U.S. Senate candidate Bernie Moreno (R-OH) speaks to guests during a campaign rally with Republican vice presidential nominee Sen. JD Vance (R-OH) at Middletown High School on July 22, 2024 in Middletown, Ohio. (Photo by Scott Olson/Getty Images)

Republican Bernie Moreno’s U.S. Senate campaign is premised on a straightforward argument. The increasing cost of gas, groceries and housing are putting the American Dream out of reach.

But Moreno isn’t an obvious messenger. His personal fortune would make him one of the richest members of Congress if elected, and his family was wealthy and well-connected in their native Colombia before moving to the United States. Instead, on the campaign trail Moreno sometimes references his father-in-law who started working at U.S. Steel straight out of high school. 

“(He) was able to retire recently debt free,” Moreno said in a March 14 stump speech. “Never worried about affording a car or house. He was able to do that on that good paying job at U.S. Steel.”

These days, Moreno said, things are different. 

“You look at the young people today, they can’t afford a house. To afford a house in Ohio, you have to make about $114,000 a year.”

He made a similar pitch during a recent podcast appearance.

“When President Trump was in office, if you made $60,000 a year, you could afford a home in Ohio,” he said. “Today, it’s $114,000.”

Moreno’s figures for Ohio are off. A Redfin analysis last October put the income requirements to afford a median priced home at $114,627 nationwide. The same report indicated homebuyers in Ohio cities listed among the country’s top 100 metro areas would need to make somewhere between $60,000 to $90,000. And according to a state-by-state analysis from Realtor.com this April, homebuyers in Ohio would need to earn about $60,000 to afford a median priced home.

However, for Moreno’s frustration with the housing market, he’s not a passive bystander. According to his personal financial disclosure, Moreno is invested in firms and funds engaged in large-scale real estate speculation. 

While researchers have differing views on whether institutional investors drive up prices or chase them, investors do benefit financially as housing grows more expensive. Meanwhile, at the local level, housing activists argue institutional investors distort real estate markets and have a reputation for raising rents, dragging their feet on repairs and filing eviction notices.

Moreno’s opponent, Ohio Democratic U.S. Sen. Sherrod Brown, agrees that the cost of housing is too often out of reach. But while Moreno offers a vision of government “in the background,” Brown wants guardrails.

In a hearing last year, Brown highlighted the challenges posed by limited housing stock and exclusionary zoning policy, and then a few months later he filed legislation to place limits on institutional investors targeting housing as an investment strategy.

In an emailed statement, Brown campaign spokeswoman Maggie Amjad said, “Sherrod is fighting to lower the cost of housing and create new pathways to home ownership for all Ohioans.”

Moreno’s campaign did not respond to requests for comment from the Ohio Capital Journal for this story.

Cardone Capital

One of Moreno’s allies sits atop a billion-dollar real estate empire made up of personally branded properties, sells books that describe how you too can land the deals to become wealthy, and even runs what’s marketed as a “university” to teach paying clients his sales techniques.

According to his financial disclosure, Moreno has between a quarter and half a million dollars invested in a Grant Cardone equity fund. Moreno reported earning dividends of between $15,000 and $50,000 in the latest filing.

Cardone leveraged his large social media following to crowdfund the capital for several multifamily rental buildings. The pitch was relatively straightforward: back Cardone’s investment and he’ll give you a cut every month. Somewhere down the line he’ll sell the property, likely for a profit, and the investor gets their money back and then some.

In an Instagram video with his daughter, he pencils out the purchase of a 500-unit building.

“If we raise the rents, and I’m not helping you on this, if we raise our rents just $100 how much does the value (of) the property increase?” he asked her. The camera zoomed in on an iPhone calculator as he added, “Yeah, almost $11 million. So, every, every time I could raise the rents just 100 bucks?”

“It’s worth 11 million more dollars,” she said.

Cardone came under fire after he was accused of abusing a workforce housing program in Palm Beach County. The Palm Beach Post reported that in exchange for the right to build 200+ apartments on land zoned for 67 single family homes, the apartment complex was supposed to provide more than 150 affordable units. Instead, the Post reported, eligible residents were often overcharged by hundreds of dollars a month for years. The management even reportedly counted vacant units toward its workforce requirements.

