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For the past 10 years and especially throughout the pandemic, predatory investors have been crowding out would-be homebuyers in Milwaukee.
Housing advocates say this phenomenon hurts not only low- to moderate-income homebuyers, but renters and ultimately neighborhoods as well.
“Looking back at what made Milwaukee special, it was homeownership,” said Wyman Winston principal consultant for Neighborhood Wealth and former executive director of the Wisconsin Housing and Economic Development Authority, or WHEDA. “As homeowners left, we saw the quality of housing leave along with the physical and economic decline of neighborhoods.”
A series of reports produced in the last few years associate investor-owned rental properties with poorer maintenance, higher health risks and higher eviction rates when compared to those with homeowners and local landlords.
According to a report by John Johnson, a research fellow in the Lubar Center for Public Policy Research and Civic Education at Marquette University Law School, out-of-state investors have targeted majority Black neighborhoods in Milwaukee.
Johnson found that out-of-state landlords now own 23.4% of rental houses in majority Black wards, an 8.7 percentage point leap since 2018. Yet from 2018 through mid-2022, the number of out-of-state-owned houses in majority white neighborhoods fell by nearly 100, the report said.
Winston said this is happening because Milwaukee historically has had low real estate prices compared to other parts of the country. This was a benefit to Milwaukeeans until the last market crash when new real estate entities came into being. These entities buy properties in large numbers, particularly single-family homes, then rent them out.
“From an investors point of view, buying in Milwaukee is just dirt cheap, and you can get a lot of money from your money,” Winston said. “Second, investors are taking the cash flow that is revenue from their tax-structured real estate deals and investing them here, and in many respects, that money is like grants, which mean it’s basically protected.”
Is the criticism warranted?
But some question the criticism of out-of-state investors.
“As local investors, we may not be in favor of out-of-state investors. And there is a concern about there being no local presence to serve tenants,” said Heiner Giese, an attorney for the Apartment Association of Southeastern Wisconsin. “But if an investor buys a property that was already being rented out, how does that hurt the market?”
Giese said although some look at investors as competition for homebuyers, you could also look at them as help for renters.
“If the housing market is bad and homes are overpriced and interest rates are going up, it could be beneficial for people who can afford to rehab these homes to buy them,” he said.
Dorothy York, the vice president of real estate for Acts Housing, a nonprofit that helps low-income families become homeowners, said it’s important to not to paint all investors in the same light.
“Predatory investors are often out-of-state companies that come into usually low-income neighborhoods, take advantage of the community and have destabilizing effects on the neighborhood,” she said. “But we’ve had investors in Milwaukee for years that have been providing safe affordable rental units to people and those are essential.”
York said Milwaukee needs more owner-occupied housing.
“Homeownership is not only a wealth-building and stabilizing opportunity for people, it’s also a mind shift,” she said. “When you own a piece of your community, you’re more likely to take ownership and report those negative things that make your neighborhood unattractive.”
Many renters want to be homeowners but struggle because of investors and a low housing stock, advocates say.
To help them, groups have launched initiatives to create more homeowners in Milwaukee.
Acts Housing, for example, recently started an acquisition fund to even the market for Milwaukeeans looking to purchase homes. The fund will buy homes and resell them at affordable prices to residents.
But housing advocates say more can and should be done.
Winston suggests creating a rental housing registry.
“The city needs a rental housing registry that will allow them to know who owns what and how they are doing,” he said. “Right now, they have no real way of knowing what’s going on.”
He also suggests co-ops and land trusts for homeowners.
“These will help build generational homeownership,” Winston said, adding it also would “eliminate zombie properties by creating a support system for homeowners when they are struggling or in need.”
A co-op is a form of homeownership in which residents collectively own and control a housing unit, so expenses are split between everyone who resides in that unit.
Land trusts are nonprofit organizations governed by a board of residents and public representatives that provide community assets and shared equity homeownership opportunities.
For more information
York suggests considering Acts Housing if you are looking to sell your home.
“Your home would be going to a local family,” she said. “We may even pay more, and you’d be benefiting the community.”
In case you missed it: Labor shortage, outside investors strain affordable housing efforts in Milwaukee
Thank you for this article. I have been a real estate agent since 2003, and I have been so frustrated by this situation. It is nearly impossible for a homeowner to compete with investors because investors write contingent free offers and pay cash. I don’t blame a seller for accepting the “sure thing”, but I think people really need to think about the long-term impact of their decisions. Some of the properties investors are able to snatch up are in need of cosmetic updates, so they are priced more affordably than they would be if they were “beautified”. Sadly, these are the types of properties that could cosmetically update over time, but instead, investors buy them and price them at the top of the market. It is disappointing to watch this happen.
I was equally disappointed that the Fed raised rates again. That only harms homeowners more, and in my opinion, does little to accomplish the said goal of slowing things down.
The suggested real estate multiple rental housing ownership registry is only common-sense good government, and doable with data base software. But it probably needs to be passed as a state law. Big out of state lobbyists will fight it. Enforcement is needed. Huge companies will hide, legally. Lobbyists will be paid. handsomely.
The other uphill battle is the very powerful WRA – Wisconsin Realtor Association. In 2017 they backed an act to restrict municipalities from regulating short-term rentals. See the following:
But in 2017, the legislature limited the ability of municipalities to restrict short-term rentals with an act that became law as part of the budget bill.
