..."Oh the rich get rich and the poor get poorer. In the
meantime, in between time, ain't we got...the shaft!"
Read this article and explain how it can be true in a democracy?
Carl Jarvis
On 6/14/21, Miriam Vieni <miriamvieni@xxxxxxxxxxxxx> wrote:
How Wall Street Bought Up America's Homes
By Alana Semuels, The Atlantic
14 June 21
With help from the federal government, institutional investors became major
players in the rental market. They promised to return profits to their
investors and convenience to their tenants. Investors are happy. Tenants
are
not.
In 2010, at the height of the foreclosure crisis, the federal government
watched nervously as hundreds of thousands of families lost their homes.
Empty houses blighted neighborhoods, their shades drawn, their yards
overgrown. Without some kind of intervention, federal officials worried,
the
housing market would continue in its free fall, prices would keep dropping
for existing homeowners, and the economic recovery, already tenuous, would
be imperiled.
But who would fill these empty homes? Few Americans were in a buying mood,
and for those who were, mortgages were harder to come by than they had been
before the crash. So the government incentivized Wall Street to step in. In
early 2012, it launched a pilot program that allowed private investors to
easily purchase foreclosed homes by the hundreds from the government agency
Fannie Mae. These new owners would then rent out the homes, creating more
housing in areas heavily hit by foreclosures.
"There was this glut of foreclosed properties in parts of the country, and
inadequate demand from the traditional home-buying population and even
traditional investors," Meg Burns, who was at the time the senior associate
director of the Office of Housing and Regulatory Policy, told me. "We were
trying to influence demand."
It worked. Between 2011 and 2017, some of the world's largest
private-equity
groups and hedge funds, as well as other large investors, spent a combined
$36 billion on more than 200,000 homes in ailing markets across the
country.
In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes
sold between January 2011 and June 2012; today, institutional investors own
at least one in five single-family rentals in some parts of the metro area,
according to Dan Immergluck, a professor at the Urban Studies Institute at
Georgia State University. Some of the nation's hardest-hit housing markets
were finally stabilized.
The investors argued that they could be good landlords-better, in fact,
than
cash-strapped small-timers. According to Diane Tomb, the executive director
of the National Rental Home Council, a trade group established in 2014,
single-family rental companies "professionalized" a sector traditionally
run
by mom-and-pop landlords, bringing with them 24/7 responses to maintenance
requests and a deep pool of capital they can spend on homes.
They also projected they could make money, which no one had done on a large
scale in the home-rental business. "We wanted to rescue these neighborhoods
and create a long-term, permanent income stream for our shareholders," says
Frederick Tuomi, who was until recently the president of Invitation Homes,
which is now the largest single-family rental company in the nation. (Tuomi
is currently on a temporary leave of absence to care for a family member.)
Wall Street analysts and potential shareholders, however, were skeptical.
Maintaining thousands of homes of different sizes, ages, and conditions
across an entire metro area seemed like a logistical nightmare. "How can
you
operate and create scale in that situation?" Sam Zell, the billionaire
real-estate investor, told CNBC in 2013. "I don't know how anybody can
monitor thousands of houses." When the new rental companies started
offering
shares to investors on the public market in late 2012, the response was
tepid.
But housing trends were on the side of the investors: America was becoming
a
renter nation. According to census data, between 2007 and 2017, the United
States added less than 1 million households in owner-occupied homes, but
6.5
million in renter-occupied homes. Many families wanted to live in a
spacious
house in a good school district, but could no longer afford to do so as
owners. The homeownership rate bottomed out at 62.9 percent in 2016, down
from a high of 69 percent in 2005.
Of course, the trends that favored these new landlords were largely
produced
by a financial crisis that Wall Street had itself abetted. That some of the
same investment firms that had played a part in the housing crisis were now
poised to profit from it made for a dismal irony. But if the new companies
could deliver on their promises of making home rentals easy, affordable,
and
worry-free, perhaps everyone could win: The companies could return a
profit,
the housing market could be shored up, and houses that had lain fallow
after
the crash could once again be happy homes.
