Corporate Prey: How Corporate Landlords Destabilize Black Homeownership

They really are zeroing in on the places where our communities have been forced to live because of segregation, because of redlining, because of economic depression, and looking in the future about how they can actually speed up the gentrification of those communities and further push our folks out where there is less infrastructure for them, where there is less stability for them, all for the sake of profit. Hello and welcome to another episode of Justice Above All, a podcast from the Legal Defense Fund's Thurgood Marshall Institute. I'm your host for this episode, Juliana Castro, Thurgood Marshall, Senior Fellow and Former Secretary of Housing and Urban Development. On this episode, we're going to be exploring how the mass bind up of single-family homes by corporate entities has impacted black home ownership and renting across the nation. As we've discussed in previous episodes, the federal government has a long history of disinvestment in black communities. For instance, redlining was once a core tool in the government's housing arsenal and helped engineer and solidify housing segregation. In the 1930s, after the establishment of the Federal Housing Administration, the country was facing a housing shortage, so with the initiation of the New Deal, a campaign to increase the nation's housing stock was launched. And a cornerstone of this campaign included subsidizing the development of suburban communities under the condition that none of the homes be sold to black residents. And through this discriminatory strategy, black Americans were ushered into urban housing projects while suburbs became all white communities. This state-sponsored segregation still shapes where black Americans live. In Levitam, New York, for example, FHA subsidies helped develop communities of white, middle-class residents in homes with deeds that expressly prohibited resale to black buyers. This meant that white buyers could buy homes with low-interest mortgages while black homeowners had put down large-down payments and get high-interest uninsured mortgages if they could even get mortgages at all. This discrimination obliterated black communities access to equity building and home ownership, and exacerbated a large gap between white and black homeownership rates. But throughout the mid and late 20th century, this gap started to narrow, and some black Americans gained access to suburban home ownership. In the last two decades, though, the gap between black and white homeownership has widened once again. Jennifer Holmes, senior counsel at the Legal Defense Fund, explains that we've started to see a decline in black homeownership to a level that mirrors the one observed in the 1960s. Unfortunately, in the last 15 years or so, black homeownership rates have actually declined. They've regressed to approximately the levels that they were in the 1960s, which was a time, of course, when legal discrimination defined the housing market. Right now, black homeownership home ownership rates are about 43%, compared to 72% for a white homeownership rates. So there's still this stark gap. The government had a large role in creating that segregation and fueling white homeownership rates while depressing black ownership rates. Fast forward to the housing crisis, this got exacerbated because now many private companies, like banks and mortgage companies, were offering loans, subprime loans with these really abusive credit terms. They were targeting black would-be homeowners with those types of loans. These had high interest rates, high risk loans. While they were offering the possibility of homeownership, many of these subprime mortgages were very risky and built to fail and ultimately did fail when the housing crisis hit in 2008. So all of these historical practices have led to the stark gap in black and white homeownership rates that we still see today. Black homeowners lost a generation of wealth in the housing crash of the Great Recession. Christina Livingston, Executive Director of the Alliance of Californians for Community Empowerment Institute, explains further. If you look at what happened in the Great Recession, the targeting the using of the infrastructure of black churches to target black homeowners and particularly older black homeowners who did already have homes and moved them to reverse mortgages or subprime mortgages meant that when the Great Recession hit because of the housing crash, that the black community itself lost a generation of wealth and that our homeownership levels dipped significantly, particularly compared to our counterparts. So in California, where I work and organize, right now, the homeownership rate for black folks is just under 37%, the homeownership rate for white folks is around 65%. And what I think is even more concerning than the homeownership rate is that if you look at the exact opposite, if you look at the homelessness rate in California, I mean, black folks in California make up under 7% of the population, but they constitute 40% of the homelessness population. And this is a state that the homelessness population in California is half of the entire country. And so we are looking at a very small number of people of black people in the state, largely concentrated into homelessness and almost entirely locked out of homeownership. Further threatening prospects for homeownership is a different type of market competitor, backed by billions of dollars, corporate landlords. Corporate landlords are large investment firms like hedge funds, private equity firms, and real estate investment trusts that buy single family homes and mass, crowding would be owners out of the market. They often rent these homes out to tenants while still holding the lease for the long term, turning profits for their shareholders while tenants reap none of the rewards of owning a home. A mid-a-housing crisis for low and middle-class Americans and a depleting black middle class, the world of private global finance is entering American housing markets with unprecedented magnitude. Because corporate landlords are backed by wealthy investors with an abundance of resources at their fingertips, they are able to buy out entire streets, edging prospective home buyers out of the market entirely. According to analysis of Redfin data conducted by the Hill, in the last quarter of 2021, real estate investors bought a record 18.4% of sold homes in the United