Big investors have hundreds of housing violations

IndyStar combed through 40,000 housing code violation cases from 2018 to July 2023, which catalog the worst problems in rental homes, so severe that the Marion County Public Health Department had to step in. The data shows:

• Of Indianapolis’ 11 biggest corporate homeowners, the three worst violators were VineBrook Homes, Indianapolis-based SLB Investments LLC and New York City-based private equity firm Cerberus Capital Management, whose property management wing, FirstKey Homes, manages the rentals. 
• Together, these three companies were responsible for at least 620 housing violation cases. Each case represents at least one housing code violation at a rental home on a given date.
• VineBrook Homes, which IndyStar found owns at least 1,400 homes in Indianapolis, had by far the most violation cases, at 269, with 108 in the first seven months of 2023 alone. That is one violation case every two days, almost, on average.
• In 2023, the three worst violators all hit a five-year record high in violation cases: Cerberus, which IndyStar found owns at least 1,700 houses in Indianapolis, had 53 in the first seven months of 2023 while SLB Investments LLC, which IndyStar found owns at least 800 houses in the city, had 88.
• Problems often only started after the investor took over. Of the violation cases that the 11 biggest corporate owners were responsible for, 59% happened in homes that had no housing violations in the past decade until the investor took over, an IndyStar analysis of 1,300 housing code violations at those addresses from 2013 to 2023 found.

IndyStar spoke with a dozen VineBrook Homes tenants who detailed unlivable conditions from lack of heat to mold to vermin. What tenants shared amounted to a pattern of glacial maintenance response times and shoddy fixes. Based on VineBrook’s Securities and Exchange Commission filings, tenants and comparisons with the work of four affordable housing developers, the company’s business model appears to rely on keeping rehab and maintenance costs low while generating as much revenue as possible. 

Together with the data, the tenants’ stories indicated that the worst corporate investors are responsible for hazardous housing conditions in homes they purchase and rent out. 

“It was like living in a third world country,” Robinson, 44, said. “It was like living under a slumlord. This ain’t America, that’s how I felt.”

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In response to a detailed list of questions about the conditions reported by their tenants, VineBrook responded with a statement claiming that emergency maintenance requests in the past three years took a little less than a day on average to resolve and routine requests took 7 to 10 days.

“Obviously, with a high unit count of older properties, repairs and violations naturally do arise within the VineBrook portfolio as homes age with use over time,” the VineBrook statement stated, adding that the company makes timely repairs, minimizes violations and works with tenants and local governments to prevent issues.

But the data shows about 12% of VineBrook’s 1,400 Indianapolis homes had problems in the past five years that went unaddressed for so long or were so egregious that the health department had to step in.

In some cases, it took multiple visits from health department inspectors to resolve the issue. 

VineBrook also argued that they are transforming housing that was not habitable into homes for rent.

“VineBrook was founded on a vision to acquire and restore distressed properties with an eye for helping to rejuvenate neighborhoods and providing workers and families with access to safe, affordable single-family homes,” a VineBrook company statement to IndyStar stated.

Indeed, many large corporate investors buy homes that are in need of repair, renovating them and thus driving up their value, a report by Urban Institute found. But IndyStar found that the quality of a significant number of renovations were at times, suspect, and at worst, nonexistent.

FirstKey Homes and SLB Investments both said in separate statements to IndyStar that they think the number of violations at their homes is low. 

“No housing violation is acceptable, and it is the goal of the Companies to eliminate them; however, the complete elimination is not realistic,” Grover Davis, an attorney for SLB Investments, said.

Although the company racked up dozens of housing violations in the first half of 2023, FirstKey Homes said the number of violations relative to the number of houses their parent company owns in Indianapolis is low. But, the statement added, even one violation is unacceptable.

Even so, the housing code violation data is just the tip of the iceberg, as reporting a violation to the health department is often the last form of recourse for tenants who’ve exhausted every other option.

Lower-income renters hit worst

On one hand, the majority of homes rented out by these investors aren’t in terrible condition. In general, professional rental companies can also rehab homes more cheaply and efficiently because they can order supplies in bulk to save money, Michael Hicks, an economics professor at Ball State University, said.

On the other hand, IndyStar found that institutional investors that cater to lower income renters tend to have more housing code violations than those that rent out more expensive, often luxury, homes.

The violations also tend to be concentrated in lower-income neighborhoods on the far east side and west side.

For instance, VineBrook Homes, whose Indianapolis homes had an average rent of $1,210 as of July 2023, according to the company, well below the city’s average rent of about $1,530 for houses as of June 2023, according to John Burns Research and Consulting data.

The company’s rental houses had six and a half times more violations than the higher-end homes rented by Las Vegas-based AMH, formerly American Homes 4 Rent, in a five-year period, which had an average nationwide rent of $2,014 as of March 2023.

Renting houses for relatively affordable rates is often at odds with quality maintenance.

This leaves the lowest-income renters stuck between a rock and a hard place: to rent a home they can afford in the neighborhoods where they work and where their kids attend school, they often have to reckon with an unresponsive landlord and bad living conditions.

And despite the hazardous conditions tenants face, Jeff Bennett, who was until recently senior policy advisor to the mayor, said it can be difficult for the Marion County Public Health Department to collect fines from noncompliant property owners for housing violations because of the limited enforcement tools they have at their disposal.

Indiana’s lack of tenant protection laws — including the inability of tenants to withhold rent when landlords refuse to make necessary repairs or to deduct repair costs from their rent — gives landlords like VineBrook, which owns more than 24,000 houses across the country, outsized power. 

VineBrook boasted in its 2022 annual report that “We believe we are the largest SFR operator in the country specializing in workforce housing, defined as housing that costs less than $1,400 per month.”

But for some, VineBrook’s comparatively affordable rents are cold comfort. For Aguilar, the renter who discovered the raccoons in her attic, the problems were one thing. Being disrespected was another. She said she felt property managers didn’t take her concerns about her home seriously because she’s Hispanic and doesn’t speak much English.

“Even animals were treated better,” Aguilar said, with her daughter translating. “We were practically treated like animals.”

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