That's not what happened. I talked with tenants from 24 households who
lived
or still live in homes owned by single-family rental companies. I also
reviewed 21 lawsuits against three such companies in Gwinnett County, a
suburb of Atlanta devastated by the housing crash. The tenants claim that,
far from bringing efficiency and ease to the rental market, their corporate
landlords are focusing on short-term profits in order to please
shareholders, at the expense of tenant happiness and even safety. Many of
the families I spoke with feel stuck in homes they don't own, while
pleading
with faraway companies to complete much-needed repairs-and wondering how
they once again ended up on the losing end of a Wall Street real estate
gamble.
In 2011, Rene and Erica Valentin were living with their two young children
in a small two-bedroom apartment in suburban New Jersey. They had been
saving for years to buy a house. But then Rene, now 42, was laid off as a
district manager at Best Buy, and the couple decided that the only way they
would ever be able to afford to buy was in a cheaper market.
Erica, now 34, applied to be an engineer at AT&T in an Atlanta suburb. When
she got the job, the family picked up and drove south, moving into a
two-bedroom apartment near the city center. They pinched pennies as Rene's
job search stretched into its second year. By the time he finally found a
position in 2014-again at Best Buy-the family still couldn't afford to buy.
But their daughter, Sophia, was about to enter first grade, and the
Valentins wanted her in a good school district and not to have to share a
room with her brother. So they decided to rent.
A real-estate agent showed them around Lawrenceville, a sprawling suburb 30
miles northeast of downtown Atlanta, where the homes are large and the
schools are good. Every house they saw was owned by the same company,
Waypoint Homes, which they told me the agent explained was a professional
rental company, with 24/7 maintenance, quarterly check-ins, and deep
pockets
to spend on repairs.
They settled on a 2200-square-foot house on a quiet street. From the
outside, it didn't look like much-vinyl siding, black shutters, brick
detailing. But it had three bedrooms, two bathrooms, walk-in closets, and a
large, fenced-in backyard, all for just $1,373 a month. Soon enough, they
were installing a tire swing in the backyard, hanging art on the walls, and
putting up curtains in the kids' bedrooms-dark blue for Antonio, light blue
for Sophia. They paid their rent using Waypoint's online platform,
impressed
by how far technology had progressed from the days of dropping a check in
the mail. The property wasn't theirs, exactly, but they finally felt like
they could settle down.
As the Valentins were nesting, America's new corporate landlords were
looking for efficiencies. The companies set about standardizing flooring
and
appliances, which would, in theory, lower costs and make life easier on
maintenance workers. They established centralized call centers to handle
tenant communication, and installed smart locks so that potential renters
and maintenance staff could let themselves in to look around or do repairs.
At the same time, the industry was consolidating. Investment groups created
companies to manage the homes: Blackstone established Invitation Homes;
Cerberus created FirstKey Homes; Colony Capital created Colony American
Homes. And then those companies started merging.
In 2015 alone, Colony American Homes merged with Starwood Waypoint
Residential Trust, Cerberus Capital Management acquired more than 4,000
homes from BLT Homes, and American Homes 4 Rent said it was acquiring
American Residential Properties in a $1.5 billion deal. By 2017, two major
players, Invitation Homes and American Homes 4 Rent, controlled nearly 60
percent of the market.
On calls with investors, those two companies touted their cost-cutting
measures, which often involved pushing responsibilities onto tenants. In
2016, Jack Corrigan, the chief operating officer of American Homes 4 Rent,
told investors that the company hoped to reduce spending on repairs,
maintenance, and "turn costs"-preparing a home for a new tenant-from $2,500
per home to $1,600. That same year, Colony Starwood cut property-management
costs 25 percent from the previous year; one of its money-saving
innovations
was to use videos and chat software to show tenants how to fix minor
problems, so they wouldn't have to request repair staff for a clogged
garbage disposal or a leaking toilet.
