The now discredited Mandatory Offer of Compensation (the Participation Rule) exacerbates housing inequality. It specifically contributes to absentee ownership by out-of-area investors and other fair housing abuses. This is my own original research and analysis about the impact of the Participation Rule on our southeastern Wisconsin market. 

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This has not been reported before.

In Milwaukee specifically, out-of-area investors also known as absentee owners, now own 7,170 single family homes, condos, duplexes, or triplexes across Milwaukee, up from 5,250 at the end of 2018. This category of ownership has grown by 50% since 2017 and 476% since 2005. Today, nearly one in five Milwaukee rental homes is owned by a landlord based outside Wisconsin. An egregious example is a company called VineBrook Homes Trust out of Ohio (though most executives live in Texas). They purchased 436 properties through the Milwaukee MetroMLS system starting in November of 2019, ending in October of 2022. Over 90% of the transactions were reported as cash.

 

My analysis of their activity in the MLS database indicates that the MLS’ Mandatory Offer of Compensation to the buyer-side broker (VineBrook Homes) totaled at least $952,826. In three years VineBrook Homes received almost one million dollars in buyer-agency commissions, enough to pay for their agent and pocket the rest. It is likely they would have been uninterested in acquiring all these properties if there was no Mandatory Offer of Compensation and they had to pay for their own agent.  VineBrook Homes is now losing millions and is possibly heading towards bankruptcy.

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These are the hidden costs of antitrust activities. Corrupt rules lead to corrupt outcomes.  Milwaukee is cursed with a legacy of real estate corruption.  From block busting, red lining, steering, and other activities, fair housing abuses have deep historical roots in this market.  Realtors have played a significant part in negative housing outcomes for our citizens.  They are finally being called to task.

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These are Realtor associations which have apologized for past history of discrimination and fair housing abuses:

 

National Association of Realtors

Chicago Association of Realtors

California Association of Realtors

Minneapolis Association of Realtors

St. Louis Association of Realtors

Wisconsin Realtors Association

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