Hundreds of thousands of single-family homes
are now in the hands of giant companies — squeezing renters for revenue and
putting the American dream even further out of reach.
Chad Ellingwood wasn’t really in the market
for a home in the summer of 2006. But when his best friend came across an intriguing
listing in Woodland Hills — a bedroom community in
Entering the property beneath the canopy of a
grand deodar, Ellingwood, a big man with a gentle presence, felt as if he had
been transported to a ranch house in Northern California, much like one he
often visited as a child, all old growth and overgrown greenery — olive trees,
citrus trees, sycamores and redwoods. He and his friend meandered past a pond
to an inviting teal house built in 1958, “a whimsical masterpiece,” Ellingwood
told me. Inside there was a “captain’s quarters” — a room designed to look like
the hull of a boat with a built-in water bed and drawers — and numerous
stained-glass windows that the couple who owned it had made themselves. The
pièce de résistance depicted a faerie woman with flowing hair whose fingers
turned into peacock feathers. Behind the house were a couple of small
buildings, one of which was office-size — a meditation “Zen den,” Ellingwood
thought. The other was an A-frame, Swiss-chalet-style granny unit above the
garage, where the owner displayed a toy train collection.
“The house was not in amazing shape,”
Ellingwood said. “It needed some help. But I loved it. I wanted it immediately.”
One of Ellingwood’s goals had always been to
buy a house by the time he turned 30 — a birthday that unceremoniously came and
went six months earlier. When Ellingwood began speaking to lenders, he realized
he could easily get a loan, even two; this was the height of the bubble, when
mortgage brokers were keen to generate mortgages, even risky ones, because the
debt was being bundled together, securitized and spun into a dizzying array of
bonds for a hefty profit. The house was $840,000. He put down $15,000 and sank
the rest of his savings into a $250,000 bedroom addition and kitchen remodel,
reasoning that this would increase the home’s value.
Suddenly adulthood was upon him. He married
on New Year’s Eve, and his wife gave birth to their first child, a son, in
April. When his 88-year-old grandfather, an emeritus professor of electrical
engineering at the
But shortly after the birth of Ellingwood’s
second son, in June 2010, his marriage fell apart. He and his wife each sued
for sole custody. To pay his lawyer, he planned to refinance his house, and his
grandfather advanced him his inheritance. By 2012, Ellingwood had paid his lawyer
more than $80,000, and in the chaos of fighting for his children, he stopped
making his mortgage payments. He consulted with several professionals, who
urged him to file for bankruptcy protection so that he could get an automatic
stay preventing the sale of his house.
In May 2012, Ellingwood was driving his two
boys to the beach, desperate to make the most of his limited time with them,
when he got a call. He pulled over and, with cars whizzing by and his boys
babbling excitedly in the back seat, learned that he had lost his house. He had
dispatched a friend to stop the auction with a check for $27,000 — the amount
he was behind on his mortgage — but there was nothing to be done. Because
Ellingwood began to file for bankruptcy and then didn’t go through with it, a
lien was put on his house, his “vortex of love” as he called it, that precluded
him from settling his debt. The house sold within a couple of minutes for
$486,000, which was $325,000 less than what he owed on it.
In the months after, though, Ellingwood was
graced with what seemed like a bit of luck. The company that bought his home
offered to sell it back to him for $100,000 more than it paid to acquire it. He
told the company, Strategic Acquisitions, that he just needed a little time to
get together a down payment. In the meantime, the company asked him to sign a
two-page rental agreement with a two-page addendum.
It was clear from the beginning that there
was something a little unusual about his new landlords. Instead of mailing his
rent checks to a management company, men would swing by to pick them up. Within
a few months, Ellingwood noticed that one of the checks he had written for
$2,000 wasn’t accounted for on his rental ledger, though it had been cashed. He
called and emailed and texted to resolve the problem, and finally emailed to
say that he wouldn’t pay more rent until the company could explain where his
$2,000 went. For more than three months, he withheld rent, waiting for a
response. Instead, the company posted an eviction notice to his door.