The Ohio Capital Journal reached out to Cardone Capital for comment, but the company did not respond.

Cardone endorsed Moreno in the current U.S. Senate race as well as during his brief run in 2022. One of Cardone’s companies, Cardone Training Technologies, cut a $40,000 check to a Moreno-aligned Super PAC. Moreno has had Cardone speak to his employees and appeared on stage alongside him for a real estate seminar.

Yellowstone

One of Moreno’s brothers runs a major construction company in Colombia called Amarilo. The company set up a private equity firm called Yellowstone Capital Partners to help finance its efforts. More recently, Yellowstone set up a fund for real estate and property development in the U.S.

According to his financial disclosure, Moreno has between $1 million and $5 million invested in the fund, called Yellowstone Housing Opportunity Fund III. The fund bills itself as an answer to the shortage of “attainable housing,” i.e. aimed at people earning 80% to 120% of an area’s median income. It backs “middle market” developers — those who have “outgrown ‘friends-and-family’ capital but remain below the radar of larger institutions.”

The face of that fund in the U.S. is a lending platform called Techo Funding, LLC run by Moreno’s nephew Paul Stockamore. The company did not respond to Ohio Capital Journal’s request for comment.

The company’s emphasis is funding build-to-rent projects. In a trade publication article, Stockamore and his co-founder, J.P. Ackerman, described the approach as a hybrid of multi-family and single-family rental properties.

“The product is designed for the lifestyle of today’s renters while also delivering a more durable structure to withstand tenant use and turnover,” they wrote. 

And in addition to lowering repair and maintenance costs for managers, they contend renters will pay a premium for a shiny new home — as much as 10% to 20% above market.

The company describes itself as part of the Anchor Loans family of companies. Anchor was acquired by the real estate investment management firm Pretium in 2021. At the time, the firm had $30 billion in assets; this summer it had grown to more than $50 billion. The company’s CEO Don Mullen described a new $1.5 billion fund as a means of “growing the stock of quality single-family homes in key markets across the country, helping solve for the tremendous shortage of viable housing.”

A congressional report from 2022 criticized Pretium’s eviction policies during the COVID-19 pandemic. The company led the pack among four corporate landlords in terms of eviction filings — many of those 6,264 filings coming during the CDC’s eviction moratorium. The report also noted Pretium established policies to refuse federal rental assistance if it was less than half what the tenant owed. 

And while supporters of the build-to-rent approach argue producing new housing stock for rent lessens their impact on the home ownership market, a report from the Government Accountability Office noted the Federal Housing Finance Agency isn’t so sure. Even if the developments aren’t taking homes out of the market for purchase, if new homes are going to the rental market instead of the ownership market, it still limits the available stock for homebuyers.

Blackstone & legislative pushback

While Cardone and Yellowstone are positioned to take advantage of the rising housing costs Moreno criticizes, at the end of the day they’re relatively small players in the market. The poster child for institutional investors’ entry into the rental market is the investment management company Blackstone. Through at least 2023, Moreno maintained investments there, too.

Following the 2008 financial crisis, Blackstone bought up tens of thousands of distressed single-family homes and converted them to rentals. Similar to the mortgage-backed securities that helped fuel the 2008 recession, these rentals were packaged into securities and traded on financial markets.

The company’s tactics were so aggressive that in 2019, the United Nations Human Rights Council in a report criticized Blackstone and its subsidiary Invitation Homes (also referenced in the Congressional report criticizing Pretium) for aggressively raising rents, charging tenants for routine maintenance and relying too heavily on evictions.

Moreno seemingly liquidated his reported holdings in a Blackstone fund this year.

In 2023, Moreno reported a $250,000-$500,000 stake in Blackstone Private Credit Fund. This year, he reported $1,000 or less in that fund. However, according to the fund’s prospectus, real estate investments made up only a tiny portion of its overall portfolio. The biggest share is invested in the software industry.

U.S. Senator Sherrod Brown. (Photo by Graham Stokes for the Ohio Capital Journal. Republish photo only with original story.)

