Port of Greater Cincinnati Development Authority outbid a dozen other investors to purchase 194 homes owned by an out-of-state investor.
As large institutional investors continue to snatch up approximately one-fifth of the nation’s single-family homes, one organization in Cincinnati waged and won a huge battle against investors in an effort to help hundreds of local residents become homeowners.
After a California-based investment company that owned nearly 200 Cincinnati area homes went into foreclosure, the Port of Greater Cincinnati Development Authority, a quasi-governmental group that seeks to boost homeownership, outbid a dozen other investors to purchase the 194 homes owned by the out-of-state owner, in a deal partly orchestrated by the Cincinnati office of Colliers International Group.
Now, the Port plans on renovating the homes and selling them to Cincinnati residents, with preference going to the home’s current tenants.
“We plan to sell them at as low a price we can,” Laura Brunner, the Port Authority’s executive director told the Wall Street Journal.
The program is the first of its kind to take on institutional investors at such a large scale and win. Other cities have embarked on similar ventures, including in Oakland, California, where a community land trust bought a smaller number of houses from numerous investors and helped their tenants get on the path to homeownership. In Long Beach, California, the city and state government teamed up to buy an apartment tower and rent its units to families at below-market rates.
Institutional investors are just one of the several factors leading to historically low inventory on the United States housing market right now, including high demand, soaring building costs and a slowdown in construction after the 2008 crash.
Investors now count for approximately 18 percent of all home sales in the United States, up from just 8 percent in 2009, when investors first started purchasing homes that previous owners had lost in foreclosure, according to Redfin.
The trend is especially prevalent in midsize cities like Cincinnati, where homes can be purchased for cheap and rented out high, typically to people who cannot afford the down payment on a home but can afford to rent one.
Brunner told the Journal the Port Authority got involved because it feared the prevalence of investors in the housing market was locking working people out of homeownership, and that out of town building owners would neglect their properties.
“Homeownership is the best way in our country to create wealth,” she said on the podcast The Journal. “If we take a significant percentage of the homes off the market, then that’s a problem.”
The Port Authority was able to complete the purchase by taking on debt, which it intends to pay off as the homes are sold, and it was able to outbid the other investors because it does not hope to make a profit, just to break even.
“We knew that if we didn’t buy them another investment group would buy them and keep these houses out of homeownership for the foreseeable future,” Brunner said.