Ellingwood hired a lawyer and reported to the
But it would only get bigger. Strategic
Acquisitions was but one of several companies in
Over the next seven years, Strategic Acquisitions would turn
over management to Colony Capital, and Colony’s real estate holdings would
merge with a series of companies, culminating in the Blackstone subsidiary Invitation
Homes, making
Invitation Homes the largest single-family-rental company in America, with
82,500 homes at its height — and 79,505 homes after Blackstone sold its
shares at the end of last year. Ellingwood, however, could hardly distinguish
among the various L.L.C.s he paid rent to: Strategic Property Management,
Colony American Homes, Starwood Waypoint, Invitation Homes. The offices changed
cities, downsized staff, hiked rents and imposed increasingly punitive fees.
Ellingwood was required to submit his rent in different ways — online,
certified mail, cashier’s check, in person — with slightly different rules, by
the 1st, by the 3rd. The leases grew in length from four pages to 18 to 43 as
the companies doubled down on strictures and transferred more responsibilities
— mold remediation, landscaping, carbon-monoxide detectors — onto the renter.
Ellingwood didn’t know it at the time, but
his story was to be the story
of millions of renters around the country, the beginning of a downward spiral
into the financial industry’s newest scheme to harvest money from housing.
Wall
Street’s latest real estate grab has ballooned to roughly $60 billion,
representing hundreds of thousands of properties. In some communities, it has
fundamentally altered housing ecosystems in ways we’re only now beginning to
understand, fueling a housing recovery without a homeowner recovery. “That’s
the big downside,” says Daniel Immergluck, a professor of urban studies at
Before 2010, institutional landlords didn’t exist in the
single-family-rental market; now there are 25 to 30 of them, according to
Amherst Capital, a real estate investment firm. From 2007 to 2011, 4.7 million
households lost homes to foreclosure, and a million more to short sale.
Private-equity firms developed new ways to secure credit, enabling them to
leverage their equity and acquire an astonishing number of homes. The
housing crisis peaked in
Jade Rahmani, one of the first analysts to
write about this trend, started going to single-family-rental industry
networking events in
Throughout the country, the firms created
special real estate investment trusts, or REITs, to pool funds to buy bundles
of foreclosed properties. A REIT enables investors to buy shares of real estate
in much the same way that they buy shares of corporate stocks. REITs typically
target office buildings, warehouses, multifamily apartment buildings and other
centralized properties that are easy to manage. But after the crash, the
unprecedented supply of cheap housing in good neighborhoods made corporate
single-family home management feasible for the first time. The REITs were funded with money
from all over the world. An investment company in
“There’s no way of looking at the ownership
of properties and understanding who owns them ultimately,” says Christopher
Thornberg, a founding partner of the research firm Beacon Economics. While
Invitation Homes and American Homes 4 Rent became publicly traded REITs, as far
we know “the big money is still in private equity,” he says. (Progress
Residential and Main Street Renewal are two such companies.) “They are
completely subterranean. They’ve got multiple layers of corporations within
corporations within holding companies.”
Colony Capital, the Los Angeles-based
private-equity firm run by the Trump megadonor Thomas J. Barrack Jr., didn’t
have as much money as Invitation Homes. As a result, it was choosier, says
Peter Baer, the founder and chief executive of Strategic Acquisitions, the
company Colony contracted to acquire homes. From early 2012 to 2014, Strategic
bought nearly 3,000 homes for Colony. Ellingwood’s home was one of the first.
Baer told me he was instructed to buy “conventional product” in the price range
of $300,000 to $600,000, typically three- or four-bedroom homes in good school
districts that would be easy to rent — i.e., the types of homes desirable to
first-time home buyers. Invitation Homes sought similar opportunities. (Some
REITs developed software to evaluate public records for such factors, as well
as for other metrics like proximity to employment hubs and transportation corridors.)
Throughout 2012 and 2013, representatives of private-equity firms flew to
auctions all over the Sun Belt buying in bulk and squeezing out individual
investors. By October 2012, as Stephen Schwarzman, the chief executive of Blackstone, said, the company was spending $100
million on homes a week.
