You only have to glance at the 27-story One City Center and dozens of new condo complexes to see that Durham has entered a new phase of development that few would have predicted at the turn of the millennium. But the powers behind those changes—the developers that fund and profit from gentrification—are much harder to see, despite the immense control they wield over the city’s future. 

Their influence is only likely to grow. An analysis of property ownership records from the past 20 years shows that the new powerbrokers are increasingly large investment firms based outside of North Carolina, and the city has little power to regulate their influence.

In 2000, 65 percent of the land in Durham that is used for commercial purposes—including offices, restaurants, and other businesses, as well as apartment buildings—had an owner that lived in North Carolina, according to the contact address listed on the deed. More than a third lived in Durham itself. 

But today, more than half of those commercial properties have an out-of-state owner. Less than a quarter have an owner in Durham. The trend is particularly stark with apartment buildings: Around 75 percent of the city’s apartment units have an owner based outside of North Carolina.

Though the trend isn’t visible in residential properties like condominiums and single-family homes—only 3 percent of residential land has an out-of-state owner in 2020—that doesn’t account for the role developers have played in which homes are built.

Individual out-of-state developers like Virginia’s McCann Realty Partners and Ohio’s Epcon Communities own hundreds of units at a time, so their influence remains long after ownership has changed hands. And corporate companies renting single-family homes are a growing force in the market: California’s American Homes 4 Rent owns over 200 houses in Durham. 

“It influences our ability to create our own future as a city,” Durham Mayor Steve Schewel says. “Every dollar that goes to an outside corporation is a dollar that leaves Durham.”

For the new investors, that’s by design. Many of them, especially for apartment buildings and other residential complexes, are large national or international hedge funds and property-management firms, with dozens of holdings, in search of attractive new markets. In turning to Durham, they’re changing the makeup of the city.

The new decision-makers are companies like Miami’s Rialto Capital Management. Launched as part of one of the largest homebuilding companies in the nation, Lennar Corporation, Rialto is now part-owned by Connecticut’s Stone Point Capital. It claims to control over $100 billion in assets, specializing in “dislocated real estate markets expected to develop in the coming years.” The investment firm began buying property in Durham in 2016 and currently owns 444 parcels of land in the city.

Because these investors tend to be a maze of hedge funds and holding companies, ownership records almost certainly undercount the influence of out-of-state firms. The company leading the redevelopment of Northgate Mall, for instance, is a North Carolina-based property-management firm called Northwood Ravin, which also owns four apartment buildings in the city. But one of the companies that founded Northwood Ravin, the “vertically integrated real estate company” Northwood Investors, has offices across the U.S., UK, and Luxembourg, and claims Northwood Ravin’s properties as part of its own portfolio. 

The fact that Charlotte is a national banking headquarters further complicates the situation. Many companies that are technically based in North Carolina are better thought of as regional or national development firms. Take the other founder of Northwood Ravin, Ravin Partners LLC. Headed by David Ravin, the former head of Charlotte-based Crosland’s residential division, the company consists “of Crosland’s former residential development and construction teams,” which had built “more than 20,000 multi-family units across the southeast,” according to a 2011 press release. 

However, local ownership alone isn’t enough to ensure that Durham residents have a place to live in the city.

“Local developers weren’t building any affordable housing,” Schewel says. “That hasn’t changed with the advent of out-of-state developers. They were building market-rate housing, and unless we’ve had some leverage, that’s what we’ve seen no matter who’s been developing.” 

Rather, the problem is that the little leverage the city and its residents have is disappearing with changes in ownership trends, especially for the 46 percent of Durham residents who rent their homes. 

“Multifamily properties are real cash cows,” says Mel Norton, a housing activist, Durham for All board member, and operations director of The Carolina Federation. (Disclosure: The author is also a Durham for All member.) Using their immense capital, these investors are seeking dependable revenue streams and participating in what Norton calls “new forms of accumulation,” turning Durham’s growing popularity into various kinds of financial implements that build wealth for the global 1 percent, thanks to increasing rents, noxious fees, and strict policies.

The very fact that out-of-state owners are based elsewhere creates formidable obstacles for tenants trying to resist that process. 

“A local firm is going to be much less likely to do something that makes a lot of people in Durham angry, because that directly affects their standing in their community and therefore their bottom line,” explains Durham City Council member Jillian Johnson. An out-of-state landlord, though, is insulated from community ire. “If you don’t pay the rent, there’s nobody to appeal to, nobody to protest,” Johnson says.

Research by Ekim Buyuk for Dataworks NC backs Johnson’s point. Buyuk found that there have been increases in eviction rates in large, corporate apartment buildings in the past few years, even as the overall eviction rate in the city has decreased. Buyuk also notes that those corporations were increasingly based elsewhere. Norton adds that we need more research to better understand the impact. 

“What we’re still trying to figure out is what is the relationship between the increase in out-of-town and corporate ownership in property and things like maintenance of properties,” she says. “What’s the human impact of this shift?” 

What’s already clear from Dataworks NC’s other research is that it’s the scale of corporate investors that sets them apart from local landlords, even if they are equally profit-driven.

“They are trying—and really explicitly so—to achieve the maximum increase in rent with the minimum increase in maintenance,” says Tim Stallmann, a worker-owner at Research Action Design, which works with Dataworks. With so much capital and property to manage, that means prioritizing quick, efficient turnover to reach maximum occupancy at the maximum rent. To do so, Stallmann says they use new practices that squeeze tenants to the breaking point, like setting rent by algorithm and using large databases to blacklist tenants who have previously been evicted. 