States. In a housing market already characterized by increased demand and low inventory. What's such for is progress residential. There are billion dollar investment ventures that is bought 19 to 32 homes on one street in one Nashville suburb alone. Katie Goldstein, director of housing and healthcare campaigns at the Center for Popular Democracy, explains how this practice is predatory in nature. So progress residential with over 85,000 single family rental homes is now the largest single family rental homeowner in the United States, surpassing invitation homes, which is extremely large. Single family home rental company. The company has been growing at a really rapid rate. A company alongside criticism and protests from tenants and community organizations because of unsafe practices and problems. They've also come under fire at several congressional hearings and numerous media stories and part of the allegations that we've heard from tenants who are renting from them is around deceptive business practices, hasty evictions and also property neglect. So this business model that we're talking about, about trying to extract as much money as possible that really disadvantages tenants. And part of the issue and how it impacts home ownership is that large corporate landlords like progress are outbidding first time home buyers and historically black neighborhoods. We see this particularly in Charlotte, North Carolina and Atlanta, Georgia, places where you know progress and other corporate landlords are buying up whole neighborhoods as a way to speculate on the prices but also locking homeowners out of the market. And really the way to show this is that by the end of 2021 large corporations bought up nearly a third of all home sold in Charlotte, North Carolina. So this is a huge issue that's targeting particular geographical areas. Corporate landlords then drive up housing prices and are charging rents that are actually higher than what local residents would have paid for a mortgage. So now tenants are paying more than what they might have previously paid for ownership. So this is a huge concern for our members of cross or the network at the center for popular democracy and across renters rising is that their impact in the market is not only locking people out of home ownership but really changing the terms of the market for rentals as well. Private investment firms have focused their efforts on black and brown neighborhoods. They've forward the market in historically black and brown communities and have made it harder for black and Latino renters and potential homeowners to reside in the neighborhoods they've historically called home. The idea here is that these corporations can come in and buy housing that is right now pretty depressed and then pretty quickly jack up the rents they're going into communities that are right now being at risk of displacement. So that is really really weird black and brown people are in the first place. And so in California, Blackstone, for instance, just bought a bunch of lie-type buildings. These are buildings whose affordability covenants are about to expire. These are seniors that are living in these homes. These are black and brown people that are living in these homes. And what Blackstone knows is that once those covenants expire, they can jack up the rent pretty significantly. They can evict that entire community of people and in California because we don't have vacancy control. Once they get new folks in, they can jack up those rents to market rates. They're not subject to any sort of rent control if it's in a rent control jurisdiction. They're certainly not subject to the rent cap because once a unit is vacant, they can jack up the rents. So they really are zeroing in on the places where our communities have been forced to live because of segregation, because of redlining, because of economic depression, and looking in the future about how they can actually speed up the gentrification of those communities and further push our folks out where there is less infrastructure for them, where there's less stability for them, all for the sake of profit. - Dispying up of single-family homes by corporate entities is particularly devastating for Black communities and Black Americans' prospects for home ownership. Home ownership is an incredibly important aspect of economic prosperity. And the benefits of home ownership already don't accrue equally to Black Americans. But it crucially provides stability, helps build equity, and can help create generational wealth. - Well, for most people, a home is the largest asset that they will ever own. And buying a home has long been considered like the linchpin of the American dream because it's traditionally considered this crucial economic step on the ladder to prosperity. And unlike renting, when you own a home, each monthly payment that you're making towards your mortgage builds equity, and that equity creates some financial stability. If you are a homeowner and you fall on hard times, sometimes you can tap into your home's equity to be collateral for alone or a line of credit. Home's often, not always, but homes often appreciate unlike a lot of our other assets. So as they go up in value, they build wealth for the homeowner. And we know wealth is a crucial part of economic prosperity. It's more important than income and that there's a huge wealth gap between Black Americans and White Americans and home ownership is part of that. The home is a tangible asset that you can pass down to your children. You know, it's something that kind of creates, can often create a stable home life and it's something that people feel very proud to have in their family to pass down to their kids, both in terms of just the kind of emotional ties to it, but also a way of bequeathing wealth to their children. So there are a lot of traditional benefits to home ownership, but these benefits don't always accrue to Black homeowners in the same way as White homeowners. And that's because there's often a devaluation of Black owned homes and Black communities and other communities of color as well. There's a Brookings Institute report that found that on average, Black homes were undervalued by about $50,000 compared to comparable White homes. And that's beyond what can be accounted for by differences in the actual quality of the house or the quality of the neighborhood. This is something that's really just a result of perceptions of Black