Strategic would buy the property, obtain
possession (often by offering occupants “cash for keys” — a few thousand
dollars to move out as soon as possible), rehabilitate the property to Colony
standards and then manage it for a year or two until Colony was ready to take
over. The deals were so good, in fact, that the gush of inventory lasted only a
couple of years; the market recovered, in part because of these investors.
“Between Invitation Homes and Colony, that created a bottom for the market in
But even at the time, some saw things
differently. “Neighborhoods that were formerly ownership neighborhoods that
were one of the few ways that working-class families and communities of color
could build wealth and gain stability are being slowly, or not so slowly,
turned into renter communities, and not renter communities owned by mom-and-pop
landlords but by some of the biggest private-equity firms in the world,” says
Peter Kuhns, the former Los Angeles director of the activist group Alliance of
Californians for Community Empowerment. Around
Landlords can be rapacious creatures, but
this new breed of private-equity landlord has proved itself to be particularly
so, many experts say. That’s partly because of the imperative for growth:
Private-equity firms chase double-digit returns within 10 years. To get that,
they need credit: The more borrowed, the higher the returns.
When credit was tight after the financial
crisis, the acquiring firms, led by Blackstone, figured out a way to generate
more of it by creating a new financial instrument: a single-family-rental
securitization, which was a mix of residential mortgage-backed securities,
collateralized by home values, and commercial real estate-backed securities,
collateralized by expected rental income. In 2013, a year after Ellingwood’s
home was acquired, Blackstone’s Invitation Homes securitized the first bundle
of single-family rentals — 3,200 of them for 75 percent of their estimated value:
$479 million. Those who bought these bonds received 3 to 5 percent in monthly
interest until their principal was returned (generally in five years).
Blackstone put some of that $479 million toward repaying the short-term credit
lines it took out to buy the houses. Because the value of the portfolio of
homes had increased since their acquisition, Blackstone could extract much of
the difference as cash and buy more homes. Blackstone issued a second bond
package of nearly $1 billion six months later. Other REITs like Colony American
Homes quickly began doing the same, rolling homes like Ellingwood’s into a $486
million securitization.
With the securitized homes, the rental income
now needed to cover not only the mortgage but also the interest payments distributed
to bondholders — creating an incentive to keep occupancy and rents as high as
possible. In fact, Invitation Homes’ securitized bond model assumed a 94
percent paying-occupancy rate, putting pressure on the company to evict
nonpaying tenants right away.
The growth imperative became even more urgent
as the REITs began to go public. Since a rebound in the real estate market made
acquiring new properties more expensive, companies looked for growth from their
tenants: i.e., by raising rents, cutting down operating costs and maximizing
efficiencies. In a 2016 fourth-quarter earnings call, Tuomi, the chief
executive of Colony Starwood (formerly Colony American), declared that “not
getting every charge that you are legitimately due under leases” — termination
fees, damage fees and the like — is “revenue leakage.” In 2016, Colony made $14
million on fees and an additional $12 million on tenant clawbacks, like
retaining security deposits, says Aaron Glantz, author of “Homewreckers,” a
book on the single-family-rental industry.
“What is really dangerous to tenants and
communities is the full integration of housing within financial markets,” says
Maya Abood, who wrote her graduate thesis at the Massachusetts Institute of
Technology on the single-family-rental industry. “Because of the way our
financial markets are structured, stockholders expect ever-increasing returns.
All of this creates so much pressure on the companies that even if they wanted
to do the right thing, which there’s no evidence that they do, all of the
entanglements lead to an incentive of not investing in maintenance,
transferring all the costs onto tenants, constantly raising rents. Even little,
tiny nickel-and-diming, if it’s done across your entire portfolio, like little
fees here and there — you can model those, you can predict those. And then that
can be a huge revenue source.”
As Tuomi put it in 2016, “Ancillary revenue
is the first kind of low-hanging fruit.”
