Investors Drive Up Prices for Aspiring Homeowners Posted on October 26, 2022October 27, 2022 by Carmella D’Acquisto Harrison Colby, 34, sits on his back porch in Riverwest, smoking a Camel Blue and looking out at his corner lot backyard. The previous owner’s crops have taken over the garden beds. There is a sandbox, but Colby doesn’t have any children. Three fruitless cherry trees line the broken-up concrete sidewalk. Colby says the yard, which needs an overhaul, was the biggest deterrent to buying this home. But he knew he had to put in a quick offer if he stood a chance to buy the house before a company swooped in. Colby is one of the lucky few who were able to buy a home. “To me, Riverwest has always been a place where anyone could live,” said Colby. “It was beautiful, accessible, had tons of small businesses and, well, it used to be affordable. It has been the only neighborhood I’ve called home in my 10 years in the city.” Colby purchased his home for $188,000 in 2021. The previous owners bought the property in 2013 for $27,000. The purchase price rose nearly 700% in fewer than ten years. Riverwest home owner Harrison Colby. Riverwest, one of the smaller neighborhoods in Milwaukee, has no chain businesses. From bars and breweries to co-op grocery stores and theaters, all of Riverwest’s businesses are owned by community members. Situated next to the Milwaukee River, neighborhood residents enjoy quick access to biking and hiking trails, fishing, hills to sled on and ice rinks to skate. Riverwest is a neighborhood full of interesting characters. Each year, residents and visitors participate in “the people’s holiday,” a 24-hour bicycle race around the neighborhood. Businesses like the Florentine Opera, Woodland Pattern Book Center and Riverwest Radio serve as creative hubs. According to The Washington Post, the Riverwest neighborhood is “the countercultural center of the city” and a “magnet for Milwaukee artists and activists for decades.” Photo courtesy: Riverwest24.com The residents who call Riverwest home are having trouble renting and buying houses in their own community. Over the past few years there has been a significant rise in outside investors purchasing single family homes, either to flip and sell for a profit, or to enter the rental market. This isn’t just a Riverwest problem. According to a 2021 study by Marquette’s Lubar Center for Public Policy and Civic Education, since 2005, the share of single-family homes owned by a landlord in Milwaukee has doubled, from 10% to 21%. In 2005, 59% of duplexes were owner-occupied. Fifteen years later, only 47% are. And tht’s just single-family homes and duplexes. Milwaukee’s many residents also live in condominiums, triplexes and multi-family units that range from fewer than 10 units to over 100. The groups of non-owner occupants, or “institutional buyers,” as the National Association of Realtors calls them, include huge companies and corporations down to small limited liability companies (LLCs). And though there’s a significant increase in institutional buyers from out of state, that doesn’t mean there aren’t problems with local corporate property owners as well. Sarah, a long-time Riverwest renter who asked to be identified only by her first name, was recently kicked out of the apartment she had been living in for three years. Her landlord, who lives out of state, decided at the last minute to sell the property while the market was hot. Sarah received an eviction notice via text right after paying her June rent. She was left to find a new place within weeks. Infamous landlord Youseff Berrada bought about 8,000 rental units in Milwaukee and Racine under several different company names in about five years. The Wisconsin Department of Justice sued Berrada after a slew of civil allegations accusing him of creating a “web of fees and illegal practices to extract money out of tenants on top of their rent,” and several other allegations. Just last week, a Riverwest resident started a “Victims of Berrada Properties” Facebook group. According to UW-Milwaukee’s Encyclopedia of Milwaukee, Riverwest is one of the city’s most permanently integrated neighborhoods, sitting between the mostly white East Side and mostly African-American North Side. Riverwest’s over 30,000 residents are getting pinched out from owning– and even renting– in their own community. Sarah had not considered the possibility of home ownership while she searched for new apartments, despite the desire for autonomy. At her last apartment, she was able to squirrel away some money to save for a down payment. Now, her rent has significantly increased, and she can no longer save, making homeownership even less likely in the coming years. “I really fought to stay in this neighborhood,” said Colby. “Houses were moving so quickly it became nearly impossible to even view a place before it was off the market. Then, in about