The obligation to repair their own rental wasn't the only responsibility
passed on to tenants. I reviewed one Colony Starwood lease from 2016; it
was
34 pages long and specified that tenants were responsible for landscaping,
"routine insect control," replacing air filters in their central air
systems
once a month, repairing broken glass (regardless of how it was broken), and
repairing and maintaining sewer and sink backups. American Homes 4 Rent
started levying "trip charges" if maintenance staff were sent out to homes
to assist with repairs that the tenants should have performed themselves,
David Singelyn, the company CEO, explained at a 2015 investor forum. Some
companies began requiring that tenants buy renter's insurance to cover the
property itself, rather than just their belongings, a clause lawyers in
some
states say is unenforceable.
As the industry started to grow, the major players all described their
desire to standardize and improve the business of being a landlord. But
even
to the companies' employees, the effort to become more efficient started to
look more like craven attempts to squeeze tenants. "It shouldn't be just
about making money, but that's what it turned into," Shanell Hanson, who
was
a property administrator for Colony American Homes in an Atlanta suburb
from
2014 to 2016, told me. Hanson said the company had six maintenance workers
for 2,100 homes in the area she managed. Residents would frequently call
with substantial problems: Sewage was overflowing, or the house was full of
mold. But with such a small staff, Hanson could rarely deal with the
problems quickly. And the law was on the corporations' side: If tenants
want
to seek financial remedy for a landlord not keeping the property in
adequate
condition, under Georgia law, they have to take the landlord to court, a
costly and lengthy process. "It's almost impossible to do without an
attorney," Lindsey Siegel, an attorney at Atlanta Legal Aid who works on
housing issues, told me.
Hanson said she was instructed by a supervisor not to answer the phone when
certain tenants called. "Her response would be, 'We're not fixing that,
just
don't call the tenant back,'" Hanson said of the supervisor. Hanson said
she
was fired when she reported the company to OSHA because she worried that
the
homes were in such poor shape that the conditions for the maintenance staff
she supervised were dangerous.
In 2017, Invitation merged with Starwood Waypoint, the company that itself
had merged with Colony American in 2015. Invitation said it could not
comment on individual employees (or the alleged OSHA complaint), but that
company policy protects whistle-blowers from retaliation, and that the
company does not tolerate unsafe working conditions for maintenance
workers.
A spokeswoman added that the events Hanson alleges occurred when the
company
was under different ownership. (Fred Tuomi, the longtime Invitation CEO,
was
a senior executive at Colony American beginning in 2013, and headed the
company as it merged with both Starwood Waypoint and Invitation.)
Invitation
also said that any employee not returning tenants' calls was not following
its company policy.
Many other single-family landlord companies were cutting corners on
maintenance and repairs. "As the corporation got bigger, it just got worse,
in terms of what we had to work with and how we had to deal with problems,"
a former Los Angeles leasing agent who worked for Waypoint between 2015 and
2017 told me. (She spoke on the condition of anonymity because she still
works in real estate.) Regional teams received bonuses for keeping costs
low, she said, which incentivized them to skimp on spending. Instead of
responding to tenants personally, supervisors would send calls for
maintenance to out-of-town call centers-which would in turn assign
maintenance workers dozens of repairs in a day, not realizing that Los
Angeles traffic could mean that relatively short distances could take hours
to traverse.
Another former Waypoint leasing agent, in Florida, who also spoke on the
condition of anonymity because she is still in the real-estate field, told
me that the company stopped replacing shower-curtain rods and changing
locks
when tenants moved out. When Waypoint learned that it was spending $5
million annually on paint, local managers were told to just touch up the
walls rather than repaint them, giving the interiors a splotchy, unfinished
appearance, she said. At one point, a mandate came down from a field
manager
that the company was going to do everything it could to not to return
security deposits to tenants. "It wasn't a company policy, and you will
never find it in writing, but it was a verbal thing passed down to field
project managers," she said.
