Oberlin College Poverty Generating Real Estate Investments

Oberlin College becomes a REIT

What does a real estate investment trust have to do with Oberlin College? Very little, one would think, but that is not how many Oberlin residents view the situation. The College has been slowly buying up houses for decades as they come on the market, resulting in the College owning 60% of the town. Consolidating contiguous real estate parcels sounds reasonable on the surface since the city has been a hodge-podge of real estate parcels since its beginning.

When the College buys a house, the property sometimes (but not always) becomes tax-exempt. When a home leaves the tax base, the city’s tax base is eroded. This has not set well with many Oberlinians since the shrinking number of often poor, tax-paying households have to pick up the slack. The College and its BOT are only dimly aware of this irritant and do not appear inclined to address this growing sore on town-gown relations.

Purchased houses are often torn down, including houses in good condition and ones that are local architectural treasures. Tearing down homes that can be viable investment properties to reduce the tax valuations of the real estate is the College cutting off its nose to spite its face. Such investment stupidity only exacerbates Oberlin’s shrinking housing supply and needlessly irritates the Oberlin City Council.

A shrinking housing supply in the face of slowly growing demand drives up house prices and rents in Oberlin. Not an effective way to win friends and influence people. Nor is it a way to reduce Oberlin’s wealth distribution disparity, which is the largest of any community in Lorain County — including the depressed cities of Lorain and Elyria.

It gets even crazier when considering that the College has often damaged the value of a purchased parcel by tearing down its house. In other words, the College often makes an investment in a property, presumably using endowment funds, and then drives down the value of the investment by destroying its house. Incurring the additional expense of having the house torn down only adds more insult to this investment injury!

Imagine the outcry if the College were to invest endowment money in a stock that it knew for sure was about to drop sharply in price! Crazy. But then, why should the BOT and administration care about investment losses since the losses come out of somebody else’s money?

Run your REIT as if it were an investment!

The College’s FUBAR house investment policy needs a PR whitewash that would not require paying a dime to a team of bloated PR experts. There is a way to end the insanity, but it would require the BOT to revise its fossilized thinking. Tear down only the houses that are condemned or when the College has a real need to re-use the land under them.

In some instances, the cost of fixing up a condemned property could be a good investment. This would improve housing availability alleviate the declining real estate tax collections because houses that are rented as investment property owe real estate taxes regardless of the owner’s tax status. Meanwhile, the land under the houses would be available should the College have a future need for it. Getting investment income from a house is a better deal for the College than is destroying a house’s rental and investment value and getting nothing in return.

House maintenance costs by themselves are not an excuse for destroying a good house. It is not just the Gibsons who are under the crushing heel of the College — that weighty heel is slowly crushing people’s homes and other businesses as well. We all know that the College would never try to dodge the real estate taxes on an income-producing investment property by erroneously claiming that the house is exempt from taxes only because the College owns it.

Imagine how absurd it would be if the College were to purchase both Gibson’s Bakery and the building it occupies and then claim that both the bakery and its real estate are tax-exempt because the College owns it. Such an arrangement might fly if the college could credibly claim that the bakery was a retail store shelf-stocking teaching experience for handicapped students. All it would require would be a little legal creativity — something that the College has plenty of.