Ellingwood
was soon paying more in rent than he had paid for his first and second
mortgage combined. When he owned the house, the most he paid was $3,300 a
month. Strategic and later Colony American increased his rent from $3,500 to
$3,800 in just a few years. (Strategic did not respond to questions about
Ellingwood’s tenancy or that property.) In August 2017, Waypoint increased it
again to $4,150 (a 9.2 percent year-over-year increase — nearly five percentage
points higher than the already-burdensome city average). And that didn’t
include fees. When Colony took over from Strategic, it introduced an online
payment portal. All tenants were required to use it — and using it cost a $121
“convenience fee.” “It was anything but convenient,” Ellingwood told me. After
submitting the payment, which went to the national office, the tenants, he told
me, were obligated to call the local office to report it. Once, a landscaping
charge appeared on his bill, even though no one was landscaping his property.
Three months later, a worker showed up at his house for the first time and
asked him to sign a work invoice. Ellingwood refused. (He was able to get the
fee removed.) But the fees, many of which were outlined in his lease, kept
coming: lawyer fees, utilities conveyance fees, pipe-snaking fees. In 2015,
Colony emailed about a lease renewal, asking him for a new security deposit and
inquiring whether his appliances had been included in his original lease, as if
to suggest he should be paying a fee for them. “I bought these appliances,”
Ellingwood told me. He emailed back: “I have receipts.”
There were also late fees, with which
Ellingwood became all too familiar. In 2013, the economy was still weak, and
his income was irregular. The bills, however, didn’t stop: $600 a month just
for water, power and gas. Then there was child support. He took on odd jobs as
a fence builder and an insurance-claims inspector. Sometimes his mother, Dana,
who was laid off from an insurance company in 2008, would buy a big cut of meat
and ask Ellingwood and his girlfriend, a caterer, to cook it for her, so they could
all share it and Ellingwood wouldn’t feel like an object of charity.
One of the first times he was late, a notice
of eviction was posted to his door. He paid the rent — and the $50 late fee.
But three days later, there was another pay-or-quit notice — this time because
he hadn’t paid a $35 delivery fee for the late-fee notice. The second eviction
notice, in turn, incurred a second $35 delivery fee. Over the years, he amassed
a stack of late fees, more than 40 of them. “It’s embarrassing,” Ellingwood
told me, handing over the stack. Three-quarters of the time, he was late
because he didn’t have the money in the bank. One-fourth of the fees were
incurred because he was frustrated; he wanted to put pressure on a company that
he felt invested nothing in the upkeep of its properties.
After taking Ellingwood to court in
For seven and a half years, meanwhile,
Ellingwood watched as his home began to crumble. He kept up what he could: He
tended his garden, and he made small fixes like snaking the pipes or repairing
a short. But he couldn’t tackle the bigger things. The exterior paint peeled
and chipped, and the wood underneath began to rot. After a leak in the
bathroom, mold grew on the tiles. Invitation Homes would agree only to crudely
patch up the walls where the leak was — with Ellingwood’s own supply of
drywall. He had to decide whether to live with the mold or spend the money to
fix it himself. He invested a few thousand dollars in a new bathroom floor.
Other leaks, however, sprang up. It turned out that the home’s water pipes were
rusted. It took nearly five years for the company to fix an eight-foot section.
The shower in a second bathroom continued to leak into the darkroom, ruining
the vintage photos shellacked into the walls and ceilings. The company slapped
grout over the cracks. The shower still leaks. “Good thing it’s not your main
shower,” a representative told him. (DesJarlais declined to comment on
Ellingwood’s situation but said that some tenant complaints “date back to
previous companies that no longer exist, and in no way should it be suggested
that their practices are applicable to the current operations of Invitation
Homes.”)
The company certainly didn’t seem to care
about the floodplain at the back of Ellingwood’s property. During El Niño, the
backyard became a small sea that lapped at his house. The wooden stairs to his
granny unit began to split from the side rails. He propped them up with
two-by-fours. After two years of Ellingwood’s duly noting the damage and the
risks it presented, Invitation Homes asked him to fill out an online work
order. Four different workers came to give quotes. “They were looking for the
cheapest repair,” Ellingwood said.
Finally, the company picked a man who just
wedged new planks on either side of the steps so that they would reach the side
rail and bolted everything together. Ellingwood took me out back and poked the
base of the steps. The wood crumbled like a soggy graham cracker.