a month’s time, they’d be back on the market for about three times their original price.” Riverwest resident Nevenka Crnojevich had a similar experience. “Please keep the rent as low as you can,” wrote Crnojevich, a Riverwest resident in an online discussion about rent prices. “You will get tenants who stay and appreciate your kindness. I’m an old lady on limited income without a car. This neighborhood is perfect for someone like me and many others without cars. I already was gentrified out of the lower east side when my wonderful landlord died last year. The new anonymous ownership group kicked me out to give the apartment a ‘much needed facelift’ so they could double the rent.” Crnojevich was fortunate to find a place in Riverwest with a conscientious owner who used to live in the building. She says the level of crime in the neighborhood has stayed about the same since the 1980s, yet somehow rent has skyrocketed. Looking at this Certo map that visualizes Milwaukee’s non-owner occupied buildings, only a small number of properties in Riverwest are owner-occupied. This includes businesses and municipal buildings. But largely, Riverwest houses are not owned by the residents who call them home. And largely, the many families who are trying to invest in the community may no longer afford to live there. Certo Map showing non-owner-occupied buildings from Burleigh Street to Keefe Avenue. “Thousands of Milwaukeeans switching from home owning to renting has not appreciably reduced housing costs,” wrote John D. Johnson in his study Out-of-State Investment in Milwaukee’s Home Rental Market. “On the contrary, the people renting most single-family homes and even some duplexes are spending considerably more each month in rent than they would spend as homeowners of the same property, even after accounting for extra costs like insurance, taxes, and routine maintenance.” Not only are renters spending similar amounts of money as homeowners, they face non-financial barriers to securing housing, even in the rental market. According to Atticus Jaramillo, visiting assistant professor in the Department of Urban Planning at UW-Milwaukee, the more properties a company owns, the more likely they are to have robust automated processes. This includes things like maintenance requests and payment, but perhaps more importantly, the applicant screening process. “So for example, let’s say you have access to an applicant’s court records,” said Jaramillo. “Even if the applicant came out on top in the court, these [screenings] programs might just flag the issue, despite the renter not being at fault.” Applicants in economic recovery, bouncing back from bankruptcy or with steep debt-to-income ratios may no longer have the opportunity to defend their cases. According to Harvard University’s study of the social benefits and costs of homeownership, homeownership is a strong feature of a stable community. If this is the case, there is concern about the growing number of residential homes being sold to institutional buyers, not just on a personal level, but a communal one. Jaramillo says that there are several challenges that develop when a person who is consistently trying to transition to home ownership cannot make the jump. Self-esteem issues linked to social expectations can pop up, along with worsening mental health. For families with children, having access to desired schools may become more difficult. Additionally, the unstable nature of renting means families can be moving from home-to-home often, sometimes even once a year. “I’ve been renting for nearly 15 years,” said Colby, the Riverwest resident. “I think about the amount of money I’ve spent paying off someone else’s mortgage and it’s astronomical. I likely paid over $100,000 in rent. That’s more than half of my mortgage.” Traditionally, a single-family home was designed for owner-occupation. According to research by PEW, investors bought 24% of all single-family houses sold nationwide last year. In Wisconsin specifically, between 2020 and 2021, there has been a 57% increase in single-family homes purchased by investors. According to the National Realtors Association, 42% of reported single-family nation-wide purchases by institutional investors were later converted to rentals. The same study found that the rent prices on multifamily properties are up 11% while rents on single-family properties are up 13% year over year. And the more people or businesses sell to outside investors, the less likely it is that those homes will ever re-enter the housing market. “I am so lucky to live here,” said Colby. “There are so many other deserving people that should own homes in this neighborhood. I don’t anticipate selling this house any time soon, but when I do, it will only be to a local family.” Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Reddit (Opens in new window)Click to print (Opens in new window)