Giant companies are buying up Nebraska homes. Is there any way to stop them?
By Emma Schartz / Flatwater Free Press
July 2, 2022, 6 a.m. ·
Private equity-backed companies are gobbling up vast swaths of residential property across the country, including in Omaha.
They are buying up hundreds of thousands of homes every few months. Then they are renting them out, often for more money, and often in neighborhoods with larger Black populations and more single mothers than the national average.
The result: The number of tenants behind on rent in these homes has nearly doubled in the past three years, according to a new report by the House Committee on Financial Services.
The Congressional committee and many other groups are now seeking to understand the impact that private equity companies are having on American homeownership – and searching for solutions.
Nebraska is not immune. According to a recent investigation by Flatwater Free Press and KETV Channel 7, Vinebrook Homes has been the largest buyer of single-family homes in Douglas County in the past two years. Vinebrook now appears to be the third-largest landlord in the city, with most properties in North Omaha.
Across the nation and the Omaha metro, community groups and local leaders are searching for answers: Should they combat companies like Vinebrook? If so, how?
Other states are trying to enact laws to regulate private equity landlords. Nonprofits are trying to fill the gaps, promoting homeownership through community land trusts. In Omaha, local organizations are working to support homeownership in low-income neighborhoods.
Many Omaha residents may not know about out-of-state real estate companies like Vinebrook. But in other cities, where these companies started buying up homes more than a decade ago, it’s now clear that the Vinebrooks of the world have changed the homeownership landscape.
“Many residents….suspected that something was going on,” said Rutgers University Law Professor David Troutt, co-author of a housing ownership study focused on Newark, New Jersey. “They knew it for the number of houses that seemed to be changing hands, they knew it from rising rents, and they knew it from the badgering calls, knocks on doors…but they didn’t know exactly what.
“And now that they know…that it is an unprecedented number of outside investors seeking rent…there’s been a sense of ‘what next?’”
Across the country, some state leaders are trying to change the home-purchase process itself.
In 2020, California signed a law to prohibit the bulk sale of foreclosed properties at auction. It raised fines for vacant property owners who fail to maintain their homes.
The bill also restructured foreclosure auction practices. If the highest bidder at a foreclosure is someone planning to live in the home, the sale is complete. But if a company like Vinebrook buys that same home, the sale is delayed for 45 days to allow an “eligible bidder” to match that bid.
In May, Ohio Sen. Louis Blessing introduced a bill calling for a similar 45-day holding period in his state.
“In Ohio, there was no other legislation that even spoke to this issue. We needed to have a state-level conversation on this,” Blessing said.
City leaders across the country are also demanding reform.
Atlanta Mayor Andre Dickens called for legislation to limit the corporate investors that purchased one-third of homes in Atlanta during the first quarter of 2022. In Newark, Mayor Ras Baraka announced a slew of initiatives to combat real estate behemoths.
A recent “Who Owns Newark?” study found that 47 percent of that city’s one-to-four unit buildings were bought by outside companies.
The study suggested regulations to keep rents and homeownership affordable, discourage speculation and require owner transparency.
Land trusts also may close the gap between Wall Street real estate companies and residents trying to buy their first homes.
Community land trusts are nonprofits that hold land in a trust permanently, allowing people to purchase property on that land and enter a long-term, renewable lease. A 2019 study by the Lincoln Institute of Land Policy found that land trusts lowered the annual move rate to 2.6% in areas where they operate, markedly lower than the 6.9% move rate of all U.S. homeowners.
Northern California Land Trust is the oldest such land trust in California.
“A lot of people share that, there's no way that they would be in the Bay Area if it wasn't for living in a land trust property because they wouldn't have been able to afford it,” said Sarah Scruggs, the trust’s policy director.
There are no community land trusts in Nebraska. Although the Omaha Municipal Land Bank sounds similar, its programs differ in the length and depth of the organization’s involvement. Community land trusts, for example, focus solely on affordable housing.
There is some action locally.
In Omaha, Front Porch Investments awarded $7.3 million in March to promote development of local affordable housing. Awardees were a mix of nonprofits and redevelopment groups, including Habitat for Humanity, which recently broke ground on the $25 million Bluestem Prairie development in North Omaha.
“The concept of buying properties to then have portfolios is a story as old as time,” said Naomi Hattaway, Director of Communications and Community Strategy at Front Porch Investments. “We can’t just point fingers and say you’re bad. But if we can’t offer solutions, or hold them to a higher bar, it’s all for naught.”
inCOMMON Community Development was also on that awardee list.
inCOMMON’s neighborhood work focuses on Omaha’s Park Avenue and the Walnut Hill neighborhood near Saddle Creek Road. “How can we help neighbors capture some of the land before it goes to sale too quickly, whether that’s single family residences or vacant lots or land assemblies?” said co-director Christian Gray. “Immediately off the bat, we began to notice how difficult it was to win any bids in the neighborhood.”
Gray said inCOMMON is now exploring community land trust models.
The organization is redeveloping 75 units of affordable housing through the Low Income Housing Tax Credit, a federal income-based housing program, on Park Avenue. Gray said inCOMMON also frequently speaks with outside developers looking to purchase in the neighborhood, trying to encourage affordability.
“There’s a… lack of interest from most developers that we’ve talked to,” Gray said. “There’s not an interest to pursue, there’s not that will. That tells me that we’re lacking affordable housing incentives, in that we’ve made affordable housing too complex.”
Nonprofit involvement as a solution is not without criticism, especially concerning its involvement in North Omaha. State Sen. Justin Wayne, who represents parts of Northeast Omaha, said he didn’t see much of a difference between nonprofits and companies like Vinebrook.
“Everybody’s worried about the private companies now, but nonprofits have been buying land in North Omaha for the last five years and nobody said anything,” Wayne said after a May 26 housing forum co-hosted by the Flatwater Free Press. “To me it doesn’t matter if it’s a nonprofit or a private person, private equity firm, something like that, they’re still buying up the land, so the issues are the same.”
City of Omaha officials say they are stepping in to support homeownership in the face of companies like Vinebrook buying up massive amounts of real estate.
One plan: The Choice Neighborhood Program, a federal Housing and Urban Development program offering competitive grants to revitalize neighborhoods. Omaha received $26 million, and is funding projects by owner-occupants to improve the aesthetics of North Omaha homes.
Despite this work, private equity firms continue to buy property across the country. In fact, national real estate companies bought nearly one of every five homes sold in the United States during the fourth quarter of 2021.
“People know precious little about what’s going on, in many ways,” said Troutt, the Rutgers professor. “Once it’s better known and becomes a topic of conversation, people come up with all sorts of really ingenious ways of dealing with things. But they have to know that they’re going on.”
The Flatwater Free Press is an independent, nonprofit newsroom focused on investigations and enterprise reporting.