Nov 8, 2024
The Chicago community of South Shore looks different today than when Arlean Pleasant, an 83-year-old resident, was raising her children. The once family-oriented community is now increasingly being targeted by investors eager to buy properties — including hers.
She says she receives around three solicitations a month, each promising to purchase her home in cash, “as is,” with no need for repairs or even tidying up. Despite having no plans to leave, Pleasant and other residents are worried about what these changes will mean for the community as a whole as more renters move in.
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“It impacts the neighborhood because most of the time when people come in, and they don’t own the house, they don’t take any interest in it,” Pleasant told CBS "It makes me feel that there's a land grab, especially when they, you know, say sell "as is."
What is causing the sudden interest from investors?
The increase in investor interest in South Shore is likely due to the Obama Presidential Center, which is expected to open in the spring of 2026. This high-profile project will feature a library, test kitchen, children's play area, and a 45,000-square-foot athletic and conference center. The center is expected to attract attention, stimulate economic activity, and potentially increase property value.
Phillip Moore, managing director of Lending at the Community Investment Corporation (CIC), confirms one of the driving forces of investor interest is likely the Center.
“I think you have a significant amount of money, dollars coming into a certain area that drives, ‘Hey, I want to be next to the center. My property values are going to go up as well,’” he shared with CBS.
The data from the DePaul Institute for Housing Studies (IHS) confirms what residents like Pleasant have noticed. In 2023, nearly 40% of the 141 single-family homes sold in South Shore were purchased by businesses rather than individuals. The shift towards investor ownership in the area extends beyond single-family homes. In the past three years, out of 416 condo sales in South Shore, 148 were purchased by businesses.
Moore notes that many of these properties are not being renovated, rented, or resold. Rather, the businesses are sitting on them.
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“There is a lack of homes there that are done, completed, as far as being fixed up; ready, ready to be sold,” said Moore. This can leave units in limbo, leading to deteriorating conditions if properties are merely held without proper maintenance.
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How could this shift impact the wider housing market?
Investor home purchases are rising nationwide. According to Redfin analysis, investor home purchases increased 3% year over year in the second quarter of 2024, the largest increase since the second quarter of 2022. Investors bought 1 out of every 6 U.S. homes that sold — and 1 of every 4 low-priced homes that sold.
According to Redfin senior economist Sheharyar Bokhari, many investors are looking to take advantage of the increase in renter demand.
“Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals. Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand.” he shared.
The cities with the biggest increase in share of homes bought by investors are Las Vegas, Los Angeles, Sacramento, California, Oakland, California, Phoenix and Tampa, Florida.
The surge in investor activity worsens existing housing market challenges, including limited inventory and affordability. When investors outbid individual buyers, especially for lower-priced homes, first-time buyers are pushed out, increasing rental demand.
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This trend can shift neighborhoods from owner-occupied homes to rentals, impacting community stability and long-term local investment. As profit-driven investors dominate the market, the balance between rental supply and affordable homeownership skews further, worsening housing insecurity for many Americans.
Government regulations could help owners stay in their homes and protect communities
Nationwide, policymakers are grappling with how to handle the fallout when investors purchase an increasingly large portion of available homes. In communities like South Shore, this trend threatens the ability to keep housing affordable.
Dixon Romeo, executive director of Not Me We, a grassroots group advocating for housing protections in South Shore, is working to protect the community. He worries when investors become landlords because "they're not committed to trying to keep rents low."
Currently, Romeo is pushing for a Chicago city ordinance to help people who live in the South Shore and want to stay there. He's suggested a home improvement program that could provide $40,000 in grants to make property improvements, with the requirement that property owners stay in the neighborhood for five years.
Congressional bills introduced in Washington to cap the number of properties investors can purchase have not been successful. They may also be ineffective if companies simply create multiple entities to buy and manage each group of properties to stay under the limit. Several states, including California and Nebraska, have considered bills to limit investors in their state.
As Pleasant continues to receive offers for her home, she is committed to staying in her home of 50 years. However, many communities may continue to struggle until regulations make neighborhoods less appealing to investors.
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Danielle is a personal finance writer whose work has appeared in publications including Motley Fool and Business Insider. She believes financial literacy key to helping people build a life they love. She’s especially passionate about helping families and kids learn smart money habits early.