Ellingwood
and his girlfriend, Amber Linder — who lived with Ellingwood and helped
with his rent — had no idea they weren’t the only miserable Invitation Homes
renters until 2017. During a trip to
Ellingwood was afraid to join the group,
certain that it had been infiltrated by company spies. But by March 2018, he
was frustrated enough to ask for membership and discovered that there were more
than 1,200 people with complaints just like his.
On yet another sunny
In June
2016, Chisholm told me, she rented a tan-colored ranch house in
She looked at her bank account and realized that her rent check hadn’t
been cashed. Waypoint told her that it hadn’t been received. In August,
she got an automated email from Zillow that inexplicably advertised her home.
An Invitation Homes employee emailed to tell her that she would be sent into
automatic eviction but that she shouldn’t worry, they wouldn’t act on it. By
then the refrigerator had broken, rats ate the bananas on her kitchen counter
and two-inch cockroaches climbed the wall into in her granddaughter’s crib.
(Waypoint authorized only two exterminations per year.) Chisholm’s August rent check hadn’t been cashed,
either. She was told it hadn’t been received. She begged the office
manager to visit her house and observe the problems firsthand.
According to Chisholm, the manager sat with
her for hours and broke down in tears. “You don’t know the environment that I’m
working in,” Chisholm says the office manager told her. “Your property manager
is lying to you. She has all your checks. They’re stacked up on her desk.” She
explained why: By claiming not to receive the checks or by refusing to cash
them on the grounds that “they weren’t for the full amount owed” (Chisholm was
withholding the pool fee until the problem was fixed), the company could still
evict her for nonpayment. The manager promised to send the checks to
Chisholm via certified mail so that she would have proof of payment. And she
did. (The manager did not reply to requests for comment.) While Invitation
Homes declined to comment on the experiences of any individual tenants, it said
in a statement, “We aren’t always perfect, but we do work every day to provide
the best possible experience for our residents.”
In February 2017, Chisholm started her first
Facebook group. The only person she knew to invite was a fellow tenant of
Waypoint Homes, who found her on Yelp. (He wrote to her, bewildered that she
had written a positive review of the company; she had done so the month she
moved in because a maintenance worker said his bonus depended on it.) But the
group grew, gaining hundreds of members in the first few months. Suddenly she
was fielding messages and phone calls from tenants around the country —
particularly in Chicago; Phoenix; Atlanta; Florida; Los Angeles; Riverside,
Calif.; and Las Vegas, the places where private equity had invested most
heavily.
She started to notice patterns. False
advertising was one of them. Helena Abonde, a Swedish woman, began to post
frequently to the group. In May 2017, she had to leave
When she arrived at the house, no one was
there to meet her; instead, Cota sent her the code to the smart lock. Her dogs
were panting in the May heat of the
Another common practice was charging
burdensome fees. For each utility bill received by Invitation Homes — many
single-family-rental companies, or S.F.R.s, put utilities in the company’s name
and then charge the utility back to the tenant — the company levies a $9.95
“conveyance” fee. The company also piled on landscaping fees, $100 monthly pool
fees, a $50 monthly pet fee (“pet rents” were up 300 percent, Invitation Homes
announced in 2017, accounting for additional gains of $1.5 million) and
automatic enrollment in smart-lock services for $18 to $20 a month. The first
month of the smart-lock service was free, so that by the time the charge
appeared on the rent bill, it was too late to opt out, per the nearly 40-page
lease.
And then there were the fees people were
charged when they moved out. In
Of all
of Invitation Homes’s practices, those that most alarmed Chisholm involved
habitability issues — poor maintenance and lack of inspections. In
As moderator of the group, Chisholm began
taking it upon herself to intervene on behalf of tenants. She would email blast
Stephen Schwarzman, the chief executive of Blackstone; Charles Young, the chief
operating officer of Invitation Homes; Mark Solls, the chief counsel of
Invitation Homes; and various Blackstone officials who were members of the
Invitation Homes board. Often, the local office would suddenly respond to the
issue within hours. (DesJarlais, the spokeswoman for Invitation Homes, says
that if this happened, it was a coincidence.)
