Big investors began buying up abandoned homes after the 2008 financial crisis and then again during the COVID-19 pandemic at a time when more than 10 million Americans faced foreclosure on their homes. Those faceless corporations sought to profit from the pain and suffering of average American families.
Today, a company founded by an African American man is trying something different. It has created a business model that profits from buying, renovating, renting and selling affordable homes in African American neighborhoods that have been suffering from gentrification, like Brewerytown, Point Breeze and University City.
“Our goal is to demonstrate that you can take private capital and do good with it and still make a good return. That is our whole business model,” said Tawan Davis, founding partner and chief executive officer of Steinbridge Group. “People have believed for years that investing in our communities was a losing proposition. We take private money and invest it in an impactful way and still make money.”
About five years ago, Steinbridge Group purchased about 200 homes in Philadelphia, renovated them and started renting them to teachers, police officers, firefighters, nurses and other medical professionals.
“These are people who are the backbone of the city. Some of them are working two jobs,” Davis said. “We started by buying and renovating large numbers of row houses. We did it initially to rent.”
The company rented to people making less than 80% of the area median income for a family of four, which in Philadelphia County is $75,600.
According to Davis, the row homes are fitted with new roofs, marble top counters and wood floors. But while perusing the renter’s credit profiles, it was noticed that many of them would probably be able to afford a mortgage.
“We found out that a lot of people had or were experiencing negative credit impacts on very minor issues,” Davis said. “If they could fix one or two things, they were right on the verge of home ownership.”
So the company partnered with PNC Bank and Deborah Spence, an African American real estate broker who owns Fierce Realty Corp., in Bala Cynwyd.
Spence has created a program that focuses on financial literacy and credit improvement for potential homeowners. Part of it includes taking the potential homeowners on an open house on wheels to look at properties while she teaches them the importance of financial independence.
Currently, about a half a dozen people are in the program which lasts between 90 and 120 days.
“I’m guiding them step by step,” Spence said. “Most people who are renting can probably afford a mortgage,” she said.
“Home ownership should be the goal of those that are on the margins. It’s a way out of poverty and a way to transfer wealth to their children,” Spence said. “Independence is more than just fireworks and barbeque. It’s really seeking a better situation for you and your family.”
Once the potential homeowners complete the program with Spence, Davis said, they are introduced to bankers at PNC.
“Those bankers will begin to walk the potential homeowner through the process,” Davis said. Between $5,000 and $10,000 in down payment assistance is available from PNC, and possibly the city of Philadelphia, he said. In addition, other financial assistance is also available.
“Home ownership is a critical step in achieving financial wellness,” said Travis Branch, executive vice president of PNC Bank. “Serving as the preferred provider for these Steinbridge properties reflects that commitment and our focus on helping to strengthen the economic vitality of Philadelphia’s neighborhoods.”
After World War II, in the mid-1940s, many African American men returning from serving in the U.S. military settled in Philadelphia and purchased homes for their families under the GI Bill which offered home loans to veterans.
Between the 1960s and 1990s were the peak years, when about 60% of African Americans owned their homes in Philadelphia, Davis said. That was one of the highest rates of African American home ownership in the country.
In the 1990s, adjustable rate mortgages tied to interest rates became popular, Davis said. Later, when interest rates shot up, some homeowners saw the mortgage rates increase rapidly.
“Mortgage rates doubled and sometimes tripled and people started to lose their homes in Philadelphia and around the country,” Davis said.
Then the financial crisis came in 2008, followed by the pandemic, more than a decade later which negatively impacted home ownership in the U.S. and Philadelphia, but disproportionately for African Americans.
A 2021 report by the Federal Reserve Bank of Philadelphia revealed that Black home ownership in the city continued to lag white home ownership and has steadily declined in the last 30 years, partly because of a legacy of historical racial discrimination.
“It’s a big problem to solve,” but one that he is committed to, Davis said. “Philadelphia had a very long history of strong home ownership broadly, specifically in the African American community for many years.”
Read the full article at The Philadelphia Tribune.