North side monopoly: How investment funds scoop up affordable houses

Image 1 of 2

Wall Street investors are getting a big slice of the North Minneapolis housing market, while some in the neighborhood feel they are getting denied the chance of homeownership.

During the 2008 foreclosure crisis, predatory lenders hit the North Side particularly hard.  Hundreds of homes ended up sitting vacant and boarded up.  

But where most saw a housing disaster, a few saw unprecedented opportunity. 

Beginning in 2014, a Georgia company called HavenBrook Homes went on a buying spree, purchasing 400 homes in the Twin Cities. 

Half of its portfolio, 202 homes, are located in North Minneapolis and 152 homes are located in the 55412 zip code that includes the Camden neighborhoods.

The area was attractive to investors for several reasons: home prices were very low, rents were still high and the housing stock was in relatively good shape.  It was also close to downtown.  The neighborhood, in other words, was primed for gentrification.


Michael George rents a Havenbrook home on Humboldt Avenue North, where there are three of the company’s rental homes.

He said he would have bought the house if it was on the market at the time.

“Paying this rent over $1,500 bucks, that’s a mortgage,” said George.  "I want something on our own.  If they had it on the market when we first looked at it, I would’ve bought it.”

If George had bought the house for $106,000, his monthly payment would have been around $789. That would include a 30-year mortgage, an interest rate of 4.3 percent, and three percent down, plus PMI, taxes and insurance. The payment would be about half the $1,500 he’s paying for rent, and he would be keeping the equity. 

“They didn’t give the North Side - the people who live in this area - the chance to own the American dream, to own their own home,” George commented.

In about a week, he is moving to Brooklyn Park where he and his wife have bought a house.


Minneapolis Council Member Phillipe Cunningham expressed his concerns to the Fox 9 Investigators.

“This is a continuation of the history of wealth extraction, rather than wealth building.  And honestly, that’s what renting is,” Cunningham said. “So this is a money-making model, a business model, we are going to take this house, barely fix it up and ride it out as long as possible and when market turns again, dump the houses and make a profit off of it.  And that’s very, very concerning for the stability of our housing.”

And that’s what happened three months ago, Havenbrook, which also owns rental homes in 10 other states, was bought by Front Yard Residential, another investor group, this one based in the U.S. Virgin Islands. 

Front Yard bought the Minnesota homes in a package deal for $68.49 million, an average price of $171,225 a home.  That is $27.14 million more than Havenbrook paid for the properties, according to a review of real estate records.

The entire deal was backed by Freddie Mac through a pilot program for large property owners and a guaranteed, interest only loan. Freddie then sold that loan to Wall Street investors as securities. 

The next day, Front Yard’s stock price skyrocketed. 

But that same day, the Federal Housing Finance Agency (FHFA), which oversees Freddie, shut the pilot program down, citing an “impact analysis” that it was unclear what the program was doing to neighborhoods. The agency would not comment for this story.

“Freddie Mac understands the impact an investment will have for Freddie Mac,” said Dr. Britany Lewis from the University of Minnesota’s Center for Urban and Regional Affairs. 

“If it was about the impact for the communities here, that would not be the product being sold to those equity investors, right?  Because presumption is they’re (investors) doing pretty good,” said Dr. Lewis.

Havenbrook, now part of Front Yard, will continue to manage the properties. 

When the Fox 9 Investigators stopped by the company’s Roseville office, no one there would talk to us.

In a prepared statement, Front Yard said they are serving a need, providing an “important alternative to underserved families.” 

“A substantial portion of families in the communities we serve are credit-challenged, and banks are unwilling to ease their mortgage standards and provide them with the financing they need in order to buy a home,” according to the statement. 


According to the Metropolitan Council, in 2014 when Havenbrook moved into North Minneapolis, there were 8,466 homes that were homesteaded (owner occupied) and still considered affordable (50 percent average median income). But in just three years, that number has dropped nearly 20 percent as the market has tightened. There are 933 (11 percent) that are still homesteaded, but no longer affordable.  Another 686 homes (8 percent) have been converted to rentals.


The City of Lakes Community Land Trust has helped 120 low and middle-income people own their own home in North Minneapolis. In some ways, HavenBrook is their competition.

When the group’s Executive Director, Jeff Washburne was asked why there were so many rentals in the area he responded: “Skin color, I think is at the core of it.  We still have a race issue in this city.”

That history includes housing discrimination and redlining by banks, recently explored in a FOX 9 Presents, half-hour documentary, North At A Crossroads.  

Today, North Minneapolis has the lowest homeownership rate in Minnesota.

Even after 2008, 55 percent of mortgage applications were denied, the highest rejection rate in the region, according to the Institute on Metropolitan Opportunity at the University of Minnesota Law School.

“How do we gobble up as much as we possibly can right now for the benefit of the community? There’s housing stock here. There are parts of town right now that we are priced out of,” added Washburne.

Here’s how the City of Lakes Community Land Trust works:  Imagine a $200,000 property for sale. But a family that can only afford $140,000 mortgage.  The land trust puts up the other $60-grand and retains title to the house. 

If it’s sold a few years later, for $240,000, the family keeps all the equity they’ve put in plus 25 percent of the increase in value. 

To make the home affordable for the next family, the land trust takes the rest of the increase in value, plus it’s original investment, and puts it back into the home to reduce the price for the next family. Instead of the next family buying a $240,000 house, it’s only $150,000.

“It’s a way to take a one-time public investment and make it work over generations of home buyers,” said Washburne.