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When José Rivera moved into his house, he thought he was on the path to home ownership. But after several years and more than $90,000 in rent, he can’t even get his landlord to fix the broken pipe that leaked raw sewage into his home.
Rivera’s landlord is Colony Starwood Homes, a rental giant backed by Wall Street investment firms. When he first told the company about his leaky pipe, they cleaned the carpet, but left the sewage issue alone. When the pipe leaked again, Rivera filed another complaint — and five days later, he received a notice to vacate.
Rivera is just one of the many renters highlighted in a just-released report looking at the new face of financialization in the housing market. The report is authored by three consumer advocacy and housing rights groups — the Alliance of Californians for Community Empowerment (ACCE), Americans for Financial Reform, and Public Advocates.
Chief among their concerns are companies like Starwood Waypoint Homes, backed by Wall Street firms Colony Capital and Starwood Capital, and Invitation Homes, backed by The Blackstone Group, a private equity fund. These single family rental giants have become shapeshifters, merging with each other to slowly take over the rental housing market. Starwood Waypoint and Invitation Homes announced their own merger in August of 2017, becoming a single company owning more than 82,000 single family rentals across the country.
These companies are among the beneficiaries of the 2008 housing market collapse. In the wake of the financial crisis, Wall Street firms swooped in to neighborhoods to buy up houses, crowding out the families and local landlords who couldn’t compete with their cash payments.
In the decade since the mortgage crisis, the financialization of housing rentals has ballooned. Institutional investors now own a quarter of the country’s single-family rentals, and just nine of these firms are renting out 200,000 houses in 13 states. A large portion of those homes are regionally concentrated, compounding the effects . In Sacramento County, for example, Invitation Homes is the largest private landlord, and owns more property than anyone besides the county itself.
The structure of these rental empires pits the profits of investors against the needs of tenants — and unsurprisingly, the tenants often lose the fight. That’s where the report’s authors come in. Over the course of their research, they conducted more than 100 interviews with tenants who are essentially renting from Wall Street firms. The report tells the stories of absurd rent increases, dangerous failures in property management, and high eviction rates. And, as the authors note, lower income families and people of color are disproportionately affected by these practices.
Take, for example, Renita Barbee, who will need to leave her Wall Street firm-owned home after an exorbitant rent increase. The first notice she received from her landlord announced that her monthly payments would go from $2120 to more than $3000. She joined an organizing campaign along with other ACCE members, writing letters and protesting. Finally, her landlord sent a new notice — the initial amount was a mistake, and her rent would only increase to $2330. Even still, the price is out of her budget. Barbee says her husband and daughter will move in with family while she rents a coworker’s room until they can figure out a new plan.
For some renters, the runaround they’ve received from their Wall Street landlords only compounds the ever-present stress of gentrification and displacement. Merika Reagan moved to into a house in Oakland after being priced out of her hometown of San Francisco. After Waypoint Homes, the previous landlord, merged with Starwood, the path to home ownership changed for Reagan and her wife. When their last least expired, the couple were offered a year-long renewal with a rent increase of $350 a month, or a month-to-month contract that would up their monthly rent by $1000. Both options are out of the couple’s budget, but moving out would likely mean leaving Oakland entirely — and being displaced from the region for a second time.
Through organizing, some families, like Eva Jimenez and Ramon de la Rosa, have been able to wrest some control from their Wall Street landlords. The couple lived in their home for 12 years, Jimenez explains in the report, initially as homeowners, and then eventually as tenants of Waypoint after a predatory loan led to foreclosure. They pushed Waypoint to deal with maintenance issues, but received only negligence in return — as well as a massive rent hike they couldn’t afford. Through an organizing campaign with ACCE, they were able to stop the rent increase so they could stay in their home.
While Jimenez may have found some success in organizing with other renters, the report’s authors have ideas for policies to protect tenants before the rent hikes happen. Chief among them: protect tenants, especially through rent control measures and eviction rules that extend to single family rentals, not just multi-family properties.
The authors also suggest that private equity funds should be required to provide more information on the companies in their portfolio, especially their relationship to the communities where they operate. There’s no better place to start than with these mass landlords, who are quickly rewriting the rules on achieving the American dream of home ownership.