Three large, private equity-backed corporate landlords operate in Milwaukee’s house rental market. All three began buying lots of Milwaukee houses in 2018 or 2019, and they ended 2022 owning just shy of 1,500 homes in total. The largest, VineBrook Homes, bought over 450 houses in Milwaukee last year, according to city parcel records.

But all three companies mostly ceased buying houses by late 2022, and in fact, two of the three have spent early 2023 selling houses. One of the companies, SFR3, has made double the money it spent to buy those properties. The other company, VineBrook, has actually lost money on these transactions. The third company, Highgrove Holdings, ended its buying spree months before the other two, and likewise hasn’t sold anything recently.

The different trajectories of these three companies give clues to their financial health, business strategy, and potential consequences they may have on Milwaukee neighborhoods.

In some ways SFR3 and VineBrook follow similar business models. Both are private companies which raise money by selling securities to qualified investors. Over the past few years, each has bought thousands of cheap houses across cities in the midwest and south.

In Milwaukee, each focuses on single family homes usually worth around $100,000. They mainly buy homes on the north side of the city–either north of Capitol Drive or west of 35th Street. VineBrook is much larger. At the end of 2022, they owned about 950 houses in Milwaukee and 27,000 across the country. SFR3 owned about 240 in Milwaukee, while their website claims “thousands of single-family rentals” in total. Neither are primarily flippers; instead, they follow a buy-to-rent business model.

Before 2023, I can find no records of VineBrook selling a single house in Milwaukee. SFR3 was more willing to flip their recent acquisitions, selling 14 in 2021 and 45 in 2022. Through mid-May 2023, SFR3 has recorded 25 more house sales and VineBrook 13.

I was able to directly compare the sale price with the purchase price in 23 of SFR3’s sales this year. They paid $2,084,630 for those 23 properties, owned them for an average of 67 weeks, and sold them for $4,218,000–a profit rate of 102%. Twenty of the houses were sold to an owner-occupier, according to transaction returns filed with the Wisconsin Department of Revenue.

Direct comparisons were possible for 11 of VineBrook’s 2023 sales, all of which took place between March 16th and May 12th. VineBrook paid $966,112 for these 11 properties, owned them for an average of 103 weeks, and sold them for $909,500–a loss of 6%. They only sold one of these properties to an owner-occupier.

SFR3 made a profit in each comparable home sale–not counting any rehab expenses. Their biggest gain came on a house they bought on the 1500 block of N. 57th Street, in the Washington Heights neighborhood. They paid $153,000 in November 2021 and sold it for $331,000 in February 2023.

VineBrook lost money in 6 sales and sold for more than they spent in 5. Their biggest gain was just $15,000. They paid $85,000 in June 2021 for a house on the 2900 block of N. 46th St, and they sold it for $100,000 in May 2023.

Their worst loss came just a few blocks away, on the 2300 block of N. 47th. That house was purchased out of foreclosure by an owner-occupier for $33,000 in December 2019. Then, that buyer sold to VineBrook for $109,000 in December 2020. VineBrook sold it to another owner-occupier for $50,000 in April 2023. This appears to be the rare instance where two owner-occupiers made out well at the expense of a private equity firm.

Why is SFR3 so much better at selling for a profit than VineBrook? It appears that SFR3 is both a savvier buyer and a more patient seller than its larger rival. Take those 23 SFR3 sale comparisons from this year. When SFR3 bought them, they paid just 89% of the then-assessed value of the properties. When they sold, they received 162% of the current assessed value. (Assessed values are based on property sales in the previous year or two.)

By comparison, VineBrook originally payed 115% of the assessed value of the houses it went on to sell in 2023. When it sold them, it received just 83% of the current assessed value.

SFR3 made shrewder purchases to begin with, but it also made more money by selling to owner-occupiers who are willing to pay top dollar. VineBrook apparently overpaid for houses to begin with, and it also appears to be selling hastily, usually to other landlords.

VineBrook’s troubles extend far beyond Milwaukee. In January, they forfeited $41 million in initial deposits after terminating purchase agreements to buy about 2,900 more houses (not in Wisconsin). This contributed to their $92.4 million net loss in the first quarter of 2023. By comparison, VineBrook reported a net loss of $2.7 million in the first quarter of 2022. VineBrook also faces challenges from rising interest rates. As of March 31, the company’s total debt was $2.6 billion, of which $1.9 billion was in floating interest rate loans.

In an April 2023 letter to shareholders, VineBrook’s CFO described their intention to “opportunistically pursue dispositions that offer the ability to recycle capital into accretive opportunities and reduce our exposure to sub-scale markets. In addition to using net proceeds from sales to further fund our revitalization program, we intend to use the remaining net proceeds to de-lever the Company, improving our balance sheet and the strength of the Company.”

In plain English, the company intends to spend 2023 selling houses in order to pay off debt.

