Out-of-State Investors are Taking Away Hoosier Homeownership Opportunities!

We have a housing crisis in Indiana. Fewer and fewer Hoosiers own their homes while out-of-state investors have and continue to buy single-family homes in record numbers. The American dream of homeownership has turned to that of being a long-term renter. Although this is a statewide problem, it is particularly acute in Indianapolis.

Our Homes are Increasingly Owned by Out-Of-State Companies

We estimate over 27,000 single-family rental (SFR) properties in Marion County are now owned by corporate investors (LLCs, INCs, LLPs, REITs, etc). This activity, to date, is not slowing, with more purchases made every month. We estimate that around 13,000 (and growing) of these homes are owned by out-of-state investors. With each transaction is a loss of income, each month, of upwards of $15 to $20 million in rent payments that leave Indiana and disappear from our local economy.[1]

Focusing on the 27,000 investor-owned SFR properties in Marion County identified by the FHCCI, 12,570 or 46% of those properties are owned by out-of-state investors. Imagine if half those homes were available to prospective home buyers!

In August 2023, the Fair Housing Center of Central Indiana FHCCI released a new report, “Who Owns Indy’s Houses: A Review of the Largest Single-Family Home Investors.” In this report, the FHCCI explains how homeownership disparities are increasing in Indianapolis and across the state due to large corporate investors, mostly from out-of-state and heavily funded by Wall Street, purchasing our single-family homes. These corporate owners purchase properties at rapid rates, often converting formerly owner-occupied homes into rentals, and out-competing individual home buyers with all-cash offers.

As landlords, the corporate entities tend to file evictions frequently per unit, and fail to maintain properties at high rates. All these impacts are felt strongly in our neighborhoods of color. By allowing these activities to continue unchecked, Indiana legislators not only fail to protect renters, but also allow the deterioration of Indianapolis’ housing stock and minimize the ability of residents to build wealth through homeownership.

These large, often out-of-state, corporate investors evaluate how they are profiting across a very short time period, sometimes buying and selling houses or entire portfolios in quick turnarounds. In contrast, the local landlord or mom-and-pop owner typically sees their property or properties as a long-term investment, requiring them to keep up on needed repairs, have a presence on the property, and know their tenants.

According to a 2022 report from MetLife Investment Management, four in ten single-family rental homes could be owned and controlled by Wall Street within just seven years at the national level.[2] At the same time, these companies are raising rents and not completing needed repairs, they are gaining huge profits off Hoosier families.

The two largest SFR investor owners have focused much of their attention on the eastern portion of Marion County. The Far Eastside neighborhood, which has nearly 2,000 SFR properties, has more than 1,200 of those owned by out-of-state investors. VineBrook, Cerberus, and Progress Residential alone own 562 of those properties. Lawrence, which adjoins the Far Eastside to the north, has more 600 of its 940 SFR properties owned by out-of-state investors – primarily Cerberus, VineBrook, Tricon, SLB, and Progress Residential. On the southside, neighborhoods like Camby / West Newton, Poplar Grove / Five Points, and Valley Mills have more than 80% of their single-family-rental properties owned by out-of-state investors.

Investors Beat Hoosier Buyers with All-Cash Offers for Homes

Prior to the market settling in 2012, 20% of the SFR rental properties had owners located outside of Indiana. That number spiked to nearly 75% from 2013 to 2016 as companies like American Homes 4 Rent and Cerberus / FirstKey made their entrance into Marion County. More recently, approximately 45% of SFR rental properties are owned by out-of-state investors and most often, they buy in cash, using it to compete against first-time and low to moderate income home seekers in search of their American dream of homeownership.

Since 2018, cash buyers of all types have accounted for more than 40% of residential real estate sales in Marion County. Out-of-state investors paid in cash in over 70% of their real estate transactions. In 2022, that number reached 81%. Local buyers, on the other hand, are far less likely to bring cash to the table as only 35% of sales were paid with cash when the buyer hailed from Indianapolis.

As property values and rents have skyrocketed, real estate investors have taken hold of many neighborhoods they’ve identified as giving them the best return on their investment and sought to squeeze as much profit as possible out of their portfolios. As profit margins have come into focus, efforts to increase revenue and decrease expenses have driven up rents, increased evictions, and decreased property maintenance.

Investor Owned Homes May Sit Empty

Because these property holdings are investments, houses may sit vacant while the owner [investor] waits in hope of capitalizing on a future sale. We see this across Indy in vacant lots still being held by out-of-state investors who picked them up for pennies on the dollar after the foreclosure crisis and are still sitting empty without a constructed house.

ATTOM recently reported that among the 23.6 million investor-owned homes in the U.S., in the second quarter of 2023, about 843,000 are vacant, or 3.6%. Particularly troubling was that the highest level of vacant investor-owned houses was in Indiana (6.9% vacant), followed by Alabama (6.1%), Oklahoma (6%), Ohio (5.9%), and Illinois (5.8%).

Not only do corporate investors purchase homes and transform them into rentals, we are also starting to see the building of entire Build-to-Rent (BTR) communities, including in the suburbs of Indianapolis. A recent analysis of Yardi Matrix data found that Indianapolis was the 10^th biggest market in the nation for BTR completions, adding 912 single-family rentals in the most recent five years evaluated.

