Bloomberg looked at how private equity money pouring into single family home purchases is turning first-time homebuyers into renters.
It traced the “growing crop of landlords taking huge sums of capital from Wall Street and building gigantic portfolios of rental homes” and “taking homes off the market and renting them back to people who would have otherwise been in a position to buy.”
Investment firms were able to afford more than ordinary families could, and at the same time rents on single-family homes were also rising fast— “up 19% in the Phoenix metro area during the pandemic” which led to buyers losing out on buying a home and seeing it “resurface at a rent that was hundreds of dollars a month more than what they would have paid to own it with a mortgage.”
The article noted tenant rights advocates describing “Wall Street landlords as mass evictors” while “conservative pundits such as Fox News’ Tucker Carlson have blasted them for crowding regular homebuyers out of the market, warning that the very fate of the republic is at stake.”
Owning a home not only “lets a family control its own means of production,” but also lets owners accrue wealth and then tap their equity. “Home equity represents a huge portion of wealth in the U.S., especially for moderate-income families that have few other opportunities to use borrowed money to invest in assets that can rise in value over time,” according to Bloomberg.
Many of the new Wall Street landlords invested through established companies such as Progress Residential, owned by private equity firm Pretium Partners. Pretium is the second-largest single-family landlord after Invitation Homes, Inc. The company “employs software that scans real estate listings every 15 minutes. When its acquisitions team sees a home it likes, it estimates rent and a repair budget and aims to get a cash offer out within hours of the home going on the market.”
As other outlets have also reported extensively, the predatory behavior of private equity firms in the housing market is being scrutinized and resisted. Bloomberg cited Senator Elizabeth Warren accusing the Wall Street landlords of shamelessly “profiting off the destruction they caused.” Also according to Bloomberg, “Housing activists contended the companies were following the private equity playbook of heaping on fees and cutting maintenance costs to boost their bottom line.”
The article also highlighted a 4,000 member Facebook group called Victims of Progress Residential, “where tenants complain about rent hikes and unexpected fees and trade tips on navigating the inevitable corporate bureaucracy that comes with being one of 75,000 customers.”
Bloomberg also noted PESP’s research on eviction filings and how Pretium filed more eviction cases during a period when a federal eviction ban was in place. According to the article, Minnesota Attorney General Keith Ellison filed a suit alleging that Pretium and HavenBrook Homes had carried out a plan “to extract ever greater profits from their tenants by severely under-maintaining their homes.”