Affordable housing advocates are trying to push back by increasing awareness of these practices and tenants’ legal rights. Dataworks, for instance, is gathering evictions data in real time for outreach to tenants who are at risk, as well as building public data sets for the Durham Neighborhood Compass so that information is more readily available. But that only goes so far, as tenant protections are slim.

North Carolina laws mean there’s little the city or county can do, policy-wise, to directly address the trend toward conglomerate, out-of-state owners.

“We have very little control generally over any kind of private land transaction,” Johnson says. “The state of North Carolina has very strict restrictions on what local governments are able to do to regulate their housing markets.” 

The obvious policies other cities around the country use to protect affordable housing are illegal at the local level. A 1987 state law prohibits North Carolina cities from passing rent control. The city lawyer has advised that inclusionary zoning policies requiring developers to build affordable housing are illegal (and attempts to skirt the legal issues proved completely ineffective in Chapel Hill). And the state constitution’s uniformity clause prevents local governments from taxing certain kinds of property, like buildings over a certain size, at a higher rate.

The one power local government does have is its zoning authority, which it recently used to stop a new unaffordable development in Braggtown. In theory, it could place strict restrictions on what kinds of buildings can be built, then negotiate for affordable housing concessions in return for granting developers the right to build something in excess of those limitations. But that approach makes development slow and expensive, increasing the cost of building everything. 

“We have an affordable housing shortage that’s most intense, but we have an overall housing shortage, too,” Johnson says. “If we were to do that, I worry that the market would get out of whack.”

Instead, the city’s predominant approach has been to facilitate affordable housing projects itself. But Durham’s new landlords have shifted the market in ways that make those solutions increasingly difficult, too. 

In the past, the city relied on funding from the federal Low-Income Housing Tax Credit (LIHTC) program, which provides a credit of either 4 or 9 percent of the construction cost in return for guarantees on affordability. Increased costs mean those credits aren’t enough anymore. 

“The land is much more expensive, and it’s really hard to do a 4 percent tax credit deal, which used to drive a lot of these mandatorily affordable units,” Schewel says. 

To fill the gap, the City of Durham has created two of its own funding sources: the first dedicated housing fund in the state, which raises about $6 million a year from a 2 cent tax, and the $95 million affordable housing bond passed last year, which is the largest in North Carolina history. Those funds support a variety of programs for low-income housing, including emergency rental assistance, tax abatement programs, and eviction diversion efforts. 

They also go to other affordable housing developers. The city helps pay for repair and upkeep on Durham Housing Authority properties—something especially important after carbon monoxide leaks at McDougald Terrace, the largest of DHA’s facilities. Johnson adds that few cities offer that kind of support: Most housing authorities are entirely funded by the federal Department of Housing & Urban Development (whose requested budget was slashed by $8.6 billion for fiscal year 2021). The city also created a loan program to support nonprofit affordable housing developers, who can’t match the speed with which investment firms can buy up property, given their deep pockets.

But it’s not enough. While the city’s housing funds, combined with the fact that DHA owns a substantial amount of land around downtown, means the city can build “thousands of units” of affordable housing, Schewel says, “that’s not going to nearly stem the tide.” Rialto and Northwood Investors alone claim to have raised $16 billion in funds—over 168 times more than Durham’s affordable housing bond, and over 31 times more than the city’s entire budget. 

“We could put our entire city budget into housing and it wouldn’t get us where we need to be,” Johnson says.

The problem will exist as long as we depend on for-profit developers.

“This is just the natural result of a consumer market for housing,” Johnson says. As rising prices elsewhere in the country make Durham a more attractive place to live, the increased demand will continue to attract out-of-state investors who see Durham as a profit-maker. 

This problem can’t be solved without significant shifts in power at the state and federal levels.

“Legislative change will be important,” Schewel says. “And that won’t change until we have a different legislature.” 

Norton agrees, arguing that the city needs increased authority to be able to make a real dent.

“I think having a legal and enforcement framework that allowed more agency and discretion at the local level and the state level would be really valuable,” she says. “But we just don’t have the political power right now.” 

Even worse, while breaking the right-wing stronghold on the legislature in November is essential, it may not be enough in the long run, given the influx of national and international capital. So far, Durham’s new class of investors hasn’t thrown its full weight into local and state politics, but that may be because they don’t need to. 

“Given North Carolina’s political situation, there’s not really anything we can do to stop them,” Johnson says. 

If the balance of political power changes and those interests do get involved, they’ll prove another large roadblock for affordable housing.

“The real estate lobbies tend to be very powerful,” Norton says. “The property-rights lobbies tend to be very powerful.”

None of this is good news for Durham residents. The city already had the highest eviction rate in the state, and now that COVID-19 is decimating incomes, especially for low-wage service workers, there is a catastrophic evictions crisis on the horizon. Getting through the short-term will be hard enough. But the long-term changes in property ownership mean a further erosion of local control, which places any lasting solution even further out of reach without substantial, long-term, state-wide organizing efforts that can build a new base of progressive power.

Comment on this story at [email protected]. 

Support independent local journalism. Join the INDY Press Club to help us keep fearless watchdog reporting and essential arts and culture coverage viable in the Triangle.