Pretium CEO Don Mullen has advice for fixing America’s housing problems. Here’s why you shouldn’t listen to him.

Pretium Partners’ Don Mullen is attempting to win back the good graces of lawmakers. In an open letter released the same day the Biden administration launched new federal housing guidelines, the private equity CEO encouraged the White House and Congress to adopt a new housing policy package.

Unfortunately, Don Mullen’s advice to federal leaders would further line corporate landlords’ pockets without meaningfully addressing the core issues plaguing tenants. This is hardly surprising. Pretium’s rental housing platform, Progress Residential, is the largest single family landlord in the United States, managing 90,000 rental homes across 30 markets.^[1]

Prior to creating Progress, Mullen was a Goldman Sachs executive famous for leading Goldman to bet against the mortgage market during the Global Financial Crisis of 2007. Mullen made a fortune as homeowners, particularly homeowners of color, lost their homes in record numbers.^[2] Mullen capitalized even further on this crisis by buying up the tens of thousands of foreclosed homes and renting them to families who had lost their homes or could no longer qualify for a mortgage due to tightened lending practices.

Mullen and Pretium Partners helped form the institutional single-family rental (SFR) industry – directly benefiting from the loss of the American Dream for thousands of homeowners, many of whom were then forced to rent homes.^[3]  And in the years since the Great Recession, Pretium and Progress Residential have subjected their renters to predatory neglect, health hazards, ever-rising rents, and   (including many filed during the pandemic).

In recent years, tenant mistreatment has been a systemic occurrence for Progress. Tenants in North Carolina, Minnesota, and Georgia have vocalized their Progress horror stories. In addition, more than 10,000 aggrieved tenants formed a Facebook group titled “Victims of Progress Residential”.

Private equity firms typically seek a uniquely high 15-20% return on investment over a short period of time, usually 3-5 years.^[4] This incentivizes firms to prioritize maximizing revenue while minimizing costs. To increase revenue, private equity may employ tactics including but not limited to raising rent, evicting tenants who fall behind on rent, adding junk fees to leases, and imposing excessive fines. They may also reduce operational costs by limiting staff and foregoing building maintenance, sometimes even in cases of emergency^[5].

Minnesota Attorney General Keith Ellison filed a lawsuit against one of Progress’s shell LLCs in February 2022, stating that the company’s “strategy of extracting profit from their tenants by claiming to provide them with prompt, high-quality maintenance and repair but actually leaving them in uninhabitable homes isn’t just shameful, it’s deceptive, fraudulent, and violates Minnesota law.”^[6]

In August of 2022, the U.S. House Select Subcommittee on the Coronavirus Crisis released a report investigating the eviction practices of Progress Residential and other corporate landlords during the first 16 months of the pandemic. Pretium filed more than 6,000 evictions during this time.^[7] Furthermore, representatives of the company engaged in abusive tactics to remove tenants from their homes, including placing tenants into the eviction filing process after they fell as little as $500 to $1,000 behind on rent.^[8]

Mullen’s policy recommendation letter to federal officials comes less than six months after these House findings were announced. While the letter is full of pro-tenant language, Mullen’s extractive agenda has hardly changed since 2008.

For one, Mullen’s letter urges Biden to recommit to his campaign promise of providing a tax credit for all renters to cover the cost of any rent paid over 30% of income. If renters were to receive this tax credit, profiteering landlords would be allowed to carry on charging egregiously high rents as normal, only now federal subsidies would cover any costs over 30% of a renter’s income. The tax credit attempts to tackle rent burdens without meaningfully addressing the very price gouging practices that created this problem. By reducing public pressure, the rent tax credit policy would also stem the momentum behind the growing nationwide movement for rent control measures.

Similarly, Mullen’s proposed expansion of rent-to-own housing could cause great harm to tenants. Although rent-to-own could allow tenants who wouldn’t qualify for a traditional mortgage to take steps towards homeownership, the rent-to-own structure is rife with potential pitfalls. Studies show that tenants tend to pay higher rent under rent-to-own schemes when they are low income and/or have multiple missed payments.^[9] If the home needs repairs, tenants can sometimes be left with the bill even when the deed is in the landlord’s name.^[10] Worst of all, rent-to-own tenants who are unable to make their payments are sometimes evicted with zero home equity despite months of making payments towards their home.^[11] While rent-to-own is marketed as an entryway to homeownership, the model has the potential to cause huge financial upsets for economically vulnerable people while allowing plenty of opportunities for investors like Mullen to profit.

