Renters Call Who For Repairs? Wall Street Landlords Are Here.
|December 15, 2013||Posted by Staff under Financial|
Here’s What Happens When Wall Street Builds A Rental Empire
Most rental houses in the U.S. are owned by individuals, or small, local businesses. A new breed: a Wall Street-backed investment company with billions of dollars at its disposal. Over the past two years, Colony American and its two biggest competitors, Invitation Homes and American Homes 4 Rent, have spent more than $12 billion on at least 75,000 homes.
This new incursion by hedge funds and private equity groups into the American single-family home rental market is unprecedented, and is proving disastrous for many of the tens of thousands of families who are moving into these newly converted rental homes.
Tenants of these Wall Street-backed rental companies have posted hundreds of scathing reviews on Internet message boards, such as Yelp, Topix and Zillow. (These sites also include a sprinkling of positive comments, though they comprise a distinct minority.)
Attempts to get issues fixed usually end in frustration, the renters said. Local management companies hired to service the homes ignore calls and emails, sometimes for weeks. When tenants try to get in touch with the owners — the firms buying up the properties — the result is often the same, they said.
Some tenants have grown frustrated enough to sue.
“Complaints were coming at us like out of a fire hose,” said a former Invitation Homes employee. Call centers were overwhelmed. “Getting someone on the phone was next to impossible,” the employee said. “I have no doubt the customer experience was compromised.”
The investment companies are focusing most of their attention on cities like Atlanta, Las Vegas and Tampa, hard hit by the foreclosure crisis but with good prospects for long-term growth. They are buying up so many houses in these places — 200,000 in the past two years, according to Bloomberg News — that they are pushing up prices and edging out ordinary buyers.
The Empire Strikes Back
Over the last year and a half, Wall Street hedge funds and private equity firms have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Millions of evicted Americans need a place to live, as millions of bank-owned houses are vacant. Wall Street is renting these foreclosed houses back to us.
Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.
In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012.
Blackstone is the largest owner of single-family rental homes in the nation — and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.
Blackstone manages more than $210 billion in assets. It’s a public company whose institutional owners include Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase. (Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank foreclosed on the most families in 2013.) If Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks make money too.
In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.
Ed. Notes: Will what these writers get to complain about ever inspire them enough to focus on solutions? They really should take a page from their opponents and go for the rents. Don’t let lenders and landlords gobble it all up. Keep it all circulating at home. Just get the local government to shift the property tax off buildings, onto locations. As the tax on land rises, the price will fall, drying up the flow to Wall Street. Government could cut other taxes, and/or fund truly desired programs, and/or disburse the revenue as a dividend to residents. Whichever chosen, the fat flow of funds would no longer enrich speculators but benefit the community.