So when William Scepkowski, a Marine veteran,
sent Chisholm pictures of his young daughter’s pink, rashy back, a result of
her prolonged exposure to toxic mold, Chisholm began emailing. According to
Chisholm, Scepkowski couldn’t get anywhere with the local office. He moved his
family to a hotel and at 9 p.m. on a Friday cold-called Schwarzman at his
office in
Not long after, in late August 2018, Chisholm
told me she got a call from a number she didn’t recognize. “Hi, Dana. This is
Mark Solls” — the chief counsel of Invitation Homes. Dana waited, then laughed.
“Charles and I want to fly out to meet you Friday,” she says he said, referring
to Charles Young, the chief operating officer. Solls asked that she not tell
her Facebook groups, and she agreed — not, she says, because they were asking
her to but because she didn’t want to alarm or excite them. Chisholm spent the
intervening days in fear. “These big, global megalandlords, they’re flying out
within days just to meet with me,” she told me. “It was overwhelming. I was
scared, scared, scared, scared.” She got a manicure to soothe her nerves and
asked her church group to pray for her. On Friday morning, she met Solls and
Young where they were staying, at the new Marriott M Club in
“What do you want from us, Dana?” Young said,
according to Chisholm. “And I said, ‘Um, I want you to admit that you don’t
have a 99.8 percent satisfaction rate!.” — something the company claimed.
“I won’t say those words,” Young said slowly,
according to Chisholm. “I will say we have room for improvement.”
According to Chisholm, Solls and Young told
her that they wanted Chisholm to change the narrative about their company. She
told them that changing the narrative meant changing what they were doing. At
one point, Chisholm said, “If you want to change the narrative, resolve my
issue right now.” In April 2017, she had settled the eviction suit that they
filed against her. She paid $11,000 and got her $5,000 security deposit back.
For the entire year, on a house that was leased for $3,000 a month, she paid
only $9,000. But she insisted that it didn’t make up for the pain and suffering
she was confronting every day. “I said something preposterous,” she told me of
the meeting with Solls and Young. She asked to be given her house and millions
of dollars for a tenants’ fund. “Mark said: ‘We can’t offer you the house. You
know that.’ ‘I don’t know that, Mark,.” she said. “We can’t give you that
house,” Young said, according to Chisholm, “but we can give you enough money to
buy a house.” “Mark shot him a look like I thought it was going to kill him
right there!” Chisholm told me. When they left, Young and Solls promised to
call Chisholm on Monday to build trust.
Over the weekend, Chisholm thought more about
how Invitation Homes could redeem itself, and for hours she worked on a
proposal to create a victims’ fund that wronged tenants could access in the
event that, say, they needed a hotel room because their house flooded for the
sixth time. (Chisholm has at times solicited money from group members to
support tenant actions against the company.) She thought $25 million was fair —
the same amount Schwarzman had announced he was donating to his high school.
And she wanted her nonprofit to have full control of that money and how it was
spent. When Solls and Young called as promised, she mentioned her proposal to
them and then followed up with an email.
The next day, Solls called while Chisholm was
driving. Her proposal would cost way too much, he said. Instead, he offered her
a consulting job contingent on her changing the story about Invitation Homes on
her Facebook groups: $10,000 a month, with a $50,000 bonus and another $50,000
in six months “if she behaved — well, those are my words not his,” Chisholm
told me. “It was an insult. I would have loved to consult with them if they
were willing to change.” Solls and Young declined to comment on their
conversations with Chisholm. But DesJarlais, the Invitation Homes spokeswoman,
wrote in an email: “We were hoping to engage in a constructive dialogue with
Ms. Chisholm about whether she could offer helpful guidance. In the end, we
could not make it work. But we respectfully disagree with how she characterized
those conversations.” Since late 2018, Chisholm has been consulting for other
institutional investors instead.
The worst thing about Invitation Homes, in
Chisholm’s opinion, is the way they create fear in their tenants. “You either
pay these fees and settle with us or we’ll make you homeless, or we’ll ruin
your credit with an eviction,” she said of Invitation Homes’ practices. “That
is the threat renters live under!”