people, perceptions of Black neighborhoods. It's essentially the devaluation of an asset because of discrimination. And when private investment firms decide to take over a neighborhood, they don't end up just pricing residents out of homeownership, but they destabilize entire communities. So our folks really understand home ownership is not just the way to build wealth, but a way to really build stability in their communities. And being locked out of that means for them that for so many folks that they feel like there is no real hope, there is no real reason to keep fighting forward because they're just going to be any additional wealth that they might get from getting a better job, from getting a raise at their job, was going to continually be stripped because of the rising cost of rents. And that is particularly true for our members who are living in homes that were owned by corporate landlords, because they in particular, because of their responsibility to produce profits for their shareholders, we're jacking up the rents at an astronomical rate. And because they were buying up entire swathes of communities, it was having a disproportionate impact on the housing market in general in that neighborhood. Our tax system actually incentivizes the sort of investment these firms are doing by buying up real estate. Real estate investment trusts or REITs allow investors to make income off property without technically buying or managing it. These REITs are attractive to billionaire investors because of their huge income streams and because they are taxed differently from other sources of income, which means the investors typically avoid paying their share of corporate income taxes. There's a lot of tax incentives that lead private equity firms to see this as a good investment. That-- and one is there's something called a REIT. It's a real estate investment trust. And it's a kind of corporate entity that these private firms will create. And investors can pull resources and then invest in a number of properties where the REIT is technically the owner of those properties. And it's taxed in a very different way than if you were I bought a home or if a company, a corporation just outright bought a home. And it really lessens the tax burden on these private investors. So that's something that drives them to see this as a profitable investment. Because the goal of corporate investment is to maximize profits for shareholders, tenants who rent under corporate landlords often end up in predatory contracts. In some cases, renters are deceptively sold the promise of home ownership while being trapped in contracts structured to fail. Vision property management has used this strategy. In 2020, LDF was joined by the ACLU of Michigan and the National Consumer Law Center in filing a federal class action lawsuit against vision property management. On behalf of Detroit and Flint Area residents trapped in these predatory agreements, Jennifer, one of the attorneys on the case, describes the facts of the lawsuit. Vision property management is a company that operated in a number of states across the country. Our lawsuit is focused on Michigan and in particular Detroit and the counties that surround Wayne County where Detroit is located. After the housing crisis, after there were a lot of homes that went through foreclosure, particularly in the black and brown neighborhoods, vision bought up these foreclosed homes, these distressed properties. They bought them in bulk hundreds of properties. And they basically sold these homes to people in the community under this contract that they called a lease with option to purchase contract. And this is kind of an instrument that they made up, a very complex contract. But it placed the buyers at a huge disadvantage. They lacked a lot of the rights that you would have if you owned your home. But they also lacked a lot of the rights that you normally have if you are a tenant and rent your home. For example, they didn't get the deed to their home until the very end of the term of the contract. They could be evicted. Instead of, if you're a homeowner, you don't have to go through a foreclosure process, where there's more protections before you can get evicted. They were responsible for all the repairs, all the upkeep, all the taxes. And they didn't get some of the normal protections you get when you buy a home, like appraisals, a professional inspection, a third party looking at whether you can actually afford this home. None of that was part of the vision contracting process. And the contract wasn't clear that there was a really high interest rate. No interest rate was actually mentioned in the contract at all. But in fact, just a small, small portion of what people were paying each month actually being applied to the purchase price. So a pretty bad deal for people, many of whom were first-time home buyers, and are stuck in these contracts that were being marketed to them as an easy path to home ownership. But in reality, only 5% or less people actually owned the home by the end of the contract, most of them were evicted, or they walked away because this was such a raw deal for them. And so there was also a racial dimension to this practice. Vision's business was concentrated in black neighborhoods. And our lawsuit alleges that it was discriminatory because of a couple of reasons. One was the way that they bought these properties through the Aureo, which is the real estate owned market, meaning properties that have been through foreclosure and even the banks don't want them. And they're usually the poorest quality properties. Because vision focused on buying those properties, they were much more likely to be in black neighborhoods. They also bought properties from the Wayne County Treasurer, also foreclosed upon properties. Wayne County, compared to other areas of Michigan, has a much higher black population because it's where Detroit is located. But vision didn't buy properties from the other counties in Michigan. Finally, they advertised in a way that kind of kept the business local. They put out yard signs in front of each home. And this hyper-local marketing practice means that you're only reaching out to people who are already in the black neighborhood, foot traffic that is going to pass those homes. You're not even attempting to spread your business in a more diverse-- to more diverse potential buyers. So all of these things were ways that they targeted and concentrated