ACTS Housing is launching an acquisition fund to combat investor landlord purchases in Milwaukee
Faced with an influx of out-of-state investors gobbling up properties, ACTS Housing is launching a homeowner acquisition fund to purchase Milwaukee homes and resell them at affordable prices to city residents.
The fund, which the group hopes will eventually tally $11 million, plans to purchase at least 100 homes in 2023 and resell them to individual buyers.
President and CEO Michael Gosman said the fund will help the nonprofit fulfill its mission of increasing homeownership rates in Milwaukee, particularly among Black and Hispanic residents.
“If we’re going to offer great homeownership opportunities for families, we have to make sure there is inventory available to them that meets their needs,” Gosman said.
The aim is to blunt the dominance in the Milwaukee housing market by large investors.
Nearly 400 Milwaukee homes have been purchased by three out-of-state based investor companies so far this year alone. That puts them on pace to nearly double the number of homes they purchased last year.
John Johnson, a Marquette University research fellow and housing expert who gathered those figures, said the investor influence in the market makes it nearly impossible for low-to-moderate income renters to buy homes.
Even though Acts isn’t typically in the business of selling homes, Gosman said the nonprofit felt the need to act urgently, given the pace of investor landlord purchases.
“We found ourselves in a situation where we had to ask, ‘If we don’t enter this space to disrupt what we’re seeing, who’s going to do it?’” he said. “And we came to the answer that it needs to be us.”
Fund part of concerted effort to address homeownership inequity
Acts said it plans to sell single-family and duplexes priced between $90,000 and $140,000, with some move-in ready and others rehabs. Acts’ home purchasing team will be led by Dorothy York, the nonprofit's vice president of real estate, who has a background in real estate brokerage.
Program participants will likely mirror the demographics of Acts participants:
90% of those participants have low-to-moderate incomes
80% are Black, Indigenous and from other communities of color
Graduates of any homebuyer education program
Those who participate will be expected to remain in their home for a minimum of five years.
The nonprofit has already raised $3 million toward its $11 million goal through multiple grants, including a $1 million grant from the Zilber Family Foundation.
The group said it is submitting requests to the city and county for additional funds, including money earmarked in the American Rescue Plan Act for affordable housing. The goal is to generate an even split of public and private funds.
Around $10 million will go toward home purchases and rehabs. The remainder will be spent on paying the team and other operating costs.
The fund plans to use the same strategies many investor landlords use to buy homes: off-market sells through direct offers to homeowners, purchases with waived inspections, purchases of portfolios (multiple homes at once) and foreclosed homes.
ACTS was already considering building an acquisition fund but scaled up its efforts after partnering with the Community Development Alliance, York said.
The alliance is a Milwaukee-area consortium of philanthropic and government partners seeking to increase homeownership among Black and Latino communities and low-to-moderate income residents.
Teig Whaley-Smith, chief alliance executive of the alliance, said when polled, the roughly 100 stakeholders involved in the group identified the creation of a housing acquisition fund as a top priority.
A recent Wisconsin Policy Forum report found Milwaukee had the worst racial disparity in homeowner rates among nearly a dozen peer cities in 2020, with 26 percentage points separating the combined Black and Hispanic homeowner rate and the white homeownership rate.
In addition, the city has a significant number of rent-burdened households, defined as households spending more than 30% of their income on rent.
Johnson, the Marquette researcher, said many Milwaukee residents would be better off financially as homeowners than renters, even after factoring in homeowner's insurance and property taxes.
“That’s why ACTS Housing tenants have been successful,” he said. “And that’s not even including any sort of equity advantage that you get.”
York said the fund has two measurable goals: to increase the number of people of color owning homes in Milwaukee and consistently sell enough homes that the fund becomes self-sustaining.
Private equity landlords have ramped up homebuying
According to Johnson, the rate of home purchasing by two of the three biggest out-of-state private equity firms has increased significantly. And although one of them, Highgrove Holdings, only purchased eight homes this year, Johnson's research suggests the entity plans to purchase 1,100.
Investors and prospective landlords with loads of cash already have an advantage because they typically purchase “portfolios,” or properties in bulk at prices as low as $35,000 per property.
This type of purchasing is often a point of frustration for activists and potential buyers.
“There may be a landlord selling all five of their properties, and they’ll sell all of them in one transaction. And the price per house is pretty affordable for someone who lives in the neighborhood,” Johnson said. “But they could never acquire that much cash to buy all five of them and that limits the markets.”
With the Federal Reserve increasing interest rates, mortgages will become harder to obtain for the average resident, giving investors who can make cash purchases even more of an advantage in the markets.
Why are we seeing this trend more now?
In the past, package deals were rare, as local landlords tended to sell their properties individually. The housing crash of 2008 led the number of city homeowners to fall precipitously. And finally, with rents at an all-time high, real estate has quickly emerged as a lucrative money-making venture for private equity firms.
However, York said she thinks the ACTS acquisition fund can make a difference.
“We’re definitely trying to interrupt that flow of investor to investor (sales),” York said, “and with this Housing Acquisition Fund, we think we’ll be able to.”
Talis Shelbourne is an investigative solutions reporter covering the issues of affordable housing and lead poisoning. Have a tip? You can reach Talis at (414) 403-6651 or tshelbourn@jrn.com. Follow her on Twitter at @talisseer and message her on Facebook at @talisseer.
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This article originally appeared on Milwaukee Journal Sentinel: ACTS Housing fund will buy and resell at least 100 Milwaukee homes
