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‘The Rent Eats First’: How Renters and Communities are Impacted by Today’s Housing Market [1]

['Jamie Barron']

Date: 2022-08-02 20:58:51+00:00

Chairman Brown, Ranking Member Toomey, Members of the Committee on Banking, Housing, and Urban Affairs: thank you for the opportunity to testify today on how renters and communities are impacted by today’s housing market and how institutional investors are changing the landscape of single-family housing in Hamilton County.

My name is Laura Brunner, CEO and President of The Port of Greater Cincinnati Development Authority. The Port is a public, quasi-governmental agency focused on mending broken real estate to promote job creation, homeownership, and equitable development throughout Hamilton County. Our work is guided by the belief that real estate should work for everyone.

With tools, resources, and experience, The Port is in a unique position to pioneer diverse models of real estate equity, developing innovative solutions to complex issues. Our Public Finance Practice acts as a financing conduit, offering resources such as the issuance of tax-exempt debt, Property Assessed Clean Energy bonds, tax increment financing, among others, to further stimulate private investment in commercial real estate and fund critical economic development efforts across the region. Through our Driving Real Estate to Accelerate Microenterprise (DREAM) Loan fund, we’ve infused much-needed capital to projects in disinvested neighborhood business districts and minimized barriers for neighborhood microenterprise and entrepreneurs. The Port’s Communities First Down Payment Assistance program offers down payment and closing cost assistance grants to eligible homebuyers across the state.

Our Neighborhood team focuses on the acquisition and rehabilitation of blighted residential and commercial properties to provide housing options across multiple price points from affordable to market-rate, resulting in the revitalization of neighborhoods and disinvested commercial districts. The Port operates the Hamilton County Landbank, whose mission is to return vacant properties back to productive use. In cooperation with our governmental and non-governmental partners, the Landbank facilitates the rehab and reutilization of vacant, abandoned, or tax-foreclosed real properties until end users are identified for highest and best use of these properties. Since 2012, we have successfully disposed of more than 1,000 properties.

The Homesteading & Urban Redevelopment Corporation (HURC) is another Port-operated entity dedicated to improving the quality of housing stock and increasing homeownership throughout the region. This program is primarily focused on income-qualified affordable homes and requires a significant amount of subsidy. With average sale prices for HURC homes ranging from $75,000 to $165,000, we are able to offer lower-cost options for buyers in low-to-moderate income areas. There is an estimated shortfall of 40,000 affordable housing units in Hamilton County and HURC is actively addressing this shortage by bringing much needed quality units online.1

The Port also leads a more targeted neighborhood real estate rehab initiative known as the Rehab Across Cincinnati & Hamilton County (REACH) program. REACH focuses on accelerating neighborhood reinvestment by acquiring and renovating pivotal blighted properties in target areas which have seen a long-term decline in housing value. It has a transformational impact on neighborhoods plagued with limited housing activity, creating new market comps and making communities attractive for future investment. Since 2015, The Port’s residential program has created more than 100 renovated and new market rate and affordable homes across the region.

Housing development is not simply a by-product of economic development; but rather, an engine of economic stability and growth. The Port recognizes that a sufficient supply of housing, affordable to households of all income, is the foundation for economic mobility and opportunity. Jobs provide financial stability, and homes create wealth. Real estate is one of the fastest ways to shrink the wealth gap and to help restore the middle class. In Cincinnati, Black homeownership is only 33%. Nationally, about 42% of Black households own their home, compared to 72% of white households, and “if the typical Black-owned home was worth the same as the typical white-owned home, Black wealth would more than double.”2 Housing and homeownership is the foundation of everything else in our lives, and for too long, the lingering legacy of redlining and segregation has stifled Black residents from the opportunity available to their White counterparts.

Homeownership remains an integral part of the American Dream. Owning a home is a symbol of financial success and a vehicle for accumulating wealth and building equity. However, the idea of the American Dream is even more so about opportunity and upward mobility. The reality is that not everyone wants to be a homeowner and not everyone has the means to purchase a home, but everyone should have access to a place to live and a pathway to homeownership. Locally, a recent report found that the Cincinnati metro area has more than 81,000 extremely low-income renters, but only 33,000 available units they can afford. Roughly 67% of the extremely low-income households are severely cost burdened and spend more than half of their income on rent.3 Access to affordable rentals and the ability to save enough money to purchase a home have become increasingly hard today, partly due to institutional investors infiltrating the housing market across the country.

Our attention to investor activity in the local housing market came out of a conversation with the City of Cincinnati’s property maintenance division and quality of life team around code enforcement. We wanted to know who the worst landlords in the Cincinnati area were. It took months of rigorous research to uncover that over 4,000 single-family homes in Hamilton County had been purchased by just five institutional investors since 2013. Tracking the acquisitions was an arduous task and required review of numerous real estate transactions and auditor data in an effort to connect large corporate investors organized as Real Estate Investment Trusts (REITs) and LLCs to specific names. Property purchase price information was limited because of varying LLC names and a long list of transfers to themselves. Eventually, we were able to track consistencies in owner name and addresses on the Hamilton County Auditor’s website. Tracking this information was messy work, but it led us to the same five worst landlords identified in our initial conversation with the City. The results are sobering. Through our research, we uncovered over 90 different LLC’s affiliated with VineBrook Homes, the largest outside investor in the regional housing market. It became very clear that this ownership structure is based on the maximization of profit by hiding behind a cloak of anonymity.

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[1] Url: https://www.cincinnatiport.org/the-rent-eats-first-how-renters-and-communities-are-impacted-by-todays-housing-market/

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