Cincinnati Scores Big Win Against Institutional Real Estate Investors
The Port of Greater Cincinnati Development Authority outbid a dozen other investors to purchase 194 homes owned by a nonstate investor.
As large institutional investors continue to grab about one-fifth of the nation’s single-family homes, an organization in Cincinnati has fought and won a massive investor battle to help hundreds of local residents become homeowners.
After foreclosure action was taken by a California-based investment company that owned nearly 200 homes in the Cincinnati area, the Port of Greater Cincinnati Development Authority, a quasi-state group trying to boost home ownership, outbid a dozen other investors in the purchase of the 194 homes she owns include out-of-state owners, in a deal orchestrated in part by the Cincinnati branch of Colliers International Group.
Now the port plans to renovate the homes and sell them to Cincinnati residents, giving preference to the home’s current tenants.
“We plan to sell them at the lowest possible price,” Laura Brunner, the Port Authority’s executive director, told the Wall Street Journal.
The program is the first of its kind to be accepted and won over by institutional investors on such a large scale. Other cities have begun similar ventures, including in Oakland, California, where a community land trust bought a smaller number of homes from numerous investors and helped their tenants find their way to home ownership. In Long Beach, California, the city and state governments have teamed up to buy a residential tower and rent its units out to families at below-average prices.
Institutional investors are just one of several factors driving historically low inventories in the US housing market right now, including high demand, rising construction costs and a slowdown in construction activity following the 2008 crash.
According to Redfin, investors now make up about 18 percent of all home sales in the United States, up from just 8 percent in 2009 when investors began buying homes that previous owners had lost to foreclosures.
The trend is especially prevalent in mid-sized cities like Cincinnati, where homes can be bought cheaply and rented out expensively, typically to people who can’t afford the down payment on a home but can afford to rent one.
Brunner told the Journal the Port Authority intervened because it feared investor dominance in the housing market would foreclose workers from home ownership and that out-of-town building owners would neglect their properties.
“Home ownership is the best way in our country to create wealth,” she said on the podcast The Journal. “If we’re taking a significant percentage of the houses off the market, then that’s a problem.”
The Port Authority was able to complete the purchase by taking on debt that it intends to repay with the sale of the houses, and it was able to outbid the other investors by not hoping for a profit, just breaking even.
“We knew that if we didn’t buy them, another investment group would buy them and keep those homes out of home ownership for the foreseeable future,” Brunner said.
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