Charles Young, who was named the chief operating officer of Starwood
Waypoint in 2015 and now serves in that position for Invitation Homes, told
me that the company never told staff to avoid returning security deposits.
Tuomi, of Invitation, said that while the companies may have been "horribly
inefficient" at first, they've gotten better at responding to problems as
they've gotten bigger, with the help of technology and more experience.
Invitation launched an advance-scheduling and route-optimization program
last year to improve the efficiency of its maintenance staff, according to
Kristi DesJarlais, an Invitation Homes spokesperson. The company told me
repeatedly that complaints about the early days of the single-family rental
industry are no longer valid.
Rene and Erica Valentin's problems with their rental home began almost
immediately. Their pipes would periodically break, sending a stream of
water
onto their living-room carpet. Sometimes the water would be boiling
hot-their kids once stepped in it and burned their feet, they told me.
Getting someone to come fix the pipes was always a production. Erica said
she would call, or file a complaint online, and it would take days,
sometimes weeks, before she received a response. Repair workers would come
and replace small sections of broken pipe, but Waypoint never investigated
why the problem persisted. They didn't replace the soggy carpet, either; a
faint mildew smell started to permeate the house. The contractors Waypoint
sent seemed, to the Valentins, unqualified-one didn't have a car and had to
call his mother to drive him to Home Depot to pick up a part. "You would
expect this type of behavior from a one-person landlord who's a jerk, but a
big multimillion-dollar company-how do you treat your tenants like that?"
Erica said. "They have the money to fix things."
The Valentins thought about leaving, but moving is expensive, and they were
still saving up to buy a house. They also worried that breaking a lease
would ruin their credit. So they stayed, and the problems mounted. Their
air-conditioning stopped working; the family waited eight sweltering
Georgia
summer days for a repairman, who told them that the wrong-size unit had
been
installed at the house and that it would never keep them cool. When they
asked if Waypoint could install the proper unit, they told me the company
did not respond. Waypoint merged with Invitation Homes in late 2017.
But despite the new ownership, the flooding continued. One Sunday afternoon
in March 2018, they returned home and saw water rushing out of their house.
They found their home submerged in four inches of water and their bulldog,
Bam Bam, whimpering in a corner. They called Invitation and waited, moving
their soggy couch to the garage, piling ruined children's books and teddy
bears on tables, wondering why the issue had never been fixed after dozens
of calls.
The problem, it turned out, was more significant than a bad section of
pipe.
The house's pipes had been the subject of a class-action lawsuit because
they broke so frequently, and the pressure regulator in the hot-water
heater
was faulty, sending too much water into an already fragile system. They
learned this from a contracting company that Invitation dispatched to
diagnose-but not to fix-the problem. When Rene got back to the house from a
trip to pick up a pizza, the contractors were packing up their equipment.
Invitation was looking for someone to do it for a cheaper price, they told
him.
A few hours later, another contractor showed up in a Honda Civic. With
Invitation's permission, he started pulling up the drenched wall-to-wall
carpet and knocking down walls, leaving exposed nails and dust throughout
the house, the Valentins told me. It was slow-going-the contractor didn't
know much about drywall, Rene said, and he was working alone. He set up
industrial fans to dry out the wet concrete floor and advised the Valentins
to wear masks if the dust bothered them for the next few weeks.
An Invitation spokeswoman told me that according to company records, the
Valentins had experienced some plumbing issues, but that those issues were
"promptly addressed." The company gave the family the option of staying in
a
hotel during the flood and at the company's expense, the spokeswoman said.
(The Valentins said that they were told to pay upfront for a hotel, and
that
the company would "consider a partial reimbursement" later. They said they
were still required to pay rent during this time.)
Living in a decaying house was taking a toll on the family. The mold was
aggravating their son's allergies; the dust made him feel even worse. The
day after the flood, his face began to swell. Erica started to cry as she
realized that her efforts to find a good home had landed them in a place
that was making her family sick. But she felt powerless to do anything
about
it.
