In 2018, a California-based real estate company called Raineth Housing owned nearly 200 properties in Cincinnati for which it was delinquent on $350,000 worth of property tax bills. It was sued by the city of Cincinnati in 2019 after officials accused the properties, many of which were in poor condition, of being a “public nuisance.” Many neighbors had complained about poorly-maintained lawns, lack of communication from the owners and a revolving door of tenants, who either left the homes within months or were evicted by Raineth.

When officials looked deeper into the problem of institutional owners – large real estate companies that buy and rent housing in bulk – they found that over 4,000 single family homes within the county were owned by such investors.

In December of 2021, Cincinnati’s port authority purchased the 194 homes owned by Raineth in a foreclosure auction, outbidding 12 other investors, for $14.5 million. The Port, short for the Port of Greater Cincinnati Development Authority, plans to repair and, in a few dozen cases, gut renovate the homes to sell them either to current renters or to other low-income Cincinnati residents.

Over a year later, the agency says it’s still working through the long process of contacting residents, providing homeownership training, and communicating with community groups on how best to engage residents about the opportunities. The Port plans to initiate the repair process this year with four or five homes a month, according to executive vice president Philip Denning.

The poor condition of some of the homes highlights the damage that institutionally-owned single family homes can have on neighborhoods. It also highlights the power gap between corporate landlords and low-income renters, who can not afford a downpayment on a home and who have been historically excluded from homeownership.

Advocates in Cincinnati also believe the purchases are removing vital low-end housing from the market, making homeownership even more unrealistic for those who have traditionally been excluded from it.

“What it does is it makes every one of those families not have the opportunity to purchase,” says Sister Barbara Busch, executive director of Working in Neighborhoods, a nonprofit that has been providing homeownership workshops to residents of the former Raineth properties. “In the long run, if we really are sincere about wanting to see more African American homeownership, we have to get that housing stock back and put it in decent shape.”

Many of the county’s institutionally-owned homes are in the West and East Price Hill neighborhoods, with 359 in West Price Hill alone. These two neighborhoods are home to 83 of the 194 properties The Port purchased from Raineth in 2021, which is why they are partnering with Price Hill Will, a local nonprofit community development corporation that works on economic development.

According to Price Hill Will executive director Rachel Hastings, the presence of institutional investors in the neighborhood traces back to the 2008 housing crisis.

“The foreclosure crisis was devastating in our neighborhood, and it really primed the pump,” she says.

When the homes were purchased, The Port did not have a clear idea of the condition they were in, and the process of inspecting them and determining needs took the better part of a year.

“We’ve spent the last nine months after acquisition understanding exactly what we bought,” says Philip Denning, executive vice president of The Port. The Port was only permitted by a court-appointed receiver to inspect 30 of the properties prior to the purchase, Denning says.

The agency planned to pay back the debt they issued to buy the homes with rental income from the properties. But this was complicated when they saw the condition of some of the homes.

“They were really just in much worse shape than we thought,” Denning says.

Denning says the agency was led to believe only 10 of the properties were vacant, whereas in reality about 60 were. These properties were in the worst shape and will need a gut rehab, he says, a process that won’t start until this year. The vacant homes further complicate the Port’s plans to pay back their debt with rent receipts.

“Having that many properties not be occupied is a major hurdle that we have had to figure out how to overcome,” he says.

Price Hill Will purchased one of the vacant homes from The Port for $72,000. It’s currently being renovated as part of their homesteading program, in which they purchase vacant homes, rent them out to tenants and eventually transfer the ownership to renters in exchange for performing home improvements.

Denning says after the repairs are made, there won’t be an issue making sure the homes are affordable. “Affordability is almost not going to be the problem in any way, shape, or form,” he says, because the vast majority of homes in the portfolio will be sold for between $130,000 and $150,000. “That’s a very, very affordable homeownership product, one that is almost distinctly not available,” he says.