Under the act, a municipality may only prohibit rentals fewer than seven days in length. They may also cap the total number of days in a year when a property may be rented, as long as the cap numbers 180 or greater and the property is rented for periods of between six and 28 days at a time.
https://www.wra.org/WREM/Nov17/RightToRent/
Thanks again for a timely and informative article. Also for the insightful comments above. I would only add that, I understand sellers may be seeking a stable offer, or the “best”offer. But would caution not to be pound wise and penny foolish. The impact of who you sell to, will impact your on-going quality of life. You cannot relocate to a suburban or even a rural WI location and not feel the impact of Milwaukee as the largest city in WI. We cannot always point the finger elsewhere, we are all responsible for our actions and all actions have impact.
This is my concern. I purchased a rental property under an LLC in 2014, OWNER Occupied. I requested at that time and years after this “opportunity” to purchase the VACANT Lot, directly next door to my property. My city of Milwaukee’s real estate taxes was current then and are current now. Each time I was told by the Real Estate department that the lots were “On Hold” by Alderwoman Coggs because they were giving opportunities to an investor. I am an investor; that has invested in and upgraded an extremely distressed property- and each adjacent lot, cleaned the city block, and initiated resident communications with the City of Milwaukee in general. At this point, I feel like the City of Milwaukee has lied to me. I have had no financial support from the City Programs; no funds have been granted, and many of the City of Milwaukee-funded “loans” require you to place a lien against your property. Hence, the message to an Owner Occupant is to take our junk, fix it, and do the best you can; and do not stumble or we will come back and take the property from you if you fail on paying real estate taxes on time. There are no incentive grants for OWNER Occupied Investors. On one hand, the City of Milwaukee does not want out-of-town investors; yet, on the other hand, they treat born-in-this-city resident owner occupants like crap. The city of Milwaukee has advertised that you can purchase the lot next door; “except”, if it is a prime location for investors; residents and owners are denied the opportunity. Why?? Because Alderpersons are themselves making deals with in-state and out-of-state investors. This is not fair and I believe this is a form of real estate redlining for constituents who have endured the burden and paid taxes into the City of Milwaukee. In this case, I do blame the City of Milwaukee. And frankly, I believe I and my neighbors are being treated this way to provide white investors the opportunity to come in and rob our community of the opportunity to own it. We wonder why this state is so divided. It is because of this sneaky and obvious effort to gentrify our black community. The funds due to our community are systematically sent to the suburbs under the leadership of Alderpersons, who only want to be famous. This is not a complaint; it is the hard truth about this hypocritical, sneaky, and “ism” infected community. We have new construction currently being built; that no one has asked for our direct feedback on. We are directly adjacent to a main street. The alderperson rarely conducts public meetings. But, instead spends 99% of her time meeting and organizing with investors. Then when she walks through the neighborhood once per year; she brings 6 police officers with her. How insulting and rude; we pay Alderperson salaries and Police officer salaries through our taxes. Now we have a Mayor who is worse than the Alderpersons he spawned. Not once has he walked the inner city neighborhoods and asked about the needs. He gets on Television and tells everyone he was “POOR” and had to live in the inner city. Well, someday, he will be returned to the inner city. If he was so poor, how is he healthy and educated????? Why, Because someone listened to his unappreciative and discounting self. This City and State needs national attention on this mess that it is expecting people of color to just lay down and accept.
The comments regarding “Predatory Investors” in the article are not quite true. The City of Milwaukee Department of City Development” is systematically “giving and selling” many of these properties themselves to out-of-state and in-state investors; under a program. And the Acts Program dollars granted are 2 million dollars. Is that about 10 to 15 homes? Yes. This means this is nothing compared to what the investors are being allowed to bite off of our tax dollars and take from in-state, born and raised in Wisconsin Investors. The Act Program is just a smoke and mirrors to make all believe something is being done. Owner Occupants in South Milwaukee and Brewers Hill were all allowed to buy vacant lots next to their properties. However, once they passed the North Ave boundary, where the majority of the homeowners and Owner Occupants are of African and Hispanic descendants; the properties are “On- Hold”. Also, this notion that residents left the area, is also, not completely true. The City of Milwaukee left the areas! They stopped administering and maintaining city-owned properties, streets, and neighbors. Until they figured out that this land is now valuable; and until the City of Milwaukee figured out that the City itself can be its own investor. So now, the Ma and Pop Landlords and Owner Occupants are being pushed out by Out of State and In-State Investors. Some of the In-State investors are right out of Brookfield, Wisconsin. As I said, we will be bringing National attention to this entire issue and we are not afraid of Wisconsin. We need public officials who truly want the residents to participate in government. Many of the City of Milwaukee meetings are scheduled during work hours; residents, can not take off work to participate. And many meeting notices are sent one day before or on the morning and day of the actual meeting! This is not conducting business; this is conducting confusion and chaos and discourages community participation. Why am I communicating this? Because we all need to know and understand and communicate the problems, so, they can be at the least, addressed. Please try leaving messages for the Alderpersons in the City of Milwaukee, good luck in getting timely and business-focused responses. Often times, these alderperson assistants call you back and the alderperson does not get involved, makes a failed commitment or you never hear back at all. The system is broken.
The investor program I mentioned is totally separate from the ACTS Program. The Acts Program is for residents who want to purchase primarily single-family homes.
The Apartment Association of Southeast Wisconsin is a ” membership” focused group. Landlords- multi-family and duplexes from all over the city and state talk about landlord concerns. I have never experienced a true community-centric discussion within this Association. The article is infusing many comments from the Association and etc… which have competing objectives. And none of these objectives and organizations are working cohesively. This is why there is so much division in this state. The perception of the inner city of Milwaukee is that it is all crime-ridden and not worth discussion at all. However, everyone wants the residents to just be their tenants and shut up.