The Valentins' story is not unique. The tenants I spoke with said that
their
landlords ignored their requests for repairs and kept homes in hazardous
condition. Many said they'd received eviction notices even if they'd paid
their rent on time.
These negative experiences occurred across the industry. In 2016, LaSonia
Kimball moved out of the Covington, Georgia, home she rented from Colony
Starwood and awaited the return of her $750 security deposit. Instead, she
was charged $4,297.40 for repairs such as hedge trimming and interior
painting. She took the company to court to get it to drop the fees and give
her back her security deposit, which it ultimately did, though it did not
admit wrongdoing. (Invitation told me that Kimball's deposit was retained
"due to damages beyond normal wear and tear" but that it was eventually
returned.)
Timothy and Michelle Poorman's Invitation Homes rental in McDonough,
Georgia, burned down in December 2017; according to a complaint filed in
state court in August, a fire investigator found that the chimney, which
was
installed by Invitation Homes, had lacked necessary parts and had not been
correctly ventilated. The Poormans are currently suing for compensation for
their lost property. (Invitation said that it could not comment on pending
litigation but that it disputes the allegations in the Poormans' lawsuit.)
Waypoint Homes never did a move-in inspection after Carla Brown and her
family moved into their home in Marietta, Georgia; her porch collapsed when
she was standing on it and she broke her ankle. (She settled with the
company.)
David Ochwangi rented a house from American Homes 4 Rent in Smyrna,
Georgia,
and repeatedly filed maintenance requests because the pipes were leaking;
the company refused to make repairs and a burst pipe ruined thousands of
dollars of electronics, appliances, and furniture, according to a complaint
filed in Georgia state court.
The air-conditioning in Jennifer Callahan's Florida home was wired
incorrectly; when she complained that it was unsafe for her four-month-old
baby to be in the house, where temperatures could reach 100 degrees, the
American Homes 4 Rent office told her she was a "drama queen" and did not
send someone to repair it for a week and a half, she told me. American
Homes
4 Rent did not return multiple requests for comment.
Tenants also say that rather than taking advantage of economies of scale,
the rental companies are taking advantage of their clients, pumping them
for
fines and fees at every turn. This impression is backed up by the financial
reports of the companies themselves. American Homes 4 Rent increased the
amount of money it collected from "tenant charge-backs" (essentially
billing
tenants for repairs after they move out) by more than 1000 percent between
2014 and 2018, according to company earnings reports, though it only grew
the number of homes it owned by 70 percent over that period. In some
states,
Invitation Homes keeps the utilities in its name, and charges tenants a
monthly $10.99 "utility service fee," which is in addition to the cost of
water, gas, and electricity. The company increased its "other property
income"-the amount it collected from resident reimbursement for utilities,
service charges, and other fees-by 114 percent between the first nine
months
of 2017 and the first nine months of 2018, despite only growing the number
of homes it owned by 71 percent. On an earnings call in 2017, Invitation
Homes' then-CEO John Bartling said that "automated charges to residents"
drove profits in the quarter, leading to a 22 percent increase in "other
income."
As early as 2015, single-family rental companies started filing eviction
notices against tenants even if they were just a day or two late on the
rent, according to Elora Raymond, a professor at Georgia Tech who was one
of
the co-authors of a study that looked at the eviction practices of
single-family corporate landlords. By filing eviction notices, the
companies
can charge tenants a 10 percent late fee as well as hundreds of dollars in
legal fees, even if the company doesn't actually move to evict the tenant.
The study, published by the Federal Reserve Bank of Atlanta, found that
institutional investors in Atlanta were 18 percent more likely to file
evictions than small landlords. One company cited in the study was in
eviction proceedings against one-third of its tenants.