Invitation
Homes and Blackstone insist that they have had no impact on the housing
market — other than to set what they describe as a “higher standard for quality
across the board.” Company associates repeatedly emphasized that Invitation
Homes owns less than 1 percent of the nation’s single-family-rental housing and
that it has invested an average of $25,000 into each home it owns. The company
says its self-reported statistics speak for themselves: a 96 percent occupancy
rate and a 70 percent renewal rate. And in general, Invitation Homes says,
renters stay in its houses an average of three years.
But there are other factors to consider. One
is the demographics of the single-family renter. According to Invitation Homes,
its average tenant is 39 years old, and tenants’ average household income is
about $100,000 a year (which, in expensive rental markets like
And so, having bought the bulk of foreclosed
homes in certain desirable neighborhoods — many of which didn’t have rental inventory
before the crisis — these companies now have what Suzanne Lanyi Charles, a
professor of urban planning at Cornell, characterizes as oligopolistic power
over some local housing markets. Institutional investors own 11.3 percent of
single-family-rental homes in
Edward Coulson, director of the Center for
Real Estate at the
Besides former homeowners intent on
maintaining an address in a certain school district, typical tenants, according
to a former employee, are those who need to find a home quickly. In certain
areas, Invitation Homes also seems to rent to a higher-than-average number of
minorities. In a small survey of 100 tenants in
Moreover, Invitation Homes’ profits are
directly tied to focusing on places with population growth and critical housing
shortages. California — which is experiencing a well-known housing crisis —
accounts for 16 percent of Invitation Homes’ portfolio and is one reason it has
stronger returns than American Homes 4 Rent, according to analysts at K.B.W.
Apparently untroubled by these developments,
Fannie Mae guaranteed a $1 billion 10-year fixed-rate loan to Invitation Homes
in 2017, which was securitized by Wells Fargo. The loan is collateralized by
7,204 Invitation Homes rentals. It was the first single-family-rental loan
guaranteed by a government-sponsored entity, and Freddie Mac followed suit.
“Why is the taxpayer backing up loans so that they can get reduced interest
rates?” said Eileen Appelbaum, co-director for the Center for Economic and
Policy Research. “Why do we shift the risk to the
At the same time, Invitation Homes continues
to streamline, centralizing its operations in
In 2017, Blackstone earned more than $1.5
billion on the I.P.O. of Invitation Homes. And since then, now that median
housing-sale prices have fully rebounded — up 46 percent since 2011 —
Blackstone has realized even greater gains by exiting the business entirely,
shedding its remaining 41 percent ownership in a series of billion-dollar
second offerings from last March to November. A majority of its shares were
bought by mutual funds like Vanguard and J.P. Morgan. According to The Wall
Street Journal the exit earned Blackstone $7 billion, more than twice what it
invested. Blackstone, meanwhile, is moving on — to e-commerce warehouses,
mobile homes, student housing and affordable housing around the world.
Abood told me that “the easiest thing for
people to understand is the most sensationalized: ‘Invitation Homes is a
horrible landlord, and people are mad,.” she said. “Yeah, that’s a story. But
the harder story to make people care about is the way that all of our lives are
starting to be intertwined into these financial markets that most of us have no
investment in. The financiers are making so much money that depends on
our everyday debt and expenses. Our mortgages, our rents, our car loans, our
student loans. And all of that is dependent on low- and
moderate-income people.”
Whenever
Ellingwood passed by his front door, he was filled with anxiety, afraid of
what he might find posted there. It was mid-April, and he was waiting for a
late paycheck and was again past-due on his rent. He couldn’t put off paying
any longer, so he called his best friend, Mitch Glaser, with whom he was
building an organic-fertilizer company, and asked for a loan of $900.
Glaser, whose home had nearly been foreclosed
on in 2012, didn’t hesitate. “He could be in my position, and I could be in
his,” Glaser told me. Ellingwood hopped in his truck and drove an hour to
Finally a woman appeared, and Ellingwood
handed her his check. It matched the ledger she saw on her screen. Still, she
said, “Let me make sure it hasn’t gone up,” and then started messaging her
colleague, Ellingwood’s property manager, on her phone. “This is what the
ledger shows,” she mumbled as she typed the words. “Please confirm.” Emblazoned
across the wall, in big plastic letters, was the motto: “Together with you we
make a house a home.”
