An out-of-state investment firm has scooped up dozens of houses in north Minneapolis in recent months, alarming city and neighborhood leaders who want property improvements but worry about absentee landlords and stifling homeownership in the wake of the foreclosure crisis.
Offering cash during the winter lull in the housing market, HavenBrook Homes quickly bought about 40 homes on the North Side and is now renting them out. The transactions made up a large portion of the sales in several neighborhoods early this year, with some converted from owner-occupied residences to rentals.
Large-scale buy-ups are a raw subject for the North Side, a high-poverty area victimized several years ago by a mortgage-fraud scheme that left dozens of homes in foreclosure.
“I think any time that there’s mass purchases like that, you wonder who the buyer is, where’s their money coming from,” Council Member Barb Johnson, who represents the North Side, said about this latest round of purchases. “And then also, do they have the ability to carefully manage rental properties — and single-family homes are the hardest ones to manage.”
HavenBrook, which is based in Georgia, told city officials that it plans to rehab several distressed properties, hire local rental staff, and carefully screen and train tenants, potentially improving conditions in an area rife with problem landlords.
In a statement Wednesday, CEO Robert Lee said that the company has a strong record of job creation and community services and that “it’s important for us to make a positive impact in the communities we serve.”
HavenBrook is following in the footsteps of another institutional buy-to-rent investor, Dallas-based Invitation Homes, which recently bought more than 500 properties in the metro area — about 40 of them in Minneapolis, though none on the North Side. Those purchases attracted the attention of the city’s regulatory services staff, which wrote a report in January advising that it will keep a watchful eye on mass home purchases for rental.
“It’s scary, I think, in some sense, for our city,” said JoAnn Velde, the city’s deputy director of housing inspections. “But they could also help stabilize a neighborhood if they do things right.”
HavenBrook bought about 40 other properties altogether in the metro area, mostly in St. Paul, Brooklyn Center and Columbia Heights, according to Jean Bain, consultant for the Northside Home Fund, a partnership of public and private entities that tracks north Minneapolis housing.
The median price of HavenBrook’s Minneapolis homes was about $94,900. Bain, a Realtor who tracked the purchases as a consultant for the fund, lamented that some of the houses could have been sold to people looking for affordable owner-occupied housing.
“There were a couple of cases where they bought two on a block,” she said. “So if they are a bad landlord, if they don’t monitor their properties well, if they don’t keep them up well, that can be devastating to a block.”
HavenBrook’s parent company, Sylvan Road Capital, is run by Morgan Stanley’s former head of housing strategy, Oliver Chang, who has said the country’s shift toward renting is a compelling investment opportunity.
The company’s Minneapolis homes are scattered around Crystal Lake Cemetery, primarily in the Folwell, Webber-Camden and Cleveland neighborhoods. The company’s website shows that it is operating in two other markets: Georgia and Florida.
One of the sellers, Aashley Hase, said HavenBrook made an offer after only one showing — about 60 days after the house was put on the market. It took more than a month for the company to transfer utility bills into its name, Hase said.
She said that she originally bought the property to help revitalize the area and that she didn’t know much about HavenBrook until after the sale. “This is really alarming because especially over here on the North Side, we have been working so hard to make this a community,” Hase said.
HavenBrook also bought the home next to Hase’s, near Lowry and Girard Avenues N. On Thursday afternoon, tenant Judy Lessley — who has lived there for two years — said HavenBrook made several repairs to the building that were never performed by her previous landlord. “They seem OK,” she said.
Johnson, the City Council member, said she cannot recall another example of purchases occurring as quickly as HavenBrook’s did. She worries about the financial bundling of homes in the area by faraway investors, which can make owners hard to track.
Johnson has been working to increase North Side homeownership to foster more investment in the area, but north Minneapolis nonetheless accounted for about 38 percent of all Minneapolis conversions to rental in 2013, according to city data. About half of the city’s population is made up of renters.
Roberta Englund, executive director of the Folwell and Webber-Camden neighborhoods, said most houses on the North Side are single-family, meaning the impact of problem properties can spread much farther than a single high-rise building.
“The saturation of rental properties in these neighborhoods — of basically single-family residences — is too great,” she said.