La Shay Harvey, a tenant of Invitation Homes in Covington, Georgia, told me
she was charged a $95 late fee for missing rent one month even though she
had paid her rent through Invitation Homes' online portal, which had
malfunctioned. She dropped off a money order the next day, but the company
refused to accept the payment, eventually filing an eviction notice and
sending her a bill for a $200 legal fee, a $75 insufficient funds fee, a
$144 filing fee, and $199 in late fees, plus back rent, although she says
she had tried to pay the rent. She took the company to court and won, but
she will never forget coming home one day to see her daughter crying
because
of the eviction notice affixed to the front door. (Invitation disputes
Harvey's account, saying she has been late paying rent eight times since
2017.)
Houses require a lot of work under the best of conditions. Small-time
landlords can do a poor job of managing properties. The tenant isn't always
right. But the volume of complaints, and the common themes among
them-maintenance requests ignored, corners cut, costs passed on to the
renter-suggest that the rental companies have failed to meet the pledge
they
made back when the incentives first kicked in: to make rental housing a
business that benefits both tenants and investors. Tenants have filed more
than 600 complaints about Invitation Homes and nearly 800 complaints about
American Homes 4 Rent through the Better Business Bureau. (Together, the
two
companies own about 126,000 homes.) In a Facebook group of unhappy tenants,
daily posts suggest that the companies continue to fail to respond to some
long-reported problems.
Invitation Homes receives a 4.3 out of 5 from its tenants in internal
surveys, the company said, adding that its business model depends on
keeping
people happy so that they'll stay in their home, reducing turnover. Tuomi
told me that as Invitation acquires more homes, it adds employees,
stimulating local economies.
In May, Young, Invitation's chief operating officer, took me on a tour of a
few of its empty rental properties in the Sacramento suburb of Roseville.
They were on quiet suburban streets, and they had wall-to-wall carpeting,
evenly painted white walls, and spacious backyards. Young showed me how
local staff go through an extensive inspection list before new families
move
into a home-turning on taps, checking power outlets, running the garbage
disposal.
On the long drive back to Invitation's office, I asked Young whether he
thinks the company's model of maintaining homes across far-flung metro
areas
is practical. In the beginning, when the industry was just getting started,
it had some kinks to iron out, he allowed. But now, as Invitation reaps the
benefits of scale, residents are happy, he said. Invitation gave me the
names of three tenants who the company said would talk with me about their
positive experience with the company, but none of the tenants responded to
repeated calls.
Yet many of the renters I spoke with believe that to achieve the
professionalism that Young described, the companies have had to adopt an
adversarial relationship with tenants. In 2016, with the real-estate market
heating up in metropolitan areas across the country, single-family rental
companies also started pushing the limits of how much they could raise rent
every year. American Homes 4 Rent raised rents by 11 percent between 2016
and 2018; the average rents in the top 30 markets in the country increased
by just 6 percent over the same time, according to Zillow. American Homes 4
Rent owned 70 percent more properties in the first nine months of 2018 than
in the same period in 2014, but it collected 150 percent more rent. "It's
up
to us to educate tenants in a new way that there will be annual rental rate
increases," David Singelyn, the CEO of American Homes 4 Rent, said at an
investor's forum in 2017. "This has been a very passively managed industry
for 30, 40 years, up until the institutional players came in."
If investors were once wary of the single-family rental business, they
aren't any longer. The share price of American Homes 4 Rent was up 40
percent between August of 2013 and August of 2018. Investors such as Morgan
Stanley and BlackRock increased their holdings in Invitation Homes in the
third quarter of 2018. By December, the eight ratings firms covering the
company had each given Invitation a "buy" rating, indicating that they
believe it's undervalued.
Single-family rental companies are now "darlings" of the real-estate
sector,
according to Haendel St. Juste, an analyst at Mizuho Securities who covers
the industry. "You have this proof of concept now," he told me. "They've
exceeded expectations." When I reached out to Sam Zell, the Chicago
real-estate investor who had been skeptical of single-family rentals in the
past, he, too, had changed his tune. "Technology has disrupted the real
estate industry," he said in a statement, "and the single-family rental
sector may be a case in which resulting efficiencies have a big impact."
