Hundreds of Minnesota homes neglected by hedge fund are now in hands of nonprofits

Three years after the Minnesota Attorney General’s Office went after a slate of private equity landlords operating in north Minneapolis, hundreds of single-family houses have been transferred to nonprofit ownership.

Neglected houses are being repaired in preparation for sale to first-time homeowners, and the landlords who once tried to profit off of them by cutting costs on maintenance have exited the Minnesota market.

The gray house at 3539 Irving Av. N., one of the first of these properties to be fully rehabbed by nonprofit developer PRG, was the site of a celebratory news conference on Tuesday morning, where state and local officials bid HavenBrook Homes and its investment firm owner, Pretium Partners, goodbye.

“HavenBrook got out of Minnesota and quite honestly, friends, good riddance,” said Attorney General Keith Ellison.

For years, north Minneapolis residents who rented from HavenBrook Homes complained about their landlord cutting corners on repairs and allowing the community’s naturally occurring affordable homes to slide into disrepair. Tenants formed a coalition, assisted by researchers from the University of Minnesota, to understand how much real estate speculation was happening in north Minneapolis.

In 2022, the Attorney General’s Office sued HavenBrook, Pretium Partners and other corporate defendants. Much of the litigation concerned peeling back the layers of corporate ownership to determine who was really responsible for the homes’ upkeep. A settlement last year led to the defendants forgiving nearly $2 million in rental debt, paying $2.2 million into a tenant restitution fund and promising to transfer their entire portfolio to affordable housing entities.

Assistant Attorney General Katherine Kelly, who led the lawsuit against HavenBrook, said the settlement wouldn’t have been as large if the private equity firm at the top of the shell companies hadn’t been included as a defendant.

At one point, HavenBrook had acquired more than 600 houses, primarily in the metro area. Under increasing regulatory pressure, the company began to whittle down its portfolio, selling vacant properties at auction-level prices and relocating families in some cases, Kelly said. By the time of the settlement, over 300 homes were left.

Pretium recruited a New Jersey housing nonprofit, Brick by Brick, to take over the remaining houses. Brick by Brick sold the vacant ones for direct ownership, or to local nonprofits like Land Bank Twin Cities and PRG, but continued renting to families that could not move.

Brick by Brick CEO Scott Fergus said his agency stepped into that intermediary role because no in-state housing nonprofit had the capacity to put together the financing to buy out all of Pretium’s remaining assets in Minnesota at once.

“It’s not usual to have to step into the middle of litigation and to be a part of providing an outcome that, in and of itself, was pretty unique,” Fergus said. “We hope that what this model provides is at least a structure that other nonprofits can follow in other states so that they can be a part of purchasing properties from private equity funds to convert to local ownership.”

Following rehab, former HavenBrook houses are now entering the market between $250,000 and $300,000, with gap funding coming from state and city sources.

While officials toured the remade house, next-door neighbor Stefanie Anderson watched from the garden path.

The house at 3539 Irving Av. N. was a “nightmare” when HavenBrook owned it, Anderson said.

Over the years, there were a couple of good tenants who told her about their frustration with the landlord’s lack of upkeep, she said. For the past three years, the house has been vacant, attracting squatters she and her son chased off.