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Financialization of Single-Family Rentals: The Rise of Wall Street’s New Rental Empire

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City Rising is a multimedia documentary program that traces gentrification and displacement through a lens of historical discriminatory laws and practices. Fearing the loss of their community’s soul, residents are gathering into a movement, not just in California, but across the nation as the rights to property, home, community and the city are taking center stage in a local and global debate. Learn more.

Richard and Vanessa Bulnes bought their house in East Oakland in 1992, where they raised their children and lived for 20 years. After Richard had a stroke in 2008, reducing the family’s income, and after being defrauded by a predatory loan in the loan modification process, the Bulnes family lost their home to foreclosure. Their fate also befell on 35 of their neighbors, like millions of others across the country between 2006 and 2012. That was only the beginning. 

The Bulnes family found a house in the neighborhood to rent — one that, like their own, had been bought up by investors after another family in their neighborhood lost it through a foreclosure. The rent was more than the mortgage payments on their former home. Still, it was a place where Vanessa, now her family’s sole financial source of support, could run her in-home daycare center which she’d run for 22 years. Only when dangerous levels of lead were discovered in the soil during a permitting check in 2013 did she learn that the landlord, whose permission she would need before the county could remediate the problem, was a large corporation, Waypoint Homes. Waypoint Homes became Starwood Waypoint after a 2016 merger and came under the control of a Los Angeles-based global finance firm called Colony Capital. More recently, in August 2017, the company announced a merger with Invitation Homes, controlled by the New York-based private equity firm Blackstone. Every year, Vanessa and Richard were faced with a larger, and more distant, “landlord.”

For several years, Vanessa and Richard repeatedly and tirelessly reached out to their corporate landlord in an attempt to have the soil remediated on their property so that Vanessa could continue to run her business. Unable to get the management company to clean up the toxic soil, the county revoked Vanessa’s childcare license. Vanessa not only lost her business of 22 years because of her corporate landlord’s negligence, but she lost her family’s primary source of income. As Vanessa looked for new work, their rental payments began to fall behind, and in late December 2016, Vanessa and Richard received an eviction notice. The Blackstone Group, based in New York City, didn’t know and didn’t care.

Richard and Vanessa Bulnes
Richard and Vanessa Bulnes | Photo provided by Anya Svanoe and Amy Schur

Wall Street as Modern Day “Land Lord” 

Stories like the Bulnes’ are not uncommon.

In recent years, Wall Street financial conglomerates like the Blackstone Group have been buying up tens of thousands of houses across the country, making them a growing force in the residential rental housing industry. In fact, Blackstone is now the largest landlord for Single-Family Rentals (SRF’s) in the world and the largest landlord in the country. “Mom and pop” landlords are becoming less and less common. Fewer tenants have a landlord who lives in the neighborhood or across town and increasingly, tenants are dealing with corporate landlords that don’t even have physical offices with real people you can talk to in the same state. 

All told, one-fourth of single-family rentals today are owned by institutional investors, and more than 200,000 families pay their rent to nine giant private equity firms like Starwood Waypoint and Blackstone (that are now merging). The holdings of these nine are concentrated in less than 20 cities across the country with Blackstone’s Invitation Homes owning 14,389  in California alone.


How Did We Get Here? 

In 2008, the whole world saw the result of the growing financialization of the housing market, together with the unregulated, reckless greed of Wall Street. These financiers and speculators took the global economy to the precipice of collapse while wreaking havoc on ordinary Americans like Richard and Vanessa Bulnes. Today, this type of casino-like gambling in the housing market is back in a new form: the Wall Street financialization of rental housing. 

After Wall Street crashed the global economy in 2008, leading to massive loss of wealth in low-income communities of color, private equity firms and other institutional investors created new companies to acquire extremely discounted homes through auction, short sale or the purchase of distressed loans. This was called the REO (Real Estate Owned home) to Rental business. 

Blackstone, the world’s largest private equity firm, created Invitation Homes in 2012 and spent over $10 billion amassing a portfolio of more than 48,000 homes, at times spending over $150 million a week. Similarly, Colony Capital, the world’s third largest private equity firm at the time, created Colony American Homes, the second largest single-family rental company, with $550 million in initial investment. In 2016, Colony American Homes merged with Starwood Homes to become Colony Starwood, and in August of this year, the company merged with Invitation Homes to become the largest single-family rental company in the world and the largest landlord in America. The combined company, which will keep the Invitation Homes name, owns 82,000 homes and will be the second largest residential real estate company in the world.


Beginning in late 2013, the financial industry was able to take single-family rental housing one step further as a commodity for trading, by selling bonds backed by the future rent checks of thousands of single-family homes, through a process referred to as securitization. Sound familiar? This process is very similar to the mortgage-backed securitization made famous by the 2008 financial crisis. Invitation Homes issued the first single-family rental-backed security for $500 million in 2013. Since then, ten more companies have entered the market, amounting to 37 securitizations and totaling $44 billion with $16.4 billion still outstanding.

