COLUMBUS, Ohio (WCMH) – The influx of out-of-town and private investment firms seizing single-family homes in Ohio led one state lawmaker to devise a plan to even the playing field for local homebuyers.
A bill introduced by Sen. Louis Blessing (R-Colerain Township) on Monday aims to stifle investors’ ability to buy foreclosed homes at public auctions in Ohio, give individual tenants, homebuyers and housing nonprofits a leg up in the bidding process.
“You start reading and hearing stories about people trying to buy homes and getting, you know, shut out because they lost to an institutional investor that was able to bid $50,000 cash above asking price,” Blessing said.
To even the playing field, Blessing said Senate Bill 334, modeled after similar legislation in California, bars investment firms from placing a bid on a foreclosed property until 45 days after the home is listed for sale.
Tenants living in the property are in the first tier of eligible buyers, and residents looking to buy the house for at least a year are next in the line-up.
If no bids are placed, housing-oriented nonprofits and local governments can place a bid – a tiered system that will give individual residents and nonprofits the opportunity to beat wealthy investment firms to the punch, Franklin County Auditor Michael Stinziano said.
“The goal of the legislation is again to get local residents to that first bite at the apple,” Stinziano said. “Doesn’t prohibit (private investors), but at least gives a window of time in which local residents would be able to invest in their own community versus outside entities.”
‘Feeding frenzy’: Single-family homes owned by investors doubled from 2015 to 2021
In Ohio’s three largest cities – Columbus, Cleveland and Cincinnati – real estate investors funneled about $750 million toward purchasing single-family homes in 2021, according to an analysis by real estate company RedFin.
Those investors accounted for 16% of Franklin County’s single-family home purchases in 2021, more than double its rate six years ago, Stinziano said. That percentage is even higher in majority-minority neighborhoods, he said.
“It is something that we feel is in response to the impact COVID and real estate market has had and where outside money is able to come in and make a big dent in the housing availability,” Stinziano said.
One of the largest real estate investors in Franklin County is Vinebrook Homes, a company that specializes in acquiring and leasing single-family homes, according to its website.
The company – whose website states that it’s plugged into the housing market in 23 major U.S. cities – purchased at least 637 single-family Franklin County properties in 2021 alone, according to data provided by the auditor’s office.
Private investment firms with a “boatload of resources” and cheap debt often place cash bids on homes just hours after they’re listed online, according to Carlie Boos, executive director of the Affordable Housing Alliance of Central Ohio.
When corporate investors are willing to waive contingencies and purchase homes with no inspection, sight unseen, Boos said they’re contributing to a “feeding frenzy” that’s leaving the “average Joe” high and dry.
“That’s just not a fair fight,” Boos said. “In that scenario, a human being is going to lose to a computer algorithm from Wall Street every single time.”
Benefits of local homeownership are widespread, housing experts say
Jeaneen Hooks, an associate vice president of the Columbus Urban League, said out-of-town investment firms aren’t always readily accessible to tenants living in their properties.
Maintenance concerns are less likely to be addressed by foreign investors, resulting in an uptick in code violations, Hooks said. And private companies often jack up rent and mortgage payments – hitting low-income, marginalized Ohioans the hardest.
“Some of those relationships that we’ve seen with outside investors have been unproductive, unsafe, and have created some unfair situations and living conditions for our residents,” Hooks said.
While Blessing said he’s not out to get private investors through his introduction of SB 334, evening the playing field for local residents has benefits that extend beyond maintenance issues and rising rents.
“The ability to purchase a home that’s affordable, form a family, build intergenerational wealth and really have a solid stake in the community, which is hard to do if, you know, your rent or your mortgage is eating up 50% of your paycheck or more,” Blessing said.
Blessing acknowledged that his legislation is not a panacea for solving Ohio’s affordable housing crisis. But, he hopes it will be a drop in the bucket in giving local residents the upper hand at having a stake in their community.
“Is it such a bad thing to give an individual the opportunity to put some sweat equity into that, live in it, and now they’ve got, you know, they’re building wealth?” he said. “I think that’s a good thing.”