Investment in single-family homes by bulk real estate investors has been on the rise nationally and across Ohio for more than two decades. Now, the recently accelerated pace of acquisition has inspired the Ohio Statehouse to attempt to rein-in the practice.
Background: Institutional Real Estate Acquisition
Institutional real estate acquisition refers to investments made by entities that have access to great amounts of capital. These entities might be large institutions such as pension funds, insurance companies, and endowments in residential real estate assets. More recently, private companies, which are often backed with private equity, have entered the market. In community development circles, “institutional real estate investors” typically refers to the private companies that aggressively and quickly create large portfolios of residential properties.
The practice has become so pervasive, that bulk or institutional investors bought nearly a quarter of U.S. single-family homes sold in 2021, according to an analysis of sales completed by Pew Charitable Trusts. The same analysis showed that 21 percent of home sales in Ohio (32,945) were to institutional investors, nearly twice as many as occurred in 2020.
Bulk investors generally have the ability to outbid other buyers and come to the seller with all cash offers. Doing so is contributing to increased prices for sales and rents, and is creating other detrimental impacts on local housing markets.
Among the problems created by institutional real estate acquisition (IREA) are:
Displacement: IREA can lead to displacement of long-time residents in the target area, as rents increase.
Market instability: Investment in real estate can result in market instability, particularly when investments are heavily leveraged, or when investors withdraw en masse.
Inflation: Institutional investors buying large amounts of property can raise prices of real estate, leading to inflation that may make it difficult for lower-income households to afford to purchase homes or pay rent.
Inequality: Institutional real estate investment concentrating in certain neighborhoods or cities can trigger unequal development and ultimately, unequal distribution of resources.
Assessing the Impact on Ohio
GOPC is currently working in one small Cincinnati suburb where Vinebrook Homes Ohio, a real estate rental company that specializes in single-family home rentals, is the 5th largest landowner in the city, after the city, state, local country club, and local Center for the Blind. In 2022, Vinebrook controlled more acreage in the city than the local Board of Education by owning more than 250 properties in their name. They may own additional property under a different LLC. In the City of Cincinnati itself, 950 homes are owned by the company which is currently being sued by the city for public nuisance, civil conspiracy, and intentional, repeated violations of the Ohio Landlord Tenant Act and Cincinnati Municipal Code.
A Legislative Response
The pervasiveness of institutional investment in Ohio’s residential real estate marketplace has inspired the introduction of two bills at the Ohio Statehouse, Senate Bill 36 and Senate Bill 76, both of which have been introduced by Senator Bill Blessing (R- Cincinnati). GOPC has been among the groups working with Senator Blessing in developing these bills.
Senate Bill 36 grants tenants of rental properties, as well as certain non-profit (501(c)3 organizations) bidders the right to purchase properties sold at a foreclosure sale. That bill has, to date, received two hearings in the Senate Community Revitalization Committee, with another hearing planned for the week of March 20. GOPC is among the groups that has spoken in support of the bill.
Senate Bill 76, joint sponsored by Sen. Blessing with Senate Minority Leader Nikki Antonio (D- Lakewood), includes a number of transparency requirements related to disclosing who are the investor/owners affiliated with an LLC purchasing a residential property, as well as levies a fee on high-volume landlords (defined by the bill as 50 or more properties in a single county). That bill is pending in the Senate Ways and Means Committee and has received a single hearing, with an additional hearing planned the week of March 20.
As work around this issue continue at the Statehouse, be sure to check back for updates both here on our blog as well as our bill tracking and legislative testimony pages.