Although more housing units are desperately needed in Indianapolis and statewide, are these units the best fit to meet this need? Homes with high rents and no ability to gain equity? The BTR building boom is part of a national trend which had over 14,500 houses completed last year and more than three times as many under construction. Housing advocate Marie Claire Tran-Leung of the National Housing Law Project summed this up, “This type of housing does increase supply somewhat, but not necessarily the type of supply that would help a lot of people who are really in desperate need of housing.”

Buy, Evict, Repeat

Across Marion County, for all rental property types, eviction filings increased by 30% from 2021 to 2022 – from around 18,000 to around 24,000 filings. With approximately 170,000 rental properties in Marion County, that was one eviction filing for every seven rental households in 2022. However, not all landlords and property managers are evicting at equal rates. Some large out-of-state investors have been aggressively evicting residents, as evidenced by the increase in filings from 2021 to 2022.

While Marion County eviction filings increased by 30% in 2022 over 2021, the largest out-of-state SFR investor owners had much higher increases. During this time, the five largest out-of-state investor companies increased their eviction filings by 136%. VineBrook had a 51% increase in eviction filings from 2021 to 2022 while Cerberus (+162%), Yamasa (+560%), and Progress Residential (+208%) had much more noticeable increases in filings. In terms of volume of eviction filings, VineBrook evicted more than 300 renters in 2022, 50% more than the next highest SFR evictor, Cerberus.

In 2021 and 2022, the eviction rate in Marion County was around one filing for every four rental units. However, in ZIP Codes of color, there was one eviction filing for three rental units, while in predominantly white ZIP Codes there was one filing for every five units. Many neighborhoods with higher eviction rates also have fast-growing Hispanic populations. Neighborhoods like the Far Eastside (+55% Hispanic population, 2000 to 2020), Lawrence (+105%), and East Warren / Cumberland (+87%).

Bad Property Maintenance

According to data reported from the Marion County Public Health Department, from 2021 to 2022, there was a 6% decrease in the number of code violations for SFR properties. However, for large SFR investors – those with more than 100 SFR properties owned in Marion County – there was a 6.2% increase in code violations.

In Marion County, large, out-of-state SFR owners incurred 505 code violations in census tracts of color compared to 258 in majority-white census tracts. Per unit, that was 16 violations per 100 units in tracts of color compared to 11 in majority-white tracts.

In ten neighborhoods, more than one in four SFR code violations can be attributed to one of five large SFR investors – Cerberus, JOB, Progress Residential, SLB, and VineBrook.

Not Just a Marion County Problem / Substandard Housing and Evictions Are Part of a National Story

Due to the cost of data, we were limited in evaluating the counties outside of Marion County. What we could share in our report were the news stories documenting similar problems statewide by these out-of-state investors, including in Fishers and Columbus. We also documented in our report how these out-of-state investors are also bad actors in other cities and states leading to similar problems we are seeing in Marion County. Our report also discusses how governments, legislative bodies, and tenants are fighting back.

Plunder: Private Equity’s Plan to Pillage America

In August 2024, the FHCCI brought author Brendan Ballou, author of Plunder: Private Equity’s Plan to Pillage America to Indianapolis for a hosted event and to share the findings of his book and action steps. As part of this event, the FHCCI hosted an exhibit on the impact of corporate investors, particularly out-of-state investors and private equity, on Indianapolis’ single-family market as well as opened the event localizing the issue. You may view the following event materials:

We Can Change This!

As demonstrated, leadership is failing our residents. We have been in a housing crisis, and private equity has been flocking to Indiana due to its weak oversight of bad housing actors, escalating this crisis further. Home buyers and renters are both being impacted and the harms are going to be felt for generations to come in the loss of the building of generational wealth through homeownership. Action needs to be taken now and we call upon our local, state, and federal leadership to do so. You can help!

Marion County Residents: Find out who your city council member, state representative/senator and federal delegation is here

Non-Marion County Residents: Find out your state representative/senator and your federal delegation here

Demand:

Improving transparency through effective landlord registries.
Require landlord licensing to counteract issues of habitability.
Limiting the number of home purchases by private equity companies.
Requiring housing equity fees for large property owners.
Proactive inspections to ensure habitability for renters.
Tax out-of-state investors at higher rates.
Require out-of-state companies have designated local property management.
Require right of first purchase by a renter if an investor wants to sell the home.
Invest in homeownership programs.

Report problems with investors! Please contact the FHCCI and report any problems you are having with investor owners. You can do so anonymously if that is easier for you. Call our office at 317-644-0673 or complete this online form.

Want to learn more? Follow the FHCCI on social media, attend our conferences and events, download our publications, become a fair housing tester, and stay engaged. Together, we can protect housing consumers and ensure fair housing for all.

References

[1] FHCCI estimated this calculation of 12,570 out-of-state-investor-owned SFRs * $1,200 to $1,500 per month average rent

[2] Raisinghani, Vishesh. “‘Your tax dollars are helping Wall Street’: Big-money institutions could control a stunning 40% of US rental homes by 2030, analysts say — here’s why that’s a problem.” Moneywise, August 2, 2023. https://moneywise.com/real-estate/wall-street-poised-to-buy-up-rentals