Highgrove Holdings and SFR3 aren’t required to make the same kinds of detailed financial disclosures, so we have less insight into the health of their balance sheets. Still, the fact that SFR3 only sells their homes for substantial profits, while Highgrove has sold nothing at all, suggests that they don’t currently face the same financial crunch as VineBrook.

As Milwaukee’s home rental market grows more consolidated, we may see more situations where large landlords facing financial difficulties seek to offload many properties at once. VineBrook’s current willingness to sell their houses at relatively cheap prices has mainly just benefited other landlords. The house on 47th Street described above is the exceptional case in which VineBrook’s struggles actually benefited a local homeowner.

The dramatic consequences of the late 2000s subprime mortgage crisis on Milwaukee neighborhoods are well known, but specific data on foreclosures has been remarkably difficult to come by.

Previous studies have documented plummeting homeownership across the city (particularly on the north side), followed by a surge in out-of-state investment. But researchers have lacked public data on how many foreclosures occurred, who initiated them, which properties experienced them, and the subsequent ownership history of those parcels. To fill that gap, I have assembled a novel dataset of residential foreclosures matched to city parcel records for the years 1995 through 2022. This includes all detached single family homes, condos, duplexes, and triplexes. See the data note at the end of this article for details.

From 1995 through 2006, the city saw an average of 800 house foreclosures a year. Then, in 2007, there were over 1,300 foreclosures. That jumped again to almost 2,500 in 2008. During the decade of 2007-2016 my records show a total of 21,500 foreclosures.

The pandemic, with its attendant boom in home values, saw foreclosures drop to their lowest levels since at least 1995. I found records of 351 foreclosed homes in 2020, 393 in 2021, and 434 in 2022.

Over the past 3 years, foreclosures by lenders have declined, likely because rising home values mean that few homeowners find their mortgages underwater. A homeowner struggling to make their mortgage payment can often avoid foreclosure by selling the house for a profit.

By contrast, foreclosures over delinquent taxes grew from 72 in 2020 to 138 in 2021, and 211 last year. As property values increase, the number of owners struggling to pay their tax bill may be increasing.

The wave of foreclosures during the housing crisis was geographically concentrated in poor and majority nonwhite neighborhoods. In 2012, for instance, the 3^rd aldermanic district (covering the east side) experienced 54 foreclosures, or a rate of 8 per 1,000 houses. The neighboring 6^th district simultaneously saw 217 foreclosures, a rate of 24 per 1,000. Meanwhile, homes in the 15^th district (covering parts of the near west and near north sides) were foreclosed on at a rate of 35 per 1,000 just in 2012 alone.

The cumulative effect after a decade of unrelentingly high foreclosure rates is mindboggling. Citywide, 14% of all houses experienced at least one foreclosure from 2007 to 2016. In Sherman Park and Washington Park, more than 3 out of every 10 houses were foreclosed on. Other parts of the city escaped practically unscathed. In the Upper East Side, fewer than 1-in-25 homes were foreclosed.

The map below shows the cumulative 2007-2016 foreclosure rate for each residential block in the city with at least 10 houses. Blocks shaded in blue experienced no foreclosures at all during the decade. The more than 500 blocks shown in the darkest shade of red experienced foreclosure rates of 32% or more. In 33 blocks, more than half of houses were foreclosed on between 2007 and 2016. And on the 2400 block of North 44^th Street fully three quarters of homes—21 out of 28—received a foreclosure.

Needless to say, the wave of foreclosures closely follows the declines in owner-occupancy since the Great Recession. Of all the properties which received a foreclosure between 2007 and 2016, 62% (over 13,000 homes) were owner-occupied at the beginning of the year in which the foreclosure occurred, according to city parcel data.

Often, foreclosed properties during this period were sold at auction or at bargain prices to cash buyers. Once outside the owner-occupied housing market, houses often remained held by investors. Since about 2018, several corporate landlords with private equity backing have assembled large portfolios in these neighborhoods, largely by consolidating the holdings of the smaller landlords who preceded them.

Foreclosures cast a long shadow, and the effects of the subprime mortgage crisis are still shaping many Milwaukee neighborhoods more than a decade after the Great Recession officially ended.

Data note

This foreclosure dataset combines several sources. Foreclosure records from 1995-2016 are sourced from an owner history dataset maintained by the Milwaukee City Assessor’s office. (Special thanks to Jeff Arp for his help). Records from 2017-2022 are from the Real Estate Transaction Returns filed with the Wisconsin Department of Revenue. I matched each source dataset to city parcel records, which allowed me to standardize addresses as well as identify the property type and ownership status at various points in time. In all likelihood, this dataset undercounts the true number of foreclosures because some foreclosure records could not be matched to parcel data or were otherwise missing.

Researchers and community groups are encouraged to explore the data for their own uses. Files are available at https://github.com/jdjohn215/milwaukee-foreclosures. Please direct questions to john.d.johnson@marquette.edu.