their business to black communities that we allege violated the Fair Housing Act and the Equal Credit Opportunity Act. We also bring on some consumer protection claims, saying that vision practices were unfair and deceptive to their consumers. Unfortunately, corporate landlords are not invested in ensuring that they're providing safe, clean, and affordable homes in the communities they're taking over. There have been numerous reports of tenants living in homes with vermin, mold, and crumbling infrastructure. And because of the predatory contracts the tenants are stuck in addressing these issues false to the tenant, not the corporate landlord. Katie describes how renters in Charlotte experience huge rent increases year to year on the one hand, while also bearing the full responsibility for maintenance issues with their property on the other. Yeah, I mean, I think that it's a constant state of insecurity, right? So we were just talking to a bunch of tenants in Charlotte, North Carolina, where corporate landlords have bought up a third of the housing stock. And rent increases were between $200 to $500 every year. And so that's an enormous amount of money that's being charged. And so actually when tenants saw $100 to $200 rent increased, they didn't think it was that high because of what the rates are looking like. So we're really talking about a race to the top in terms of rent increases. They also had experiences with really terrible services and conditions and being required to do their own maintenance. So for instance, in a tricon building, one tenant, which is a single family corporate owner, one tenant was responsible for power washing her own walls outside of her house. So this is something that she was responsible for. And so their fees or decreases in conditions and services. Christina's organizing work addresses the same experiences Katie has described. Renders are paying a store, but it rents for homes that have habitability concerns. They're forced to address themselves. And because of fear and the looming threat of eviction, residents are often too scared to speak up about the problems they're experiencing. They are in constant fear that if they complain of the multiple habitability concerns that they are living in, whether that be mold or vermin, or there was a tenant whose entire air conditioning unit fell onto the bed in front of them, that if they start to complain that they will get eviction notices, that they will actually be subject to even higher rent increases, they don't feel like they have a voice that they can-- they don't have a place where they can raise their voice around the concerns that they have. So they keep quiet. And oftentimes, because the rent is so high, multiple families are having to live in a home, and it is causing additional habitability concerns. And then the looming threat of eviction is always what's on the mind of tenants, whether or not it's a formal eviction because they're unable to afford the rent, but also an economic eviction by saying, OK, now your rent is $500. And this is how you have to pay. So so many tenants are getting pushed out of communities where they've been for a long time or they have family roots. Renters in homes owned by corporate landlords often feel a constant threat of eviction. Men, this is not without reason, especially for black residents. Progress residential has been accused of legging evictions more heavily on majority black communities during the COVID-19 pandemic. So it's critical that the government step in and create protections that safeguard renters from landlord harassment, mistreatment, and unjust evictions. Because the majority of black people are renters, we have to get very serious about protections for renters. That includes things like anti-harassment laws of landlords, just cause for eviction, rent control, vacancy control, those kinds of things that mean that if you are living in a unit, you know that you can expect only a reasonable rent increase that matches the kind of inflation that you might find across the board. And that actually matches up with how much income people are bringing in. That people should not have to pay over 30% of their income, which is in itself already pretty high given, black families are actually spending more like 50 or 60% of their income. And in addition to the protections for renters, there needs to be concerted effort to ensure black families can stay in their homes before they're evicted or for close upon and a private investment firm scoops it up. Government programs like the Distressed Assets Stabilization Program are intended to work with homeowners to save their homes from foreclosure. I think there are also some government programs that could kind of stop the problem before it starts. So upstream of when the private company gets involved is a person's living in a home and maybe they get evicted or that home gets foreclosed. If we, we should try to stop those events. So we're not even getting into the point where the private investor is buying up foreclosed homes. So programs during the Obama administration, for example, there's a program called the Distressed Assets Stabilization Program that was intended to help people save their homes before they went through foreclosure. And programs like that that attack the problem more upstream, I think, are very helpful. And recently, the Biden administration has moved to change the Distressed Assets Stabilization Program to get more homes into the hands of individuals and nonprofits with community-minded goals instead of private equity groups. I think that's an important change. There are some nonprofits that we should make a distinction between a private equity investor who's scooping up homes. And then there are some organizations that are nonprofits that have a more community-minded goal where they might be buying up properties, but in a way that they're going to give their planning to make fair loans, maybe with financial counseling, maybe with zero interest loans to individual homeowners to try to help them achieve a home ownership, rather than as compared to some of these private investors who are just planning to rent the homes to tenants, often on leases that are full of fees and other burdensome terms. Christina stresses that we have to rethink opportunities to own a home and allow for more individuals to access home ownership. There is a lot more opportunity for homeownership. If we're looking at credit