the past year.

Lin's biggest challenge during the past several years has been to find ways to prevent banks from foreclosing on and evicting community members. "When the economic crisis escalated, our ability to address problems dramatically decreased," said Lin. "The city had no bandwidth at the time because we were struggling financially ourselves."

According to Lin, many Oakland residents were hit hard by the economic crisis and the foreclosure wave initiated by the banks, in part because there was no government or nonprofit infrastructure for homeowners to turn to for help. "There were no nonprofits in Oakland that had a program to do single-family," either through assisting homeowners to keep their house, or by taking over foreclosed properties and rehabilitating them. "So we ended up being a city that had housing stock available, and investors buying it."

"My job right now: I see it as building infrastructure for the long haul to provide alternative ways to stabilize neighborhoods and keep people in their homes, alternatives to purchases by investors." The goal is to create options for a more equitable housing in the city, she explained.

This infrastructure includes outreach programs, counseling for homeowners experiencing financial hardship and bank obfuscation, and even a financial assistance programs to prevent foreclosure through the Restoring Ownership Opportunities Together program (ROOT). The city council approved funding for these programs in October 2012.

But to date, staff reports show that only one Oakland household was able to avoid foreclosure with help of the city's ROOT program. Negotiations to prevent two other foreclosures by Wells Fargo and one by Bank of America are underway.

A representative for Wells Fargo said the bank has extensive outreach programs to help its borrowers avoid foreclosure. "March of this year will be the third time that Wells Fargo has hosted a Home Preservation Workshops in Oakland and the fifth such workshop in the East Bay where more than 2,700 homeowners have attended," bank spokesperson Mariana Phipps wrote in an email. According to Phipps, "for every Wells Fargo customer that has gone into foreclosure in the Oakland metropolitan statistical area, the bank has helped or is helping three more with alternative options."

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