As out-of-state investors continue to invest in properties, ACTS Housing is setting up a homeowner’s fund to buy Milwaukee homes and sell them to city residents at affordable prices.
The fund, which the group hopes will eventually raise $11 million, plans to buy at least 100 homes by 2023 and resell them to private buyers.
President and CEO Michael Gosman said the fund will help the nonprofit achieve its mission of increasing homeownership rates in Milwaukee, particularly among black and Hispanic residents.
“If we’re going to provide families with great home ownership opportunities, we need to make sure there’s inventory that meets their needs,” Gossman said.
The goal is to erode the dominance of Milwaukee’s housing market by large investors.
This year alone, 400 Milwaukee homes have been purchased by three out-of-state investors. That’s almost double the number of homes they bought last year.
Marquette University researcher and housing expert John Johnson, who compiled those figures, said the investor’s influence on the market makes it impossible for low- to moderate-income renters to afford a home.
Although the Acts don’t typically sell homes, Gosman felt the need to act quickly given the pace of the nonprofit’s investor-owner purchases.
“If we don’t get into this place to disrupt what we’re seeing ourselves, who will?” We are in a situation where we have to ask. “And we came to the answer that it should be.”
Part of a concerted effort to address home ownership inequity
Deeds says single-family and duplexes plan to sell between $90,000 and $140,000, some ready to move in and others to renovate. The House of Acts acquisition team is led by Dorothy York, the nonprofit’s vice president of real estate, with experience as a real estate broker.
Program participants reflect the demographics of Acts participants:
- 90% of those participants have low to moderate income.
- 80% are Black, Indigenous and from other communities of colour.
- Graduates of any home buyer education program
Those who participate are expected to stay in their homes for at least five years.
The charity has raised $3 million toward its $11 million goal through various grants, including a $1 million grant from the Zilber Family Foundation.
The group said it is making requests to the city and county for more money, including funds earmarked for affordable housing under the America’s Savings Plan Act. The goal is to create decentralized public and private funds.
About $10 million will go toward home purchases and rehabs. The remainder will be used to pay team and other operating expenses.
The fund plans to use strategies that many investors use to buy homes: direct offers to homeowners for off-market sales, purchases of foreclosed inspections, portfolio purchases (multiple homes at once) and foreclosures.
ACTS had been considering building an acquisitions fund, but stepped up its efforts after partnering with the Community Development Alliance, York said.
The Coalition is a coalition of philanthropic and government partners in the Milwaukee area that seeks to increase homeownership in Black and Latino communities and low- to moderate-income residents.
Related:A Milwaukee group has called for millions of dollars and policy changes to increase more affordable housing and reduce the racial home ownership gap.
Related:Black families have not recovered from the Great Recession, a UW-Madison report on racial wealth gaps suggests.
Tigh Walley-Smith, chief executive of the partnership, commented that the nearly 100 stakeholders involved in the group identified the creation of a housing acquisition fund as a priority.
A recent Wisconsin Policy Forum report found Milwaukee had the worst racial disparity among nearly a dozen peer cities in 2020, with 26 percentage points separating the combined black and Hispanic homeownership rate from the white homeownership rate.
The city also has high rent-burdened households, defined as spending more than 30 percent of their income on rent.
Johnson, the market researcher, said many Milwaukee residents are financially better off owning a home than renting, even after factoring in homeowner’s insurance and property taxes.
“This is why ACTS Housing tenants are successful,” he said. And that doesn’t include any equity interest you get.
York said the fund has two measurable goals: to increase the number of homeowners of color in Milwaukee and to consistently sell enough homes to make the fund self-supporting.
Private owners have increased home buying
According to Johnson, the volume of home purchases at two of the three largest out-of-state private equity firms has increased significantly. And while one of them, Highgrove Holdings, has bought just eight homes this year, the Johnson Research firm plans to buy 1,100.
Wealthy investors and prospective landlords already have an advantage because they typically buy “portfolios” or properties in bulk at prices as low as $35,000 per property.
This type of purchase is often frustrating for activists and buyers.
“There might be a landlord selling five of their properties, and they sell them all in one transaction. And the cost of a home is very affordable for someone living in the neighborhood,” Johnson said. But they couldn’t get that much money to buy five of them and that would limit the market.
As the Federal Reserve raises interest rates, mortgages will become harder to obtain for the average resident, giving buy-to-let investors a greater advantage in the market.
Why are we seeing more of this trend now?
In the past, package deals were rare as local landlords tended to sell their properties privately. In the year The housing bust of 2008 caused the city’s homeownership rate to drop precipitously. And finally, with rents skyrocketing, real estate has quickly emerged as a lucrative venture for private equity firms.
However, York said she thinks the ACTS recovery fund could make a difference.
“We’re definitely trying to break that investor flow to investor (sales), and with this housing acquisition fund, we think we can.
Tallis Shelbourne is an Investigative Solutions reporter covering affordable housing and lead poisoning issues. Do you have a tip? Tallis can be reached at (414) 403-6651 or tselbourn@jrn.com. Follow her on Twitter @talisseer And message her on Facebook at @talisseer.
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