as one of the major ways that folks can actually get into homeownership, like people's credit, first we were not allowed to get the credit market in general. But then the kinds of things that we get credit for, we have less ability to show evidence of having done those things. And so why are we not actually allowing people to show credit when they're paying rent all the time? Or there are lots of ways that actually we are paying out and that is not being given credit for us. There are ways of changing the system of how we decide who gets to get into homeownership. - Addressing the housing crisis doesn't just fall to states and localities. The federal government also has a responsibility to ensure that the country is meeting its housing needs and that we all have access to a clean, safe, and affordable home. - Like this is a responsibility, not just of states and localities, but really the federal government to fund social housing that's off of the private market. We are advocating for $1 trillion to build 12 million units of social, public, green housing that's in community control because we think that that will be a way that will really meet the crisis where it's at and actually have governments start to think of housing as a public good and therefore a human right. So that's one piece. We also agree completely that there should be universal rent caps, just cause eviction protections. And everything that we need to actually confront the red dirt crisis that's in this country and the instability that red dirt feel. Historically homeowners have had so much more that comes from the federal government than we do. and we really need to start matching our policies with making sure that renters are protected. And of course, we need to try to restrict the power of corporate landlords in the market. We need to make sure that there are no loans coming from the federal government to ensure the mortgages of these massive sales. We need to make sure that there's actually ways that we're restricting their actions and their profit model in order to make sure that tenants are not at the whim of whatever corporate landlord decides to buy their home this year. Tendents are already harnessing the power of organizing. Residents in these corporate owned properties have realized the power in their collective voice. Christina and Katie say that in their work, they've seen the empowerment that comes from organizing to bring about real opportunities to negotiate with landlords to get the pairs done and to keep rents down. And you see people like sort of blossom in there so they start to get really great at telling their story and they start to feel really confident that if with all of them together, that there's actually no way that they're going to lose this thing. And then they're like, let's go figure out how we can go even further. There are other people and other buildings that are owned by this landlord and they need help too. And we can come together with them and not just change our building but change their building. And so you start to see that they feel empowered and that they want to share that empowerment with other people. And they want to share their story not for the sake of just saying this terrible thing is happening to me, but for the sake of saying this terrible thing shouldn't happen to anyone and actually we can come together and make a change. And it's like really one of the most beautiful things that you can experience as a person is to watch the transformation from person who's hiding behind the door to a person standing, you know, speaking to the power in front of a crowd of people. And so one of the places that that happens is that we do have monthly mass renters rising meetings that are over Zoom with tenants from all across the country that have corporate landlords. It's usually between like 150 to 300 tenants and they come on and they share their stories and they talk about their organizing. And they show photos of the actions that they took against their landlord and they share strategies and they learn about the housing market and how it's working and how it doesn't work for them. And they make plans of how to organize together. So I've seen this happen both for individuals but also in a collective way to really be building a movement to say this isn't right. We're coming together. We want to unify and we want to take this action. And we also want to make sure that the government knows that they're responsible for this, which is a huge part of this. It is actually changing the responsibility of tenants just being individuals thinking about their individual housing situation, figuring out how to survive in the market but actually saying there are policies, there are practices, there are things that can transform in this country and have to in order to make sure that our folks have the stable and dignified lives that they deserve. Renters and residents across the country have a powerful voice. And if we're to meanfully address the current housing crisis, policy to catch up with the organizing and vision of renters, perspective homeowners, and black communities. You know, tenants are not taking this lying down. They're organizing and have been organizing for decades across the country in order to improve the conditions. What really needs to happen is policy needs to meet where the organizing is because we're building the power that we need. But we really need elected officials, the federal government, everyone to take this issue so seriously that they're passing real policies that improve the material benefits for the tenants that are really risking their homes to do the kind of organizing that's necessary to make this happen. This has been another episode of Justice Above All, a podcast from the Legal Defense Fund's "The Good Marshall Institute." If you're a renner or someone currently residing in a corporate owned property, renters rising has a host of helpful resources and toolkits, such as information on rental assistance, eviction defense toolkits, and important housing policy updates among many other resources. You can find these resources on their website at rennerstashrising.org rennerstashrising.org. To keep up with LDF's work, visit www.nwcpldf.org. To keep up with the latest research from the Third Good Marshallist, visit www.tminstituteldf.org. This episode has been produced by Kisee Devani and Jackie O'Neill, it's edited by Kisee Devani. Thank you for listening.