The Real Corporate Landlords of Atlanta – Next City
The Equity Factor

The Real Corporate Landlords of Atlanta

(AP Photo/David Goldman)

“It’s not rare for us to go and try to make sure that no one buys the house of someone who’s facing foreclosure,” says Rob Call, an organizer for Occupy Our Homes Atlanta (OOHA). In Georgia, houses are publicly auctioned every first Tuesday of the month on each county courthouse’s steps. As the housing market in Atlanta and across the country recovers from the crash of 2008, the auctions have become increasingly busy events. “Before the fall of 2012, these auctions were mostly vacant. No one was really trying to go after these homes, but then they were [suddenly] swamped with people bidding up houses with quick access to sizable cashier’s checks.”

OOHA soon discovered that the purchasing frenzy fell in line with the larger national trend of Wall Street betting heavily on the purchases of single-family homes to convert them to rental housing. First-time home buyers in markets across the country will tell you about the looming presence of money-flush investors scooping up their potential starter homes. It’s not only home buyers who are watching the trend closely. As we learned in 2008, decisions made by large financial institutions can affect the entire economy and impact all of us, whether it’s your mortgage or your apartment building that the bank owns or not.

OOHA started researching properties in the Atlanta area that were once owned by a bank — after a foreclosure — and then purchased directly by investment-driven companies big and small. Invitation Homes, a subsidiary of the Blackstone Group, eventually became the focus of their investigation. (They released a report earlier this year called “Blackstone: Atlanta’s Newest Landlord.”) One reason they singled out Blackstone is because it’s the largest institutional investor in single-family homes, equal to about 40 percent of the current market share on Wall Street. The report included survey data from a small number of Invitation Homes tenants and concluded that with such a recent and large portfolio of homes, the company sometimes fails to adequately renovate and maintain its properties.

Last March, Lauren Fetters and her boyfriend moved into a three-bedroom, two-and-a-half bath single-family home in the neighborhood of Grant Park. “It was kind of doomed from the beginning,” recalls Lauren, who was among the small sample of tenants polled for the OOHA report. The first two leases Invitation Homes sent to the couple contained significant typos. After a third, accurate lease was signed, they moved in and didn’t interact with the company again until November. “As long as we sent our check on time, which we always did, we never heard from them. In the winter, we started having problems with our electric, tankless water heater. Our water was not getting as hot as it should have.

“We complained and we told them that this was a problem for us. They had someone come out and look at it that had never even seen a tankless water heater before. They had no idea what they were doing. We asked them to replace it. They said no. I asked our property manager to come out and feel our water and see what we were going through and she never did. She said that she was waiting to hear from the maintenance department to get a maintenance man to come with her to see it, because she herself couldn’t fix it. They never came and then we moved out [the following] March.

“We hated them,” she says. “They didn’t give a crap about us as long as we sent our money in. They didn’t care about us as tenants at that address. We weren’t people to them.”

After I reached out to Invitation Homes to ask about the OOHA report, a representative denounced the findings in an email, “The report grossly distorts the facts and ignores institutional investors’ contribution to the American housing recovery.” It continues, “Invitation Homes provides a quality, affordable product — typically as much as 30 percent less than multifamily rentals per square foot — and professional service.”

In addition to property management concerns, there is also the issue of affordability. Atlanta, like many U.S. cities, is experiencing a bit of a revival and that in turn has raised housing costs, driving new concerns about gentrification. The connection between Invitation Homes and Wall Street only aggravates the concern for advocates like Call.

“What we saw in Atlanta was that most of their purchases were in the suburbs,” says Call, “but when they were purchasing in the city, their purchases were concentrated in areas that were pretty primed for gentrification. One example of that is they have a lot of houses in the area between the fortressed neighborhood of Grant Park and a neighborhood called Peoplestown, which is a low-income neighborhood inhabited mainly by people of color who have been living there for a while.”

Columbus Ward, president of the Peoplestown Revitalization Corporation, a local CDC, has observed escalating rental costs in his community: “We have seen that some of the houses that have been acquired recently are much higher than the ones that we rent. Close to $100 more for the same size unit.”

Beyond Atlanta, others have questioned the rise of this new breed of Wall Street-backed landlord.

Environmental psychologist Desiree Fields, a professor at the City University of New York, questions how financial institutions now in the landlord business will use their access to sensitive personal housing data.

“There’s definitely some concern about [glitches],” she says, “because there’s an interest in using rent payment history as input for alternative credit scores. On the one hand, you can see this as a good thing, right? Because, this would allow people that don’t have a very good credit file to actually build a credit history. But it’s only good as far as the data is reliable.”

In a report she authored for the New York-based Right to the City Alliance, Fields offers some suggestions for policymakers, which includes government evaluation of bulk sales, the creation of a national tenant clearinghouse, assurances of community benefits from developers, and financial transaction fees on securitized bonds fed by rental income, something that she says has been a “non-starter” in the past. That “speaks to the importance of local level rent stabilization and rent control laws,” she says.

Fields says there is anecdotal evidence that investor-landlords might not be fully complying with fair housing laws, like honoring Section 8 vouchers. In the email to me, the Invitation Homes rep wrote that the company “complies with applicable Georgia and Federal landlord/tenant and related housing laws including all Fair Housing laws and provides extensive Fair Housing training to all employees.”

Representatives from the City of Atlanta declined to comment for this article, but did confirm that the city doesn’t currently track single-family home data. In November 2013, Atlanta released a Strategic Community Investment report to create a framework for targeting transitional neighborhoods for community revival by Atlanta’s public and private partners, including corporate investors. Authored by a for-profit company that also consults for asset management firms and hedge funds, the report endorses hedge funds and private equity buyers as more desirable than others. These deep-pocketed investors “have inherent advantages over owner-occupant, government and non-profit homebuyers,” the report’s authors wrote. “Their offers are made entirely with cash, with short closing times and few contingencies. They are well-equipped to handle repair costs if necessary and do not ask sellers for concessions.”

Fields too can see one benefit of the investment community’s bulk home purchases: They’ve put a floor under the foreclosure crisis’s downward spiral. Yet that too is complicated.

“Renting could be the most viable option for people and that’s fine,” she says. “But then our housing policy has been so heavily rated towards homeowners for so long that we don’t really have a strong national housing policy around renting.” She warns that the creation of unregulated securities markets that fuel this trend and the lack of government oversight reveal alarming similarities to the circumstances that caused the worst damage in housing markets like Atlanta’s during the foreclosure crisis. “One of the reasons that we wanted to shine a light on this issue is that we don’t want to, in another five years, have these places hit again.”

The Equity Factor is made possible with the support of the Surdna Foundation.

Alexis Stephens was Next City’s 2014-2015 equitable cities fellow. She’s written about housing, pop culture, global music subcultures, and more for publications like Shelterforce, Rolling Stone, SPIN, and MTV Iggy. She has a B.A. in urban studies from Barnard College and an M.S. in historic preservation from the University of Pennsylvania.

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