Single-family rental companies have also moved this industry into the stock market. Some of the largest single-family rental companies are, or were, publicly traded, including Invitation Homes/Colony Starwood and American Homes for Rent. By selling stocks, the single-family rental companies then become accountable to shareholders and face increasing pressure to deliver financial returns. The pressure to deliver short-term economic returns for shareholders, often at the cost of long-term productivity, social responsibility and more redistributive business models, is a core by-product of the modern financialized economy.

From Predatory Mortgages to Predatory Rentals:  Wall Street Landlords Bad for Tenants and Communities

Wall Street landlords like Blackstone’s Invitation Homes are accountable to their shareholders who are promised a high-profit margin. So far, the record of Wall Street landlords has been marked by unprecedented rent increases, a spike in evictions and a shifting of maintenance costs to tenants by nickel and diming their renters. Vanessa and Richard Bulnes learned the hard way. After years of fighting to get their corporate landlord to repair their roof and remediate the soil in their backyard — their landlord sent a maintenance person that informed them that he was responsible for 1,800 properties. Stories like this and countless more demonstrate their penchant for large rent increases and how challenging it can be to get repairs done by a very absent absentee landlord. 

Colony Starwood Homes in Southern California

In California, rent increases by some of the largest Wall Street landlords have been astronomical. For example, Colony Starwood Homes reported that in Northern California rental renewal rates increased by 9-13%, the largest in the nation. This means that if tenants already living in a Colony Starwood home want to continue to rent, they must pay between 9 to 13% more each year. A survey conducted in early 2017 of Los Angeles County tenants renting from Invitation Homes and Colony Starwood shows consistently high rental increases in the Southern California market as well. Of the 100 tenants surveyed, 77% reported rental increases and the average reported increase was 9% or $171 per month.

In December 2016, the Federal Reserve of Atlanta found that large single-family rental companies are evicting tenants at a higher rate than “mom-and-pop” owners. In 2015, Colony Starwood moved to evict one-third of all of its tenants. In an interview with Reveal News, Elora Raymond, the lead author of the Federal Reserve report said, “Given the public debate, we expected to see that gentrification was a major cause of evictions, but when we did our analysis we couldn’t find any correlation between the influx of wealthier residents and the eviction of existing, lower-income tenants.” The only factor that did predict whether a tenant would get an eviction notice was “the concentration of blacks in the neighborhood.”

According to reports from these companies to their investors, a key part of their financial strategy with these rentals is to extract additional money from their tenants in the form of fines and fees. The CEO of Colony Starwood explained to investors that failing to harvest the “low hanging fruit” of ancillary revenues should be viewed by companies as “revenue leakage” and the company should maximize every fee that they are “legitimately due under the lease.” Colony Starwood reported an increase in revenues of 90% from 2015 to 2016, which the company credits primarily to the acquisition of new homes, but also to the enhanced implementation of “smart home service charges, tenant chargebacks, late charges and early-termination charges.” 

Crushing the American Dream

It is not only tenants that are being harmed, but also prospective homeowners and communities located in Invitation Home’s “target areas” that are feeling the negative effects. Cash-carrying investors have been buying up many of the moderately-priced single-family homes, crowding out thousands of prospective first-time homebuyers. Not only is this making homeownership more difficult for many, but it leaves the neighborhoods where this is taking place with fewer homeowners.

Homeownership in the US

Beginning in 2012, these companies developed new technologies such as proprietary software and algorithms to instantly bid on thousands of homes at auctions across the country. The software identified the homes with the greatest profit potential based on property assessment information, estimates of projected maintenance costs and data on neighborhood characteristics referred to as their target areas or “strike zones.” Target areas are typically neighborhoods with high job growth and low-supply of housing, meaning that there is a constant shortage of housing and a greater ability to set high prices and benefit from greater home price appreciation. Potential new homeowners lose, as cash-carrying investors purchase the homes they had their sights on, and communities lose, with absentee landlords down the street, instead of homeowners.  

The financialization of single-family rental housing is increasing income and wealth inequality by effectively redistributing tenants’ rent payments to wealthy investors and redistributing home price appreciation to private equity funds and corporate executives rather than homeowners. It is part of a greater story where low-income communities of color are stripped of their wealth and systematic barriers are created to prevent people like Vanessa and Richard Bulnes from regaining that wealth. Where families like the Bulnes used to own in their own homes and build businesses in their own communities to pass down for generations to come — that money continues to get concentrated at the top by the few wealthy elite. We cannot continue to stand silently as Wall Street’s rental empire continues to wreak havoc on our communities — we need homes for people, not hedge funds.

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