ELISSA NADWORNY, HOST:
It's hard enough to buy a home these days, given the massive housing shortage, inflation and higher mortgage rates. Adding to the challenge, institutional investors - they've been buying up a record share of homes to rent out. And critics say it's taking some of the most affordable properties off the market. The city of Cincinnati is pushing back. As NPR's Jennifer Ludden reports, a city agency outbid investors to buy homes itself so it can eventually sell them to renters.
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JENNIFER LUDDEN, BYLINE: Demetrius Harper-Edwards meets me at his house after work and before he takes his 8-year-old twins to soccer practice. He and his girlfriend Sarai Yisrael also have a 2-year-old.
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LUDDEN: He moves toys away. They spent the pandemic dreaming of buying a house, maybe even this house, which they've rented for four years. Harper-Edwards shows me the backyard they love.
DEMETRIUS HARPER-EDWARDS: The kids play. We come out, play cornhole with the kids, barbecue out here, just enjoy it.
LUDDEN: He's a carpenter. She's a seamstress and designer. They've researched how to fix their credit and been saving for a down payment. Yisrael says buying a home would be especially meaningful for her since as far as she knows, no one in her family ever has.
SARAI YISRAEL: My parents - no. My mom and my grandmother - they were actually born in Alabama, so...
LUDDEN: She assumes her ancestors were slaves and says, home ownership would change the face of our family.
YISRAEL: It means longevity, you know? It means that I can leave a place for my children. They can take some stress off of my children's shoulders just already.
LUDDEN: Suddenly, this year, that dream got more real. Out of the blue, they got a letter saying the house they rent had changed hands. It was among nearly 200 homes owned by a California investment firm that went under. Other investors lined up with offers, but a city agency outbid them, and now it wants to help Yisrael and Harper-Edwards buy the house.
HARPER-EDWARDS: So it's just the universe playing out and just - like, OK, you want your shot? Here it is.
LUDDEN: Their new landlord is The Port of Greater Cincinnati Development Authority, known as The Port. Laura Brunner heads it, and last year her staff did some digging and found institutional investors own at least 4,000 houses here. Most were bought for cheap after the 2008 housing crash, then turned into rentals. Brunner says this threatens to exacerbate the racial wealth gap in Cincinnati, where only a third of Black residents own homes.
LAURA BRUNNER: So we're really saying in these low- to moderate-income neighborhoods, which is where these investments are, they're taking a significant amount of inventory off the table and saying, people don't get to own homes anymore. So they're really capturing them as renters.
LUDDEN: On top of that, she says her staff has found outside investors are more likely to hike rents, evict tenants and let houses fall into disrepair.
BRUNNER: Just, you know, treat it like a cash cow. Take as much profits as you can, not pay your debt until you decide, OK, now I'm getting enough pressure put on me; I'll just walk.
LUDDEN: The California company that went defunct was Raineth Housing, and The Port's move to buy up its properties is a risky experiment. Brunner doesn't know of any other public agency that's done it. So far, they've paid more than $16 million.
BRUNNER: If we have a chance to fight back on this really predatory practice, there was no question that we had to do it.
LUDDEN: David Howard is with the National Rental Home Council. And he says large investors fill a need, especially as higher interest rates make it harder to buy a home.
DAVID HOWARD: We're entering a period of time where I believe there will be greater demand for rental housing. And I think the industry has an important role to play in providing quality, affordably priced rental housing for people who either need or want that option.
LUDDEN: In Cincinnati, though, a number of properties the board has bought are in bad shape.
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LUDDEN: In the kitchen of a three-bedroom home, a contractor pulls up nails from a saggy floor with a large hole. Facilities manager Ron Shouse says this house was vacant. He thinks it flooded after pipes froze.
RON SHOUSE: The floor was rotten. We pulled it up. It's a lot more rotten than we thought. So the cabinets are rotten. So where the original scope didn't include cabinets and such, we have to put them in now.
LUDDEN: Some homes with tenants also need work. There have been broken furnaces, leaky roofs, mold. One family has been using a toilet that's not connected to a pipe. Expensive rehabs like this set up a brutal numbers game. The Port's plan is to make back its money from renting and eventually selling the homes. But the whole point is to keep rents affordable and sales prices low enough that people can pay. To help tenants get ready to buy, it's partnered with a local nonprofit that specializes in that.
HOPE WILSON: Thank you all for coming out this evening.
LUDDEN: Hope Wilson is with Working in Neighborhoods and greets a dozen people at this homeownership workshop. She walks them through credit history, what banks consider for a loan and the extra cost beyond a mortgage. Like, when something breaks, it's on you.
WILSON: And so either you're going to become very handy, you're going to make friends with friends who are really handy, or you're going to have a great savings account.
LUDDEN: But even those in good financial shape can't compete with corporations, says Sister Barbara Busch. She's executive director of Working in Neighborhoods and has seen people lose out again and again to large investors.
BARBARA BUSCH: They have cash on hand. They can close within 10 days. They can do all the things that makes both the real estate agent and the seller happy because, you know, this is going to be a quick thing.
LUDDEN: Buying homes directly from The Port without that competition will be easier, though it may still take years for some renters to be ready. Among the first on track to buy are Demetrius Harper-Edwards and Sarai Yisrael. He's dealing with a couple of old payday loans and has applied for student debt relief.
HARPER-EDWARDS: I'm checking off all these boxes, and I was like, oh, I didn't think I was going to be able to do that. But now it's like - they just confirmed it. Like, oh, you qualify. You know, you ready.
LUDDEN: Harper-Edwards' family are homeowners. In fact, one house has been passed down for 60 years. If this all works out, he says, maybe he'll buy another place one day and become a landlord himself. Jennifer Ludden, NPR News, Cincinnati.
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