Homeowners need protection from predatory property wholesalers, experts tell Pittsburgh City Council

Housing experts told Pittsburgh City Council members Wednesday that legislation is needed to protect vulnerable homeowners from predatory residential property wholesalers.

Legislation introduced in August would require residential property wholesalers — corporations that buy up houses and sell, lease or use them for Airbnbs — to get an annual license. The proposed licensing process would include a $200 fee, an insurance requirement and a background check.

It also would require wholesalers to provide homeowners with information on how to assess their property’s value, hire a real estate agent or seek legal counsel. Councilwoman Deb Gross, D-Highland Park, who sponsored the legislation, said those measures would help combat wholesalers who pressure homeowners into accepting much less than their home is worth.

A related bill would create a do-not-solicit list for homeowners who don’t want to be contacted by residential property wholesalers.

A study by the Pittsburgh Community Reinvestment Group showed that 24.8% of Pittsburgh home sales in 2021 involved wholesalers, up from 15.5% in 2010. The study said the wholesalers, on average, paid about 70% of what individuals would’ve paid for properties.

“What PCRG found in Pittsburgh is happening nationwide,” said Ben Preis, a researcher at Drexel University who has studied the corporate takeover of housing at a national level.

Residential property wholesalers are largely unregulated, he said, with only four states nationwide regulating the industry.

Wholesalers often use predatory tactics and prey on homeowners who may not realize there are better options available, said Megan Hammond, executive director of the Fair Housing Partnership of Greater Pittsburgh.

Wholesalers, she said, offer “immediate cash” to target vulnerable populations such as low-income households or seniors who are “valuing cash for their immediate needs” but not getting a fair value for their property.

Hammond said this disproportionately impacts homeowners in predominantly Black neighborhoods, where houses, on average, sell for about 12% less than similar properties in mostly white neighborhoods.

Dave Breingan, director of Lawrenceville United, said the local organization has often seen examples of vulnerable neighbors falling victim to predatory practices that make them feel like they have to sell their home, though they’re not getting a fair deal.

In one instance, he said a low-income, lifelong Lawrenceville resident inherited his parents’ house. A developer who was flipping properties in the neighborhood asked to tour his property, took note of code violations at the house and reported them to the city. The homeowner then received a property code violation, which came with the risk of fines. The developer then pressured him to accept an offer on the home that was far less than the property was worth so he wouldn’t get stuck paying fines or making costly repairs.

In another example, Breingan said, a wholesaler knocking on doors in the neighborhood convinced an elderly woman suffering from dementia to agree to a similarly low offer by trying to confuse her.

“These investors and flippers are sometimes really taking advantage,” he said.

Corporate owners also tend to be less responsive to concerns at their properties, as they’re not invested in the community, experts said.

It’s often hard to track them down when there are complaints about properties that need to be taken care of, Councilman Anthony Coghill, D-Beechview, said.

Predatory wholesaling practices have become a growing problem, Gross said, with the corporations “basically stealing the wealth and equity” from homeowners and contributing to a larger affordable housing crisis in the city.

“I really think it is a threat. It is a risk to our neighborhoods,” she said. “They’re just taking housing off the market, some of them just letting it rot in place.”

The legislation could be ready for a preliminary vote as early as next week, with a final vote as soon as the following week.