But one potential problem is with appraisal gaps, when there’s a difference between a home’s appraised value and its resale value. Many houses in the portfolio were purchased for about $75,000, but will need about that much money in repairs, so the resale value could be about twice that. But most banks don’t approve mortgages if the requested loan amount is higher than the home’s appraised value.

The Port, along with nonprofit partners, initiated homeownership training to help people in the former Raineth portfolio understand the requirements for purchasing a home. Many of the current renters had no long-term plans for homeownership, and many have underlying issues like bad credit or no credit that would make a first-time home purchase difficult.

WIN has been handling the homeownership workshops. They’ve done three in-person outreach sessions, one a month for the last three months. Sister Barbara Busch, with WIN, says about 30 renters in the portfolio have expressed interest in buying a home, although not neccesarily one of the 194 homes purchased by The Port. The timeline for making that purchase a reality depends on each family’s circumstances.

“We can have families who would be ready in three to six months, or we could have families that would be ready in three years, and anything in between,” Busch says. She says that once a few families buy homes, it will lead to more purchases. “It gives you courage to try yourself,” she says.

After the purchase, The Port notified renters to let them know they were the new landlord. They also let them know everything they would be offering: help paying back rent and past utility bills, repairs and financial counseling, and help buying their homes if they wanted. They were immediately met with skepticism, but Denning said this was for good reason.

“These folks have been at the mercy of a profit-driven entity for a long time,” Denning says. “We swooped in here looking like something that was too good to be true.” He says it took a number of months to build a foundation of trust. Many renters took up the offers of rent assistance, and Denning says to date 85 renters were connected with a total of $600,000 in rental assistance.

Sister Barbara Busch says WIN has been doing outreach through a number of channels, including phone, virtually and in-person workshops.

“For many of these families, it’s going to take them time to really believe that there is an opportunity here,” she says.

This is partly because out of town investors have fostered years of distrust.

“One of the big problems we see in out of town investors…they’re obviously not as concerned about what happens to the house,” says Busch. This can lead to anything from small cosmetic issues; institutional investors are more likely to get rid of bushes and trees that need trimming so that it’s easier to mow the lawn, grass patches may be replaced with gravel. Or more serious public safety issues; investor-owned buildings tend to have more delays in repairs compared to owner-occupied single-family homes. When renters move out or are evicted, the buildings are rarely renovated.

New scrutiny has come to these private equity home purchases in recent years, including a congressional hearing last year. Corporate entities made up 28% of all single family home purchases last year. Representatives from these home rental companies have pushed back that their overall presence in the housing market is overblown, as large corporations only own a relatively small slice of the housing pie. But focusing on their total share in the housing market obscures the impact these companies have in specific neighborhoods and their tendency to buy where most renters are Black or low-income earners.

“It’s definitely concentrated in parts of the Midwest,” says Hastings. She says Cincinnati has become fertile ground for the acquisitions due to a combination of unaffordable rents and relatively low sales prices for homes. The inability of neighbors to easily contact building owners is also a complaint she’s heard; in at least one case, a downspout became disconnected, leading water to flow into a neighbor’s yard, but the neighbor couldn’t find anyone to complain to.

“If you’ve only got three or four homeowners left on that block, it really makes a difference to the neighborhood as a whole,” Busch says.

The Port says that their model of purchasing and rehabbing homes has led to interest across the country, with officials in Milwaukee and New Orleans reaching out to them to ask how to finance and run a similar operation.

“We’ve created a not-before-thought-of model for homeownership on the affordable housing level,” says Tom Millkin, VP of communications and marketing at The Port.

While officials would like to figure out how to expand eventually, they’re still dealing with the portfolio they have. Which means state interventions won’t be able to stem the tide of homes being purchased by big investors.

“I personally feel like we need more legislation to prevent these investors from purchasing so many properties,” Hastings says. Raineth was not the largest out of town investor in Hamilton County’s housing market, though they were among the most notorious. Residents are worried about what happens when another owner is delinquent on their taxes.

“What happens to all of those properties and all of those families? It’s just very scary,” Hastings says.