Mullen also advocates for “increasing private sector participation” in the Section 8 Housing Choice Voucher (HCV) program by reducing administrative burdens, moving to biennial inspections, paying Housing Assistance Payments (HAP) to landlords prior to inspection, and use of remote virtual inspection. This ignores the reality Section 8 has a massive problem with landlord discrimination even though it has already undergone copious attempts to increase landlord participation. Despite the introduction of fair housing legislation, reforms that reduced the frequency of rental inspections, streamlined paperwork, and increased market value of vouchers, many landlords still remain reluctant to house voucher holders due to their own race and class biases.^[12]  And given Progress’ history of less-than-stellar property maintenance, lowering the inspection threshold for low income rental units is a recipe for disaster.

More generally, it’s likely that Don Mullen focuses so heavily on Housing Choice Vouchers for the same reason he suggested the renter tax credit: it puts on the appearance of expanding options for poor and working class people while allowing private equity firms to continue to rake in the cash. The Housing Choice Voucher system already benefits landlords like Progress Residential by using public funds to pay private landlords.^[13] Though HCV is considered “public housing,” private landlords can and do profit handsomely from it if they so choose.

Despite evidence of their negative impacts on tenants, it’s clear that private equity and real estate industry lobbying will continue to be a powerful determinant of what policy measures are politically possible. Mullen himself has contributed over $2 million to Democratic Party coffers, including $200,000 to the Biden Victory Fund PAC.

It’s time to stop looking to status quo actors like Don Mullen and Pretium Partners for solutions. Money talks, but well-organized communities have the power to drown it out. We should turn to tenant movement leaders to devise policies that shift the balance of power back towards ordinary people and away from landholding corporations. Organizers like Inquilinxs Unidxs por Justicia, ACCE, People’s Action, and African Communities Together are pushing governments at all levels to enact stronger tenant protections, improve transparency in the housing system, and prevent displacement. It’s up to federal leaders to center the experiences of tenants and take action.^[14]

^[1] https://www.prnewswire.com/news-releases/pretium-founder-and-ceo-don-mullen-sends-letter-to-president-biden-urging-collaborative-public-and-private-sector-action-to-address-our-nations-housing-challenges-301728509.html

^[2] Kevin Roose, “Goldman Executive Who Made Millions on Housing Bust Now Wants to Make Millions on Housing Un-Bust.” New York, July 20, 2012, https://nymag.com/intelligencer/2012/07/goldman-mortgage-chief-gets-it-both-ways.html. Gillian B. White, “The Recession’s Racial Slant,” The Atlantic, June 24, 2015 https://www.theatlantic.com/business/archive/2015/06/black-recession-housing-race/396725/.

^[3] Richard Warnica, “Why a Canadian Crown Corporation Is Banking on the Downfall of the American Dream,” Toronto Star, February 20, 2021, https://www.thestar.com/business/2021/02/20/why-a-canadian-crown-corporation-is-banking-on-the-downfall-of-the-american-dream.html

^[4]https://pestakeholder.org/news/hawaii-business-magazine-explores-private-equitys-impact-on-tenants/

^[5] https://www.propublica.org/article/when-private-equity-becomes-your-landlord

^[6] https://kstp.com/kstp-news/local-news/minnesota-attorney-general-keith-ellison-lawsuit-havenbrook-homes/

^[7] “Examining Pandemic Evictions: A Report on Abuses by Four Corporate Landlords During the Coronavirus Crisis,” Select Subcommittee on the Coronavirus Crisis Staff Report, July 2022, https://coronavirus.house.gov/sites/democrats.coronavirus.house.gov/files/2022.07.28%20SSCC%20Staff%20Report%20Examining%20, pg. 8

^[8] Ibid, pg. 19

^[9] https://www.sciencedirect.com/science/article/abs/pii/S0148619508000106

^[10] https://www.fastcompany.com/90795531/divvy-real-estate-venture-capit

^[11] https://www.fastcompany.com/90795531/divvy-real-estate-venture-capit

^[12] https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2021/05/12/biden-wants-to-offer-more-housing-vouchers-many-landlords-wont-accept-them

^[13] https://www.rent.com/blog/section-8-vs-public-housing/

^[14] https://news.yahoo.com/rent-control-is-making-a-comeback-201559070.html