Single-family rental companies are continuing to expand, suggesting that,
rather than a temporary response to a generational crisis in the housing
market, institutional ownership of single-family rentals may be a new
fixture of the real-estate industry. Invitation Homes spent more than $200
million on new homes in the first nine months of 2018. As the supply of
cheap homes for sale evaporates, American Homes 4 Rent has started building
new homes to add to its stock.
Despite the fact that the housing market has largely rebounded, the federal
government continued financially supporting single-family rental companies
until recently. In 2017, Fannie Mae provided a $1 billion loan guarantee
for
Invitation Homes, which allowed the company to benefit from lower interest
rates than it would have received without the government's backing, as well
as more favorable loan terms. It wasn't until August 2018 that the Federal
Housing Finance Agency, which was created in 2008 to oversee federal
housing
agencies, announced that it was ending its participation in the
single-family rental market because the companies could be successful
without the government's help.
That success may be coming at the expense of would-be homeowners-the
Americans Fannie Mae was created to assist. As the rental companies
continue
to acquire more real estate, they are competing with people who have
repaired their credit in the decade since the recession, socked money away,
and are now finally ready to buy again. "Our fear is that any home that
goes
into [an] investor's portfolio isn't just about homeownership today-it is
locking that home out of potential homeownership for decades to come," says
John O'Callaghan, the president and CEO of the Atlanta Neighborhood
Development Partnership, a nonprofit that promotes affordable housing.
In some areas, renters say that it is difficult to find properties that
aren't owned by the big institutional investors. Heather Bryant's
Invitation
Homes property in suburban Georgia had unreliable air-conditioning, a
sewage
system that frequently backed up, and a rodent problem that the company
refused to address, she told me. But she and her husband kept re-signing
the
lease. "So many of the rental houses in Georgia are owned by them that it
is
nearly impossible to find someone who owns privately," she told me. Iyesha
Stringer moved out of one Colony American house in the Atlanta area,
disgusted with the company because it had withheld 60 percent of her
deposit
and didn't fix mold or flooding issues in the house. "I said I'd never rent
from a big company again," she told me. She moved into another property,
only to find out a few months later that Colony American had bought the
house and was going to start managing it. It's now managed by Invitation
Homes.
After four years of dealing with Invitation Homes, Erica and Rene Valentin
decided they couldn't take it anymore. When I visited them three days after
the flood, they were still wearing face masks because their house was full
of dust. Exposed nails lined the floor, and many of their belongings were
stacked in the garage, one of the few places that had stayed dry. Desperate
to get out, the family started to look at properties to buy. But home
prices
were on the rise, partly because of the presence of rental companies and
institutional investors, which snapped up more than 5,000 homes in the
Atlanta area in 2017 alone, according to Amherst Capital.
They eventually found a home they thought they could afford at $204,000.
When they applied for a loan, however, they were denied. They had
significant credit-card debt, and all their years of renting had deprived
them of the wealth accumulation that has typically attended homeownership.
They finally bought in Dacula, another suburb in growing Gwinnett County,
for a little more than $300,000, but only after Rene took out a loan
against
his car to come up with the down payment. Now, they're squeaking by on
their
monthly payments, but they know that one lost job could lead them to
financial ruin. They like to say they found their dream home, but had to go
through hell to get it.
In a sense, they were lucky. The Federal Reserve began raising interest
rates in 2015, and it is getting costlier to borrow money. In Atlanta, home
prices are rising three times as quickly as yearly increases in wages in
the
region.
That means many families will be forced to stay in institutional rentals.
Instead of building wealth, they'll continue to fork over rent money every
month to companies looking for more ways to increase rents and fees.
Drive through the neighborhoods ravaged by the recession, and they may look
back to normal. Once-empty homes are full of families, their lawns mowed,
their lights on. But inside, these homes are different. They're inhabited
by
renters, not owners. These families may live in a nice house and send their
kids to a good school, but they don't have independence, or the financial
security that comes with owning your own home. A decade after being all but
destroyed, they've yet to escape the crisis's long shadow.