Ohio Senate considers stemming Wall Street’s takeover of housing in the state

Politicians in Ohio’s General Assembly are seeking to challenge corporate landlord consolidation and give Ohioans a better shot at affordable housing with new legislation. Introduced in the Ohio’s Senate Ways and Means Committee in March by Sen. Lou W. Blessing, III, Senate Bill 76 (SB 76) would do the following with respect to corporate landlords in the state:

• Levies a tax on any landlord that owns 50 or more single-, two-, or three-family houses in a single county.
• Imposes the tax on a monthly basis, at a rate of $1,500 for each such house owned on the first day of the month.
• Requires a group of commonly owned or controlled persons to file and pay the tax as a combined taxpayer group.
• Divides the revenue from the new tax equally between the Low- and Moderate-Income Housing Trust Fund and the Local Government Fund.
• Imposes a penalty for failure to file or pay the tax equal to the number of taxable houses owned multiplied by 5% of the median Ohio home price.
• Imposes a criminal penalty for filing a fraudulent refund claim, classified as a fifth degree felony and punishable by a fine of up to $750,000.
• Requires pass-through entities to provide the applicable county auditor with contact information related to each taxable house the entity owns or transfers.
• Requires taxpayers to provide information on their income tax or commercial activity tax returns about any taxable house that gave rise to taxable income or gross receipts.

PESP strongly supports SB 76 because it would do much to counteract the consolidation of single-family homes by corporate landlords — like private equity and hedge funds — and would also bring much needed transparency to the ownership structure of such properties.

Recent trends in the housing market have seen corporate landlords invest heavily in single-family homes,^[1] leading to issues for prospective homeowners and renters alike. First-time homeowners often compete asymmetrically with large firms for homes, losing out to companies that can purchase using all cash transactions.^[2] Tenants also lose when private equity firms become their landlords, often experiencing exorbitant rent increases and lower quality maintenance when properties are owned by private equity.^[3]

Part of the difficulty in addressing the issues posed by corporate housing consolidation is the lack of transparency regarding the ownership structures of the real estate companies used to purchase and manage such properties.^[4] Information related to private funds is further limited because they are subject to less detailed and frequent disclosures when compared to firms in the public market.^[5]

Although a common private equity owner may be responsible for multiple real estate companies driving housing consolidation, the lack of disclosures relating to subsidiaries makes it difficult to attribute consolidation to a single entity. Moreover, the lack of ownership transparency makes it difficult to identify the parent company of problem corporate landlords and thus hold them accountable. Therefore, the identification of common ownership of single-family homes by corporate landlords would do much to pull back the veil on the parties responsible for property consolidation and rental property issues.

Issues related to corporate housing consolidation have made their way to our state. VineBrook Homes, owned by private equity firms Access Capital Partners and NexPoint Real Estate Strategies Fund,^[6] has been in the news for the poor conditions and maintenance of their rental properties in places like Cincinnati and Huber Heights. Such problems are magnified by VineBrook’s consolidation of single-family homes: as of February 2023, Huber Heights officials estimated that VineBrook owns roughly 15% of homes in the city.^[7]

In Columbus, private equity owned Progress Residential has been accused of shoddy repairs and excessive fees.^[8] This is unsurprising as this is in line with its track record of property management in other states across the country.^[9]

Whether one is a tenant or prospective first-time homebuyer, the incursion by Wall Street firms into single-family home ownership is antithetical to solving our nation’s housing issues. SB 76 would provide the tools Ohioans need to combat housing market consolidation and shed light on the opaque ownership relationships used to do so. Thus, by passing SB 76, Ohio can safeguard the American dream for its residents by shielding them from unfair competition with, and exploitation by, corporate investors with deep pockets.

If you have any questions about Ohio’s SB 76 potential impact on private equity investment, please contact PESP’s Senior Policy Coordinator, Chris Noble, Esq., at chris.noble@pestakeholder.org.

^[1]https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html; https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents

^[2]https://www.nytimes.com/2022/04/23/us/corporate-real-estate-investors-housing-market.html

^[3]https://www.propublica.org/article/when-private-equity-becomes-your-landlord

^[4]https://shelterforce.org/2022/08/23/when-landlords-hide-behind-llcs/

^[5]https://www.institutionalinvestor.com/article/b1zwb1l31py9yr/Report-Sparks-Questions-Over-Transparency-Into-Private-Equity-Holdings

^[6]https://accessprivatecap.com/access-private-capital-raises-11-5-million-investment-in-vinebrook-homes/

^[7]https://www.daytondailynews.com/local/vinebrook-homes-sees-hundreds-of-local-complaints-evictions-company-commits-to-customer-service/5222HVDUYRFNLNZJLO52ZFAMBE/

^[8]https://www.nbc4i.com/news/investigates/columbus-rental-woes-tied-to-national-company/

^[9]https://pestakeholder.org/wp-content/uploads/2023/04/PESP_Report_NRHC_Progress_April2023_final-1.pdf