DesJarlais, the Invitation Homes spokeswoman,
later repeated this motto to me. “This isn’t just an in-and-out kind of thing,”
she said. “We love our residents.” The company, she told me, is looking to grow
in its current markets. “We call that infill — so we’re going to fill in those
concentrated suburban areas that we’re already in ... where we already have
geographic heft.” The company, she said, is buying more of what their customers
want: 1,700- to 2,400-square-foot homes. A former worker told me that in
certain markets, the company is selling off the larger homes that are more
challenging to rent. When I asked DesJarlais whether “infill” purchases affect
regional housing affordability, she replied, “The word ‘affordable’ is kind of
a subjective term.” Later, she emailed to say, “Our minimal percentage of all
purchases in our markets can’t possibly impact affordability — the numbers just
don’t hold up.”
At the end of June, Invitation Homes emailed
Ellingwood his lease-renewal offer, extending an “early-bird special” with a
monthly rent of $4,351 for the first 12 months and $4,569 for the second 12
months if he signed his lease within 10 days. The new 39-page lease made him
responsible for things that were typically the purview of landlords: He was
financially liable if the home became infested with bedbugs; the company was
generally not liable if he sustained property damage, injury or death from
exposure to mold. It also said that if Invitation Homes had to take him to
court again, he agreed to leave once and for all.
Ellingwood asked the company to show some
compassion and not raise his rent. But he had no law to lean on. In the fall of
2018, when California voted on Proposition 10, a bill that would enable local
jurisdictions to determine whether rent control or rent stabilization should
extend to single-family rentals, the No on Prop. 10 campaign raised $65
million, much of it from publicly traded REITs — more than two and a half times
the amount raised by the proposition’s supporters. Blackstone contributed $5.6
million to the No campaign, and Invitation Homes contributed nearly $1.3
million. The measure was roundly defeated. But this fall,
When Ellingwood didn’t hear back regarding
his rent request, he followed up, and after two weeks, the renewal coordinator
for Southern California West cut his rent increase in half. Ellingwood didn’t
agonize over whether to agree; he signed almost immediately. The only nightmare
greater than renting his home from Invitation Homes was not renting his home
from Invitation Homes. Even if he had the money to front a move, which he
didn’t, his credit wasn’t good enough to clear a rental application in a
housing market as competitive as
“They’ll want to sell it,” Ellingwood told me
at his kitchen table late one night. “Or I’ll fight them to the point where
they want to sell it back to me.” Nevertheless, knowing that he would not be
forgiven if sent to eviction again, I asked Ellingwood if he was worried. “Of
course,” he said. “I’m living on the razor’s edge.”
He paused. “But it doesn’t make sense for
them to lose me. In fact, that should make me their favorite customer. They
live off of their fees.”
“Homewreckers,”
https://www.harpercollins.com/9780062869531/homewreckers/
Graduate
thesis at the Massachusetts Institute of Technology on the single-family-rental
industry
https://dspace.mit.edu/handle/1721.1/111349
Tenants
of Invitation Waypoint Homes
https://www.facebook.com/groups/TenantsofInvitationWaypointHomes/
OneWest
and then foreclosed on more than 35,000
https://theintercept.com/2017/01/03/treasury-nominee-steve-mnuchins-bank-
accused-of-widespread-misconduct-in-leaked-memo/
Reported
in The Atlantic last year
https://www.theatlantic.com/technology/archive/2019/02/
single-family-landlords-wall-street/582394/
oligopolistic
power over some local housing markets
https://www.tandfonline.com/doi/full/10.1080/07352166.2019.1662728?scroll=top&
needAccess=true&
Better
Business Bureau profile
https://www.bbb.org/us/tx/dallas/profile/property-management/invitation-homes-08
75-90466743/complaints
Elora
Raymond’s research at the Atlanta Federal Reserve
https://www.frbatlanta.org/-/media/documents/community-development/publications
/discussion-papers/2016/04-corporate-landlords-institutional-investors-and-
displacement-2016-12-21.pdf
The
Wall Street Journal
https://www.wsj.com/articles/blackstone-moves-out-of-rental-home-wager-with-a-
big-gain-11574345608