Tawan Davis doesn’t like to call himself a landlord. “I hate that word,” says the chief executive of real estate firm Steinbridge Group. Never mind that he’s the one behind a $60-million investment to buy up to 600 single-family homes in Philadelphia, with plans to rent them out to working-class residents.
Davis’ New York-based Steinbridge Group has profited off of investments from office properties to multi-family apartment buildings. When Davis took the helm in 2016, he pushed Steinbridge toward long-term investments in the rental market. In doing so, he singled out the type of renter getting squeezed out of many American cities: working-class individuals and families who don’t necessarily qualify for subsidized affordable housing but cannot afford the onslaught of new, luxury developments.
Fully renovated homes — upgraded facades, roofs, interiors — will rent between $800 and $1,500 a month, according to Davis, aiming for families making between $45,000 and $65,000 annually. “The largest tenant base we’ve found are nurses,” he says. “There are only so many people that can pay $3,000 a month in rent … In all this, no one is addressing the average working person.”
There is an understandable concern about an outside investor firm swooping in to buy up single-family properties. Over the past few years, large investor firms have earned a poor reputation in cities across the country for buying up distressed single family homes in bulk, foreclosing on owners and flipping them or renting them out for hefty profits. Big firms haven’t been the greatest landlords, either — a 2016 study from the Atlanta Federal Reserve found that large corporate landlords in the Atlanta area were more likely than smaller landlords to evict tenants, with some corporate landlords filing evictions for a third of their properties in one year.
“That is not our business,” Davis says. “Because we’re not coming in and doing that, we’re not displacing families, we’ve been more well received … I like to think of us as members of the community. And there’s a couple ways we differentiate ourselves.”
To start with, Steinbridge purchases its homes one at a time; the firm has accumulated around a hundred so far in Philadelphia.
Davis is also strategic about earning the city’s trust. “You move to a new city, and you don’t know everything,” he says. “We do not believe we are a panacea … we’re in the process of learning.”
So far, Steinbridge has partnered with Philadelphia Community Corps to integrate job training with its renovation effort, as well as West Philadelphia’s Catalyst Church for community outreach. The firm is starting a summer internship program for local students interested in real estate and property management. Steinbridge also chose a local property manager, TCS Management, to maintain its building stock.
Tawan Davis. (Photo by Kate Devlin)
Another differentiating factor: Davis himself, raised by a single mother in Portland, Ore., who put himself through Georgetown University, followed by a stint at Goldman Sachs. That was followed by master’s degrees in sociology and economics at Oxford, before finishing with an MBA from Harvard Business School. He now lives in Philadelphia.
His real estate career includes a mix of private and public sector jobs, one of which being the vice president of real estate for the New York City Economic Development Corporation. “I could have stayed in politics,” Davis notes. But ultimately, he determined the lack of affordable housing in cities to be “a market failure by economic definition.”
“There is demand, and there’s plenty of land and resources to build affordable housing,” Davis says. “So the inability of the market to respond to that demand is a market failure.”
City, state and federal intervention can only go so far, Davis believes. “It’s very easy to exhaust the public sector. There’s only so much cash to go around and only so many tax incentives the city can bear,” he says. “There must be a private market solution.”
Steinbridge Group’s investment in Philadelphia’s single-family housing is just the first step to such a solution. The firm announced last November, it would be investing $425 million in the acquisition and refurbishment of single-family and small multi-family residences for rental housing in transitioning neighborhoods. Though the initiative starts in Philly, the firm plans to expand the model to Northern New Jersey, New York’s outer boroughs, Baltimore, Chicago, Washington, DC and Boston.
Philadelphia has ideal housing stock to get the work started. The city famously has a robust inventory of attached single-family housing (rowhouses), a legacy of the local real estate industry’s emphasis on homeownership. Due in large part to historical denial of credit, especially to working class borrowers of color, much of that single-family housing stock has been poorly maintained, abandoned or foreclosed upon. (The city has recently been expanding subsidized home repair loan programs for homeowners.)
To Davis, the investment makes good economic sense in Philadelphia and beyond. He’s quick to offer figures like the increase, from 2.2 to 6.6 years, in which couples rent after marriage. In Philly, he also points to the disparity in new housing development, with 4,000 higher-priced apartments hitting the market or under construction, and only 1,500 absorbed a year.
Davis knows the strategy will vary as Steinbridge expands to new communities, but he’s certain the business plan checks out — both economically and, to Davis, morally. “I consider it my calling,” he says. “And we have found people want to help us because this particular sector of the real estate market is broken.”
“These communities see flippers come in and out, in and out, over nine months,” Davis says. “And they’ve seen that we haven’t sold a single house. We’re in it for the long run.”