By contrast, U.S. Sen. Brown’s portfolio is straightforward. He and his wife reported two mortgages, and at most a little more than $1 million in pension and retirement funds. In a news release announcing legislation to limit the roles of institutional investors in the housing market,  Brown said the firms “buy up homes that could have gone to first-time homebuyers, then jack up rent, neglect repairs, and threaten families with eviction.”

His Stop Predatory Investing Act would prevent large investors from deducting interest or depreciation going forward, and incentivize them to sell single family homes back to homeowners or local nonprofits. Housing advocates praised the bill, including Kristen Baker, who heads up the Local Initiatives Support Coalition of Greater Cincinnati.

“Approximately 1 in 6 homes in Ohio are owned by institutional investors, including 4,000 homes in Cincinnati,” she said. “We know from our experience in Cincinnati that the transfer of ownership and control of local housing to large institutional investors has resulted in decreased maintenance of properties and aggressive eviction practices from long distance, corporate landlords; and that it also denies homeownership opportunities for families in those communities.”

More recently Brown signed on to legislation that would give the Federal Trade Commission and Department of Justice a role in reviewing large housing transactions for anti-competitive impacts. Neither bill has attracted a Republican cosponsor.

Institutional investors’ impact

Although institutional investors have a reputation for raising prices, Laurie Goodman, a fellow at the Urban Institute’s housing finance policy center, warns correlation is not necessarily causation.

“It’s clear that, yes, areas in which institutional investors are more active, tend to have more rapid home price appreciation,” she explained, “but it is not clear that they cause that more rapid home price appreciation.”

Goodman argued institutional investors as a whole control only about 3% of the U.S. single-family rental market. And they’re zeroing in on communities where they expect population and employment gains that construction won’t be able to keep pace with, markets in which “rents would have gone up anyway,” she said.

Goodman added that while there’s “no question” institutional investors have a track record for filing lots of evictions, that doesn’t necessarily mean tenants are losing their homes.

“Most eviction notices do not result in evictions,” she said. “Eviction notices are a rent-collection technique for the larger landlords in a way that they’re not for smaller landlords.”

However, eviction filings, even if it doesn’t result in an eviction, is a public record and could damage a renter’s chances when they go to rent a different place in the future.

Some other researchers are more critical of the role institutional investors play in the housing market. They argue looking at the rental market as a whole is the wrong perspective. Instead, you need to drill down to the zip code, census tract or neighborhood level.

“They want to dominate a corner of that space — I want to be the single family rental in this zip code,” said Austin Harrison, an assistant professor of urban studies at Rhodes College.

In his home city of Memphis, Tennessee, Harrison said, institutional investors don’t control the entire city’s rental market, but they still exert significant influence in the neighborhoods where they’re clustered.

“Where they’re doing it, they are controlling the market, and they are setting rents, and that is driving up the price,” he explained.

Brian An, the co-director for Urban Research at Georgia Tech University, studied 2022 code complaints in neighborhoods around Atlanta. And while he stressed some large landlords may be very responsive, bigger wasn’t better for tenants.

“Properties owned by large corporations, defined as those having more than 50 properties in Fulton County, more than 20% of their properties were reported as having code complaints,” he said. “Whereas that number goes down to 15% if we just look at the single-family rental properties owned by individuals.”

“So, 15% versus 20% to 25% I think that’s a big gap,” he said.

An added that even if institutional investors nudge prices higher, there’s another way to look at it, too.

“Definitely it makes home ownership harder in those communities,” he said. “But on the other hand, they also provide access to the neighborhoods that were not probably accessible to these renters.”

In addition to higher sticker prices or less responsive landlords, Harrison is worried about longer term effects. He sees investors buying up the cheap suburban properties — “you know, stick a coat of paint on it, put a couple of thousand dollars into it, it’s ready to rent” —  where first time homebuyers often start.

That’s an important rung on the ladder, but he argued, “it’s hard to see a path for those properties to get back to the home ownership market.”

“Once I’m, you know, American Home for Rent or Main Street Renewal, and I have 2,000 (or) 3,000 properties in a city, if I’m selling off that portfolio, I’m not going to hire 3,000 real estate agents to sell it to 3,000 first-time homebuyers,” Harrison explained. “I’m going to sell it to somebody else who can buy 3,000 properties.”

Follow Ohio Capital Journal Reporter Nick Evans on Twitter.